<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BANK OF THE OZARKS, INC.
(EXACT NAME OF REGISTRATION AS SPECIFIED IN ITS CHARTER)
ARKANSAS 6022 71-0556208
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
425 WEST CAPITOL AVENUE
SUITE 3100
LITTLE ROCK, ARKANSAS 72201
(501) 374-4100
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GEORGE G. GLEASON, II
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
BANK OF THE OZARKS, INC.
425 WEST CAPITOL AVENUE
SUITE 3100
LITTLE ROCK, ARKANSAS 72201
(501) 374-4100
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
COPIES OF ALL CORRESPONDENCE TO:
LES R. BALEDGE, ESQ. H. WATT GREGORY, III, ESQ.
JEFFREY J. GEARHART, ESQ. ROSE LAW JOSEPH S. MOWERY, ESQ. GIROIR,
FIRM, A PROFESSIONAL ASSOCIATION 120 GREGORY, HOLMES & HOOVER, PLC 111
EAST FOURTH STREET LITTLE ROCK, CENTER STREET, SUITE 1900 LITTLE ROCK,
ARKANSAS 72201 (501) 375-9131 ARKANSAS 72201 (501) 372-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED PROPOSED
CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share........ 1,531,455 $16.00 $24,503,280 $7,426
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 199,755 shares subject to the exercise of the Underwriters' over-
allotment option.
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
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<PAGE>
BANK OF THE OZARKS, INC.
CROSS-REFERENCE SHEET PURSUANT TO RULE 501(B) OF REGULATION S-K SHOWING
LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1 PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
----------------------- ---------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages
3.Summary Information and Risk
Factors....................... Prospectus Summary; Risk Factors; The Com-
pany
4.Use of Proceeds................. Prospectus Summary; Use of Proceeds;
Capitalization
5.Determination of Offering
Price......................... Outside Front Cover Page; Underwriting
6.Dilution........................ Dilution
7.Selling Security Holders........ Principal and Selling Stockholders
8.Plan of Distribution............ Outside Front Cover Page; Underwriting
9.Description of Securities to be
Registered.................... Description of Capital Stock
10.Interests of Named Experts and
Counsel....................... Legal Matters; Experts
11.Information with Respect to the
Registrant.................... Prospectus Summary; Risk Factors; The Com-
pany; Dividend Policy; Use of Proceeds;
Capitalization; Selected Consolidated Fi-
nancial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Supervision and
Regulation; Management; Certain Transac-
tions; Principal and Selling Stockholders;
Description of Capital Stock; Shares Eligi-
ble for Future Sale; Index to Consolidated
Financial Statements
12.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Management
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE OR JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 22, 1997
PROSPECTUS
1,331,700 SHARES
[INSERT LOGO]
BANK OF THE OZARKS, INC.
COMMON STOCK
Of the 1,331,700 shares of common stock, $.01 par value (the "Common Stock"),
of Bank of the Ozarks, Inc. (the "Company") being offered hereby, 700,000
shares are being sold by the Company and 631,700 shares are being sold by
certain stockholders of the Company (the "Selling Stockholders"). See
"Principal and Selling Stockholders." The Company will not receive any proceeds
from the sale of the shares by the Selling Stockholders.
The Common Stock is the only class of outstanding capital stock of the
Company. Prior to this offering there has been no public market for the Common
Stock of the Company. Application has been made for the Common Stock to be
approved for trading on The Nasdaq Stock Market, Inc. ("Nasdaq") National
Market under the symbol "OZRK". It is currently estimated that the initial
public offering price for the shares of Common Stock being sold hereby will be
between $14.00 and $16.00 per share. See "Underwriting" for information
relating to the method of determining the initial public offering price for the
Common Stock.
-----------
SEE "RISK FACTORS," BEGINNING ON PAGE 6 OF THIS PROSPECTUS, FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
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<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
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Total(3)................... $ $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company and Selling Stockholders
estimated to be approximately $210,000 and $190,000, respectively.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 199,755 shares of Common Stock at the Price to Public
referred to above, less the Underwriting Discounts and Commissions, solely
to cover over-allotments, if any. If all of such shares are purchased, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by it and subject to the right
of the Underwriters to reject any order in whole or in part, and subject to
certain other conditions. It is expected that delivery of the shares of Common
Stock will be made on or about , 1997.
-----------
STEPHENS INC.
-----------
The date of this Prospectus is , 1997.
<PAGE>
[INSERT MAP WHICH WILL DEPICT THE COMPANY'S MARKET AREA IN NORTHERN, WESTERN AND
CENTRAL ARKANSAS AND THE LOCATION WITHIN THIS AREA OF ITS EXISTING AND PROPOSED
OFFICES.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING
THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, included
elsewhere in this Prospectus. Unless the context requires otherwise, references
in this Prospectus to the "Company" shall mean Bank of the Ozarks, Inc. and its
consolidated subsidiaries. All references to shares of Common Stock to be
outstanding after this offering assume that there will be no exercise of the
over-allotment option by the Underwriters. All per share information in this
Prospectus has been adjusted to reflect a reduction of par value from $.10 to
$.01 per common share and a 99-1 stock dividend, both effected May 22, 1997.
THE COMPANY
The Company is an Arkansas business corporation registered under the Bank
Holding Company Act of 1956. The Company owns two state chartered subsidiary
banks, Bank of the Ozarks, wca ("Ozark WCA"), and Bank of the Ozarks, nwa
("Ozark NWA"), that conduct banking operations through 11 branches and two loan
production offices in ten communities throughout northern, western and central
Arkansas. At March 31, 1997 the Company had total assets of $286.9 million, net
loans of $221.4 million and total deposits of $247.3 million.
The Company provides a wide range of retail and commercial banking services
including non-interest bearing and interest bearing checking, savings and money
market accounts, certificates of deposit ("CDs"), and individual retirement
accounts, as well as real estate, consumer, commercial, industrial and
agricultural loans. Other banking services include personal and corporate trust
services, safety deposit boxes, real estate appraisals, credit related life and
disability insurance, automated teller machines ("ATMs"), telephone banking,
credit cards and merchant credit card services.
Since 1994 the Company has experienced significant growth in operations and
maintained favorable returns on assets and stockholders' equity. Between
December 31, 1994 and March 31, 1997 the Company's total assets increased from
$165.0 million to $286.9 million, net loans increased from $111.2 million to
$221.4 million, and total deposits increased from $148.5 million to $247.3
million. For the fiscal year ended December 31, 1996 the Company's return on
average assets was 1.26% and its return on average stockholders' equity was
17.7%.
The Company's goal is to maximize long-term stockholder value through strong
year-to-year growth in assets, loans, deposits and net income in a manner
consistent with safe, sound and prudent banking practices. To achieve this
goal, the Company's business strategy is to:
. Expand loans and deposits through market share growth and de novo
branching;
. Provide customers with the breadth of products and financial services of a
regional bank;
. Employ, empower and motivate management to provide personalized customer
service, consistent with the best traditions of community banking, while
maximizing profits; and
. Maintain asset quality and control overhead expense.
The Company's corporate offices are located at 425 West Capitol Avenue, Suite
3100, Little Rock, Arkansas 72201, Telephone: (501) 374-4100.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
By the Company.................. 700,000 shares/(1)/
By the Selling Stockholders..... 631,700 shares
Common Stock to be outstanding
after this offering.............. 3,579,800 shares/(1)/(2)/
Use of proceeds by the Company.... The net proceeds to be received by the
Company from the sale of the Common Stock
will be used to repay indebtedness
(approximately $5.0 million) and for
general corporate purposes, including
capital investments in the Company's
subsidiary banks to fund anticipated growth
and expansion. See "Use of Proceeds" and
"Capitalization."
Proposed Nasdaq National Market
symbol........................... OZRK
</TABLE>
- --------
(1) An additional 199,755 shares may be sold pursuant to an over-allotment
option granted by the Company to the Underwriters. See "Underwriting."
(2) Excludes shares to be authorized for issuance from time to time under the
Company's stock option plans, of which approximately shares are
anticipated to be granted under such plans upon the effective date of this
offering at an exercise price equal to the initial public offering price.
See "Management--Director Compensation" and "--Stock Option Plan."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ -----------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income.... $ 9,525 $ 9,046 $ 7,994 $ 8,312 $ 11,805 $ 2,698 $ 3,116
Provision for loan
losses................ 1,219 338 339 360 1,486 221 259
Non-interest income.... 2,159 1,068 2,713 1,168 1,865 358 756
Non-interest expense... 6,806 6,162 5,735 5,996 7,151 1,625 2,119
Net income............. 2,359 2,425 2,954/(1)/ 2,170 3,027 781 957
PER COMMON SHARE DATA:
Earnings............... $ 0.65 $ 0.82 $ 0.99/(1)/ $ 0.75 $ 1.05 $ 0.27 $ 0.33
Book value............. 3.96 4.53 5.07 5.66 6.44 5.61 6.62
Weighted average shares
outstanding
(in thousands)........ 3,620 2,968 2,975 2,894 2,880 2,880 2,880
BALANCE SHEET DATA AT
PERIOD END:
Total assets........... $175,531 $181,609 $165,030 $212,476 $270,600 $225,292 $286,942
Total loans............ 115,008 115,032 112,806 153,198 214,462 164,663 224,641
Allowance for loan
losses................ 2,011 1,716 1,649 1,909 3,019 2,051 3,240
Total investment
securities............ 40,002 44,786 40,521 37,137 39,608 40,091 42,170
Total deposits......... 158,662 164,362 148,453 182,463 231,648 194,791 247,263
FHLB advances.......... -- -- -- 7,947 12,517 7,947 12,017
Notes payable.......... 3,719 2,278 -- 3,920 5,396 3,920 5,396
Total stockholders'
equity................ 11,635 13,484 15,076 16,294 18,547 16,169 19,076
Loan to deposit ratio.. 72.49% 69.99% 75.99% 83.96% 92.58% 84.53% 90.85%
AVERAGE BALANCE SHEET
DATA:
Total average assets... $174,928/(2)/ $178,570/(2)/ $167,333 $185,160 $240,208 $218,757 $278,469
Total average
stockholders' equity.. 12,086/(2)/ 12,559/(2)/ 14,287 15,392 17,144 16,232 18,812
PERFORMANCE RATIOS:
Return on average
assets................ 1.35% 1.36% 1.77% 1.17% 1.26% 1.43%/(3)/ 1.37%/(3)/
Return on average
stockholders' equity.. 19.52 19.31 20.67 14.09 17.66 19.25/(3)/ 20.35/(3)/
Net interest margin.... 6.22 5.76 5.24 4.95 5.36 5.47/(3)/ 4.88/(3)/
Overhead ratio/(4)/.... 3.98 3.61 3.49 3.23 2.99 2.97/(3)/ 3.04/(3)/
Efficiency ratio/(5)/.. 58.09 60.56 62.83 61.57 52.40 52.62 57.50
ASSET QUALITY RATIOS:
Net charge-offs as a
percentage of average
total loans........... 0.62% 0.52% 0.09% 0.08% 0.21% 0.20%/(3)/ 0.07%/(3)/
Nonperforming loans to
total loans........... 0.50 1.73 0.57 0.85 1.08 0.59 0.80
Nonperforming assets to
total assets.......... 1.91 1.51 0.50 0.63 0.87 0.43 0.66
ALLOWANCE FOR LOAN
LOSSES AS A PERCENTAGE
OF:
Total loans............ 1.75% 1.49% 1.46% 1.25% 1.41% 1.25% 1.44%
Nonperforming loans.... 350.96 86.10 258.46 146.28 130.69 212.32 180.70
CAPITAL RATIOS AT PERIOD
END:
Leverage capital
ratio................. 5.85% 6.83% 9.10% 7.49% 6.42% 6.79% 6.40%
Tier I risk-based
capital............... 8.46 10.13 12.71 9.80 8.45 9.10 8.29
Total risk-based
capital............... 9.72 11.38 13.96 11.05 9.70 10.35 9.53
</TABLE>
- --------
(1) Includes after tax gain of $1.0 million ($0.34 per common share) from the
May 1994 sale of a bank subsidiary having $36.7 million of total assets.
(2) Represents average of beginning and end-of-year balances.
(3) Annualized. Results for the three months ended March 31, 1997 may not be
indicative of full year results.
(4) Calculated by dividing non-interest expense by average assets.
(5) Calculated by dividing non-interest expense by federal tax equivalent net
interest income plus non-interest income (excluding gains on sale of
assets).
5
<PAGE>
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company's
management as well as assumptions made by and information currently available
to the Company's management. When used in this Prospectus, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company or its management, identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, relating to the operations, results of
operations and growth strategy of the Company, liquidity, competitive factors
and pricing pressures, changes in legal and regulatory requirements, interest
rate fluctuations, and general economic conditions, as well as other factors
described in this Prospectus. Should one or more of the risks materialize, or
should underlying assumptions prove incorrect, actual results or outcomes may
vary materially from those described herein as anticipated, believed,
estimated, expected or intended. See "Risk Factors."
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the
Company and its business before purchasing shares of Common Stock offered
hereby. Each of the following factors may have a material adverse effect on
the Company's operations, financial results, financial condition, liquidity,
market valuation or market liquidity in future periods.
GROWTH STRATEGY
The Company owns two state chartered banks operating in 13 locations in
Arkansas. The Company's current growth strategy involves growth at existing
offices and expansion via new, or de novo, branches into target Arkansas
markets. This strategy involves certain special risks as follows:
Acquisition and Development of Offices. The Company may encounter delays or
other problems in opening offices currently under construction or in opening
future offices. Although the Company has received regulatory approval and
begun construction on two additional branch sites expected to open in the
third quarter of 1997, there can be no assurance that these projects will be
completed in a timely manner. Additionally, the Company may be unable to
accomplish its future expansion plans due to lack of available satisfactory
sites in suitable locations, difficulties in acquiring such sites, increased
expenses or loss of potential sites due to complexities associated with zoning
and permitting processes, higher than anticipated acquisition costs or other
factors.
Regulatory and Economic Factors. The Company's growth and expansion plans
may be adversely affected by a number of regulatory and economic developments
or other events. Failure to obtain required regulatory approvals, changes in
laws and regulations or other regulatory developments and changes in
prevailing economic conditions or other unanticipated events may prevent or
adversely affect the Company's continued growth and expansion. Such factors
may cause the Company to alter its growth and expansion plans or slow or halt
the growth and expansion process, which may prevent the Company from entering
certain target markets or allow competitors to gain or retain market share in
the Company's existing or expected markets.
Operating Results. Even if the Company is successful in opening new offices,
there is no assurance that such offices will achieve deposit levels, loan
balances or other operating results necessary to avoid losses or produce
profitability. The results achieved to date by the Company may not be
indicative of future results or results that may be achieved from a larger
number of locations. Should any new location be unprofitable or marginally
profitable, or should any existing location experience a decline in
profitability or incur losses, the adverse effect on the Company's results of
operations and financial condition could be more significant than would be the
case for a larger company.
6
<PAGE>
Management of Growth. The Company's past and expected growth involves a
variety of risks including maintaining loan quality in the context of
significant portfolio growth, maintaining adequate management personnel and
systems to oversee such growth, maintaining adequate internal audit, loan
review and compliance functions, and implementing additional policies,
procedures and operating systems required to support such growth. Failure of
the Company to successfully address these issues could have a material adverse
effect on the Company's results of operations and financial condition.
See "Business--Growth Strategy."
LIQUIDITY
The Company's primary sources of funds are customer deposits and loan
repayments. The Company has experienced significant growth in its loan
portfolio which has resulted in a high loan to deposit ratio (90.9% at March
31, 1997). While scheduled loan repayments are a relatively stable source of
funds, loans generally are not readily convertible to cash. Additionally,
deposit levels may be affected by a number of factors, including rates paid by
competitors, general interest rate levels, returns available to customers on
alternative investments and general economic conditions. Accordingly, the
Company may be required from time to time to rely on secondary sources of
liquidity to meet withdrawal demands or otherwise fund operations. Such
sources include borrowings under the Company's revolving credit facility,
unsecured and secured Federal Home Loan Bank ("FHLB") advances and federal
funds lines of credit from correspondent banks. While management believes that
these sources are currently adequate to meet the Company's liquidity
requirements, there can be no assurance that they will be sufficient to meet
long-term liquidity demands. The Company may be required to slow or
discontinue loan growth, capital expenditures or other investments should such
sources not be adequate. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
COMPETITION
The banking industry in the Company's market area is highly competitive. In
addition to competing with other commercial and savings banks and savings and
loan associations, the Company competes with credit unions, finance companies,
mortgage companies, brokerage and investment banking firms, asset-based non-
bank lenders and many other financial and financial service institutions. A
substantial number of the commercial banks operating in the Company's market
area are branches or subsidiaries of much larger organizations affiliated with
statewide, regional or national banking companies, and as a result may have
greater resources and lower cost of funds than the Company. Additionally, the
Company may face increased competition from de novo community banks, including
those with senior management who were previously with other local banks or
those controlled by investor groups with strong local business and community
ties.
Various legislative acts in recent years, including the interstate banking
and branching laws, have led to increased competition among financial
institutions. There can be no assurance that the Company will compete
effectively in the future. Further, there can be no assurance that the United
States Congress or the Arkansas General Assembly will not enact legislation
that may further increase competitive pressures on the Company. See
"Business--Competition" and "Supervision and Regulation."
CHANGES IN ECONOMIC CONDITIONS
The Company's profitability is dependent on the profitability of its
subsidiary banks, which operate principally in northern, western and central
Arkansas. The Company's loans are made primarily to borrowers who are
residents of this area and are in substantial part secured by real estate
collateral located in such area. Thus, in addition to adverse changes in
general economic conditions in the United States such as inflation, recession
and high unemployment, unfavorable changes in economic conditions affecting
the Company's markets may have a material adverse effect on the Company's
results of operations and financial condition. Such changes could result from,
among other things, a reduction in real estate values, plant closings or
layoffs, adverse trends
7
<PAGE>
or events affecting various major industry groups such as timber, cattle and
poultry, inclement weather, natural disasters or other factors beyond the
Company's control.
INTEREST RATE RISK
The Company's earnings depend to a substantial extent on "rate
differentials," i.e., the differences between the rates the Company earns on
loans, securities and other earning assets, and the interest rates it pays to
obtain deposits and other liabilities. These rates are highly sensitive to
many factors which are beyond the Company's control, including general
economic conditions and the policies of various governmental and regulatory
authorities. From time to time, maturities of assets and liabilities may not
be balanced, and an increase or decrease in interest rates could have a
material adverse effect on the net interest margin, results of operations and
financial condition of the Company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Interest Rate Sensitivity."
RELIANCE ON KEY PERSONNEL
The Company is dependent on the services of George Gleason, the Chairman of
the Board and Chief Executive Officer of the Company. Mr. Gleason is the
largest individual stockholder of the Company, and although the Company has
entered into an employment agreement with him, the loss of the services of Mr.
Gleason could have a material adverse effect on the Company's results of
operations and financial condition. The Company is also dependent on certain
other key officers and members of management who have important customer
relationships or are instrumental to the Company's operations. The loss of
such individuals could have a material adverse effect on the Company's results
of operations and financial condition. In addition, there can be no assurance
that the Company will be able to attract and retain key personnel with the
skills and expertise necessary to achieve and manage its planned growth. See
"Business--Growth Strategy" and "Management."
POSSIBLE NEED FOR ADDITIONAL CAPITAL
The Company will use a portion of the proceeds of this offering, along with
existing credit facilities, to capitalize its planned growth. However, there
is no assurance that such proceeds and credit facilities will be sufficient to
meet the Company's future capital needs, and it may be necessary to seek
additional capital through borrowings or additional equity. There is no
assurance the Company will be able to obtain any such borrowings or additional
equity and thus the Company may have to alter its planned growth and
expansion. See "Use of Proceeds" and "Capitalization."
REGULATORY RESTRICTIONS AND REQUIREMENTS
The Company is subject to extensive government regulation and supervision
under various state and federal laws, rules and regulations, including rules
and regulations promulgated by the Federal Reserve Board, the Federal Deposit
Insurance Corporation ("FDIC") and the Arkansas State Bank Department. These
laws and regulations are designed primarily to protect depositors, borrowers,
and the Bank Insurance Fund of the FDIC and to further certain social
policies; consequently, they may impose limitations on the Company that may
not be in the best interests of the Company and its stockholders. The Company
is subject to changes in federal and state laws, regulations, governmental
policies and accounting principles. The effects of any such potential changes
cannot be predicted, but they could have a material adverse effect on the
results of operations and financial condition of the Company. See "Supervision
and Regulation."
ARKANSAS USURY LAWS
The Constitution of the State of Arkansas provides that "consumer loans and
credit sales" have a maximum interest rate limitation of 17% per annum and
that all "general loans" have a maximum limitation of 5% over the Federal
Reserve Discount Rate in effect at the time the loan was made. The Arkansas
Supreme Court has determined that "consumer loans and credit sales" are also
"general loans" and are thus subject to an interest rate limitation equal to
the lesser of 5% over the Federal Reserve Discount Rate or 17% per annum. The
8
<PAGE>
Arkansas Constitution provides significant penalties, including the forfeiture
of interest and principal depending on the type of loans, for usurious loans.
These usury provisions impose an artificial cap on the Company's net interest
margin and could have a material adverse effect on the Company's results of
operations and financial condition to the extent that the Federal Reserve
Discount Rate fails to move in tandem with market rates or that a high
interest rate environment reduces or eliminates the Company's net interest
margin. See "Supervision and Regulation--State Regulations."
CONCENTRATION OF OWNERSHIP
Following completion of this offering, George Gleason will beneficially own
approximately 36.4%, and the Company's directors and executive officers as a
group (including Mr. Gleason) will beneficially own approximately 44.3% of the
Company's outstanding Common Stock. Additionally, the Company's Stock
Ownership Plan and Trust for employees (the "ESOP") will beneficially own
approximately 10.4% of the Company's Common Stock following completion of this
offering. Mr. Gleason and Linda Gleason, his spouse, are two of the three
trustees of the ESOP. Accordingly, Mr. Gleason may have the ability to
determine the election of the Company's directors and control corporate
actions which are submitted to stockholders, which may include taking actions
that may not be in the interests of the other stockholders. See "Principal and
Selling Stockholders."
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the shares of
the Company's Common Stock. Although application has been made for the Common
Stock to be approved for trading on The Nasdaq National Market, there can be
no assurance that an active market for the Common Stock will develop or be
sustained following completion of this offering. The initial public offering
price will be determined through negotiations between the Company and the
Representative of the Underwriters and may not be indicative of the market
price for the shares of Common Stock following completion of this offering.
Additionally, the stock market has from time to time experienced extreme price
and volume volatility. These fluctuations may be unrelated to the operating
performance of particular companies whose shares are traded. Market
fluctuations may adversely affect the market price of the Common Stock. A
variety of events, including regulatory developments, quarterly variations in
operating results, news announcements, trading volume, general market trends
and other factors could result in fluctuations in the price of the Common
Stock, and there can be no assurance that the market price of the Common Stock
will not decline below the initial public offering price. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of previously issued shares of the Company's
Common Stock in the public market following completion of this offering could
adversely affect the market price of the Common Stock. Including the shares
offered hereby, approximately 1,774,700 shares of Common Stock will be
eligible for sale immediately following completion of this offering, and
approximately 11,900 shares of Common Stock will become eligible for sale in
the public market upon expiration of the 90-day period immediately following
the effectiveness of the Company's registration statement under the Securities
Act of 1933 (the "Securities Act"), subject to compliance with Securities and
Exchange Commission ("SEC") Rule 144. Further, following expiration or release
from the 180-day lock-up agreements with the Underwriters, approximately
1,793,200 additional shares of Common Stock will be eligible for sale in
accordance with SEC Rule 144. See "Shares Eligible for Future Sale" and
"Underwriting."
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Amended and Restated Articles of Incorporation contain certain
provisions that could delay, discourage or prevent an attempted acquisition or
change of control of the Company. These provisions include (i) the option for
the Board of Directors to classify or stagger the Board of Directors into two
or three classes with each class having staggered terms; (ii) a provision
establishing certain advance notice procedures
9
<PAGE>
for stockholder proposals to be considered at an annual meeting of
stockholders; and (iii) a provision that directors may be removed only for
cause, and then only by the two-thirds vote of stockholders. The Company's
Amended and Restated Articles of Incorporation also allow the Board of
Directors to authorize the issuance of preferred stock, $.01 par value (the
"Preferred Stock") with rights superior to those of the Common Stock. This
provision could discourage a third party from attempting to acquire, or make
it more difficult for a third party to acquire, control of the Company without
approval of the Company's Board of Directors, and could also limit the price
that certain investors might be willing to pay in the future for shares of the
Common Stock. See "Description of Capital Stock."
DIVIDEND POLICY
The Company currently pays a cash dividend on its Common Stock. The
Company's ability to pay dividends in the future is subject to regulatory
requirements and other conditions existing at the time, including the
Company's profitability, liquidity, financial condition and capital
requirements. Additionally, the payment of dividends is subject to
restrictions imposed by federal and state banking laws, regulations and
authorities. Accordingly, there can be no assurance that the Company will be
able to continue to pay cash dividends on its Common Stock. See "Dividend
Policy" and "Supervision and Regulation."
10
<PAGE>
THE COMPANY
The Company is an Arkansas business corporation registered under the Bank
Holding Company Act of 1956. The Company owns two state chartered subsidiary
banks that conduct banking operations through 11 branches and two loan
production offices in ten communities throughout northern, western and central
Arkansas. At March 31, 1997 the Company had total assets of $286.9 million,
net loans of $221.4 million and total deposits of $247.3 million.
The Company's lead bank, Ozark WCA, received its charter in 1937. Ozark WCA
operates from its principal office in Ozark, Arkansas, with branch offices in
Ozark, Altus, Clarksville (2), Van Buren, and Mulberry, Arkansas. In addition,
Ozark WCA has branch offices under construction in Paris and Alma, Arkansas,
and plans to add future offices, subject to regulatory approval, in Fort Smith
and Little Rock, Arkansas. See "Business--Growth Strategy." Ozark WCA also
maintains separate commercial loan and residential mortgage loan production
offices in Little Rock, Arkansas. Ozark NWA, the Company's other bank
subsidiary, was chartered in 1903 and operates from its principal office in
Jasper, Arkansas, with branch offices in Western Grove, Harrison, and
Marshall, Arkansas.
The Company was incorporated in 1981 as a one-bank holding company for Bank
of Ozark, Ozark, Arkansas. In 1986 the Company became a multi-bank holding
company through consummation of an acquisition agreement with its principal
stockholders and others pursuant to which it also acquired controlling
interests in Arkansas Valley Bank, Dardanelle, Arkansas and Newton County
Bank, Jasper, Arkansas. The Company sold Arkansas Valley Bank in 1994 in order
to redeploy capital to implement the Company's de novo branching strategy. In
1995 Bank of Ozark changed its name to Bank of the Ozarks, wca, and Newton
County Bank changed its name to Bank of the Ozarks, nwa. Additionally, in May
1997 the Company changed its name from Ozark Bankshares, Inc. to Bank of the
Ozarks, Inc. These name changes were undertaken for marketing reasons,
including facilitating parallel marketing of various common products and
services in existing and new markets.
At March 31, 1997 the Company employed 138 full-time equivalent employees.
The Company's corporate offices are located at 425 West Capitol Avenue, Suite
3100, Little Rock, Arkansas, 72201, Telephone: (501) 374-4100.
DIVIDEND POLICY
During the years ended December 31, 1995 and 1996 the Company paid annual
cash dividends on the Common Stock in the aggregate amount of $0.30 per share
per year. During the three months ended March 31, 1997 the Company paid a cash
dividend on the Common Stock in the amount of $0.10 per share. Effective for
stockholders of record on July 10, 1997, the Company will commence payment of
a quarterly cash dividend on the Common Stock of $0.05 per share ($0.20
annually).
The final determination of the timing, amount and payment of dividends on
the Common Stock is at the discretion of the Company's Board of Directors and
will depend on conditions then existing, including regulatory requirements and
the Company's profitability, liquidity, financial condition and capital
requirements. The Company's principal source of funds to pay dividends on the
shares of Common Stock will be cash dividends from the subsidiary banks. The
payment of dividends by the banks to the Company is subject to restrictions
imposed by federal and state banking laws, regulations and authorities. See
"Supervision and Regulation."
11
<PAGE>
DILUTION
As of March 31, 1997 the net tangible book value of the Common Stock was
approximately $17.6 million, or $6.12 per share. "Net tangible book value per
share" represents the tangible net worth of the Company (total assets less
intangible assets (goodwill and core deposit intangibles) and total
liabilities), divided by the number of shares of Common Stock outstanding.
Without taking into account any changes in net tangible book value after March
31, 1997, after giving effect to the sale by the Company of 700,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$15.00 per share (assuming no exercise of the Underwriters' over-allotment
option) and after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, the pro forma net tangible
book value at March 31, 1997 would have been $7.59 per share, representing an
immediate increase of $1.47 per share to current stockholders and an immediate
dilution of $7.41 per share to persons purchasing the shares offered hereby.
The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Estimated initial public offering price per share................ $15.00
Net tangible book value per share before offering................ $6.12
Increase in net tangible book value per share attributable to new
investors....................................................... 1.47
-----
Pro forma net tangible book value per share after offering....... 7.59
------
Dilution per share to new investors.............................. $ 7.41
======
</TABLE>
The following table summarizes the total number of shares of Common Stock
purchased from the Company during the past five years, and the total cash
consideration and weighted average price per share paid by current officers,
directors and other persons affiliated with the Company (including the ESOP)
("Affiliates") and to be paid by persons purchasing shares of Common Stock
offered hereby ("New Investors"), at an assumed initial public offering price
of $15.00 per share (assuming no exercise of the Underwriters' over-allotment
option) and before deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
WEIGHTED
TOTAL AVERAGE PRICE
SHARES PURCHASED CONSIDERATION PER SHARE
---------------- ------------- -------------
<S> <C> <C> <C>
Affiliates......................... 35,000/(1)/ $ 173,250 $ 4.95
New Investors...................... 700,000 10,500,000 15.00
</TABLE>
- --------
(1) Represents shares sold by the Company to the ESOP in March 1993.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, assuming an offering price of $15.00 per share, are estimated to be
$9.6 million ($12.3 million if the Underwriters' over-allotment option is
exercised in full) after deducting underwriting discounts and commissions and
offering expenses payable by the Company estimated to be approximately
$210,000.
The Company intends to use approximately $5.0 million of the net proceeds to
reduce borrowings under a revolving line of credit, the proceeds of which were
used to repay outstanding notes payable and for general corporate purposes,
including capital investments in the Company's subsidiary banks to fund
anticipated growth and expansion. The revolving line of credit provides for
maximum outstanding amounts of up to $5.0 million, is secured by 80% of the
Company's stock in its subsidiary banks, and has a final maturity of December
21, 2007. Interest accrues on outstanding borrowings under the revolving line
of credit at a variable rate equal to prime minus 0.25%. For a more detailed
description of the Company's credit facility, including the revolving line of
credit, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Company intends to use the balance of the net proceeds from the sale of
the Common Stock offered hereby for general corporate purposes, including
investments in and advances to the Company's subsidiaries, and financing its
continued expansion pursuant to its de novo branching strategy. See
"Business--Growth Strategy." The precise amounts and timing of expenditure of
such net proceeds will depend on the funding requirements of the Company and
the availability of other capital resources. Pending application of the net
proceeds as described above, the Company intends to invest such proceeds in
short term and intermediate term interest bearing securities or deposits in
its subsidiary banks.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) at March 31, 1997, (ii) on a pro forma basis to reflect the
Company's new credit facility established May 16, 1997 and (iii) as adjusted
to give effect to the receipt and application of the estimated net proceeds
from the sale by the Company of 700,000 shares of Common Stock (assuming no
exercise of the Underwriters' over-allotment option) in this offering at an
assumed offering price of $15.00 per share. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Notes payable
Term loans............................. $ 5,396 $ 5,096/(1)/ $ 5,096
Revolving line of credit............... -- 5,000/(1)/ --
Stockholders' equity/(2)/
Common Stock, $0.01 par value,
10,000,000 shares authorized,
2,879,800 shares issued and
outstanding, 3,579,800/(3)/ shares as
adjusted.............................. 29 29 36/(3)/
Preferred Stock, $0.01 par value,
1,000,000 shares authorized, no shares
issued and outstanding................ -- -- --
Additional paid-in capital............. 1,168 1,168 10,716
Retained earnings...................... 17,920 17,920 17,920
Unrealized depreciation on investment
securities............................ (41) (41) (41)
------- ------- -------
Total stockholders' equity........... 19,076 19,076 28,631
------- ------- -------
Total capitalization................. $24,472 $29,172 $33,727
======= ======= =======
</TABLE>
- --------
(1) On May 16, 1997 the Company entered into a $10.0 million term loan and
revolving credit facility. Proceeds from this credit facility were used to
repay notes payable outstanding on such date and to fund capital
investments in the Company's subsidiary banks. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
(2) See "Description of Capital Stock."
(3) Does not include 285,000 shares authorized for issuance from time to time
under the Company's Stock Option Plan (the "Stock Option Plan"), and
shares authorized for issuance pursuant to options to be granted annually
to non-employee directors under the Non-Employee Director Stock Option
Plan (the "Director Option Plan"). Approximately shares are
anticipated to be granted under such plans upon the effective date of this
offering at an exercise price equal to the initial public offering price.
See "Management--Director Compensation" and "--Stock Option Plan."
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data
concerning the Company and is qualified in its entirety by the detailed
information and consolidated financial statements, including the notes
thereto, included elsewhere in this Prospectus. The income statement, balance
sheet and per common share data as of and for the years ended December 31,
1992, 1993, 1994, 1995, and 1996 were derived from audited consolidated
financial statements of the Company. The income statement, balance sheet and
per common share data as of and for the periods ended March 31, 1996 and March
31, 1997, were derived from the unaudited consolidated financial statements of
the Company. The selected consolidated financial data set forth below should
be read in conjunction with such financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ -----------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income........ $ 15,625 $ 14,057 $ 12,645 $ 15,703 $ 21,836 $ 4,981 $ 6,016
Interest expense....... 6,100 5,011 4,651 7,391 10,031 2,283 2,900
Net interest income.... 9,525 9,046 7,994 8,312 11,805 2,698 3,116
Provision for loan
losses................ 1,219 338 339 360 1,486 221 259
Non-interest income.... 2,159 1,068 2,713 1,168 1,865 358 756
Non-interest expense... 6,806 6,162 5,735 5,996 7,151 1,625 2,119
Net income............. 2,359 2,425 2,954(/1/) 2,170 3,027 781 957
PER COMMON SHARE DATA:
Earnings............... $ 0.65 $ 0.82 $ 0.99(/1/) $ 0.75 $ 1.05 $ 0.27 $ 0.33
Book value............. 3.96 4.53 5.07 5.66 6.44 5.61 6.62
Dividends.............. 0.18 0.25 0.30 0.30 0.30 0.30 0.10
Weighted average shares
outstanding (in
thousands)............ 3,620 2,968 2,975 2,894 2,880 2,880 2,880
BALANCE SHEET DATA AT
PERIOD END:
Total assets........... $175,531 $181,609 $165,030 $212,476 $270,600 $225,292 $286,942
Total loans............ 115,008 115,032 112,806 153,198 214,462 164,663 224,641
Allowance for loan
losses................ 2,011 1,716 1,649 1,909 3,019 2,051 3,240
Net loans.............. 112,997 113,316 111,157 151,289 211,443 162,612 221,401
Total investment secu-
rities................ 40,002 44,786 40,521 37,137 39,608 40,091 42,170
Total deposits......... 158,662 164,362 148,453 182,463 231,648 194,791 247,263
FHLB advances.......... -- -- -- 7,947 12,517 7,947 12,017
Notes payable.......... 3,719 2,278 -- 3,920 5,396 3,920 5,396
Total stockholders' eq-
uity.................. 11,635 13,484 15,076 16,294 18,547 16,169 19,076
Loan to deposit ratio.. 72.49% 69.99% 75.99% 83.96% 92.58% 84.53% 90.85%
AVERAGE BALANCE SHEET
DATA:
Total average assets... $174,928(/2/) $178,570(/2/) $167,333 $185,160 $240,208 $218,757 $278,469
Total average stock-
holders' equity....... 12,086(/2/) 12,559(/2/) 14,287 15,392 17,144 16,232 18,812
PERFORMANCE RATIOS:
Return on average as-
sets.................. 1.35% 1.36% 1.77% 1.17% 1.26% 1.43%(/3/) 1.37%(/3/)
Return on average
stockholders' equity.. 19.52 19.31 20.67 14.09 17.66 19.25(/3/) 20.35(/3/)
Net interest margin.... 6.22 5.76 5.24 4.95 5.36 5.47(/3/) 4.88(/3/)
Overhead ratio(/4/).... 3.98 3.61 3.49 3.23 2.99 2.97(/3/) 3.04(/3/)
Efficiency ratio(/5/).. 58.09 60.56 62.83 61.57 52.40 52.62 57.50
ASSET QUALITY RATIOS:
Net charge-offs as a
percentage of average
total loans........... 0.62% 0.52% 0.09% 0.08% 0.21% 0.20%(/3/) 0.07%(/3/)
Nonperforming loans to
total loans........... 0.50 1.73 0.57 0.85 1.08 0.59 0.80
Nonperforming assets to
total assets.......... 1.91 1.51 0.50 0.63 0.87 0.43 0.66
ALLOWANCE FOR LOAN
LOSSES AS A PERCENTAGE
OF:
Total loans............ 1.75% 1.49% 1.46% 1.25% 1.41% 1.25% 1.44%
Nonperforming loans.... 350.96 86.10 258.46 146.28 130.69 212.32 180.70
CAPITAL RATIOS AT PERIOD
END:
Leverage capital ra-
tio................... 5.85% 6.83% 9.10% 7.49% 6.42% 6.79% 6.40%
Tier I risk-based capi-
tal................... 8.46 10.13 12.71 9.80 8.45 9.10 8.29
Total risk-based capi-
tal................... 9.72 11.38 13.96 11.05 9.70 10.35 9.53
</TABLE>
- --------
(1) Includes after tax gain of $1.0 million ($0.34 per common share) from the
May 1994 sale of a bank subsidiary having $36.7 million of total assets.
(2) Represents average of beginning and end-of-year balances.
(3) Annualized. Results for the three months ended March 31, 1997 may not be
indicative of full year results.
(4) Calculated by dividing non-interest expense by average assets.
(5) Calculated by dividing non-interest expense by federal tax equivalent net
interest income plus non-interest income (excluding gains on sale of
assets).
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
Net income increased 22.5% to $957,000 ($0.33 per share) for the three
months ended March 31, 1997 from $781,000 ($0.27 per share) for the three
months ended March 31, 1996. For the years ended December 31, 1994, 1995 and
1996 net income was $3.0 million ($0.99 per share), $2.2 million ($0.75 per
share) and $3.0 million ($1.05 per share), respectively; return on average
assets was 1.77%, 1.17% and 1.26%, respectively; and return on average
stockholders' equity was 20.7%, 14.1% and 17.7%, respectively. In May 1994 the
Company sold a subsidiary bank which had $36.7 million of total assets. This
sale resulted in a gain of $1.4 million ($1.0 million after taxes). Excluding
such gain, return on average assets and return on average stockholders' equity
for 1994 would have been 1.16% and 13.6%, respectively.
At December 31, 1994, 1995, 1996 and March 31, 1997 the Company had total
assets of $165.0 million, $212.5 million, $270.6 million and $286.9 million,
respectively; total loans of $112.8 million, $153.2 million, $214.5 million
and $224.6 million, respectively; total deposits of $148.5 million, $182.5
million, $231.6 million and $247.3 million, respectively; and stockholders'
equity of $15.1 million, $16.3 million, $18.6 million and $19.1 million,
respectively.
ANALYSIS OF RESULTS OF OPERATIONS
The Company's results of operations depend primarily on net interest income,
which is the difference between the interest income from earning assets, such
as loans and investments, and the interest expense incurred on interest
bearing liabilities, such as deposits and other borrowings. Factors that
determine the level of net interest income include the volume of earning
assets and interest bearing liabilities, yields earned and rates paid, fee
income from portfolio loans, the level of nonperforming loans and other non-
earning assets and the amount of non-interest bearing liabilities supporting
earning assets. The Company also generates non-interest income, including
transactional fees, real estate appraisal fees, trust fees, fees from
origination of residential mortgage loans for resale and commissions from the
sale of credit related insurance products. The Company's non-interest expenses
primarily consist of employee compensation and benefits, occupancy and
equipment expenses, and other operating expenses. The Company's results of
operations are significantly affected by its provision for loan losses.
Results of operations may also be significantly affected by many other factors
including general economic and competitive conditions, mergers and
acquisitions of other financial institutions within the market area, changes
in market interest rates, government policies, and actions of regulatory
agencies.
NET INTEREST INCOME
Net interest income is analyzed in the discussion and tables below on a
fully taxable equivalent basis. The adjustment to convert certain income to a
fully taxable equivalent basis consists of dividing tax exempt income by one
minus the federal income tax rate (34%).
Three months ended March 31, 1997 compared to three months ended March 31,
1996.
Net interest income increased 14.3% to $3.1 million for the three months
ended March 31, 1997 from $2.8 million for the three months ended March 31,
1996. This increase primarily resulted from a 28.1% increase in average
earning assets to $261.3 million for the 1997 period from $203.9 million for
the 1996 period. The increase in average earning assets resulted from
continued growth in the Company's loan portfolio, both at existing and new
branches. This increase was somewhat offset by a 59 basis point reduction in
the net interest margin to 4.88% in the 1997 period from 5.47% in the 1996
period, a substantial portion of which decrease
16
<PAGE>
resulted from lower average balances during the 1997 period of a relatively
high-yielding portfolio of loans acquired from the Resolution Trust
Corporation ("RTC") in late 1995.
1996 compared to 1995.
Net interest income increased 40.6% to $12.0 million in 1996 from $8.5
million in 1995. This increase primarily resulted from a 29.9% increase in
average earning assets to $223.9 million in 1996 from $172.3 million in 1995
and a 41 basis point improvement in the net interest margin to 5.36% in 1996
from 4.95% in 1995. The increase in average earning assets resulted from
expansion of the Company's loan portfolio due to continued growth of existing
branches, opening of new branches and the purchase of a discounted loan
portfolio from the RTC in late 1995. The increase in the net interest margin
resulted primarily from a 60 basis point increase in the yield on average
earning assets (a substantial portion of which was attributable to the higher
yielding RTC loan portfolio) which more than offset a 14 basis point increase
in the cost of average interest bearing liabilities.
1995 compared to 1994.
Net interest income increased 4.1% to $8.5 million in 1995 from $8.2 million
in 1994. This increase primarily resulted from a 10.3% increase in average
earning assets to $172.3 million in 1995 from $156.3 million in 1994 which
more than offset a 29 basis point decline in the net interest margin to 4.95%
in 1995 from 5.24% in 1994. The increase in average earning assets resulted
from the Company's decision in 1994 to implement its de novo branching
strategy.
ANALYSIS OF NET INTEREST INCOME
(FTE = FULLY TAXABLE EQUIVALENT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest income........... $ 12,645 $ 15,703 $ 21,836 $ 4,981 $ 6,016
FTE adjustment............ 198 218 187 53 28
-------- -------- -------- --------- ---------
Interest income--FTE...... 12,843 15,921 22,023 5,034 6,044
Interest expense.......... 4,651 7,391 10,031 2,283 2,900
-------- -------- -------- --------- ---------
Net interest income--FTE.. $ 8,192 $ 8,530 $ 11,992 $ 2,751 $ 3,144
======== ======== ======== ========= =========
Yield on interest earning
assets--FTE.............. 8.22% 9.24% 9.84% 10.01% 9.38%
Cost of interest bearing
liabilities.............. 3.44 4.88 5.02 5.07 5.01
Net interest spread--FTE.. 4.78 4.36 4.82 4.94 4.37
Net interest margin--FTE.. 5.24 4.95 5.36 5.47 4.88
</TABLE>
CHANGES IN FULLY TAXABLE EQUIVALENT NET INTEREST INCOME
<TABLE>
<CAPTION>
1995 1996 3/31/97
CHANGE CHANGE CHANGE
FROM FROM FROM
1994 1995 3/31/96
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase due to change in earning assets............ $ 1,657 $ 5,427 $1,403
Increase (decrease) due to change in earning asset
yields............................................. 1,421 675 (393)
(Decrease) increase due to change in interest rates
paid
on interest bearing liabilities.................... (1,494) 72 16
(Decrease) due to change in interest bearing liabil-
ities.............................................. (1,246) (2,712) (633)
------- ------- ------
Increase in net interest income..................... $ 338 $ 3,462 $ 393
======= ======= ======
</TABLE>
17
<PAGE>
The following table sets forth certain information relating to the elements
of the Company's net interest income for the years ended December 31, 1994,
1995 and 1996 and for the three months ended March 31, 1996 and 1997. The
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown except
where otherwise noted. Average balances are derived from daily average
balances for bank assets and liabilities as well as the averages for holding
company borrowings. The average balance of loans receivable includes loans on
which the Company has discontinued accruing interest. The yields and costs
include fees which are considered adjustments to yields.
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1994 1995 1996
------------------------ ------------------------ -------------------------
AVERAGE INCOME YIELD/ AVERAGE INCOME YIELD/ AVERAGE INCOME YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------ -------- ------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest earn-
ing deposits... $ 1,999 $ 70 3.50% $ 1,524 $ 85 5.58% $ 3,077 $ 169 5.49%
Federal funds
sold........... 1,514 58 3.83 1,832 109 5.95 2,720 145 5.33
Investment se-
curities:
Taxable..... .. 35,541 1,771 4.98 34,771 2,079 5.98 32,526 2,069 6.36
Tax-exempt.. .. 6,219 583 9.38 5,654 642 11.35 5,215 551 10.57
Loans (net of
unearned in-
come).......... 111,003 10,361 9.33 128,530 13,006 10.12 180,334 19,089 10.59
-------- ------- -------- ------ -------- --------
Total earnings
assets...... .. 156,276 12,843 8.22 172,311 15,921 9.24 223,872 22,023 9.84
Non-earning as-
sets........... 11,057 12,849 16,336
-------- -------- --------
Total assets .. $167,333 $185,160 $240,208
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
Deposits:
Interest bear-
ing transac-
tion and sav-
ings accts..... $ 49,679 $ 1,097 2.21% $ 40,537 $ 913 2.25% $ 48,989 $ 1,311 2.68%
Time deposits
of $100,000 or
more........... 19,542 787 4.03 24,307 1,436 5.91 34,689 1,975 5.69
Other time de-
posits......... 63,454 2,629 4.14 85,936 5,008 5.83 102,076 5,719 5.60
-------- ------- -------- ------ -------- --------
Total inter-
est bearing
deposits...... 132,675 4,513 3.40 150,780 7,357 4.88 185,754 9,005 4.85
Federal funds
and FHLB
borrowings..... 1,756 81 4.61 419 24 5.73 9,564 558 5.83
Holding company
debt*.......... 762 57 7.49 104 10 9.62 4,315 468 10.85
-------- ------- -------- ------ -------- --------
Total interest
bearing lia-
bilities....... 135,193 4,651 3.44 151,303 7,391 4.88 199,633 10,031 5.02
Non-interest li-
abilities:
Non-interest
bearing depos-
its............ 16,279 16,492 20,129
Other non-in-
terest liabili-
ties........... 1,574 1,973 3,302
-------- -------- --------
Total liabili-
ties........... 153,046 169,768 223,064
Stockholders'
equity......... 14,287 15,392 17,144
-------- -------- --------
Total liabili-
ties and
stockholders'
equity......... $167,333 $185,160 $240,208
======== ======== ========
Interest rate
spread......... 4.78% 4.36% 4.82%
------- ------ --------
Net interest
income......... $ 8,192 $8,530 $ 11,992
Net interest
margin......... 5.24% 4.95% 5.36%
Ratio of
interest
earning assets
to interest
bearing
liabilities.... 115.60% 113.88% 112.14%
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------
1996 1997
------------------------ ------------------------
AVERAGE INCOME YIELD/ AVERAGE INCOME YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest earn-
ing deposits... $ 3,851 $ 57 6.00% $ 1,559 $ 20 5.20%
Federal funds
sold........... 3,226 43 5.41 1,693 22 5.27
Investment se-
curities:
Taxable..... .. 32,271 480 6.03 36,907 612 6.73
Tax-exempt.. .. 6,130 156 10.32 3,230 83 10.42
Loans (net of
unearned in-
come).......... 158,425 4,298 11.00 217,905 5,307 9.88
-------- ------ -------- ------
Total earnings
assets...... .. 203,903 5,034 10.01 261,294 6,044 9.38
Non-earning as-
sets........... 14,854 17,175
-------- --------
Total assets .. $218,757 $278,469
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
Deposits:
Interest bear-
ing transac-
tion and sav-
ings accts..... $ 43,283 $ 253 2.37% $ 57,867 $ 420 2.94%
Time deposits
of $100,000 or
more........... 31,016 453 5.92 43,812 604 5.59
Other time de-
posits......... 96,593 1,378 5.79 115,165 1,571 5.53
-------- ------ -------- ------
Total inter-
est bearing
deposits...... 170,892 2,084 4.95 216,844 2,595 4.85
Federal funds
and FHLB
borrowings..... 7,956 114 5.81 12,348 183 6.01
Holding company
debt*.......... 3,920 85 8.79 5,396 122 9.17
-------- ------ -------- ------
Total interest
bearing lia-
bilities....... 182,768 2,283 5.07 234,588 2,900 5.01
Non-interest li-
abilities:
Non-interest
bearing depos-
its............ 17,651 22,052
Other non-in-
terest liabili-
ties........... 2,106 3,017
-------- --------
Total liabili-
ties........... 202,525 259,657
Stockholders'
equity......... 16,232 18,812
-------- --------
Total liabili-
ties and
stockholders'
equity......... $218,757 $278,469
======== ========
Interest rate
spread......... 4.94% 4.37%
------ ------ -----
Net interest
income......... $2,751 $3,144
Net interest
margin......... 5.47% 4.88%
Ratio of
interest
earning assets
to interest
bearing
liabilities.... 111.56% 111.38%
</TABLE>
- ----
* The interest expense of holding company debt includes interest accrued for
the years 1992-1995 on a tax dispute. Such interest accrual was $93,000 and
was recorded during the year ended 1996. Additionally, $8,000 of interest on
this assessment was accrued for the three months ended March 31, 1997.
Excluding the effects of the accruals, the rates on holding company debt and
total interest bearing liabilities would have been 8.69% and 4.98%,
respectively, for the year ended December 31, 1996 and 8.57% and 5.00%,
respectively, for the three months ended March 31, 1997. See "--Income
Taxes" and Note 10 to the Company's Consolidated Financial Statements
appearing elsewhere in this Prospectus.
18
<PAGE>
The following table reflects the extent to which changes in the volume of
interest earning assets and interest bearing liabilities and changes in
interest rates have affected the Company's interest income and interest
expense during the periods indicated. Information is provided in each category
with respect to (i) changes attributable to changes in volume (changes in
volume multiplied by prior rate); (ii) changes attributable to changes in rate
(changes in rate multiplied by prior volume); and (iii) changes attributable
to changes in rate/volume (change in rate multiplied by change in volume). The
changes attributable to the combined impact of volume and rate have all been
allocated to the changes due to volume.
VOLUME/RATE ANALYSIS
<TABLE>
<CAPTION>
MARCH 31, 1997 OVER
1995 OVER 1994 1996 OVER 1995 MARCH 31, 1996
---------------------- ---------------------- ----------------------
YIELD/ YIELD/ YIELD/
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ------ ------ ------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Interest earning
deposits.............. $ (26) $ 41 $ 15 $ 85 $ (1) $ 84 $ (29) $ (8) $ (37)
Federal funds sold..... 19 32 51 47 (11) 36 (20) (1) (21)
Investment securities:
Taxable............... (46) 354 308 (143) 133 (10) 77 55 132
Tax-exempt............ (64) 123 59 (46) (45) (91) (74) 1 (73)
Loans (net of unearned
income)............... 1,774 871 2,645 5,484 599 6,083 1,449 (440) 1,009
------ ------ ------ ------ ----- ------ ------ ----- ------
Total interest
earnings assets..... 1,657 1,421 3,078 5,427 675 6,102 1,403 (393) 1,010
------ ------ ------ ------ ----- ------ ------ ----- ------
Interest expense:
Interest bearing
transaction deposits
and savings accts..... (206) 22 (184) 226 172 398 106 61 167
Time deposits of
$100,000 or more...... 282 367 649 591 (52) 539 176 (25) 151
Other time deposits.... 1,310 1,069 2,379 904 (193) 711 253 (60) 193
Federal funds and FHLB
borrowings............ (77) 20 (57) 534 -- 534 65 4 69
Holding company debt... (63) 16 (47) 457 1 458 33 4 37
------ ------ ------ ------ ----- ------ ------ ----- ------
Total interest
bearing
liabilities......... 1,246 1,494 2,740 2,712 (72) 2,640 633 (16) 617
------ ------ ------ ------ ----- ------ ------ ----- ------
Increase (decrease) in
net interest income.... $ 411 $ (73) $ 338 $2,715 $ 747 $3,462 $ 770 $(377) $ 393
====== ====== ====== ====== ===== ====== ====== ===== ======
</TABLE>
Provision for Loan Losses. The loan loss provision reflects management's
ongoing assessment of the loan portfolio and is evaluated in light of risk
factors assessed by management as well as a desire of management to maintain a
level of growth in the allowance for loan losses consistent with the growth in
the overall loan portfolio. Among the factors considered by management in
making this assessment include the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans, historical loan
loss experience and economic and business conditions that may affect
borrowers' ability to pay.
The provision for loan losses was $221,000 for the three months ended March
31, 1996 compared to $259,000 for the same period in 1997. For the years ended
December 31, 1994, 1995 and 1996 the provision for loan losses was $339,000,
$360,000 and $1.5 million, respectively. The $1.1 million increase in 1996
relates primarily to growth in the Company's loan portfolio. Average loan
balances grew 15.8% in 1995 and 40.3% in 1996.
19
<PAGE>
NON-INTEREST INCOME
Non-interest income can generally be broken down into four main sources: fee
income, which includes service charges on deposits; trust fees; income on the
sale of loans or other assets; and gain (or loss) on the sale of securities.
Non-interest income increased 111.2% to $756,000 for the three months ended
March 31, 1997 from $358,000 for the three months ended March 31, 1996. For
the years ended December 31, 1994, 1995 and 1996 non-interest income was $2.7
million, $1.2 million and $1.9 million, respectively.
The table below shows non-interest income for the years ended December 31,
1994, 1995 and 1996 and for the three months ended March 31, 1996 and 1997.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------
1994 1995 1996 1996 1997
-------- -------- -------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service charges on deposit
accounts.......................... $ 492 $ 514 $ 806 $ 143 $ 211
Other service charges and fees..... 115 361 537 116 190
Trust income....................... 146 231 214 47 59
Gain on sale of loans.............. 44 -- 274 -- 68
Securities gains (losses).......... -- (44) (77) 21 10
Gain on sale of subsidiary......... 1,377 -- -- -- --
Gain on sale of previously
foreclosed real estate............ 360 4 14 -- 137
Printed check sales................ -- 9 90 19 26
Other income....................... 179 93 7 12 55
-------- -------- -------- ------ ------
Total non-interest income........ $ 2,713 $ 1,168 $ 1,865 $ 358 $ 756
======== ======== ======== ====== ======
</TABLE>
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and employee benefits, occupancy,
equipment and other expenses necessary for the operation of the Company. Non-
interest expense increased 30.4% to $2.1 million for the three months ended
March 31, 1997 from $1.6 million for the three months ended March 31, 1996.
For the years ended December 31, 1994, 1995 and 1996 non-interest expense was
$5.7 million, $6.0 million and $7.2 million, respectively. The dollar
increases in non-interest expense are primarily attributable to increases in
salaries and employee benefits resulting from increases in staffing associated
with the Company's de novo branching strategy commenced in 1994. Management
remains committed to controlling the level of non-interest expense through
continued refinement of the branch level accounting and budgeting process
implemented in 1995. See "Business--Overhead Objectives."
20
<PAGE>
The table below shows non-interest expense for the years ended December 31,
1994, 1995 and 1996 as well as for the three months ended March 31, 1996 and
1997.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- ---------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits..... $ 2,873 $ 3,374 $ 4,263 $ 932 $ 1,238
Net occupancy expense.............. 235 319 457 108 133
Equipment expense.................. 334 426 541 126 152
Other real estate and foreclosure
expense........................... 402 142 49 9 31
Other operating expense:
Professional services............ 62 56 60 49 40
Postage.......................... 111 118 140 27 32
Telephone........................ 93 106 125 23 33
Operating supplies............... 148 214 215 53 73
Advertising and public
relations....................... 139 101 123 17 45
Other outside service fees....... 20 31 59 13 8
Directors' fees.................. 32 79 96 20 23
Software amortization............ 55 75 69 16 27
Check printing charges........... 11 30 102 22 28
FDIC & state assessment.......... 379 373 47 24 25
Amortization of goodwill......... 64 59 56 14 14
Charitable contributions......... 264 126 126 13 19
Guaranty fee..................... -- -- 91 76 76
Miscellaneous.................... 513 367 532 83 122
-------- -------- -------- ------- -------
Total non-interest expense..... $ 5,735 $ 5,996 $ 7,151 $ 1,625 $ 2,119
======== ======== ======== ======= =======
</TABLE>
INCOME TAXES
The provision for income taxes was $429,000 for the three months ended March
31, 1996 compared to $537,000 for the same period in 1997. For the years ended
December 31, 1994, 1995 and 1996, the provision for income taxes was $1.6
million, $845,000 and $2.0 million, respectively, and the effective income tax
rates for these years was 33.6%, 27.0% and 39.9%, respectively.
The Company was assessed $326,000 of additional state income taxes for the
years 1992 through 1995 with respect to a dispute involving the taxation of
intercompany dividends. This assessment, plus $93,000 of interest expense, net
of federal tax effect, was fully expensed as of December 31, 1996 and
significantly increased the Company's effective income tax rate for 1996.
Additionally, $8,000 of interest on this assessment was accrued during the
period ended March 31, 1997. The assessment is being contested by the Company.
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
At March 31, 1997, the Company's loan portfolio was $221.4 million, net of
allowance for loan losses, compared to $162.6 million at March 31, 1996. As of
March 31, 1997, the Company's loan portfolio consisted of approximately 63.6%
real estate loans, 19.3% consumer loans, 12.9% commercial and industrial loans
and 3.9% agricultural loans (non-real estate).
21
<PAGE>
The amount and type of loans outstanding at December 31, 1994, 1995 and 1996
and at March 31, 1997 are reflected in the following table.
LOAN PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------- ---------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real Estate:
Single family residen-
tial................. $ 38,010 $ 42,569 $ 41,494 $ 55,609 $ 78,124 $ 81,747
Non-farm/non-residen-
tial................. 32,415 27,326 22,978 36,603 35,258 36,953
Agricultural.......... 8,449 9,199 8,373 9,274 11,583 11,308
Construction/land de-
velopment............ 1,637 1,672 4,668 3,471 8,808 10,211
Multifamily residen-
tial................. 6,072 4,369 3,806 4,388 3,743 2,580
-------- -------- -------- -------- -------- --------
Total real estate... 86,583 85,135 81,319 109,345 137,516 142,799
Consumer................ 17,031 17,278 17,583 25,372 39,868 43,284
Commercial and industri-
al..................... 4,724 5,405 6,191 11,077 28,154 29,103
Agricultural (non-real
estate)................ 5,383 6,161 6,889 6,963 8,363 8,667
Other................... 1,287 1,053 824 441 561 788
-------- -------- -------- -------- -------- --------
Total Loans......... $115,008 $115,032 $112,806 $153,198 $214,462 $224,641
======== ======== ======== ======== ======== ========
</TABLE>
The following table reflects at March 31, 1997 remaining maturities of loans
by type and with fixed or floating interest rates.
LOAN MATURITIES
<TABLE>
<CAPTION>
OVER 1
YEAR
1 YEAR THROUGH OVER
OR LESS 5 YEARS 5 YEARS TOTAL
-------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate................................. $ 52,763 $ 54,399 $35,637 $142,799
Consumer.................................... 11,988 28,781 2,515 43,284
Commercial and industrial................... 17,839 10,085 1,179 29,103
Agricultural (non-real estate).............. 6,352 1,883 432 8,667
Other....................................... 780 8 -- 788
-------- -------- ------- --------
$ 89,722 $ 95,156 $39,763 $224,641
======== ======== ======= ========
Fixed rate.................................. $ 86,587 $ 93,866 $11,817 $192,270
Floating rate............................... 3,135 1,290 27,946 32,371
-------- -------- ------- --------
$ 89,722 $ 95,156 $39,763 $224,641
======== ======== ======= ========
</TABLE>
NONPERFORMING ASSETS
Nonperforming assets consist of (i) nonaccrual loans, (ii) loans for which
the terms have been restructured to provide a reduction or deferral of
interest or principal because of a deterioration in the financial position of
the borrower and (iii) real estate or other assets that have been acquired in
partial or full satisfaction of loan obligations or upon foreclosure. As of
March 31, 1997, two loan relationships totaling $1.4 million accounted for 78%
of the total $1.8 million nonaccrual loans. These large nonaccrual loans are
primarily secured by real estate.
22
<PAGE>
The Company's policy generally is to place a loan on nonaccrual status when
payment of principal or interest is contractually past due 90 days, or earlier
when concern exists as to the ultimate collection of principal and interest.
At the time a loan is placed on nonaccrual status, interest previously accrued
but uncollected is reversed and charged against interest income. If a loan is
determined to be uncollectible, the portion of the loan principal determined
to be uncollectible will be charged against allowance for loan losses.
Interest income on nonaccrual loans is recognized on a cash basis when and if
actually collected.
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans and foreclosed assets held for
sale.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------ ---------
1992 1993 1994 1995 1996 1997
------ ------ ---- ------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans.............. $ 261 $1,931 $571 $1,181 $2,057 $1,771
Accruing loans 90 days or more
past due..................... 312 62 67 124 253 22
Restructured not included
above........................ -- -- -- -- -- --
------ ------ ---- ------ ------ ------
Total nonperforming loans... 573 1,993 638 1,305 2,310 1,793
Foreclosed assets held for
sale(/1/).................... 2,785 745 189 29 47 113
------ ------ ---- ------ ------ ------
Total nonperforming assets.. $3,358 $2,738 $827 $1,334 $2,357 $1,906
====== ====== ==== ====== ====== ======
Nonperforming loans to total
loans........................ 0.50% 1.73% 0.57% 0.85% 1.08% 0.80%
Nonperforming assets to total
assets....................... 1.91 1.51 0.50 0.63 0.87 0.66
</TABLE>
- --------
(1) Foreclosed assets held for sale are generally written down to appraised
value at the time of transfer from the loan portfolio into repossessions
or other real estate owned. The value of such assets is reviewed from time
to time throughout the holding period, with the value being adjusted to
the then market value, if lower, until disposition. Under Arkansas banking
law, other real estate owned is required to be written off over a five
year period ( 1/60th per month) unless approval of the Arkansas State Bank
Department can be obtained to write such assets off over an extended
period.
23
<PAGE>
ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for the periods indicated is
shown in the table below:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------- ---------
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance of allowance for
loan losses at begin-
ning of period......... $1,535 $2,011 $1,716 $1,649 $1,909 $3,019
------ ------ ------ ------ ------ ------
Loans charged off:
Real estate:
Single family residen-
tial................. 88 20 58 14 73 2
Non-farm/non-residen-
tial................. 281 537 34 51 -- --
Agricultural.......... 184 -- -- -- -- --
Construction/land de-
velopment............ -- -- -- -- -- --
Multifamily residen-
tial................. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total real estate... 553 557 92 65 73 2
------ ------ ------ ------ ------ ------
Consumer............... 86 15 31 44 216 48
Commercial and indus-
trial................. 125 46 3 47 128 --
Agricultural (non-real
estate)............... 10 60 -- -- -- --
------ ------ ------ ------ ------ ------
Total loans charged
off................ 774 678 126 156 417 50
------ ------ ------ ------ ------ ------
Recoveries of loans pre-
viously charged off:
Real estate:
Single family residen-
tial................. 9 7 -- -- 2 --
Non-farm/non-residen-
tial................. 4 2 7 33 -- --
Agricultural.......... 3 2 -- -- -- --
Construction/land de-
velopment............ -- -- -- -- -- --
Multifamily residen-
tial................. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total real estate... 16 11 7 33 2 --
------ ------ ------ ------ ------ ------
Consumer............... 13 23 12 23 35 12
Commercial and indus-
trial................. 2 9 -- -- 4 --
Agricultural (non-real
estate)............... -- 2 2 -- -- --
------ ------ ------ ------ ------ ------
Total recoveries.... 31 45 21 56 41 12
------ ------ ------ ------ ------ ------
Net loans charged off... 743 633 105 100 376 38
Provision charged to op-
erating expense........ 1,219 338 339 360 1,486 259
Sale of subsidiary...... -- -- (301) -- -- --
------ ------ ------ ------ ------ ------
Balance, end of period.. $2,011 $1,716 $1,649 $1,909 $3,019 $3,240
====== ====== ====== ====== ====== ======
Net charge-offs to aver-
age loans outstanding
during the periods in-
dicated................ 0.62% 0.52% 0.09% 0.08% 0.21% 0.07%(/1/)
Allowance for loan
losses to total loans.. 1.75 1.49 1.46 1.25 1.41 1.44
Allowance for loan
losses to nonperforming
loans.................. 350.96 86.10 258.46 146.28 130.69 180.70
</TABLE>
- --------
(1) Annualized. Results for the three months ended March 31, 1997 may not be
indicative of full year results.
The amounts of additions to the allowance for loan losses are based on
management's judgment and evaluation of the loan portfolio, with consideration
given to the nature and volume of such portfolio, overall portfolio quality,
review of specific problem loans, historical loan loss experience and economic
and business conditions that may affect the borrowers' ability to pay or the
value of the collateral securing the loans. It is management's practice to
review the allowance on a quarterly basis to determine whether the amount of
regular monthly provisions should be increased or decreased or whether
additional provisions should be made to the allowance after considering the
factors noted above. No specific allocation of the allowance is made among or
within specific categories of loans, nor does the Company take into account
any specific risk characteristics attributable to types of loans in
determining such allowance.
24
<PAGE>
The Company maintains an internal grading system which assigns each loan
(other than consumer loans) to one of seven risk categories, with each
category being assigned a specific reserve allocation percentage and
reflecting a varying level of risk based upon individual loan characteristics.
Loan grades for individual loans are changed from time to time to reflect an
ongoing assessment of loan risk. Reserves are calculated for consumer loans in
various percentages based upon the loan status being classified as current,
overdue from 30 to 89 days or overdue 90 or more days. Reserve allocations are
also calculated for outstanding letters of credit, outstanding loan
commitments and unfunded loan balances. The sum of these allocations is
utilized by management as the primary indicator of the appropriate reserve
level. The Company also maintains an internally classified loan list that,
along with the list of nonaccrual or nonperforming loans, helps management
assess the overall quality of the loan portfolio and the adequacy of the
allowance. Loans classified as "substandard" are those loans with clear and
defined weaknesses such as highly leveraged positions, unfavorable financial
ratios, uncertain repayment sources or poor financial condition, which may
jeopardize recoverability of the loan. Loans classified as "doubtful" are
those loans that have characteristics similar to substandard loans, but also
have an increased risk that a loss may occur or at least a portion of the loan
may require a charge-off if liquidated at present. Although loans classified
as substandard do not duplicate loans classified as doubtful, both substandard
and doubtful loans may include some loans that are past due at least 90 days,
are on nonaccrual status or have been restructured. Loans classified as "loss"
are those loans that are in the process of being charged off. At March 31,
1997 "substandard" loans not designated as nonaccrual or 90 days past due
totaled $1.5 million. There were no loans designated as "doubtful" or "loss"
at March 31, 1997.
Administration of the subsidiary banks' lending function is the
responsibility of the Chief Executive Officer and senior lenders at each
profit center. Such officers perform their lending duties subject to the
oversight and policy direction of the Board of Directors of each bank and the
loan committee of each bank. Loan authorities are granted to bank officers as
follows:
<TABLE>
<CAPTION>
TITLE SECURED AUTHORITY UNSECURED AUTHORITY
----- ----------------- -------------------
<S> <C> <C>
Chairman/Chief Executive Officer..... $500,000 $150,000
President............................ $250,000 $ 75,000
Executive Vice President/Senior Vice
President........................... $200,000 $ 50,000
Loan Officer......................... $100,000 $ 10,000
</TABLE>
Loans and aggregate loan relationships above $500,000 secured and $150,000
unsecured up to the lending limit of the banks can be authorized by the loan
committees or the Boards of Directors. At monthly meetings, the Boards of
Directors monitor loan delinquencies, the status of nonperforming assets, the
level and adequacy of the allowance for loan losses and other related matters.
The Company's compliance officer is responsible for serving the bank
subsidiaries of the Company in the loan review and compliance areas. Periodic
reviews of each profit center are scheduled for the purpose of evaluating
asset quality and effectiveness of loan administration. The compliance officer
prepares loan review reports which identify deficiencies, establish
recommendations for improvement, and outline management's proposed action plan
for curing the deficiencies. This report is provided to an audit committee,
which consists of three non-employee members of the Boards of Directors.
Based on the above-noted procedures, management is of the opinion that the
allowance at March 31, 1997 of $3.2 million is adequate. While management
believes the current allowance is adequate, changing economic conditions and
other conditions may require future additions to the allowance. Moreover, the
allowance is subject to regulatory examination and determinations as to
adequacy. Although not presently anticipated, adjustments to the allowance may
result from regulatory examinations.
INVESTMENTS AND SECURITIES
The Company's securities portfolio is the second largest component of
earning assets, provides a significant source of revenue for the Company and
acts as a source of funding should the Company experience unanticipated
deposit withdrawals or loan demand. The table below presents the amortized
cost and the fair value of investment securities for each of the dates
indicated.
25
<PAGE>
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------------------------- --------------------
1994 1995 1996 1997
-------------------- -------------------- -------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE/(1)/ COST VALUE/(1)/ COST VALUE/(1)/ COST VALUE/(1)/
--------- ---------- --------- ---------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities of U.S.
Government agencies.... $23,910 $22,524 $14,001 $13,831 $23,881 $23,896 $27,673 $27,458
Mortgage-backed
securities............. 11,601 11,018 14,014 14,153 10,119 10,256 9,959 10,092
Obligations of states
and political
subdivisions........... 5,317 5,321 8,126 8,191 4,094 4,119 3,176 3,204
Other securities........ 500 490 981 981 1,353 1,353 1,429 1,429
------- ------- ------- ------- ------- ------- ------- -------
Total.................. $41,328 $39,353 $37,122 $37,156 $39,447 $39,624 $42,237 $42,183
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1)The fair value of the Company's financial instruments is determined
pursuant to Statement of Financial Accounting Standards No. 107.
The following table reflects the amortized cost, by contractual maturity, of
the Company's investment securities at March 31, 1997 and weighted average
yields (for tax-exempt obligations on a fully taxable equivalent basis,
assuming a 34% tax rate) of such securities. Expected maturities will differ
from contractual maturities, because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------------------
1 YEAR OVER 1 YEAR OVER 5 YEARS
OR LESS THRU 5 YEARS THRU 10 YEARS OVER 10 YEARS TOTAL FAIR VALUE
------- ------------ ------------- ------------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Securities of U.S.
Government agencies.... $3,669 $11,035 $10,968 $ 2,001 $27,673 $27,458
Mortgage-backed
securities............. -- -- -- 9,959 9,959/(1)/ 10,092
Obligations of states
and political
subdivisions........... 220 839 1,145 972 3,176/(2)/ 3,204
Other securities........ -- -- -- 1,429 1,429 1,429
------ ------- ------- ------- ------- -------
Total.................. $3,889 $11,874 $12,113 $14,361 $42,237 $42,183
====== ======= ======= ======= ======= =======
Percentage of total..... 9.21% 28.11% 28.68% 34.0% 100%
Weighted average
yield/(3)/............. 6.27 6.90 7.42 6.79 6.95
</TABLE>
- --------
(1) At March 31, 1997 approximately $9.7 million of these securities earned
interest at floating rates repricing monthly.
(2) At March 31, 1997 approximately $2.2 million of these securities earned
interest at floating rates repricing semi-annually.
(3) The weighted average yields are based on book value and effective yields
weighted for the scheduled maturity of each security.
DEPOSITS
The Company's subsidiary banks' lending and investing activities are funded
primarily by deposits, approximately 66.4% of which were time deposits and
33.6% of which were demand deposits at March 31, 1997. Interest bearing demand
deposits consist of transaction, savings and money market accounts which
comprised 10.1%, 3.4% and 10.5%, respectively, of total deposits at March 31,
1997. Non-interest bearing demand deposits at March 31, 1997 constituted
approximately 9.6% of total deposits.
26
<PAGE>
The following table reflects the classification of the average deposits and
the average rate paid on each deposit category for the periods indicated.
AVERAGE DEPOSIT BALANCES AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ---------------------
1994 1995 1996 1997
---------------- ---------------- ---------------- ---------------------
AVERAGE AVERAGE AVERAGE AVERAGE
AVERAGE RATE AVERAGE RATE AVERAGE RATE AVERAGE RATE
AMOUNT PAID AMOUNT PAID AMOUNT PAID AMOUNT PAID
-------- ------- -------- ------- -------- ------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts............... $ 16,279 -- $ 16,492 -- $ 20,129 -- $ 22,052 --
Interest bearing
accounts:
Transaction (NOW)....... 23,381 2.08% 19,911 2.16% 22,209 2.20% 24,762 2.26%
Savings................ 8,654 2.10 7,568 2.15 8,238 2.14 8,190 2.08
Money market........... 17,644 2.43 13,058 2.46 18,542 3.49 24,915 3.91
Time deposits less than
$100,000.............. 63,454 4.14 85,936 5.83 102,076 5.60 115,165 5.53
Time deposits $100,000
or more............... 19,542 4.03 24,307 5.91 34,689 5.69 43,812 5.59
-------- -------- -------- -----------
Total deposits......... $148,954 $167,272 $205,883 $ 238,896
======== ======== ======== ===========
</TABLE>
The following table sets forth by time remaining to maturity, time deposits
in amounts of $100,000 or more at March 31, 1997.
<TABLE>
<CAPTION>
TIME CERTIFICATES OF DEPOSIT
($100,000 OR MORE)(/1/)
----------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Maturity
--------
3 months or less................................ $13,171
3 to 6 months................................... 12,490
6 to 12 months.................................. 12,107
Over 12 months.................................. 6,524
-------
$44,292
=======
</TABLE>
- --------
(1) Other than certificates of deposit, the Company had no time deposits in
excess of $100,000 as of March 31, 1997.
INTEREST RATE SENSITIVITY
Management continuously reviews the Company's exposure to changes in
interest rates. On a monthly basis the Boards of Directors of the subsidiary
banks review each bank's interest rate risk position. Among the factors
considered by management and the Board of Directors are changes in the mix of
earning assets and interest bearing liabilities, interest rate spreads and
repricing periods. Typically, management and the Board of Directors review on
a monthly basis the bank's relative ratio of rate sensitive assets to rate
sensitive liabilities and the related cumulative gap for four different time
periods--three months, six months, one year and two years. Additionally,
management and the Boards of Directors review other alternative interest rate
risk measures and models in assessing the Company's interest rate sensitivity.
As shown in the table below, the cumulative rate sensitive assets to rate
sensitive liabilities at six months and one year, respectively, was 85.9% and
85.3%. A financial institution is considered to be liability sensitive, or as
having a negative GAP, when the amount of its interest bearing liabilities
maturing or repricing within a given time period exceeds the amount of its
interest earning assets also maturing or repricing within that time period.
Conversely, an institution is considered to be asset sensitive, or as having a
positive GAP, when the
27
<PAGE>
amount of its interest bearing liabilities maturing and repricing is less than
the amount of its interest earning assets also maturing or repricing during
the same period. Generally, in a falling interest rate environment, a negative
GAP should result in an increase in net interest income, and in a rising
interest rate environment this negative GAP should adversely affect net
interest income. The converse would be true for a positive GAP. Since
conditions change on a daily basis, these theoretical conclusions may not be
indicative of future results.
RATE SENSITIVE ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------------------------------------
RATE RATE CUMULATIVE CUMULATIVE
SENSITIVE SENSITIVE PERIOD CUMULATIVE GAP TO RSA/(1)/ TO
ASSETS LIABILITIES GAP GAP TOTAL RSA/(1)/ RSL/(2)/
--------- ----------- --------- ---------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Floating rate........... $ 16,235 $ 28,399 $ (12,164) $ (12,164) (4.57)% 57.17%
Fixed rate repricing in:
1 month............... 19,542 15,159 4,383 (7,781) (2.92) 82.14
2 month............... 17,108 15,971 1,137 (6,644) (2.50) 88.84
3 month............... 17,972 17,726 246 (6,398) (2.40) 91.72
4 month............... 10,825 11,849 (1,024) (7,422) (2.79) 91.67
5 month............... 9,746 10,835 (1,089) (8,511) (3.20) 91.48
6 month............... 11,859 20,253 (8,394) (16,905) (6.35) 85.94
6 months--1 year...... 47,145 56,157 (9,012) (25,917) (9.73) 85.30
1--2 years............ 34,911 31,601 3,310 (22,607) (8.49) 89.13
2--3 years............ 25,602 6,308 19,294 (3,313) (1.24) 98.45
3--4 years............ 21,141 8,235 12,906 9,593 3.60 104.31
4--5 years............ 11,121 7,023 4,098 13,691 5.14 105.97
Over 5 years.......... 23,059 11,782 11,277 24,968 9.38 110.35
-------- -------- ---------
Total............... $266,266 $241,298 $ 24,968
======== ======== =========
</TABLE>
- --------
(1) Rate Sensitive Assets
(2) Rate Sensitive Liabilities
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented elsewhere
in this Prospectus have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the
changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of the Company's
operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Company are monetary in nature. As a result, interest rates
have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.
LIQUIDITY AND CAPITAL RESOURCES
Holding Company. At March 31, 1997 the Company had outstanding notes payable
of $5.4 million. Effective May 16, 1997 the Company entered into a $10.0
million term loan and revolving credit facility with Union Planters National
Bank, Memphis, Tennessee (the "Credit Facility"). The proceeds from the Credit
Facility were used to repay outstanding notes payable and to fund capital
investments in the Company's subsidiary banks. The term loan portion has a
principal balance of $5.0 million, payable in equal annual installments of
$500,000 commencing December 21, 1998 plus interest payable annually at 8.804%
per annum commencing December 21, 1997. The term loan matures on December 21,
2007 and provides for prepayment penalties under certain circumstances.
28
<PAGE>
The Credit Facility also provides for a revolving line of credit of up to
$5.0 million. Advances remaining unpaid for any consecutive period of 365 days
are converted to term loans under the facility, with a corresponding reduction
in availability, and are payable in equal annual installments of principal
through December 21, 2007. Interest accrues on outstanding borrowings under
the revolving line of credit (including any amounts converted to term loans
thereunder) at a variable rate equal to average prime lending rate reported
from time to time by the Wall Street Journal minus 0.25% and is payable
quarterly commencing June 21, 1997. The revolving line of credit commitment is
effective through December 21, 2007, subject to an annual compliance review by
the lender. No standby or unused commitment fees are payable by the Company
under the revolving line of credit.
The Credit Facility requires the Company's bank subsidiaries to maintain (i)
a return on average assets (commencing in 1997) for each calendar year equal
to at least 1.0%, (ii) a ratio of primary capital to assets at levels
acceptable to bank regulatory authorities but at least 7.0% at each calendar
year end and (iii) net charges to the reserve for loan losses at less than
1.0% of net loans during any calendar year. In addition, the Company may not
incur indebtedness if its aggregate indebtedness would exceed 60.0% of the
Company's tangible net worth or if borrowings under the Credit Facility would
exceed 50.0% of the tangible book value of all subsidiary bank stock pledged
to secure borrowings under the facility.
Borrowings under the Credit Facility are secured by a pledge of 80% of the
Company's stock in the subsidiary banks. As of May 16, 1997 there was $5.0
million borrowed under each of the term and revolving portions of the Credit
Facility. Immediately following completion of this offering, it is anticipated
that all outstanding borrowings under the revolving line of credit will be
repaid in full. See "Use of Proceeds" and "Capitalization."
The Company has leveraged its investment in its subsidiary banks and depends
upon the dividends paid to it, as sole stockholder thereof, as a principal
source of funds for debt service requirements. Federal and State banking
regulations restrict the payment of dividends by the Company's subsidiary
banks. Management expects this level of dividends to be more than adequate to
meet the Company's capital needs including capital required to meet the debt
service requirements imposed under the Credit Facility.
Banking Subsidiaries. Liquidity represents an institution's ability to
provide funds to satisfy demand from depositors and borrowers by either
converting assets into cash or accessing new or existing sources of
incremental funds. Generally, the Company's banking subsidiaries rely on
customer deposits and loan repayments as their primary source of funds. These
funds are used to make loans, acquire investment securities and other assets
and fund continuing operations.
The Company has experienced significant growth in its loan portfolio which
has resulted in a high loan to deposit ratio (90.9% at March 31, 1997). While
scheduled loan repayments are a relatively stable source of funds, such loans
generally are not readily convertible to cash. Additionally, deposit levels
may be affected by a number of factors, including rates paid by competitors,
general interest rate levels, returns available to customers on alternative
investments and general economic conditions. Accordingly, the Company may be
required from time to time to rely on secondary sources of liquidity to meet
withdrawal demands or otherwise fund operations. Such sources include
unsecured and secured FHLB advances, federal funds lines of credit from
correspondent banks, and borrowings by the Company under its revolving credit
facility, as described above.
At March 31, 1997 the Company's bank subsidiaries had an aggregate of $36.0
million of unused blanket unsecured FHLB borrowing availability. Additionally,
at March 31, 1997 the bank subsidiaries maintained pre-approved unsecured
federal funds lines of credit in an amount of up to $6.1 million. Since March
31, 1997 the Company has arranged additional federal funds lines of credit of
up to $9.0 million, for total federal funds availability of approximately
$15.1 million.
At March 31, 1997 the Company had net outstanding loan commitments
(including unfunded balances on outstanding lines of credit and construction
and other loans) of $18.7 million. The Company anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
29
<PAGE>
Management anticipates that the Company's bank subsidiaries will continue to
rely primarily on customer deposits and loan repayments to provide liquidity.
Additionally, where necessary, the above described borrowings (including
borrowings under the Company's Credit Facility) will be used to augment the
Company's primary funding sources.
Management believes it is important to maximize net interest income while
maintaining prudent liquidity restraints. Internal corporate guidelines have
been established to regularly monitor liquid assets as well as relevant ratios
concerning earning asset levels and purchased or borrowed funds. Management of
each bank is also required to monitor these same indicators and report
regularly to their own senior management and the Board of Directors.
Capital Compliance. At December 31, 1995 and 1996 total stockholders' equity
was $16.3 million and $18.5 million, respectively, representing 7.67% and
6.85% of total assets. At March 31, 1997 total stockholders' equity was $19.1
million or 6.65% of total assets.
Bank regulatory authorities in the United States have issued risk-based
capital standards by which all bank holding companies and banks will be
evaluated in terms of capital adequacy. These guidelines relate a financial
institution's capital to the risk profile of its assets. The risk-based
capital standards required for all banks and bank holding companies is Tier 1
capital of at least 4% and total capital (Tier 1 and Tier 2) of at least 8% of
risk weighted assets. Tier 1 capital includes common stockholders' equity and
certain other qualifying items. Tier 2 capital is comprised of allowance for
loan losses (up to but not exceeding 1.25% of risk weighted assets) plus
certain qualifying preferred stock and debt instruments. Bank regulators have
also issued leverage ratio requirements. The leverage ratio requirement is
measured as the ratio of Tier 1 capital to adjusted total assets. See
"Supervision and Regulation."
30
<PAGE>
The Company's risk-based capital ratios at December 31, 1995 and 1996 and
March 31, 1997 are presented below, followed by the capital ratios of each of
the Company's two bank subsidiaries, at such dates.
CONSOLIDATED RISK-BASED CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ ---------
1995 1996 1997
-------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tier 1 capital:
Stockholders' equity........................... $ 16,294 $ 18,547 $ 19,076
Add (less) net unrealized losses (gains) on
available for sale securities................. (9) (99) 41
Less goodwill.................................. (1,451) (1,394) (1,380)
-------- -------- --------
Total tier 1 capital.......................... 14,834 17,054 17,737
-------- -------- --------
Tier 2 capital:
Qualifying allowance for loan losses........... 1,892 2,529 2,667
-------- -------- --------
Total risk-based capital...................... $ 16,726 $ 19,583 $ 20,404
======== ======== ========
Risk-weighted assets............................. $151,361 $201,802 $213,904
======== ======== ========
Ratios at end of year:
Leverage/(1)/.................................. 7.49% 6.42% 6.40%
Tier 1 risk-based capital...................... 9.80 8.45 8.29
Total risk-based capital....................... 11.05 9.70 9.53
Minimum ratio guidelines:
Leverage/(2)/.................................. 3.00% 3.00% 3.00%
Tier 1 risk-based capital...................... 4.00 4.00 4.00
Total risk-based capital....................... 8.00 8.00 8.00
</TABLE>
CAPITAL ADEQUACY MEASURES BY SUBSIDIARY BANKS
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
OZARK WCA OZARK NWA
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholders' equity............................... $ 15,445 $ 7,259
Leverage ratio/(3)/................................ 8.27% 8.06%
Risk-based capital ratios:
Tier 1........................................... 10.66 11.17
Total capital.................................... 11.91 12.42
</TABLE>
- --------
(1) Based upon quarterly average assets (excluding goodwill) of $199.5
million, $266.9 million and $272.0 million at December 31, 1995 and 1996
and March 31, 1997, respectively.
(2) Regulatory authorities require institutions to operate at varying levels
(ranging from 100--200 basis points) above a minimum leverage ratio of 3%
depending upon capitalization classification.
(3) Based upon quarterly average assets of $186.8 million for Ozark WCA and
$90.0 million for Ozark NWA.
31
<PAGE>
BUSINESS
GENERAL
The Company is an Arkansas business corporation registered under the Bank
Holding Company Act of 1956. The Company owns two state chartered subsidiary
banks, Ozark WCA and Ozark NWA, that conduct banking operations through 11
branches and two loan production offices in ten communities throughout
northern, western and central Arkansas. At March 31, 1997 the Company had
total assets of $286.9 million, net loans of $221.4 million and total deposits
of $247.3 million.
The Company provides a wide range of retail and commercial banking services.
Deposit services include non-interest bearing and interest bearing checking,
savings, money market, CDs and individual retirement accounts. Loan services
include various types of real estate loans, consumer loans, commercial and
industrial loans, and agricultural loans. During 1996 the Company began a full
service secondary market mortgage operation to originate and sell residential
real estate mortgages. Other banking services offered include safety deposit
boxes, real estate appraisals, credit related life and disability insurance,
ATMs, telephone banking, credit cards and merchant credit card services.
Through Ozark WCA, the Company provides a wide range of personal and corporate
trust services.
Since 1994 the Company has experienced significant growth in operations and
maintained favorable returns on assets and stockholders' equity. Between
December 31, 1994 and March 31, 1997 the Company's total assets increased from
$165.0 million to $286.9 million, net loans increased from $111.2 million to
$221.4 million, and total deposits increased from $148.5 million to $247.3
million. For the fiscal year ended December 31, 1996 the Company's return on
average assets was 1.26% and its return on average stockholders' equity was
17.7%.
BUSINESS STRATEGY
The Company's goal is to maximize long-term stockholder value through strong
year-to-year growth in assets, loans, deposits and net income in a manner
consistent with safe, sound and prudent banking practices. To achieve this
goal, the Company's business strategy is to:
. Expand loans and deposits through market share growth and de novo
branching;
. Provide customers with the breadth of products and financial services of
a regional bank;
. Employ, empower and motivate management to provide personalized customer
service, consistent with the best traditions of community banking, while
maximizing profits; and
. Maintain asset quality and control overhead expense.
GROWTH STRATEGY
The Company's growth strategy, which combines market share expansion and de
novo branching, has resulted in substantial asset growth. The Company seeks to
(i) branch in strategic locations, (ii) utilize product superiority and
pricing to achieve loan and deposit growth, (iii) aggressively market the
Company's products and services and (iv) capitalize on opportunities presented
by banking industry consolidation.
In 1994 the Company initiated an expansion strategy, via de novo branching,
into target Arkansas markets. Since embarking on this strategy, the Company
has opened six new branches and two loan production offices in northern,
western and central Arkansas. The Company currently has two full service
branch facilities under construction in Alma and Paris, Arkansas, both of
which are anticipated to open during the third quarter of 1997.
The Company plans to acquire the location for and seek regulatory approval
to open a Fort Smith, Arkansas facility which will operate as a full service
branch and the Company's western division headquarters. This facility
32
<PAGE>
is expected to open during 1998. The Company also plans to seek regulatory
approval to build a headquarters facility on a newly acquired Little Rock,
Arkansas site that will consolidate its existing Little Rock offices (the
holding company office, commercial loan production office, and residential
mortgage loan production office) into a single location. The Company
anticipates applying for regulatory approval to convert this facility to a
full service banking operation when statewide branching becomes permissible on
January 1, 1999. Beyond these planned locations, the Company intends to pursue
its growth strategy with the objective of developing a regional franchise
throughout northern, western and central Arkansas.
The following table reflects the growth in loans and deposits for the
Company's profit centers as of December 31, 1995 and 1996 and March 31, 1997:
<TABLE>
<CAPTION>
LOANS DEPOSITS
MONTHS IN --------------------------- ---------------------------
OPERATION AS AS OF AS OF AS OF AS OF
OF MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
------------ ----------------- --------- ----------------- ---------
PROFIT CENTER 1997 1995 1996 1997 1995 1996 1997
------------- ------------ -------- -------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Ozark................... * $ 72,874 $ 67,602 $ 66,972 $ 98,208 $110,857 $107,348
Jasper.................. * 14,564 16,465 16,703 29,426 30,530 32,579
Western Grove........... * 25,908 25,499 27,111 14,867 12,644 14,038
Clarksville (#1 & #2)... 28 12,693 25,868 27,644 18,565 26,496 28,150
Marshall................ 25 6,994 10,631 11,037 11,321 16,279 17,847
Little Rock commercial
loan production
office................. 20 12,915 31,545 32,435 -- -- --
Van Buren............... 18 7,250 16,381 18,073 10,076 17,830 20,873
Harrison................ 14 -- 14,766 17,629 -- 17,012 20,135
Little Rock residential
mortgage loan
production office...... 8 -- 5,705 7,003 -- -- --
Telebank (Ozark)........ 3 -- -- -- -- -- 1,988
Mulberry................ 2 -- -- 34 -- -- 4,305
-------- -------- -------- -------- -------- --------
Total................... $153,198 $214,462 $224,641 $182,463 $231,648 $247,263
======== ======== ========
Less allowance for loan
losses................. 1,909 3,019 3,240
-------- -------- --------
Net loans............... $151,289 $211,443 $221,401
======== ======== ========
</TABLE>
- --------
* Operations commenced in Ozark, Jasper and Western Grove in 1937, 1903 and
1976, respectively.
The Company also intends to capitalize on the opportunities presented by the
continued consolidation in the banking industry. Many financial institutions
operating in the Company's market areas have become branches or subsidiaries
of larger statewide, regional or national organizations. Management believes
that many of these organizations have shifted decision making and certain
services away from local offices while in many cases reducing local personnel.
Such actions have created substantial opportunities for the Company to
increase market share and develop valuable customer relationships. The Company
has also been able to employ quality senior loan officers and other management
personnel from these competitors.
33
<PAGE>
BANKING PRODUCTS AND SERVICES
The Company has expanded its traditional banking products and services in
recent years. New offerings are designed to provide customers with a
competitive or superior array of products and services in each of the markets
it serves. The Company has recently introduced or is currently developing the
following:
Triple Option CD. In 1996 the Company introduced the "Triple Option CD"
which provides customers with one-time options during the 13-month term to
(i) increase the amount by up to 100% of the original balance, (ii)
withdraw, without penalty, up to 50% of the original balance and (iii)
increase the stated interest rate to match subsequent rate increases in
this product.
Money Market Gold Account. In 1996 the Company introduced a "Money Market
Gold" account designed to provide yields competitive with short-term money
market mutual funds.
Other Special CD Products. From time to time the Company offers special
CD products paying highly competitive rates with atypical maturities (e.g.,
7 months, 10 months, 20 months). These special products are heavily
marketed and generally used to establish initial market share in new
markets or attract large numbers of new customers in existing markets.
Free Checking. In 1996 the Company began offering totally free checking
accounts. These accounts feature no minimum balance requirements, no
monthly service charges, unlimited check writing privileges and free check
safekeeping.
Cash Management Services. The Company is developing and plans to offer
within 12 months a number of new cash management products including a cash
consolidation product that will permit commercial customers to
electronically transfer funds, via the ACH network, from other depository
banks to their deposit accounts with the Company. Other products under
development include account analysis, sweep services and repurchase
agreements.
ATM Network. The Company has installed networked ATMs at eight locations
and plans to include ATMs at future full service branches.
Telephone Banking Services. In 1997 the Company introduced a telephonic
voice response system which allows deposit customers to access information
regarding their individual accounts. The Company also introduced a
"Telebank" service whereby customers may open deposit accounts, effect fund
transfers to or from such accounts and obtain current rate and other
information on the Company's products and services.
Debit Cards. Within 12 months, the Company plans to introduce "debit"
cards whereby the amount of the transaction is deducted from the
cardholder's checking account.
Secondary Market Mortgage Loans. In 1996 the Company expanded its
residential mortgage product line by offering long-term fixed and variable
rate loans to be resold on a servicing released basis in the secondary
market. The Company originates such loans at its Little Rock residential
mortgage loan production office and its Van Buren, Clarksville and Harrison
offices. For the three months ended March 31, 1997 the Company originated
$4.0 million of residential mortgage loans which have been sold in the
secondary market.
Home Equity Lines of Credit. Within 12 months, the Company plans to offer
lines of credit to qualified customers secured by residential real estate.
The Company plans to continue to develop loan and deposit products to meet
changing customer needs and expectations.
MANAGEMENT STRUCTURE AND INCENTIVES
The Company believes that an empowered management team, motivated to provide
high quality, personalized customer service while maximizing profits, is a
critical element of its business strategy. The Company implements this element
of its strategy by (i) employing experienced, customer-oriented personnel,
34
<PAGE>
(ii) using a decentralized and streamlined management structure, (iii)
organizing its operations into separately accountable profit centers and (iv)
providing incentive compensation designed to reward positive financial
performance.
The Company strives to create the personal and comfortable atmosphere of a
small hometown bank. A decentralized management structure allows managers to
make credit and other banking decisions efficiently while providing a higher
degree of service and increased flexibility to local customers. The Company's
profit center managers and their staff are encouraged to pursue quality
customer service and active community involvement and to develop extensive
market knowledge, new business and customer relationships. The Company
believes that its ability to identify, hire, direct and motivate managers is
one of its distinguishing attributes.
The Company is divided into 11 separate profit centers for operation,
accounting, budgetary and bonus incentive purposes. Accountability and control
of each profit center is maintained through (i) direct senior management
oversight of profit center managers and their operating results, (ii) review
of asset quality and regulatory compliance by the Company's internal loan
review and compliance officer, and (iii) review of operations by the Company's
internal audit officer.
In 1996 the Company implemented an incentive cash bonus plan which pays
benefits to all employees based upon growth and profitability. The plan
measures actual performance against budgeted performance at each profit
center. The plan assigns customized performance criteria to each profit
center, with a common criterion being increased profitability. Management
believes this plan has been successful in focusing individuals on the key
performance areas of their respective profit centers. In 1996 the Company paid
$223,000 to employees under this plan.
Furthermore, the Company provides employees with additional incentive
compensation through participation in an employee stock ownership plan.
Following completion of this offering, the Company plans to provide additional
equity based compensation in the form of discretionary stock options to
further align the interests of management and stockholders. See "Management--
Employee Stock Ownership Plan," "--Director Compensation" and "--Stock Option
Plan."
ASSET QUALITY
The successful implementation of the Company's business strategy requires an
emphasis on maintaining asset quality. The Board of Directors and senior
management regularly monitor asset quality. In addition, the Company employs
profit center managers and other loan personnel based in substantial part upon
their ability to properly underwrite, originate and service loans. The
Company's procedures to maintain favorable asset quality include (i) regular
past due meetings among loan and collection personnel to continuously assess
the status of problem or nonperforming loans, (ii) rapid resolution of
nonaccrual loans with minimal tolerance for loans remaining in nonaccrual
status for extended periods and (iii) prompt and orderly liquidation of other
real estate received upon foreclosure. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Nonperforming
Assets" and "--Allowance for Loan Losses."
OVERHEAD OBJECTIVES
The Company has reduced its overhead ratio (calculated by dividing non-
interest expense by average assets), with the objective of becoming a low cost
provider of banking services. Over the past several years, the Company has
achieved substantial improvements in its overhead ratio as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ---------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Overhead ratio................. 3.98% 3.61% 3.49% 3.23% 2.99% 3.04%
</TABLE>
35
<PAGE>
Although there can be no assurance that this trend will continue, management
believes the Company may be able to achieve additional deposit and loan growth
at certain existing offices, with minimal additions to personnel or other
operating costs, and spread corporate overhead costs over a larger asset base
through the Company's de novo branching strategy.
LENDING ACTIVITIES
The Company's primary source of income is interest earned from its loan
portfolio and, to a lesser extent, earnings on its investment portfolio. In
underwriting loans, primary emphasis is placed on the borrower's financial
condition, including its ability to generate cash flow to support its debt
obligations and other cash expenses. Additionally, substantial consideration
is given to collateral value and marketability, as well as, the borrower's
character, reputation and other relevant factors. The Company's portfolio
includes most types of real estate loans, consumer loans, commercial and
industrial loans agricultural loans and other types of loans. The vast
majority of the properties collateralizing the Company's mortgage loans are
located within the trade areas of the Company's main offices, branches and
loan production offices.
The following table summarizes the loan portfolio of the Company by loan
category, amount and percentage of total loans at December 31, 1994, 1995 and
1996 and March 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------- --------------
1994 1995 1996 1997
-------------- -------------- -------------- --------------
% OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
-------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Single family
residential........... $ 41,494 36.8% $ 55,609 36.3% $ 78,124 36.4% $ 81,747 36.4%
Non-farm/non-
residential........... 22,978 20.4 36,603 23.9 35,258 16.4 36,953 16.5
Agricultural........... 8,373 7.4 9,274 6.0 11,583 5.4 11,308 5.0
Construction/land
development .......... 4,668 4.1 3,471 2.3 8,808 4.1 10,211 4.6
Multifamily
residential........... 3,806 3.4 4,388 2.9 3,743 1.8 2,580 1.1
-------- ----- -------- ----- -------- ----- -------- -----
Total real estate..... 81,319 72.1 109,345 71.4 137,516 64.1 142,799 63.6
Consumer................ 17,583 15.6 25,372 16.6 39,868 18.6 43,284 19.3
Commercial and
industrial............. 6,191 5.5 11,077 7.2 28,154 13.1 29,103 12.9
Agricultural (non-real
estate)................ 6,889 6.1 6,963 4.5 8,363 3.9 8,667 3.9
Other................... 824 0.7 441 0.3 561 0.3 788 0.3
-------- ----- -------- ----- -------- ----- -------- -----
Total loans........... $112,806 100.0% $153,198 100.0% $214,462 100.0% $224,641 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Real Estate Loans. The Company's portfolio of real estate loans includes
loans secured by single family residential, non-farm non-residential,
agricultural, construction and land development, and multifamily (five or
more) properties. Single family residential loans include permanent loans
secured by first liens on one to four family residential properties. Such
loans comprise the majority of the Company's real estate loans. Non-farm non-
residential loans include those secured by real estate mortgages on hotels,
motels, churches, medical facilities, nursing homes, shopping centers, office
buildings, restaurants, and other business and industrial properties.
Agricultural real estate loans include loans secured by farmland and
improvements thereon including loans secured by farmland and guaranteed by the
Farm Service Agency (formerly Farmers Home Administration) or the Small
Business Administration. Real estate construction and land development loans
include loans with original maturities of sixty months or less to finance land
development or construction of industrial, commercial, residential or farm
buildings or additions or alterations to existing structures.
The Company offers a variety of real estate loan products that are generally
amortized over five to thirty years, payable in monthly or other periodic
installments of principal and interest, and due and payable in full (unless
renewed) at a balloon maturity generally within one to five years. Certain
loans not subject to Arkansas' usury law, typically first mortgage residential
loans, may be structured as term loans with adjustable interest rates
36
<PAGE>
(adjustable daily, every six months, annually, or at other regular adjustment
intervals usually not to exceed every five years) and without balloon
maturities.
Single family residential loans are underwritten primarily based on the
borrower's ability to repay, including prior credit history, and the value of
the collateral. Other real estate loans are underwritten based on the ability
of the property, in the case of income producing property, or the borrower's
business to generate sufficient cash flow to amortize the debt. Secondary
emphasis is placed upon collateral value and other factors. Loans
collateralized by real estate have generally been originated with loan to
appraised value ratios of not more than 89% for owner-occupied single family
residential, 85% for other single family residential and other improved
property, 80% for construction loans secured by commercial, multifamily and
other non-residential properties, 75% for land development loans, and 65% for
raw land loans.
The Company typically requires mortgage title insurance in the amount of the
loan and hazard insurance on all improvements. Documentation requirements vary
depending on loan size, type, complexity and other factors.
Consumer Loans. The Company's portfolio of consumer loans generally includes
loans to individuals for household, family and other personal expenditures
(other than those secured by real estate). Proceeds from such loans are used
to, among other things, fund the purchase of automobiles, household
appliances, furniture, trailers, boats and mobile homes, and for credit
extended pursuant to credit card and other similar plans. Consumer loans made
by the Company are generally collateralized with terms typically ranging up to
72 months, depending upon the nature of the collateral and size of the loan.
Consumer loans are attractive to the Company because they generally have a
short term with interest rates at or near the maximum lawful rate in Arkansas.
Such loans, however, do pose additional risks of collectibility and loss when
compared to certain other types of loans. The borrower's ability to repay is
of primary importance in the underwriting of consumer loans.
Commercial and Industrial Loans. The Company's commercial and industrial
loan portfolio consists of loans for commercial, industrial and professional
purposes including loans to fund working capital requirements (such as
inventory, floor plan and receivables financings), purchases of machinery and
equipment, and other purposes. The Company offers a variety of commercial and
industrial loan arrangements, including term loans, balloon loans, and lines
of credit with the purpose of, and collateral supporting, a particular loan
determining its structure. These loans are offered to businesses and
professionals for short and medium terms on both a collateralized and
uncollateralized basis. As a general practice, the Company obtains as
collateral a lien on furniture, fixtures, equipment, inventory, receivables or
other assets.
Commercial and industrial loans typically are underwritten on the basis of
the borrower's ability to make repayment from the cash flow of its business
and generally are collateralized by business assets. As a result, such loans
involve additional complexities, variables and risks and require more thorough
underwriting and servicing than other types of loans.
Agricultural (Non-Real Estate) Loans. The Company's portfolio of
agricultural (non-real estate) loans includes loans for financing agricultural
production, including loans to businesses or individuals engaged in the
production of timber, poultry, livestock and crops. The Company's agricultural
(non-real estate) loans are generally secured by farm machinery, livestock,
crops, vehicles or other agri-related collateral.
DEPOSITS
The Company offers an array of deposit products consisting of non-interest
bearing checking accounts, low cost deposit products, including interest
bearing transaction (such as checking) and savings accounts, and higher cost
deposit products, including money market accounts and CDs. The following table
summarizes the deposit products of the Company by category, amount and
percentage of total deposits at December 31, 1994, 1995 and 1996 and March 31,
1997:
37
<PAGE>
DEPOSITS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------
1994 1995 1996 1997
----------------- ----------------- ----------------- -----------------
% OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts............... $ 14,653 9.9% $ 16,961 9.3% $ 21,295 9.2% $ 23,772 9.6%
Interest bearing ac-
counts:
Transaction (NOW)...... 21,166 14.3 21,157 11.6 24,424 10.5 24,879 10.1
Savings................ 7,549 5.1 7,804 4.3 8,180 3.5 8,472 3.4
Money market........... 13,071 8.8 13,041 7.1 24,325 10.5 25,844 10.5
Time deposits:
Less than $100,000..... 71,903 48.4 94,558 51.8 111,379 48.1 120,004 48.5
$100,000 or more....... 20,111 13.5 28,942 15.9 42,045 18.2 44,292 17.9
-------- ----- -------- ----- -------- ----- -------- -----
Total deposits......... $148,453 100.0% $182,463 100.0% $231,648 100.0% $247,263 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The Company acts as depository for a number of state and local governments
and government agencies or instrumentalities. Such public fund deposits are
often subject to competitive bid and in many cases must be secured by the
Company's pledge of United States Government, government agency, or other
securities. Total public fund deposits at March 31, 1997 aggregated
approximately $24.1 million, or 9.7% of total deposits. On such date, the
Company's subsidiaries had pledged $22.7 million of their investment
securities to collateralize certain deposits, primarily public fund deposits,
in excess of FDIC insurance amounts. As of March 31, 1997 the Company had $2.0
million of outstanding "brokered deposits," defined as deposits which, to the
knowledge of management of the Company, have been placed with the banks by a
person who acts as a broker in placing such deposits on behalf of others.
TRUST SERVICES
Through Ozark WCA, the Company offers a wide range of personal and corporate
trust services. As of December 31, 1995 and 1996 total trust assets under
management by the Company were $13.3 million and $16.4 million, respectively.
COMPETITION
The banking industry in the Company's market area is highly competitive. In
addition to competing with other commercial and savings banks and savings and
loan associations, the Company competes with credit unions, finance companies,
mortgage companies, brokerage and investment banking firms, asset-based non-
bank lenders and many other financial and financial service institutions.
Competition is based upon interest rates offered on deposit accounts, interest
rates charged on loans, fees and service charges, the quality and scope of the
services rendered, the convenience of banking facilities and, in the case of
loans to commercial borrowers, relative lending limits.
A substantial number of the commercial banks operating in the Company's
market area are branches or subsidiaries of much larger organizations
affiliated with statewide, regional or national banking companies, and as a
result may have greater resources and lower costs of funds than the Company.
Additionally, the Company may face increased competition from de novo
community banks, including those with senior management who were previously
with other local banks or those controlled by investor groups with strong
local business and community ties. Management believes the Company will
continue to be competitive because of its strong commitment to quality
customer service, highly autonomous local branches, active community
involvement, and products and pricing.
EMPLOYEES
At March 31, 1997 the Company and its subsidiaries employed 138 full-time
equivalent employees. None of the employees were represented by any union or
similar group, and the Company has not experienced any
38
<PAGE>
labor disputes or strikes arising from any such organized labor groups. The
Company believes its employee relations are good.
PROPERTIES
The Company targets its customers by offering a broad range of banking
services through a total of 11 branches and two loan production offices
throughout northern, western and central Arkansas as follows:
<TABLE>
<CAPTION>
SQUARE
BANKING LOCATION/(1)/ YEAR OPENED FOOTAGE
- --------------------- ------------------- -------
<S> <C> <C>
Ozark (Main)............................... 1971 (expanded 1985) 22,234
Ozark (Westside)........................... 1993 2,520
Altus...................................... 1972 1,500
Clarksville #1............................. 1994 2,520
Clarksville #2/(2)/........................ 1995 3,300
Van Buren.................................. 1995 2,520
Little Rock (corporate office and
commercial loan production office)/(3)/... 1995 4,472
Little Rock (residential mortgage
loan production office)/(3)/.............. 1996 2,000
Mulberry................................... 1997 1,875
Jasper..................................... 1967 (expanded 1984) 4,408
Marshall/(2)/.............................. 1995 2,520
Western Grove.............................. 1976 (expanded 1991) 2,610
Harrison/(2)/.............................. 1996 3,300
Alma/(4)/.................................. -- 4,100
Paris/(4)/................................. -- 3,100
Fort Smith/(5)/............................ -- --
Little Rock/(6)/........................... -- --
</TABLE>
- --------
(1) Unless otherwise indicated, the Company owns, or will own upon the
completion of construction, its banking locations.
(2) The Company owns the improvements and leases the land at these locations.
(3) The Company leases these offices.
(4) The buildings are under construction at these locations and are
anticipated to open in the third quarter of 1997.
(5) The Company plans to purchase a building site for this location and
request regulatory approval for opening a branch. This location is
anticipated to open in 1998.
(6) The Company has purchased a building site for this location and intends to
request regulatory approval to begin construction of a building on this
site in the third quarter of 1997. This building will house the Company's
corporate offices and residential and commercial loan production offices.
The Company owns the buildings comprising all 11 of its branch offices and
owns the land underlying eight of those branches. The Company leases the land
relating to three of its branches, with initial lease terms expiring in 2001,
2007 and 2024, respectively. The Company has renewal options with respect to
the leases expiring in 2001 and 2024 and purchase options on the leases
expiring in 2001 and 2007.
While management believes its existing banking locations are adequate for
its present operations, the Company intends to establish additional branch
offices in the future in accordance with the Company's growth strategy. See
"--Growth Strategy."
LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
However, from time to time the Company is involved in routine legal
proceedings arising in the ordinary course of business. Management does not
believe that any such proceedings, either individually or in the aggregate,
will result in material losses to the Company.
39
<PAGE>
SUPERVISION AND REGULATION
In addition to the generally applicable state and federal laws governing
businesses and employers, bank holding companies and banks are extensively
regulated under both federal and state law. With few exceptions, state and
federal banking laws have as their principal objective either the maintenance
of the safety and soundness of the Bank Insurance Fund ("BIF") of the FDIC or
the protection of consumers or classes of consumers, rather than the specific
protection of the stockholders of the Company. To the extent that the
following information describes statutory and regulatory provisions, it is
qualified in its entirety by reference to those particular statutory and
regulatory provisions. Any change in applicable law or regulation may have an
adverse effect on the results of operation and financial condition of the
Company and its subsidiary banks.
FEDERAL REGULATIONS
Bank Holding Company Act. The Company is subject to the provisions of the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and to supervision
by the Board of Governors of the Federal Reserve System (the "FRB")
thereunder. Federal laws subject bank holding companies to particular
restrictions on the types of activities in which they may engage and to a
range of supervisory requirements and activities, including regulatory
enforcement actions for violations of laws and policies. Because the Company's
subsidiary banks are insured depository institutions who are not member banks
of the Federal Reserve System, they are subject to regulation and supervision
by the FDIC and are not subject to direct supervision by the FRB.
As a bank holding company, the Company's activities, as well as the
activities of companies which are controlled by the Company or in which the
Company owns 5% or more of the voting securities, are limited by the BHCA to
banking, management and control of banks, and furnishing or performing
services for its subsidiaries. Certain exemptions are available to
subsidiaries engaged in servicing or liquidating activities or companies
acquired by a bank holding company in satisfaction of debts previously
contracted. Another principal exception allows the acquisition of interests in
companies whose activities are found by the FRB to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Activities that have been found to be closely related to banking include
making or servicing loans, underwriting credit life insurance, performing
certain data processing services, acting as an investment or financial
advisor, and providing discount securities brokerage services. Other approved
activities include consumer financial counseling, tax planning and tax
preparation, futures and options advisory services, check guaranty services,
collection agency services, credit bureau services, and personal property
appraisals. In approving acquisitions by the Company of companies engaged in
banking-related activities, the FRB considers a number of factors, including
the expected benefits to the public, such as greater convenience, increased
competition or gains in efficiency, which are weighed against the risks of
possible adverse effects, such as undue concentration of resources, decreased
or unfair competition, conflicts of interest, or unsound banking practices.
Under federal law, the Company and its subsidiaries are prohibited from
extending credit, selling or leasing property, and furnishing any service to
any customer on the condition or requirement that the customer (i) obtain any
additional property, service, or credit from the Company and its subsidiaries;
(ii) refrain from obtaining any property, service or credit from any
competitor of the Company or its subsidiaries; or (iii) furnish any property,
service or credit to the Company or its subsidiaries.
Under the BHCA, a bank holding company must obtain FRB approval before it
acquires direct or indirect ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any bank or bank holding
company unless it already owns a majority of the outstanding shares of any
class of voting securities of such bank or bank holding company. The FRB's
approval must also be obtained before a bank holding company acquires all or
substantially all of the assets of a bank or merges or consolidates with
another bank holding company (although the FRB may not assert jurisdiction in
certain bank mergers that are regulated under the Bank Merger Act). The
Attorney General of the United States may, within 30 days after approval of an
acquisition by the FRB, bring an action challenging such acquisition under the
federal antitrust laws, in which case the effectiveness of such approval is
stayed pending a final ruling by the courts.
40
<PAGE>
The FRB may not approve any acquisition, merger, or consolidation that would
result in a monopoly, would be in furtherance of any combination or conspiracy
to monopolize, or would be an attempt to monopolize the business of banking in
any part of the United States. Similarly, the FRB may not approve any
acquisition, merger or consolidation whose effect may be to substantially
lessen competition in any section of the country, or tend to create a
monopoly, or that would in any other manner be in restraint of trade, unless
it finds that the anti-competitive effects of the proposal are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In
considering any application for approval of an acquisition or merger, the FRB
is also required to consider the financial and managerial resources of the
companies and banks concerned, the convenience and needs of the communities to
be served, and the applicant's record of compliance with the Community
Reinvestment Act (the "CRA"). The CRA generally requires such financial
institution to take affirmative action to ascertain and meet the credit needs
of its entire community, including low and moderate income neighborhoods.
Interstate Banking. On September 29, 1994, President Clinton signed into law
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act") which amended the BHCA to permit bank holding companies to
acquire existing banks in any state effective September 29, 1995. The
Interstate Act preempts barriers that restricted entry into states--such as
regional compacts and reciprocity agreements--thus creating opportunities for
expansion into markets that were previously closed. Interstate banking and
branching authority (discussed below) will be subject to certain conditions
and restrictions, such as capital adequacy, management and CRA compliance.
The Interstate Act also contained interstate branching provisions that allow
multistate banking operations to merge into a single bank with interstate
branches. The interstate branching provisions become effective on June 1,
1997, although states were allowed to pass laws to opt in early or to opt out
completely as long as they acted prior to that date. Effective May 31, 1997,
the Arkansas Interstate Banking and Branching Act of 1997 (the "Arkansas
Interstate Act") authorizes banks to engage in interstate branching activities
within the borders of the state of Arkansas.
Banks acquired pursuant to this new branching authority may subsequently be
converted to branches. Interstate branching allows banks to merge across state
lines to form a single institution. Interstate merger transactions can be used
to consolidate existing multistate operations or to acquire new branches. A
bank will be able to establish a new branch as its initial entry into a state
only if the state has authorized de novo branching. The Arkansas Interstate
Act prohibits entry into the state through de novo branching.
Deposit Insurance. The deposits of the subsidiary banks are insured by the
FDIC primarily through the BIF, with a portion of the deposits of Ozark WCA
being insured through the Savings Association Insurance Fund ("SAIF"), to the
extent provided by law. Under the FDIC's risk-based insurance system, BIF-
insured institutions are currently assessed premiums of between zero and
twenty-seven cents per $100 of eligible deposits, depending upon the
institution's capital position and other supervisory factors. Congress
recently enacted legislation that, among other things, provides for
assessments against BIF-insured institutions that will be used to pay certain
Financing Corporation ("FICO") obligations. In addition to any BIF insurance
assessments, BIF-insured banks are expected to make payments for the FICO
obligations equal to an estimated $0.0129 per $100 of eligible deposits each
year. For the period January 1, 1997 through June 30, 1997, Ozark NWA and
Ozark WCA were each assessed a premium of $0.0129 per $100 of BIF-eligible
deposits.
As of the most recent assessment date, Ozark WCA had approximately $14.6
million of deposits that are assessed premiums at the rates applicable to SAIF
institutions as a result of a branch acquisition completed with the RTC in
1990. The SAIF premium for these deposits is currently zero to twenty-seven
cents per $100 of eligible deposits. In addition to any SAIF insurance
assessments, SAIF-insured institutions are expected to make payments for FICO
obligations equal to an estimated $0.0648 per $100 of eligible deposits each
year. Ozark WCA's SAIF-eligible deposits were assessed at $0.0648 per $100 for
the period of January 1, 1997 through June 30, 1997.
41
<PAGE>
Capital Adequacy Requirements. The FRB monitors the capital adequacy of bank
holding companies such as the Company, and the FDIC monitors the capital
adequacy of the Company's subsidiary banks. The federal bank regulators use a
combination of risk-based guidelines and leverage ratios to evaluate capital
adequacy.
Under the risk-based capital guidelines, different categories of assets are
assigned different risk weights, based generally on the perceived credit risk
of the asset. These risk weights are multiplied by corresponding asset
balances to determine a "risk-weighted" asset base. The minimum standard for
the ratio of capital to risk-weighted assets is 8.0%. At least half of the
risk-based capital must consist of common equity, retained earnings, and
qualifying non-cumulative perpetual preferred stock, less deductions for
goodwill and various intangible assets ("Tier I"). The remainder ("Tier 2")
may consist of a limited amount of subordinated debt, certain hybrid capital
instruments and other debt securities, preferred stock, and an allowance for
loan losses not to exceed 1.25% of risk-weighted assets. The sum of Tier I
capital and Tier II capital is "total risk-based capital."
In addition to the risk-based capital guidelines, the federal bank
regulators have adopted a leverage ratio as an additional tool to evaluate the
capital adequacy. The leverage ratio is a company's Tier 1 capital divided by
its adjusted total assets. The leverage ratio requires a 3.0% Tier 1 capital
to adjusted total assets ratio for institutions with the highest regulatory
rating of 1. All other institutions will be expected to maintain a leverage
ratio of 4.0% to 5.0%. For a tabular summary of the Company and the subsidiary
banks' risk-weighted capital and leverage ratios, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Capital."
Bank regulators from time to time consider raising capital requirements
applicable to banking organizations beyond current levels. However, the
Company is unable to predict whether higher capital requirements will be
imposed and, if so, at what levels and on what schedules. Therefore, the
Company cannot predict what effect such higher requirements may have on it or
its subsidiary banks.
Enforcement Authority. The FRB has been granted enforcement powers over bank
holding companies and non-banking subsidiaries to forestall activities that
represent unsafe or unsound practices or constitute violations of law. These
powers may be exercised through the issuance of cease-and-desist orders or
other actions. The FRB is also empowered to assess civil penalties against
companies or individuals who violate the BHCA or orders or regulations
thereunder in amounts up to $1 million for each day's violation, to order
termination of non-banking activities of non-banking subsidiaries of bank
holding companies, and to order termination of ownership and control of a non-
banking subsidiary by a bank holding company. Certain violations may also
result in criminal penalties.
The FDIC is authorized to exercise comparable authority under the Federal
Deposit Insurance Act (the "FDI Act"), the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") and other statutes with respect to the
Company's subsidiary banks. In addition, the FDIC has the authority to
terminate insurance of accounts, after notice and hearing, upon a finding by
the FDIC that the insured institution is or has engaged in any unsafe or
unsound practice that has not been corrected, is in an unsafe and unsound
condition to continue operations, or has violated any applicable law,
regulation, rule, or order of, or condition imposed by, the appropriate
supervisors.
The FDICIA required federal banking agencies to broaden the scope of
regulatory collective action taken with respect to depository institutions
that do not meet minimum capital and related requirements and to take such
actions promptly in order to minimize losses to the FDIC. In connection with
FDICIA, federal banking agencies established capital measures (including both
a leverage measure and a risk-based capital measure) and specified for each
capital measure the levels at which depository institutions will be considered
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Under these capital measures
a bank is (i) well capitalized if it has a total risk-based capital ratio of
10% or greater, a Tier I capital ratio of 8% or greater and a leverage ratio
of 5% or greater and is not subject to any order, written agreement, capital
directive or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure; (ii) adequately capitalized if
it has a total risk-based ratio of 8% or greater, a Tier I capital
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ratio of 4% or greater, a leverage ratio of 4% or greater (3% or greater if
the bank is rated composite "1" in its most recent report of examination and
is not experiencing or anticipating significant growth), and does not meet the
definition of a well capitalized bank; (iii) undercapitalized if it has a
total risk-based capital ratio of less than 8%, a Tier I capital ratio of less
than 4% or a leverage ratio of less than 4% (or a leverage ratio of less than
3% if the institution is rated composite "1" in its most recent report of
examination and is not experiencing or anticipating significant growth); (iv)
significantly undercapitalized if it has a total risk-based capital ratio of
less than 6%, a Tier I capital ratio of less than 3% or a leverage ratio of
less than 3%, and (v) critically undercapitalized if the bank has a ratio of
tangible equity to total assets that is equal to or less than 2%. On December
11, 1996, the FDIC advised the Company that its subsidiary banks had been
classified as "well-capitalized" under these guidelines.
FDICIA authorizes the appropriate federal banking agency to treat a well
capitalized, adequately capitalized or undercapitalized insured depository
institution as if it were in the next lower capital-based classification if,
after notice and an opportunity for a hearing, it is found that such
institution is in an unsafe or unsound condition or engaging in an unsafe or
unsound practice. Thus, an adequately capitalized institution can be subjected
to the restrictions applicable to undercapitalized institutions described
below (provided that a capital restoration plan cannot be required of the
institution), and an undercapitalized institution can be subjected to the
restrictions applicable to significantly undercapitalized institutions
described below. However, the regulations provide that a significantly
undercapitalized bank may not be reclassified as a critically undercapitalized
bank.
An institution generally is required to submit an acceptable capital
restoration plan to its appropriate federal banking agency within 45 days of
the date the institution receives notice or is deemed to have notice that it
is undercapitalized, significantly undercapitalized or critically
undercapitalized. The plan must specify (i) the steps the institution will
take to become adequately capitalized, (ii) the capital levels to be attained
each year, (iii) how the institution will comply with any regulatory sanctions
then in effect against the institution, (iv) the types and levels of
activities in which the institution will engage and (v) such other information
as the banking agency may require.
Before accepting a capital restoration plan of an undercapitalized
institution, the agency must determine that each company having control of the
institution has guaranteed that the institution will comply with such capital
restoration plan. Liability with respect to this guaranty is limited to the
lesser of (i) 5% of the institution's assets at the time when it becomes
undercapitalized and (ii) the amount necessary to restore the relevant capital
measures of the institutions that would enable the institution to be
classified as adequately capitalized.
Under FDICIA, an insured depository institution cannot make a capital
distribution (defined to include, among other things, dividends of cash or
other property, redemptions and other repurchases of stock, and any
transaction deemed by the appropriate federal banking agency or the FDIC to be
in substance a distribution of capital), or pay management fees to any person
that controls the institution, if thereafter it would be undercapitalized. The
appropriate federal banking agency, however, may (after consultation with the
FDIC) permit an insured depository institution to repurchase, redeem, retire
or otherwise acquire its shares if such action (i) is taken in connection with
the issuance of additional shares or obligations in at least an equivalent
amount and (ii) will reduce the institution's financial obligations or
otherwise improve its financial condition.
An undercapitalized institution is also generally prohibited from increasing
its average total assets unless its capital restoration plan has been
accepted, the increase is consistent with that plan, and the institution's
ratio of tangible equity to assets increases during the calendar quarter at a
rate sufficient to enable the institution to become adequately capitalized
within a reasonable time. In addition, an undercapitalized institution is
generally prohibited from making any acquisitions, establishing any branches
or engaging in any new line of business except in accordance with an accepted
capital restoration plan or with the approval of the FDIC. Furthermore, the
appropriate federal banking agency is given authority with respect to the
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below it if determines "that those actions are
necessary to carry out the purpose" of FDICIA.
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FDICIA provides that, with respect to an insured depository institution that
(i) is significantly undercapitalized or (ii) is undercapitalized and either
fails to submit an acceptable capital restoration plan within the time period
allowed by regulation or fails in any material respect to implement a capital
restoration plan accepted by the appropriate federal banking agency, the
appropriate federal banking agency must require such institution to take one
or more of the following actions: (i) sell enough shares, including voting
shares, to become adequately capitalized; (ii) merge with (or be sold to)
another institution (or holding company), but only if grounds exist for
appointing a conservator or receiver; (iii) restrict certain transactions with
banking affiliates as if the "sister bank" exception to the requirements of
Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict
transactions with bank or nonbank affiliates; (v) restrict interest rates that
the institution pays on deposits to "prevailing rates" in the institution's
"region"; (vi) restrict asset growth or reduce total assets; (vii) alter,
reduce or terminate activities; (viii) hold a new election of directors; (ix)
subject to certain procedural requirements, dismiss any director or senior
executive officer who held office for more than 180 days immediately before
the institution became undercapitalized; (x) employ "qualified" senior
executive officers; (xi) cease accepting deposits from correspondent
depository institutions; (xii) divest certain non-depository affiliates who
pose a danger to the institution; (xiii) be divested by a parent holding
company; and (xiv) take any other action that the agency determines would
better carry out the purposes of the prompt corrective action provisions.
Critically undercapitalized institutions are subject to the restrictions
imposed on significantly undercapitalized institutions. In addition, FDICIA
generally restricts payments of subordinated debt and requires the appropriate
federal banking agency within certain time periods to appoint a receiver or a
conservator for such institutions unless certain statutory criteria are met.
The FDIC is also required, by regulation or order, to "restrict the
activities" of such critically undercapitalized institutions.
Examination. The FRB may examine the Company and any or all of its
subsidiaries. The FDIC examines and evaluates insured banks every 12 months,
and it may assess the institution for its costs of conducting the
examinations. The FDIC has a reciprocal agreement with the Arkansas State Bank
Department whereby each will accept the other's examination reports in certain
cases. As a result, the Company's subsidiary banks generally undergo FDIC and
state examinations in alternating years.
Reporting Obligations. As a bank holding company, the Company is required to
file with the FRB an annual report and such additional information as the FRB
may require pursuant to the BHCA. The Company's subsidiary banks must submit
to federal and state regulators annual audit reports prepared by independent
auditors, and the Company's audit report can be used to satisfy this
requirement.
Other Regulation. The status of the Company as a registered bank holding
company under the BHCA does not exempt it from certain federal and state laws
and regulations applicable to corporations generally, including, without
limitation, certain provisions of the federal securities laws. The Company is
under the jurisdiction of the SEC and of state securities commissions for
matters relating to the offer and sale of its securities.
Interest and certain other charges collected or contracted for by the
subsidiary banks of the Company are subject to state usury laws and certain
federal laws concerning interest rates. The banks' loan operations are also
subject to certain federal laws applicable to credit transactions, such as the
federal Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves, the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or
other prohibited factors in extending credit, the Fair Credit Reporting Act of
1978 governing the use and provision of information to credit reporting
agencies, the Fair Debt Collection Act governing the manner in which consumer
debts may be collected by collection agencies, and the rules and regulations
of the various federal agencies charged with the responsibility of
implementing such federal laws. The deposit operations of the subsidiary banks
also are subject to the Right to Financial Privacy Act, which imposes a duty
to maintain confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial records,
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and the Electronic Funds Transfer Act, which governs automatic deposits to and
withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic banking
services.
STATE REGULATIONS
The Company and its subsidiary banks are subject to examination and
regulation by the Arkansas State Bank Department. Examinations of the
subsidiary banks are conducted annually but may be extended to 24 months if an
interim examination is performed by the FDIC. The Arkansas State Bank
Department may also make at any time an examination of the Company as may be
necessary to disclose fully the relations between the Company and its
subsidiary banks and the effect of those relations.
In 1982, The Interest Rate Control Amendment ("Constitutional Amendment") to
the Constitution of the State of Arkansas was adopted, which provides, in
summary, that "consumer loans and credit sales" have a maximum percentage
limitation of 17% per annum and that all "general loans" have a maximum
limitation of 5% over the Federal Reserve Discount Rate in effect at the time
the loan was made. In 1983, the Arkansas Supreme Court determined that
"consumer loans and credit sales" are also "general loans" and are thus
subject to an interest rate limitation equal to 5% over the Federal Reserve
Discount Rate or 17% per annum. The Constitutional Amendment also provided
penalties for usurious "general loans" and "consumer loans and credit sales,"
including forfeiture of all principal and interest on consumer loans and
credit sales made at a greater rate of interest than 17% per annum.
Additionally, "general loans" made at a usurious rate may result in forfeiture
of uncollected interest and a refund to the borrower of twice the interest
collected. Arkansas usury laws, however, are preempted by federal law with
respect to first residential real estate loans and certain loans guaranteed by
the Small Business Administration.
The Company is also subject to the Bank Holding Company Act of 1983
("ABHCA") enacted by the State of Arkansas. The ABHCA places certain
restrictions on the acquisition of banks by bank holding companies. Any
acquisition by the Company of more than 10% of any class of the outstanding
capital stock of any bank located in Arkansas, would require the Arkansas Bank
Commissioner's approval. Further, no bank holding company may acquire any bank
if after such acquisition the holding company would control, directly or
indirectly, banks having 25% of the total bank deposits (excluding deposits
from other banks and public funds) in the State of Arkansas. Under the ABHCA a
bank holding company is prohibited from owning more than one subsidiary bank
if any subsidiary bank has been chartered for less than 5 years.
In 1988, Arkansas enacted the Regional Reciprocal Banking Act of 1988
("RRBA") which permitted bank holding companies in Arkansas to acquire banks
and bank holding companies located in any of 17 states generally located in
the Southern and Midwestern regions of the United States. The Interstate Act
preempts the RRBA and authorizes bank holding companies, subject to regulatory
approval, to acquire banks and bank holding companies in any state, without
regard to whether the acquisition would be permitted by the laws of such
state. As discussed above, the recently enacted Arkansas Interstate Act
authorizes banks to engage in interstate branching activities within the
borders of the state of Arkansas. See "--the Company--Interstate Banking".
Arkansas bank branching laws currently prevent banks from opening branches
in any county of the state other than their home county and the counties
contiguous to their home county. These laws currently allow the Company to
open branches in only 10 counties in Arkansas, and the Company would have to
acquire a bank headquartered in another home county in order to expand its
branch banking strategy beyond this geographic area. Effective January 1,
1999, Arkansas law, as currently in effect, will allow the Company to engage
in branching activities on a statewide basis. Prior to this effective date for
statewide branching, current laws may artificially restrict the growth
opportunities of the Company and allow its competitors to expand and retain
market share in areas of the state that the Company may choose to target after
statewide branching becomes available.
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SUBSIDIARY BANKS
The lending and investment authority of the subsidiary banks is derived from
Arkansas law. The lending powers of each of the banks are generally subject to
certain restrictions, including the amount which may be lent to a single
borrower.
Regulations of the FDIC and the Arkansas State Bank Department limit the
ability of the subsidiary banks to pay dividends to the Company without the
prior approval of such agencies. FDIC regulations prevent insured state banks
from paying any dividends from capital and allows the payment of dividends
only from net profits then on hand after deduction for losses and bad debts.
The Arkansas State Bank Department currently limits the amount of dividends
that the subsidiary banks can pay the Company to 50% of their respective
current year earnings. The Arkansas State Bank Department has proposed
regulations which would increase this dividend limit to 75% of each subsidiary
bank's net profits after taxes for the current year plus 75% of its retained
net profits after taxes for the immediately preceding year.
Federal law substantially restricts transactions between financial
institutions and their affiliates, particularly their non-financial
institution affiliates. As a result, the Company's subsidiary banks are
sharply limited in making extensions of credit to the Company or any non-bank
subsidiary of the Company, in investing in the stock or other securities of
the Company or its non-bank subsidiaries, in buying the assets of, or selling
assets to, the Company, and/or in taking such stock or securities as
collateral for loans to any borrower. Moreover, transactions between the
subsidiary banks and the Company (or any nonbank subsidiary) must generally be
on terms and under circumstances at least as favorable to the subsidiary banks
as those prevailing in comparable transactions with independent third parties
or, in the absence of comparable transactions, on terms and under
circumstances that in good faith would be available to nonaffiliated
companies.
The FDIC requires all depository institutions, including the subsidiary
banks, to maintain reserves against their checking and transaction accounts
(primarily checking account, NOW and Super NOW checking accounts). Because
reserves must generally be maintained in cash or in non-interest bearing
accounts, the effect of the reserve requirements is to increase the subsidiary
banks' cost of funds. Arkansas law requires state chartered banks to maintain
such reserves as are required by the applicable federal regulatory agency.
The subsidiary banks are subject to Section 23A of the Federal Reserve Act,
which places limits on the amount of loans or extensions of credit to, or
investments in, or certain other transactions with, affiliates, including the
Company. In addition, limits are placed on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. Most of
these loans and certain other transactions must be secured in prescribed
amounts. The banks are also subject to Section 23B of the Federal Reserve Act,
which, among other things, prohibits an institution from engaging in
transactions with certain affiliates unless the transactions are on terms
substantially the same, or at least as favorable to such institution or its
subsidiaries, as those prevailing at the time for comparable transactions with
non-affiliated companies. The banks are subject to restrictions on extensions
of credit to executive officers, directors, certain principal stockholders,
and their related interests. Such extensions of credit (i) must be made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with third parties
and (ii) must not involve more than the normal risk of repayment or present
other unfavorable features.
PROPOSED LEGISLATION FOR BANK HOLDING COMPANIES AND BANKS
Certain proposals affecting the banking industry have been discussed from
time to time. Such proposals include: limitations on investments that an
institution may make with insured funds; regulation of all insured depository
institutions by a single regulator; limitations on the number of accounts
protected by the federal deposit insurance funds; and reduction of the
$100,000 coverage limit on deposits. It is uncertain which, if any, of the
above proposals may become law and what effect they would have on the Company
and its bank subsidiaries.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION/(1)/
---- --- -------------
<S> <C> <C>
George Gleason 43 Chairman of the Board and Chief Executive Officer
Mark Ross 41 President and Director
Linda Gleason 43 Director
Roger Collins 48 Director Elect/(2)/
C. E. Dougan 50 Director Elect/(2)/
Robert East 49 Director Elect/(2)/
Porter Hillard 65 Director Elect/(2)/
Henry Mariani 59 Director Elect/(2)/
R. L. Qualls 63 Director Elect/(2)/
Kennith Smith 66 Director Elect/(2)/
Danny Criner 42 President, Ozark NWA
Paul Moore 50 Chief Financial Officer
Jean Arehart 56 Executive Vice President, Ozark WCA
Susan Sisk Grobmyer 48 Executive Vice President, Ozark WCA
Darrel Russell 43 Executive Vice President, Ozark WCA
Harold Beck 54 Senior Vice President, Ozark WCA
George Landrum 56 Senior Vice President, Ozark NWA
Frank Lawrence 28 Senior Vice President, Ozark WCA
Louis Melton 50 Senior Vice President, Ozark NWA
Randy Oates 53 Senior Vice President, Company
Mark Pennebaker 39 Senior Vice President, Ozark WCA
Richard Savage 38 Senior Vice President, Ozark WCA
Betty Thomason 43 Senior Vice President, Ozark WCA
</TABLE>
- --------
(1) Unless otherwise indicated, the individual serves, or following completion
of this offering will serve, in the same position with both the Company
and each of its subsidiary banks.
(2) The Company's Board of Directors will be expanded immediately following
completion of this offering to include each of the persons indicated above
as director elect. Such persons will also serve as the Board of Directors
for each of the subsidiary banks. Each of such persons has consented to
serve in these capacities.
George Gleason has 18 years of banking experience. Mr. Gleason purchased
controlling interest in Bank of Ozark, now Ozark WCA, in 1979, serving from
that time to the present as its Chief Executive Officer. Since formation of
the Company in 1981, he has also served as its Chief Executive Officer and as
Chief Executive Officer of each of the Company's subsidiaries at substantially
all times they were owned by the Company. At various times from 1979 to 1993,
he also served as Chairman or President of certain of such entities. Since
1993 he has served as both Chairman and Chief Executive Officer of the Company
and each of its subsidiaries. Prior to 1979 Mr. Gleason practiced law in
Little Rock, Arkansas. Mr. Gleason holds a B.A. in Business and Economics from
Hendrix College and a J.D. from the University of Arkansas.
Mark Ross has 17 years of banking experience and has served as President of
the Company and its bank subsidiaries since 1986. Mr. Ross oversees most
operational and administrative aspects of the Company. From 1980 to 1986 he
served Ozark WCA in various capacities including President/Chief
Administrative Officer, Executive Vice President and Administrative Vice
President. In 1986 Mr. Ross also assumed an active role in the management of
Company's other bank subsidiaries, including serving on the Boards of
Directors of such bank subsidiaries. Mr. Ross was elected as a director of the
Company in 1992. Mr. Ross holds a B.A. in Business Administration from Hendrix
College.
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<PAGE>
Linda Gleason has 16 years of banking experience having commenced employment
with Ozark WCA in 1981. Since 1987 she has served as a director of the Company
and various subsidiaries. From 1992 to 1996 she served as the Company's Deputy
Chief Executive Officer and Assistant Secretary. Beginning in 1996 Ms. Gleason
began to phase out her day-to-day involvement in the Company and no longer
serves as an officer. Ms. Gleason has attended Arkansas State University and
the University of Arkansas at Little Rock.
Roger Collins is Executive Vice President, Chief Financial Officer and a
director of Harp's Food Stores, Inc., a regional grocery chain headquartered
in Springdale, Arkansas with 38 stores located in Arkansas and Oklahoma. Prior
to joining Harp's in 1986, Mr. Collins served for nine years as Chief
Financial Officer and Vice President of Finance for three privately held
companies in Dallas, Texas. Previously, he worked for four years in the Dallas
office of Arthur Andersen & Company. Mr. Collins holds a B.A. from Rice
University and a M.B.A. from the University of Texas at Austin and is a C.P.A.
C. E. Dougan is co-owner of Mooney-Dougan, Inc., which is engaged in
residential real estate development, construction and investments. Prior to
1997 Mr. Dougan, who has 28 years of banking experience, served 12 years as
President and Chief Executive Officer of Mercantile Bank of Crawford County
(formerly Peoples Bank & Trust Company of Van Buren and First National Bank of
Crawford County). Mr. Dougan joined the Board of Directors of Ozark WCA in
February 1997.
Robert East has served as the Chairman and President of Robert East Company,
an investment company, since 1974; Chairman and Chief Executive Officer of
East-Harding, Inc., a general contracting firm, since 1994; and Partner and
Treasurer of AMO Electrical Company, a distributor of electrical supplies,
since 1989. Mr. East is also a partner or owner of numerous real estate
projects and other investments. He served as a member of the board of
directors of Pulaski Bank and Trust from 1989 to 1996. Mr. East holds a B.A.
in Finance and Administration from the University of Arkansas.
Porter Hillard has served as a member of the Board of Directors of Ozark WCA
since 1967. Mr. Hillard has been actively engaged in agricultural business
since 1957. He has owned, operated or managed various purebred and commercial
cattle operations, a turkey hatchery, feed mills, turkey grow-out operations
and other businesses. Mr. Hillard holds a B.S. in Agriculture from the
University of Arkansas.
Henry Mariani has been the owner, Chairman and Chief Executive Officer of
Nite Lite Company since 1986, a manufacturing, wholesale and retail mail order
operation which specializes in hunting equipment and supplies. He served as a
member of the board of directors of Twin City Bank (now Mercantile Bank of
Arkansas) from 1986 to 1997. Mr. Mariani holds a B.S. in Finance from Penn
State University and is a C.P.A.
R. L. Qualls is the Vice Chairman and Chief Executive Officer of Baldor
Electric Company ("Baldor"), a marketer, designer and manufacturer of electric
motors based in Fort Smith, Arkansas. He previously served as President and
Chief Executive Officer/Chief Operating Officer of Baldor from 1990. Prior to
joining Baldor in 1986 as Executive Vice President of Finance and Planning, he
held a number of senior level positions with Worthen Banking Corporation (now
Boatmen's National Bank of Arkansas) from 1980 to 1986, including Chairman and
Chief Executive Officer of one of the affiliate banks. Additionally, from 1985
to 1986 Dr. Qualls served as Chairman of the board of directors of First
National Bank of Harrison, and between 1987 and 1990 he served on the boards
of directors of both First National Bank of Mena and the Bank of Montgomery
County. Dr. Qualls holds a B.A. and M.A. in Economics from Mississippi State
University and completed his doctoral work at Louisiana State University.
Kennith Smith has served as a member of the Board of Directors of Ozark WCA
since 1977. Mr. Smith is presently retired, having served as the owner and
operator of Smith Cattle Farm from 1984 until his retirement in 1993, managed
ARVAC Self-Help housing from 1982 to 1984 and served as President and co-owner
of Mulberry Lumber Company from 1964-1982.
Danny Criner has 21 years of banking experience and has served as President
of Ozark NWA since January 1990. Since joining Ozark NWA in 1976 Mr. Criner
has served the bank in various capacities including
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<PAGE>
Executive Vice President, Vice-President and Assistant Cashier. Mr. Criner
joined the Board of Directors of Ozark NWA in 1985 and the Board of Directors
of Ozark WCA in 1996. Mr. Criner holds a B.S.B.A. in Banking and Finance from
the University of Arkansas.
Paul Moore is a C.P.A. and has served as Chief Financial Officer of the
Company and its bank subsidiaries since July 1995. From December 1989 to July
1995 Mr. Moore served as secretary, secretary/treasurer or director of eight
privately held companies under common ownership of Frank Lyon Jr. and family.
Such companies engaged in diverse activities ranging from real estate to
agricultural to banking. Mr. Moore previously worked for the Company, serving
as its treasurer from 1983 to 1988. Prior to 1983 Mr. Moore served as
controller of Winrock Enterprises, Inc. Mr. Moore holds a B.S.B.A. in Banking,
Finance and Accounting from the University of Arkansas.
Jean Arehart has 33 years of banking and related experience and has served
as Executive Vice President of Ozark WCA since May 1997. She joined Ozark WCA
as Senior Vice President in June 1996 and currently manages its residential
mortgage lending operations. Ms. Arehart previously served as Senior Vice
President and a member of the Executive Committee of Twin City Bank (now
Mercantile Bank of Arkansas), where she worked from 1979 to February 1996.
Susan Sisk Grobmyer has 19 years of banking experience and has served as
Executive Vice President of Ozark WCA since May 1997. She joined Ozark WCA in
March 1997 as Senior Vice President and oversees all lending for the Ozark
WCA's Western Division (Van Buren, Mulberry, Ozark, and Clarksville, plus new
offices to be opened in Alma, Paris and Ft. Smith). Ms. Grobmyer previously
served as a Senior Vice President of Commercial Loans for Pulaski Bank from
1995 to 1997 and Twin City Bank (now Mercantile Bank of Arkansas) from 1978 to
1995. Ms. Grobmyer attended the University of Arkansas at Monticello.
Darrel Russell has 15 years of banking experience and has served as
Executive Vice President of Ozark WCA since May 1997. Mr. Russell oversees all
lending (other than residential mortgage loans) for Ozark WCA's Central
Division (metropolitan Little Rock area). Prior to May 1997 Mr. Russell served
as Senior Vice President. He joined Ozark WCA in 1983 after having worked two
years at InterFirst Bank in Houston, Texas. Mr. Russell received a B.S.B.A. in
Banking and Finance from the University of Arkansas.
Harold Beck has 34 years of banking experience. Mr. Beck currently serves
Ozark WCA as Senior Vice President and Cashier with principle responsibilities
for various aspects of operations. He joined Ozark WCA in 1973, and prior to
that time held positions with Union National Bank of Little Rock, First State
Bank of Conway, and Citizens Bank of Booneville. Mr. Beck attended the
University of Central Arkansas.
George Landrum has 24 years of banking experience. Mr. Landrum serves as
Senior Vice President of Ozark NWA and manages its Jasper office. He joined
Ozark NWA in 1973. Mr. Landrum holds a B.S. in Education from Arkansas Tech
University.
Frank Lawrence has six years of banking experience. Mr. Lawrence has served
as Senior Vice President of Ozark WCA since March 1997. He manages the two
Ozark WCA offices in Clarksville. From 1995 to 1997, Mr. Lawrence served as
Vice President of Ozark WCA. He joined the Company's former Arkansas Valley
Bank subsidiary in 1991 as Assistant Vice President and was transferred to
Ozark WCA in 1993 in preparation for opening of the Clarksville offices. Mr.
Lawrence holds a B.A. in Business and Economics from Hendrix College.
Louis Melton has 27 years of banking experience. He currently serves Ozark
NWA as Senior Vice President and commercial loan officer in the Harrison
office. Prior to joining Ozark NWA in 1996, he spent 13 years consecutively
with each of First National Bank in Harrison and Security Bank of Harrison.
Randy Oates has 29 years of advertising and marketing experience, including
17 years in the banking industry. He joined the Company in 1996 as Senior Vice
President in charge of marketing. From 1992 to 1996, he served as Marketing
Director for Commercial National Bank, Shreveport, Louisiana. Prior to 1992 he
held
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<PAGE>
various marketing positions including President/Partner for nine years at two
advertising firms operating throughout Arkansas and Vice President/Retail
Marketing Manager for six years at Worthen National Bank (now Boatmen's
National Bank of Arkansas).
Mark Pennebaker has 18 years of banking experience and has served as Senior
Vice President of Ozark WCA since May 1997. He joined Ozark WCA in 1996 as
Vice President and is currently engaged in commercial lending. Prior to
joining Ozark WCA, Mr. Pennebaker served as a Vice President and commercial
loan officer at Twin City Bank (now Mercantile Bank of Arkansas) from 1987 to
1996. Mr. Pennebaker joined Twin City Bank in 1984. Prior to that time he was
a Financial Examiner for the Arkansas State Bank Department. He holds a
B.S.B.A. in Finance and Economics from Rockhurst College.
Richard Savage has 16 years of banking and related experience. Mr. Savage
serves as Senior Vice President of Ozark WCA and currently oversees lending in
the Ozark office. Prior to joining Ozark WCA in 1995 he served as Executive
Vice President, Senior Loan Officer and Personnel Officer for the First
National Bank at Paris, where he worked from 1986 to 1995. From 1981 to 1986
Mr. Savage held various positions with Federal Land Bank and Farm Credit
Services affiliates. He holds a B.S. in Agri-Business from the University of
Arkansas.
Betty Thomason has 25 years of banking experience. Ms. Thomason serves as
Senior Vice President of Ozark WCA and currently manages the Ozark WCA offices
in Van Buren and Mulberry. She has also been designated to have management
oversight duties for the proposed offices to be opened in Alma and Ft. Smith.
She joined the Company in 1987, working for its former Arkansas Valley Bank
subsidiary and later transferred to Ozark WCA in 1991. Prior to 1987, Ms.
Thomason worked for three different savings and loans and a commercial bank.
Linda Gleason is the wife of George Gleason. Frank Lawrence is the nephew of
George Gleason. Except for the foregoing, no family relationships exist among
any of the persons named above.
BOARDS OF DIRECTORS
At present the Company's Board of Directors consist of three persons--George
Gleason, Mark Ross and Linda Gleason. These three also serve on the Boards of
Directors of each of the Company's subsidiaries. Ozark WCA's Board of
Directors consist of 15 members, four of whom are non-employee directors.
Ozark NWA's Board of Directors consist of six members, none of whom are non-
employee directors.
Immediately following completion of this offering, the Boards of Directors
of the Company and its subsidiary banks will be reorganized. To maximize
efficient operations, all three entities will have identical Boards of
Directors which will hold joint meetings. As indicated above, the initial
reorganized Board is expected to consist of ten members, eight of which will
be non-employee Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of both subsidiary banks have previously had an audit
committee, a compensation and personnel committee and other committees as
appropriate. The Company's Board of Directors has voted to establish, subject
to completion of this offering and reorganization of the Boards of Directors
as described above, a new and expanded committee structure as described below.
These committees will serve both the Company and its subsidiary banks and will
be established immediately following completion of this offering.
Audit Committee. The Audit Committee will make recommendations concerning
the engagement of the Company's independent public accountants, review the
terms of their engagement, review the accountant's report and all related
reports and matters, coordinate appropriate action in response thereto and
review the adequacy of the Company's internal accounting controls. The Audit
Committee will also receive and review the monthly reports and presentations
of the loan review and compliance officer and the internal auditor, provide
general oversight and direction for their work, and coordinate corrective
action as appropriate. Roger Collins, as Chairman, C. E. Dougan and Robert
East will serve on the Audit Committee.
50
<PAGE>
Compensation and Personnel Committee. The Compensation and Personnel
Committee will consider, approve and review all salaries and bonuses for
officers and employees, recommend to the Board of Directors the election of
officers, review additions and terminations of personnel, oversee
administration of the employee benefit plans and programs, including the Stock
Option Plan, and oversee staff training and educational programs. Henry
Mariani, as Chairman, Porter Hillard, and Kennith Smith will serve on the
Compensation and Personnel Committee.
Trust Committee (Ozark WCA). The operation of the trust department of Ozark
WCA and the administration of its trust accounts will be overseen by the Trust
Committee. R. L. Qualls, as Chairman, Mark Ross and Linda Gleason will serve
on the Trust Committee.
Loan Committees. Loan Committees will be established for each of the three
divisions of the Company and will consist of both board members and executive
officers. Such Loan Committees will have responsibility for reviewing and
approving all loans and aggregate loan relationships in excess of $500,000
secured and $150,000 unsecured and for administering all other aspects of the
lending function within each division. Following completion of this offering,
the Loan Committees will be established for each division as follows:
<TABLE>
<CAPTION>
WESTERN CENTRAL NORTHERN
------- ------- --------
<S> <C> <C>
C. E. Dougan, Chairman Robert East, Chairman George Gleason, Chairman
R. L. Qualls Henry Mariani Danny Criner
Susan Grobmyer Linda Gleason George Landrum
Betty Thomason R. Darrel Russell Louis Melton
Frank Lawrence Jean Arehart Bill Witty
Richard Savage Mark Pennebaker Joe Willis
</TABLE>
ALCO and Investments Committee. Management of the asset/liability (interest
rate risk) position, liquidity and investment portfolio will be overseen by
the ALCO and Investments Committee. Paul Moore, as Chairman, Mark Ross, Danny
Criner, and Dan Rolett will serve as the ALCO and Investments Committee.
DIRECTOR COMPENSATION
During 1996 the Company's Board of Directors met 11 times with all directors
present for each meeting, Ozark WCA's board met 14 times with only one absence
reported, and Ozark NWA's board met 13 times with only one absence reported.
The Company has not paid its directors in the past since all have been
employed by the Company. Ozark WCA directors have been paid a fee of $350 for
each board meeting attended. Ozark NWA directors have been paid a fee of $250
for each board meeting attended.
Following completion of this offering, the Company plans to pay non-employee
directors a monthly retainer fee of $500 and a fee of $500 for attendance at
each regular or special board meeting. In addition non-employee directors will
be paid a fee of $100 for attendance at each meeting of a committee of the
Board of Directors. Additionally, under the Company's Director Option Plan,
each non-employee director is automatically granted, on the effective date of
this offering (or otherwise on the date a director's term of office commences)
and each year thereafter on the day following the annual meeting of
stockholders (as long as such director's term as a director is continuing for
the ensuing year), an option to acquire 1,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date
of grant. All options granted to non-employee directors become exercisable
upon grant.
LIMITATIONS ON DIRECTOR AND OFFICER LIABILITY
Article Tenth of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall, to the full extent permitted by
Section 4-27-850 of the Arkansas Business Corporation Act, indemnify all
persons whom it may indemnify pursuant thereto.
51
<PAGE>
Article Ninth of the Company's Amended and Restated Articles of
Incorporation provides that the Company's directors will not be personally
liable to the Company or any of its stockholders for monetary damages
resulting from breaches of their fiduciary duty as directors except (a) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 4-27-
833 of the Arkansas Business Corporation Act, as the same exists or hereafter
may be amended, (d) for any transactions from which the director derived an
improper personal benefit, or (e) for any act, omission, transaction, or
breach of a director's duty creating any third party liability to any person
or entity other than the Company or stockholder.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for fiscal 1996, 1995 and
1994 paid by the Company to its Chief Executive Officer and its other
executive officers whose aggregate remuneration exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION/(1)/
--------------------------- ------ -------- -------- -----------------
<S> <C> <C> <C> <C>
George Gleason/(2)/.................. 1996 $405,900 $200,000 $ 4,636
Chairman and Chief Executive Officer 1995 396,000 95,832 6,100
1994 395,770 -- 5,159
Mark Ross............................ 1996 92,781 22,042 4,047
President 1995 90,876 21,683 5,029
1994 89,756 18,000 4,503
</TABLE>
- --------
(1) Represents contributions to the Company's ESOP.
(2) Effective upon completion of this offering, Mr. Gleason's salary and bonus
will be determined pursuant to a written employment agreement. See "--
Employment Agreement with Mr. Gleason."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Ozark WCA compensation committee, consisting of Linda Gleason, Porter
Hillard, and Kennith Smith, has been principally responsible for establishing
salary, bonus and other aspects of compensation for Ozark WCA employees and
other employees of the Company whose salaries are allocated among the Company
and/or its bank subsidiaries. Ms. Gleason has abstained from voting in regard
to Mr. Gleason's salary or bonus. As a member of the Board or Directors of the
Company and as one of the three members of the compensation committee of Ozark
NWA, Mr. Gleason participated in deliberations concerning executive
compensation, including the allocation of his salary among the Company and its
two bank subsidiaries.
As discussed in "--Committees of the Board or Directors," following
completion of this offering, three non-employee directors (Messrs. Mariani,
Smith and Hillard) will serve as the Compensation and Personnel Committee for
the Company and its bank subsidiaries.
EMPLOYMENT AGREEMENT WITH MR. GLEASON
Mr. Gleason has entered into an employment agreement with the Company
effective on the day following completion of this offering and continuing
through December 31, 2000. The agreement provides Mr. Gleason
52
<PAGE>
with an annual base salary of $318,000, subject to an annual cost of living
adjustment, and an annual bonus equal to 1% of the Company's net income for
each fiscal year. Mr. Gleason will continue to be paid his present base salary
until completion of this offering, at which time the base salary under the
agreement will commence. Mr. Gleason's 1997 bonus will be 1% of the Company's
1997 net income. This agreement is in addition to any other compensation that
may be received by Mr. Gleason under employee benefit plans or reimbursement
arrangements.
STOCK OPTION PLAN
The Company's Board of Directors adopted a Stock Option Plan in May 1997 to
take effect following completion of this offering. The purpose of the Stock
Option Plan will be to provide an additional incentive to executive officers
and employees to put forth maximum efforts for the success of the Company's
business and to serve the best interests of the stockholders. Under the Stock
Option Plan, the Compensation Committee or the full Board of Directors of the
Company may grant executive officers and key employees options to purchase
shares of Common Stock at prices not less than the fair market value of such
shares on the date of grant. Additionally, the Compensation Committee or the
full Board of Directors will determine, among other things, the number of
shares subject to option grants and the terms and conditions of such grants,
including the dates upon which such options vest and become exercisable and
provisions relating to termination of such options. As of the effective date
of this offering, 285,000 shares of Common Stock will be reserved and
available for issuance under this Stock Option Plan including shares
anticipated to be granted under such plan upon the effectiveness of this
offering at an exercise price equal to the initial public offering price. For
information concerning grants of options under the Director Option Plan, see
"--Director Compensation."
EMPLOYEE STOCK OWNERSHIP PLAN
In 1980 the Company adopted the ESOP to assist officers and employees in
acquiring stock ownership interest in the Company and to encourage them to
remain in the employment of the Company. The Company's Board of Directors
determines in its discretion the amount of any contribution to be made to the
ESOP each year, and employees are not permitted to make contributions to the
ESOP. The Company's contributions are allocated to the accounts of
participating employees in the proportion that each participant's eligible
compensation bears to the total eligible compensation of all participants for
the applicable year. Substantially all of the Company's contributions are
invested in Common Stock. Participants in the ESOP become fully vested after
seven years of service, although cash or shares are not distributed until
employment is terminated. At December 31, 1996, 103 employees of the Company
participated in the ESOP and 372,100 shares of Common Stock were held by the
ESOP.
401(K) PLAN
In May 1997 the Company established a qualified retirement plan, with a
salary deferral feature designed to qualify under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code") (the "401(k) Plan"). The 401(k)
Plan will permit the employees of the Company to defer a portion of their
compensation in accordance with the provisions of Section 401(k) of the Code.
The 401(k) Plan will allow participants to defer a portion of their eligible
compensation on a pre-tax basis subject to certain maximum amounts. Matching
contributions may be made in amounts and at times determined by the Company.
The 401(k) Plan provides for Company matching contributions, if determined by
the Company to be made, up to a maximum of two percent of the participant's
salary per year. No other Company matching contributions are contemplated at
this time. Certain other statutory limitations with respect to the Company's
contribution under the 401(k) Plan also apply. Amounts contributed by the
Company for a participant will vest over five years and will be held in trust
until distributed pursuant to the terms of the 401(k) Plan.
53
<PAGE>
Employees of the Company will be eligible to participate in the 401(k) Plan
if they meet certain requirements concerning minimum age and period of
credited service. All contributions to the 401(k) Plan will be invested in
accordance with participant elections among certain investment options.
Distributions from participant accounts will not be permitted before age 65,
except in the event of death, permanent disability, certain financial
hardships or termination of employment.
CERTAIN TRANSACTIONS
Each of Ozark WCA and Ozark NWA has had, in the ordinary course of business,
banking transactions with certain of its officers and directors and with
certain officers and directors of the Company. All loan transactions with
officers and directors of the Company, Ozark WCA and Ozark NWA, and their
related and affiliated parties, have been on substantially the same terms as
those prevailing for comparable transactions with other loan customers of the
Company and have not included more than the normal risk of collectibility
associated with the Company's other banking transactions or other unfavorable
features.
Mr. Gleason has received a guaranty fee in the amount of 1% per annum of the
Company's loans personally guaranteed by him. In 1996 Mr. Gleason received
$38,000 for his guaranty of the Company's $3.8 million loan from December 21,
1995 to December 21, 1996. In the first quarter of 1997 he received a similar
fee for the period commencing December 21, 1996. Also in 1996 Mr. Gleason
received $15,000 for his personal guaranty in connection with the Company's
$1.5 million loan for the period commencing September 26, 1996.
During 1996 Ms. Gleason received a $38,000 fee in consideration of her
personal guaranty of such $3.8 million loan from December 21, 1995 to December
21, 1996. In the first quarter of 1997 she received a similar fee for the
period commencing December 21, 1996.
As of May 16, 1997, the Company refinanced such loans without personal
guaranties and accordingly, no such guaranty fees will be payable in
connection with the Company's current indebtedness.
54
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 22, 1997, and as
adjusted to reflect the sale of shares of Common Stock offered hereby by the
Company and the Selling Stockholders, for (i) each person who is known by the
Company to beneficially own more than 5.0% of the outstanding shares of Common
Stock, (ii) each of the Selling Stockholders, (iii) each director and director
elect, (iv) each executive officer named in the Summary Compensation Table and
(v) all of the current directors, directors elect and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
SHARES OWNED BEFORE SHARES OWNED AFTER
THE OFFERING THE OFFERING
-------------------------- SHARES BEING ------------------------
NAME NUMBER/(1)/ % OFFERED NUMBER/(1)/ %
---- -------------- ------- ------------ -------------- ------
<S> <C> <C> <C> <C> <C>
George Gleason.......... 1,619,267/(2)/ 56.2% 316,900 1,302,367/(2)/ 36.4%
ESOP/(3)/............... 372,100 12.9 -- 372,100 10.4
Holt-Ross Children's
Trusts (Nos. 1-6)...... 217,800 7.6 181,500 36,300 1.0
Holt-Ross
Grandchildren's Trust.. 133,300 4.6 133,300 -- --
Mark Ross/(4)/.......... 125,197 4.4 -- 125,197 3.5
Kennith
Smith/(5)//(6)/........ 32,700 1.1 -- 33,700/(8)/ *
Linda Gleason/(7)/...... 9,853 * -- 10,853/(8)/ *
Roger Collins/(5)/...... -- -- -- 1,000/(8)/ *
C. E. Dougan/(5)/....... -- -- -- 1,000/(8)/ *
Robert East/(5)/........ -- -- -- 1,000/(8)/ *
Porter Hillard/(5)/..... -- -- -- 1,000/(8)/ *
Henry Mariani/(5)/...... -- -- -- 1,000/(8)/ *
R. L. Qualls/(5)/....... -- -- -- 1,000/(8)/ *
All directors and
executive officers as a
group (23 persons)..... 2,208,845 76.7 631,700 1,585,145 44.3
</TABLE>
- --------
* Less than one percent.
(1) Includes beneficial ownership of shares with respect to which voting or
investment power may be deemed to be directly or indirectly controlled.
Accordingly, the shares in the foregoing table include shares owned
directly, shares held in such person's accounts under the ESOP, shares
owned by certain of the individual's family members and shares held by the
individual as a trustee or other similar capacity, unless otherwise
described below.
(2) Excludes shares owned of record by the ESOP, except for 91,267 shares held
in Mr. Gleason's account. Mr. Gleason is one of three trustees of the plan
and disclaims beneficial ownership of all shares held by such plan except
for those held in his account. The amount also excludes an aggregate of
351,100 shares (314,800 of which are being sold pursuant to this offering)
held by the Holt-Ross Children's Trust Nos. 1-6 and the Holt-Ross
Grandchildren's Trust, for which Mr. Gleason serves as trustee, but
disclaims beneficial ownership. Mr. Gleason plans to resign as trustee of
these trusts following completion of this offering. The amount includes
210,700 shares owned of record by a trust of which Mr. Gleason is sole
trustee and has a 25% life income interest and 400 shares owned of record
by the minor children of Mr. Gleason. The address for Mr. Gleason is 425
West Capitol Avenue, Suite 3100, Little Rock, Arkansas 72201.
(3) The ESOP is an employee stock ownership plan and trust established for the
benefit of the Company's officers and employees. Messrs. Gleason and Ross
and Ms. Gleason each serve as trustees for the plan, and any shares held
by the plan may be voted at a meeting of stockholders of the Company on
matters requiring approval by a simple majority of stockholders at the
direction of a majority of the co-trustees.
(4) Excludes shares owned of record by the ESOP, except for 27,497 held in Mr.
Ross' account. Mr. Ross is one of three trustees of the plan and disclaims
beneficial ownership of all shares held by such plan except for those held
in his account. Includes 36,300 shares owned of record by a trust for the
benefit of Mr. Ross and his children. Mr. Gleason serves as trustee of
this trust and Mr. Ross maintains a life income interest only.
(5) Director elect.
(6) Shares held jointly with spouse.
(7) Excludes shares owned of record by the ESOP, except for 9,853 shares held
in Ms. Gleason's account. Ms. Gleason is one of three trustees of the plan
and disclaims beneficial ownership of all shares held by such plan except
for those held in her account.
(8) On the effective date of this offering, each non-employee director will be
granted presently exercisable options to purchase 1,000 shares of Common
Stock under the Director Option Plan at an exercise price equal to the
initial public offering price. See "--Director Compensation."
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Common Stock and the
Preferred Stock of the Company does not purport to be complete and is subject
to, and qualified in its entirety by, the Amended and Restated Articles of
Incorporation and Bylaws of the Company that are included as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.
The Company is authorized to issue 10,000,000 shares of Common Stock, $.01
par value of which 2,879,800 shares were outstanding as of May 22, 1997, and
1,000,000 shares of Preferred Stock, $.01 par value, of which no shares were
outstanding as of May 22, 1997.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences applicable to any outstanding Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. Holders of Common
Stock have no preemptive or subscription rights and there are no redemption or
conversion rights with respect to such shares. Upon liquidation or dissolution
of the Company, after satisfaction of any liquidation preferences of any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
pro rata all assets remaining available for distribution. The outstanding
shares of Common Stock are fully paid and non-assessable.
Subject to the rights of holders of any Preferred Stock then outstanding,
dividends may be paid to the holders of Common Stock when, as and if declared
by the Board of Directors out of funds legally available therefor. Federal and
state banking regulations place numerous restrictions on the ability of Ozark
WCA and Ozark NWA to pay dividends to the Company. See "Dividend Policy" and
"Supervision and Regulation--Subsidiary Banks."
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of such
Preferred Stock in one or more series and to fix the dividend rate, conversion
rights, voting rights, rights and terms of redemption, redemption price or
prices, liquidation preferences and qualifications, limitations and
restrictions thereof with respect to each series. Although the Company has no
present intention to issue shares of Preferred Stock, the issuance of shares
of Preferred Stock or the issuance of rights to purchase such shares, could
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in his best interest,
including attempts that might result in a premium over the market price for
the shares held by such stockholder.
CERTAIN CHARTER PROVISIONS
The Company's Amended and Restated Articles of Incorporation and Bylaws
contain certain provisions that could delay, discourage or prevent an
attempted acquisition or change of control of the Company. These provisions
(i) allow the Board of Directors to elect to classify or stagger the Board of
Directors at any point in the future, provided the Board is comprised of at
least nine (9) members as required by Arkansas law, (ii) allow directors to be
removed for cause only by a minimum of two-thirds ( 2/3) vote of stockholders,
(iii) give the Board of Directors the sole power to fix or change the size of
the Board of Directors and to create and fill vacancies on the Board of
Directors, and (iv) require stockholders to submit proposals for the annual
meeting of stockholders thirty (30) days in advance of the fiscal year end.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be Union Planters
National Bank, Memphis, Tennessee.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
3,579,800 shares of Common Stock. Of these shares, 1,331,700 shares of Common
Stock sold in this offering, and 443,000 shares held by non-affiliates for a
period of at least two years prior to this offering, will be freely tradeable
without restriction under the Securities Act. Following the expiration of the
90-day period immediately after the effectiveness of the Company's
registration statement under the Securities Act, 11,900 shares will be
eligible for sale in accordance with SEC Rule 144 (described below). Further,
following expiration or release from the 180 day lock-up agreements with the
Underwriters, 1,793,200 additional shares of Common Stock will be eligible for
sale in accordance with Rule 144.
The Company, Mr. Gleason and the other executive officers and directors of
the Company have agreed that they will not, without the prior written consent
of the Representative, offer, sell, or otherwise dispose of any shares of
Common Stock beneficially owned by them for a period of 180 days from the date
of this Prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares for
at least one year, including the holding period of any securities which
converted into such shares and including the holding period for any prior
owner except an affiliate of the issuer (as defined below), is entitled to
sell, within a three-month period, that number of shares that does not exceed
the greater of 1.0% of the then outstanding shares of Common Stock or the
average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks immediately preceding such sale. Sales
under Rule 144 are also subject to certain requirements as to the manner of
sale, notice and availability of current public information regarding the
Company. Any person (or persons whose shares are aggregated) who has not been
an affiliate of the Company at any time during the three months preceding a
sale, and who has beneficially owned shares for at least two years (including
any period of ownership of preceding non-affiliated holders), is entitled to
sell such shares under Rule 144 without regard to the volume limitations,
manner of sale provisions or notice or current public information
requirements. Affiliates, however, continue to be subject to such volume
limitations and other requirements. As defined in Rule 144, an affiliate of an
issuer is a person who directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with,
such issuer, and generally includes members of the Board of Directors and
senior management.
The Company expects to file registration statements on Form S-8 under the
Securities Act to register all of the shares of Common Stock issued or
reserved for future issuance under the Stock Option Plan, Director Option Plan
and ESOP. After the effective date of those registration statements (and the
expiration of the lock-up agreements, if applicable), shares issued pursuant
to such plans generally would be available for resale in the public market,
subject to the application of Rule 144 to affiliate transactions.
Prior to this offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of such shares for
sale to the public will have on the market price prevailing from time to time.
Sales of substantial amounts of Common Stock following completion of this
offering could adversely affect the market price of the Common Stock.
57
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Stephens Inc.
is acting as Representative (the "Representative"), has severally agreed to
purchase the aggregate number of shares of Common Stock set forth opposite its
name below, at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of
Common Stock offered hereby if any shares of Common Stock are purchased. In
the event of default by an Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Stephens Inc....................................................
---------
Total......................................................... 1,331,700
=========
</TABLE>
The Company has granted the Underwriters an option, exercisable in whole or
in part, from time to time, for thirty days after the date hereof, to purchase
up to 199,755 additional shares of Common Stock to cover over-allotments, if
any, at the public offering price, less the underwriting discounts and
commission set forth on the cover page of this Prospectus. If the Underwriters
exercise this option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased by it shown
in the foregoing table bears to the 1,331,700 shares of Common Stock offered
hereby.
The Underwriters have advised the Company that sales of Common Stock to
certain dealers may be made at a concession of an amount not in excess of $
per share and that the Underwriters may allow, and such dealers may re-allow,
discounts not in excess $ per share on sales to certain other dealers.
Following completion of this offering, the public offering price, the
concession and the re-allowance may be changed by the Underwriters.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined by negotiation between the Company and the Representative of the
Underwriters. Among the factors to be considered in such negotiation will be
the Company's operating performance, financial condition and earnings
prospects, market prices of similar securities of comparable publicly traded
companies and the general condition of the securities markets. The initial
public offering price may not necessarily be indicative of the market price
for the Common Stock following completion of this offering.
The Underwriters do not intend to confirm sales of shares of Common Stock to
any account over which they exercise discretionary authority without prior
authorization. The Representative intends to make a market in the Common Stock
following completion of this offering.
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with this offering
than they are committed to purchase from the Company and the Selling
Stockholders, and in such case may purchase Common Stock in the open market
following completion of this offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position by exercising the Underwriters' over-allotment option referred to
above. In addition the Representative may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the offering) for the account
58
<PAGE>
of the other Underwriters, the selling concession with respect to Common Stock
that is distributed in this offering but subsequently purchased for the
account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required, and,
if they are undertaken, they may be discontinued at any time.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain civil liabilities under the Securities
Act and to afford the Underwriters certain rights of contribution.
The Company, Mr. Gleason and the other executive officers and directors of
the Company have agreed with the Underwriters not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for shares of Common Stock,
with limited exceptions, for a period of 180 days from the date following
completion of this offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Rose Law Firm, a Professional Association, Little
Rock, Arkansas. Certain legal matters will be passed upon for the Underwriters
by Giroir, Gregory, Holmes & Hoover, PLC, Little Rock, Arkansas.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31, 1995
and 1996 and for each of the years then ended included in this Prospectus have
been included herein in reliance upon the report of Moore Stephens Frost,
P.A., independent certified public accountants, given upon their authority as
experts in accounting and auditing. The Consolidated Financial Statements of
the Company for the year ended December 31, 1994 included in this Prospectus
have been included herein in reliance upon the report of Baird, Kurtz &
Dobson, independent certified public accountants, given upon their authority
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the SEC, Washington D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to the Common
Stock offered hereby. The Prospectus does not contain all the information set
forth in the Registration Statement and exhibits and schedules thereto. For
further information with respect to the Company and such Common Stock,
reference is made to the Registration Statement and the exhibits and schedules
filed as part thereof. Statements contained in this Prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference to such
exhibit.
As a result of this offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file reports and other information with the
Commission. A copy of the Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the Commission's
principal offices, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference facilities in New York, New York, and Chicago, Illinois, upon
payment of prescribed fees. The Commission also maintains a Web site
containing the Registration Statement and all exhibits and schedules thereto
that can be accessed at http://www.sec.gov.
The Company intends to furnish the holders of Common Stock with annual
reports containing financial statements audited by an independent certified
public accounting firm.
59
<PAGE>
BANK OF THE OZARKS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Accountants....................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 and March 31,
1997 (unaudited)........................................................ F-4
Consolidated Statements of Income for the years ended December 31, 1994,
1995, and 1996 and for the three months ended March 31, 1996 (unaudited)
and March 31, 1997 (unaudited).......................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31,
1997 (unaudited)........................................................ F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and for the three months ended March 31, 1996
(unaudited) and March 31, 1997 (unaudited).............................. F-7
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bank of the Ozarks, Inc.
We have audited the accompanying consolidated balance sheets of Bank of the
Ozarks, Inc. and Subsidiaries ("the Company") (formerly Ozark Bankshares,
Inc.) as of December 31, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Bank of the Ozarks, Inc. and Subsidiaries as of December 31, 1995 and 1996,
and the consolidated results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
Moore Stephens Frost, P.A.
Little Rock, Arkansas
January 24, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bank of the Ozarks, Inc.
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Bank of the Ozarks, Inc. and
Subsidiaries ("the Company") (formerly Ozark Bankshares, Inc.) for the year
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash
flows of Bank of the Ozarks, Inc. and Subsidiaries for the year ended December
31, 1994, in conformity with generally accepted accounting principles.
Baird, Kurtz & Dobson
Fort Smith, Arkansas
January 20, 1995
F-3
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.......................... $ 9,063 $ 6,815 $ 8,453
Securities--available for sale................... 32,550 36,883 39,501
Securities--held to maturity..................... 4,587 2,725 2,669
Federal funds sold............................... 4,080 350 100
Loans, net....................................... 151,289 211,443 221,401
Bank premises and equipment, net................. 6,380 6,872 8,930
Foreclosed assets held for sale, net............. 29 47 113
Interest receivable.............................. 1,988 2,552 2,846
Excess cost over fair value of net assets
acquired, at amortized cost..................... 1,451 1,394 1,380
Other............................................ 1,059 1,519 1,549
-------- -------- --------
Total assets................................. $212,476 $270,600 $286,942
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand--non-interest bearing.................... $ 16,961 $ 21,295 $ 23,772
NOW, savings and MMDA's......................... 42,002 56,929 59,195
Time............................................ 123,500 153,424 164,296
-------- -------- --------
Total deposits................................... 182,463 231,648 247,263
Notes payable.................................... 3,920 5,396 5,396
FHLB advances and federal funds purchased........ 7,947 12,727 12,232
Accrued interest and other liabilities........... 1,852 2,282 2,975
-------- -------- --------
Total liabilities............................ $196,182 $252,053 $267,866
======== ======== ========
Commitments and contingencies (note 12)
Stockholders' equity
Common stock; $0.01 par value; Authorized
10,000,000 shares; 2,879,800 shares issued and
outstanding.................................... 29 29 29
Additional paid-in capital...................... 1,168 1,168 1,168
Retained earnings............................... 15,088 17,251 17,920
Unrealized appreciation (depreciation) on
investment securities.......................... 9 99 (41)
-------- -------- --------
Total stockholders' equity....................... 16,294 18,547 19,076
-------- -------- --------
Total liabilities and stockholders' equity... $212,476 $270,600 $286,942
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income
Loans.................... $10,361 $13,006 $19,089 $4,298 $5,307
Investment securities--
taxable................. 1,771 2,079 2,069 480 612
- --nontaxable............... 385 424 364 103 55
Federal funds sold....... 58 109 145 43 22
Deposits with banks...... 70 85 169 57 20
------- ------- ------- ------ ------
Total interest income...... 12,645 15,703 21,836 4,981 6,016
------- ------- ------- ------ ------
Interest expense
Deposits................. 4,513 7,357 9,005 2,084 2,595
Interest on borrowed
funds................... 118 26 1,025 198 302
Federal funds purchased.. 20 8 1 1 3
------- ------- ------- ------ ------
Total interest expense..... 4,651 7,391 10,031 2,283 2,900
------- ------- ------- ------ ------
Net interest income........ 7,994 8,312 11,805 2,698 3,116
Provision for loan
losses.................. (339) (360) (1,486) (221) (259)
------- ------- ------- ------ ------
Net interest income after
provision for loan
losses.................... 7,655 7,952 10,319 2,477 2,857
------- ------- ------- ------ ------
Other income
Income from fiduciary
activities.............. 146 231 214 47 59
Service charges on
deposit accounts........ 492 514 806 143 211
Other service charges and
fees.................... 115 361 537 116 190
Gain (loss) on sale of
securities.............. -- (44) (77) 21 10
Gain on sale of
subsidiary.............. 1,377 -- -- -- --
Other income............. 583 106 385 31 286
------- ------- ------- ------ ------
Total other income......... 2,713 1,168 1,865 358 756
------- ------- ------- ------ ------
Other expense
Salaries and employee
benefits................ 2,873 3,374 4,263 932 1,238
Net occupancy and
equipment............... 569 745 998 234 285
Other operating
expenses................ 2,293 1,877 1,890 459 596
------- ------- ------- ------ ------
Total other expense........ 5,735 5,996 7,151 1,625 2,119
------- ------- ------- ------ ------
Income before income taxes
and minority interest..... 4,633 3,124 5,033 1,210 1,494
Income taxes............. 1,555 845 2,006 429 537
------- ------- ------- ------ ------
Income before minority
interest.................. 3,078 2,279 3,027 781 957
Minority interest in
earnings of
subsidiaries............ 124 109 -- -- --
------- ------- ------- ------ ------
Net income................. $ 2,954 $ 2,170 $ 3,027 $ 781 $ 957
======= ======= ======= ====== ======
Earnings per common share.. $ 0.99 $ 0.75 $ 1.05 $ 0.27 $ 0.33
======= ======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL (DEPRECIATION)
COMMON PAID-IN RETAINED ON INVESTMENT
STOCK CAPITAL EARNINGS SECURITIES TOTAL
------ ---------- -------- -------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance--January 1, 1994.... $30 $1,704 $11,750 $ -- $13,484
Effect of change in
accounting method for
investment securities.... -- -- -- (146) (146)
Net income................ -- -- 2,954 -- 2,954
Dividend paid............. -- -- (893) -- (893)
Change in unrealized
appreciation
(depreciation) on
investment securities.... -- -- -- (323) (323)
--- ------ ------- ----- -------
Balance--December 31, 1994.. 30 1,704 13,811 (469) 15,076
Net income................ -- -- 2,170 -- 2,170
Dividend paid............. -- -- (893) -- (893)
Redemption of common
stock.................... (1) (536) -- -- (537)
Change in unrealized
appreciation on
investment securities.... -- -- -- 478 478
--- ------ ------- ----- -------
Balance--December 31, 1995.. 29 1,168 15,088 9 16,294
Net income................ -- -- 3,027 -- 3,027
Dividend paid............. -- -- (864) -- (864)
Change in unrealized
appreciation on
investment securities.... -- -- -- 90 90
--- ------ ------- ----- -------
Balance--December 31, 1996.. 29 1,168 17,251 99 18,547
Net income................ -- -- 957 -- 957
Dividend paid............. -- -- (288) -- (288)
Change in unrealized
appreciation
(depreciation) on
investment securities.... -- -- -- (140) (140)
--- ------ ------- ----- -------
Balance--March 31, 1997
(unaudited)................ $29 $1,168 $17,920 $ (41) $19,076
=== ====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- -----------------------
1994 1995 1996 1996 1997
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income.............. $ 2,954 $ 2,170 $ 3,027 $ 781 $ 957
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation............ 309 370 505 114 131
Amortization............ 64 134 126 13 14
Provision for loan
losses................. 339 360 1,486 221 259
Provision for losses on
foreclosed assets...... 452 124 11 1 3
Amortization and
accretion on investment
securities............. (63) (14) 9 5 --
Loss on disposition of
investments............ -- 44 77 -- --
(Gain) loss on sale of
loans.................. (44) -- (274) -- (68)
Gain on disposition of
premises and
equipment.............. (24) (24) (1) -- (45)
Gain on disposition of
foreclosed assets...... (360) (23) (14) -- (138)
Gain on sale of
subsidiary............. (972) -- -- -- --
Deferred income tax
provision (benefit).... 357 (49) (292) (29) (42)
Undistributed earning of
minority interest...... 275 -- -- -- --
Changes in assets and
liabilities
Interest receivable.... (199) (454) (563) (180) (294)
Refundable income
taxes................. 124 -- -- -- --
Other, net............. (175) 846 (237) (185) 11
Accrued interest and
other liabilities..... 377 708 375 613 780
Income taxes payable... 5 -- -- -- --
Minority interest...... -- (600) -- -- --
-------- -------- -------- -------- --------
Net cash provided (used)
by operating
activities.............. 3,419 3,592 4,235 1,354 1,568
-------- -------- -------- -------- --------
Cash flows from investing
activities
Proceeds from sales and
maturities of
securities available
for sale............... 5,230 15,116 28,784 10,242 1,566
Purchases of securities
available for sale..... (17,387) (20,354) (32,904) (13,333) (4,411)
Proceeds from maturities
of securities held to
maturity............... -- 13,696 1,862 101 56
Purchases of securities
held to maturity....... -- (4,283) -- -- --
Decrease (increase) in
federal funds sold..... -- (4,080) 3,730 1,945 250
Net increase in loans... (11,856) (40,530) (64,008) (11,544) (11,052)
Proceeds from sale of
loans.................. 474 -- 2,252 -- 811
Proceeds from
dispositions of bank
premises and
equipment.............. 166 57 1 -- 117
Purchase of bank
premises and
equipment.............. (1,320) (2,930) (997) (272) (2,261)
Proceeds from
dispositions of
foreclosed assets...... 478 97 221 28 162
Proceeds from sale of
subsidiary............. 3,946 -- -- -- --
Cash liquidated upon
sale of subsidiary..... (6,755) -- -- -- --
-------- -------- -------- -------- --------
Net cash provided (used)
by investing
activities.............. (27,024) (43,211) (61,059) (12,833) (14,762)
-------- -------- -------- -------- --------
Cash flows from financing
activities
Net increase in
deposits............... 17,454 34,011 49,184 12,328 15,615
Proceeds from FHLB ad-
vances and federal
funds purchased........ -- 7,947 4,780 -- --
Payments of FHLB
advances and federal
funds purchased........ -- -- -- -- (495)
Proceeds from notes
payable................ -- 3,920 1,500 -- --
Payments of notes
payable................ (2,277) -- (24) -- --
Dividends paid.......... (893) (893) (864) (864) (288)
Redemption of common
stock.................. -- (537) -- -- --
-------- -------- -------- -------- --------
Net cash provided (used)
by financing
activities.............. 14,284 44,448 54,576 11,464 14,832
-------- -------- -------- -------- --------
Net increase (decrease)
in cash and cash
equivalents............. (9,321) 4,829 (2,248) (15) 1,638
Cash and cash
equivalents--beginning
of period............... 13,555 4,234 9,063 9,063 6,815
-------- -------- -------- -------- --------
Cash and cash
equivalents--end of
period.................. $ 4,234 $ 9,063 $ 6,815 $ 9,048 $ 8,453
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Bank of the Ozarks, Inc. (formerly
Ozark Bankshares, Inc.) conform with generally accepted accounting principles
and practices within the banking industry. The financial statements for the
three months ended March 31, 1996 and 1997 are unaudited and, in the opinion
of management, include all adjustments necessary (which consist of only normal
recurring adjustments) for a fair presentation of the financial position,
results of operations and cash flows for the interim periods. The financial
information and results of operations of the interim periods are not
necessarily indicative of the financial position and results of operations
that may be obtained for a full fiscal year.
The policies that materially effect financial position and the results of
operations are summarized as follows:
a. Principles of consolidation--The consolidated financial statements
include the accounts of Bank of the Ozarks, Inc., and its wholly-owned
subsidiaries Bank of the Ozarks,wca, Bank of the Ozarks,nwa and Ozark
Commercial Corporation (collectively the "Company"). The Company is a multi-
bank holding company that operates under the rules and regulations of the
Board of Governors of the Federal Reserve System. Significant intercompany
transactions and amounts have been eliminated in consolidation.
During 1995, the Company acquired the remaining stock owned by minority
shareholders of Bank of the Ozarks,wca (5.964%) and Bank of the Ozarks,nwa
(4.273%). Bank holding companies, Bankstock One, Inc. and Newco Corporation,
owned the majority of Bank of the Ozarks,wca and Bank of the Ozarks,nwa,
respectively, at December 31, 1994. During 1995, these holding companies were
merged into the respective banks after the remaining stock of the minority
shareholders were purchased.
Ozark Financial Services, Inc., which was engaged in the offering of
mortgage brokerage and related services, was liquidated during 1995.
b. Nature of operations--Bank of the Ozarks,wca and Bank of the Ozarks,nwa
("the Banks") are state-chartered commercial banks with offices located in
northern, western and central Arkansas. The Banks are subject to competition
from other area financial institutions. The Banks are also subject to the
regulation of certain federal and state agencies and undergo periodic
examinations by those regulatory authorities. Ozark Commercial Corporation is
in the business of originating and servicing loans with the loans originated
being sold to investors.
c. Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These estimates and assumptions also affect the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
d. Cash and cash equivalents--For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and amounts due from banks. For the
purpose of presentation in the consolidated statements of cash flows, cash and
cash equivalents are defined as those amounts classified as cash on hand and
due from banks.
e. Investment securities--Investments in debt and equity securities are
classified into three categories: securities held as trading securities,
securities which are available-for-sale and securities being held-to-maturity.
These categories are defined as follows:
Trading securities--Securities held principally for resale in the near
term are classified as trading account securities and recorded at their
fair values. Unrealized gains and losses on trading accounts
F-8
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
securities are included immediately in other income. The Company had no
trading securities at December 31, 1995 and 1996 and March 31, 1997.
Held-to-maturity securities--General Obligation Bonds, Industrial
Development Revenue Bonds, Revenue Bonds and other securities which the
Company has the intent and ability to hold to maturity are reported at
cost, adjusted for premiums and discounts that are recognized in interest
income using the interest method over the period to maturity.
Available-for-sale securities--Available-for-sale securities consists of
bonds, notes, debentures, and certain equity securities not classified as
trading securities or as held-to-maturity securities. Unrealized holding
gains and losses, net of tax, on available-for-sale securities are reported
as a net amount in a separate component of stockholders' equity.
f. Loans and allowance for loan losses--Loans receivable that management has
the intent and ability to hold for the foreseeable future or until maturity or
pay-off are reported at their outstanding principal adjusted for any charge-
offs, the allowance for loan losses, and any deferred fees or costs on
originated loans and unamortized premiums or discounts on purchased loans.
Loans are stated at the amount of unpaid principal, reduced by unearned
discounts and the allowance for loan losses. Unearned discounts on installment
loans are recognized as income over the terms by the rule of 78's interest
method. Unearned purchased discounts are recorded as income over the life of
the loans utilizing the interest method to achieve a constant yield. Interest
on other loans is calculated by using the simple interest method on daily
balances of the principal amount outstanding.
The allowance for loan losses is established through a provision for loan
losses charged to expenses. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, overall portfolio quality, review
of specific problem loans, historical loan loss experience and current
economic and business conditions that may affect the borrowers' ability to pay
or the value of the collateral securing the loans. Accrual of interest is
discontinued on a loan when payment of principal or interest is contractually
past due 90 days, or earlier when management believes, after considering
economic and business conditions and collection efforts, that concern exists
as to the ultimate collection of principal and interest. For income tax
purposes, the Company provides the maximum addition to the allowance for loan
losses allowable under the applicable tax laws.
g. Bank premises and equipment--Land is carried at cost. Bank premises and
equipment are stated at cost less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the related assets by the
straight-line method for financial statement purposes and accelerated methods
for tax purposes. Leasehold improvements are capitalized and amortized by the
straight-line method over the estimated useful lives of the improvements.
h. Foreclosed assets held for sale--Real estate properties acquired through
or in lieu of loan foreclosure are to be sold and are initially recorded at
fair value at the date of foreclosure establishing a new cost basis. After
foreclosure, the property is amortized over 60 months. Valuations are
periodically performed by management and the real estate is carried at the
lower of carrying amount or fair value less cost to sell. Gains and losses
from the sale of other real estate are recorded in other income, and expenses
used to maintain the properties are included as operating expenses.
F-9
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
i. Income taxes--The Company utilizes the liability method in accounting for
income taxes. This method requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the financial statements or tax returns. Under this method,
deferred tax assets or liabilities are determined based upon the difference
between the values of the assets and liabilities as reflected in the financial
statement and their related tax basis using enacted tax rates in effect for
the year in which the differences are expected to be recovered or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
The Company and its subsidiaries file consolidated tax returns. Its
subsidiaries provide for income taxes on a separate return basis, and remit to
the Company amounts determined to be currently payable.
j. Trust department income--Property, other than cash deposits, held by the
Company's trust department in fiduciary or agency capacities for its customers
are not included in the accompanying financial statements, since such items
are not assets of the Company. Trust department income has been recognized on
the cash basis in accordance with customary banking practice, which does not
materially affect reported net income.
k. Excess cost over fair value of net assets acquired--The excess of cost
over fair value of net assets acquired is being amortized over a forty year
period using the straight-line method.
l. Earnings per share--Earnings per share has been calculated based on the
weighted average number of shares outstanding. Earnings per share has been
adjusted to reflect the 99-for-1 stock dividend as more fully discussed in
note 21.
m. Financial instruments--In the ordinary course of business, the Company
has entered into off-balance sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements, and
letters of credit. Such financial statements are recorded in the financial
statements when they are funded or related fees are incurred or received.
n. Advertising and public relations expense--Advertising and public
relations expense is expensed as incurred and totaled $139, $101 and $123 for
the years ended December 31, 1994, 1995 and 1996, respectively, and $17 and
$45 for the three month periods ended March 31, 1996 and 1997, respectively.
2. INVESTMENT SECURITIES
The amortized cost and approximate market values of investment securities
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
SECURITIES--AVAILABLE FOR SALE
Securities of United States government
and agencies......................... $14,001 $ 16 $(186) $13,831
Mortgage-backed securities............ 14,014 209 (70) 14,153
State and political subdivisions...... 3,539 61 (15) 3,585
Other securities...................... 981 -- -- 981
------- ---- ----- -------
Total securities--available for
sale............................... $32,535 $286 $(271) $32,550
======= ==== ===== =======
SECURITIES--HELD TO MATURITY
State and political subdivisions...... $ 4,587 $ 20 $ (1) $ 4,606
------- ---- ----- -------
Total securities--held to maturity.. $ 4,587 $ 20 $ (1) $ 4,606
======= ==== ===== =======
</TABLE>
F-10
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
SECURITIES--AVAILABLE FOR SALE
Securities of United States government
and agencies......................... $23,881 $ 71 $ (56) $23,896
Mortgage-backed securities............ 10,119 162 (25) 10,256
State and political subdivisions...... 1,369 20 (11) 1,378
Other securities...................... 1,353 -- -- 1,353
------- ---- ----- -------
Total securities--available for
sale............................... $36,722 $253 $ (92) $36,883
======= ==== ===== =======
SECURITIES--HELD TO MATURITY
State and political subdivisions...... $ 2,725 $ 17 $ (1) $ 2,741
------- ---- ----- -------
Total securities--held to maturity.. $ 2,725 $ 17 $ (1) $ 2,741
======= ==== ===== =======
<CAPTION>
MARCH 31, 1997
---------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
SECURITIES--AVAILABLE FOR SALE
Securities of United States government
and agencies......................... $27,673 $ 16 $(231) $27,458
Mortgage-backed securities............ 9,959 166 (33) 10,092
State and political subdivisions...... 507 15 -- 522
Other securities...................... 1,429 -- -- 1,429
------- ---- ----- -------
Total securities--available for
sale............................... $39,568 $197 $(264) $39,501
======= ==== ===== =======
SECURITIES--HELD TO MATURITY
State and political subdivisions...... $ 2,669 $ 13 $ -- $ 2,682
------- ---- ----- -------
Total securities--held to maturity.. $ 2,669 $ 13 $ -- $ 2,682
======= ==== ===== =======
</TABLE>
The amortized cost and estimated market value by contractual maturity of
investment securities classified as available for sale and held to maturity at
December 31, 1996 and March 31, 1997 are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------
AVAILABLE-FOR-
SALE HELD-TO-MATURITY
----------------- ----------------
AMORTIZED AMORTIZED
COST MARKET COST MARKET
--------- ------- --------- ------
<S> <C> <C> <C> <C>
Due in one year or less..................... $ 686 $ 699 $ 216 $ 216
Due from one year to five years............. 12,707 12,715 915 917
Due from five years to ten years............ 10,827 10,826 1,023 1,039
Due after ten years......................... 12,502 12,643 571 569
------- ------- ------ ------
Totals.................................... $36,722 $36,883 $2,725 $2,741
======= ======= ====== ======
</TABLE>
F-11
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------
AVAILABLE-FOR-
SALE HELD-TO-MATURITY
----------------- ----------------
AMORTIZED AMORTIZED
COST MARKET COST MARKET
--------- ------- --------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Due in one year or less..................... $ 3,669 $ 3,675 $ 220 $ 220
Due from one year to five years............. 11,035 10,957 839 842
Due from five years to ten years............ 10,968 10,835 1,145 1,150
Due after ten years......................... 13,896 14,034 465 470
------- ------- ------ ------
Totals.................................... $39,568 $39,501 $2,669 $2,682
======= ======= ====== ======
</TABLE>
For purposes of the maturity table, mortgage-backed securities which are not
due at a single maturity date have been allocated over maturity groupings. The
mortgage-backed securities may mature earlier than their weighted average
contractual maturities because of principal prepayments.
At December 31, 1995, the unrealized appreciation on available for sale
securities was $15, net of deferred income taxes of $6. At December 31, 1996,
the unrealized appreciation on available for sale securities was $161, net of
deferred income taxes of $62. At March 31, 1997, the unrealized depreciation
on available for sale securities was $67, net of deferred income taxes of $26.
The Banks had no trading securities at the beginning of 1996; however, the
Banks did hold trading securities during the year. Gross gains of $2 and gross
losses of $34 were realized on these sales. There were no trading securities
transactions during the three months ended March 31, 1997.
Assets, principally securities, carried at approximately $24,044 at December
31, 1995, $20,593 at December 31, 1996 and $22,690 at March 31, 1997 were
pledged to secure public deposits and for other purposes required or permitted
by law.
3. LOANS
The following is a summary of the loan portfolio by principal categories:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
------------------ --------------
1995 1996 1997
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Real Estate
Single family residential (1-4)............ $ 55,609 $ 78,124 $ 81,747
Non-farm/non-residential................... 36,603 35,258 36,953
Agricultural............................... 9,274 11,583 11,308
Construction/land development.............. 3,471 8,808 10,211
Multifamily residential.................... 4,388 3,743 2,580
Consumer..................................... 25,372 39,868 43,284
Commercial and industrial.................... 11,077 28,154 29,103
Agricultural (non-real estate)............... 6,963 8,363 8,667
Other........................................ 441 561 788
-------- -------- --------
Loans, net of unearned discounts............. 153,198 214,462 224,641
Allowance for loan losses.................. (1,909) (3,019) (3,240)
-------- -------- --------
Net loans.................................... $151,289 $211,443 $221,401
======== ======== ========
</TABLE>
F-12
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
The above loan categories are presented net of unearned discounts and
unearned purchase discounts totalling $4,557, $3,966 and $4,059 at December
31, 1995 and 1996 and March 31, 1997, respectively. Loans on which the accrual
of interest has been discontinued aggregated $1,181, $2,057 and $1,771 at
December 31, 1995 and 1996 and March 31, 1997, respectively.
4. ALLOWANCE FOR LOAN LOSSES
A summary of transactions within the allowance for loan losses are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance--beginning of period... $1,716 $1,649 $1,909 $1,909 $3,019
Less sale of subsidiary
bank........................ (301) -- -- -- --
Provision charged to
operating expense........... 339 360 1,486 221 259
Recoveries on loans
previously charged-off...... 21 56 41 21 12
------ ------ ------ ------ ------
1,775 2,065 3,436 2,151 3,290
Loans charged-off............ (126) (156) (417) (100) (50)
------ ------ ------ ------ ------
Balance--end of period......... $1,649 $1,909 $3,019 $2,051 $3,240
====== ====== ====== ====== ======
</TABLE>
Impairment of loans having carrying values of $1,161, $2,164 and $1,969 at
December 31, 1995 and 1996 and March 31, 1997, respectively, have been
recognized in conformity with Statement of Financial Accounting Standards No.
114, as amended by Statement of Financial Accounting Standards No. 118. The
total allowance for credit losses related to those loans was $177, $350 and
$299 at December 31, 1995 and 1996 and March 31, 1997, respectively. For
impairment recognized in conformity with SFAS 114, as amended, the entire
change in present value of expected cash flows is reported as bad debt expense
in the same manner in which impairment initially was recognized or as a
reduction in the amount of bad debt expense that otherwise would be reported.
Real estate securing loans having a carrying value of $236 was transferred
to foreclosed assets held for sale in 1996. All such items were sold during
1996. The Banks are not committed to lend additional funds to debtors whose
loans have been modified.
5. BANK PREMISES AND EQUIPMENT
Bank premises and equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land........................................... $ 984 $ 1,178 $ 2,949
Buildings and improvements..................... 3,526 3,641 3,843
Leasehold improvements......................... 1,449 1,645 1,647
Equipment...................................... 2,963 3,353 3,611
------- ------- -------
8,922 9,817 12,050
Accumulated depreciation....................... (2,542) (2,945) (3,120)
------- ------- -------
Total premises and equipment................. $ 6,380 $ 6,872 $ 8,930
======= ======= =======
</TABLE>
F-13
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
6. FORECLOSED ASSETS HELD FOR SALE
A summary of the transactions within the allowance for losses on foreclosed
assets are as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance--beginning of period... $2,100 $1,124 $1,197 $1,197 $1,197
Provision charged to
operating expense........... 452 124 11 1 3
Charge-offs, net of
recoveries.................. (1,428) (51) (11) (2) (236)
------ ------ ------ ------ ------
Balance--end of period....... $1,124 $1,197 $1,197 $1,196 $ 964
====== ====== ====== ====== ======
</TABLE>
7. DEPOSITS
The aggregate amount of time deposits with a minimum denomination of $100 was
approximately $28,942, $41,922 and $44,292 at December 31, 1995 and 1996 and
March 31, 1997, respectively.
The scheduled maturities of time deposits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Zero to one year.................................... $ 76,824 $133,506
One year to two years............................... 56,916 22,058
Two years to three years............................ 7,353 4,713
Three years to four years........................... 5,057 1,173
Four years to five years............................ 2,695 1,773
Thereafter.......................................... 4,579 1,073
-------- --------
Total time deposits............................... $153,424 $164,296
======== ========
</TABLE>
8. NOTES PAYABLE
Notes payable consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a bank, interest at 8.804%, interest
only payable in December 1996 and 1997, then payable
in annual installments of $380, plus interest,
through December 2007, secured by 100% of the issued
and outstanding stock of Bank of the Ozarks, nwa.... $3,800 $3,800 $3,800
Note payable to a bank, interest at 8.25% paid
quarterly, principal balance due on September 28,
1998, secured by 5,478 shares of Bank of the Ozarks,
wca stock........................................... -- 1,500 1,500
Notes payable to individuals, interest at 6%, payable
in annual installments of $24, plus interest,
through December 2000, unsecured.................... 120 96 96
------ ------ ------
$3,920 $5,396 $5,396
====== ====== ======
</TABLE>
F-14
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
Aggregate annual maturities of notes payable at December 31, 1996 and March
31, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
1997............ $ 24
1998............ 1,904
1999............ 404
2000............ 404
2001............ 380
Thereafter...... 2,280
------
$5,396
======
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
1998............ $ 24
1999............ 1,904
2000............ 404
2001............ 404
2002............ 380
Thereafter...... 2,280
------
$5,396
======
</TABLE>
9. FHLB ADVANCES AND FEDERAL FUNDS PURCHASED
FHLB advances and federal funds purchased include short-term borrowings with
maturities ranging from one to thirty days. Certain additional FHLB advances
have maturities of over one year. Information relating to the short-term
borrowings is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
FHLB advances:
Average............................................ $ -- $ 3 $ 12
Period-end......................................... -- 500 --
Maximum month-end balance during period............ -- 500 --
Interest rate:
Weighted average................................. -- 5.82% 5.82%
Period-end....................................... -- 5.82% --
Federal funds purchased:
Average............................................ 134 87 64
Period-end......................................... -- 210 215
Maximum month-end balance during period............ -- 210 215
Interest rate:
Weighted average................................. 6.27% 5.24% 5.47%
Period-end....................................... -- 6.22% 5.96%
</TABLE>
The long-term FHLB advances totalled $7,947, $12,017, and $12,017 at
December 31, 1995 and 1996 and March 31, 1997, respectively. Interest rates on
these advances ranged from 6.50% to 5.74% at December 31, 1995 and 1996 and
March 31, 1997. Aggregate annual maturities of these long-term FHLB advances
at December 31, 1996 and March 31, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
1998............ $ 2,000
1999............ 3,000
2000............ 5,070
2001............ 1,947
2002............ --
Thereafter...... --
-------
$12,017
=======
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
1997............ $ 2,000
1998............ 5,370
1999............ 2,700
2000............ 1,947
2001............ --
Thereafter...... --
-------
$12,017
=======
</TABLE>
F-15
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
10. INCOME TAXES
The components of income tax expense for the years ended December 31, 1994,
1995 and 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
-------- ----------------
<S> <C> <C> <C>
Current provision................................ $ 1,698 $ 894 $ 2,298
Deferred provision (benefit)..................... (143) (49) (292)
-------- ------ --------
Income taxes..................................... $ 1,555 $ 845 $ 2,006
======== ====== ========
</TABLE>
The reconciliation between the statutory federal income tax rate is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate............. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit.... 1.8 4.3 4.3
Effect of non-taxable interest income......... (2.8) (4.6) (2.5)
Sale of subsidiary............................ (3.6) -- --
Accrual for state income tax assessment....... -- -- 6.5
Other......................................... 4.2 (6.7) (2.4)
-------- -------- --------
Effective income tax rate..................... 33.6% 27.0% 39.9%
======== ======== ========
</TABLE>
During the year ended December 31, 1996, the Company was assessed
approximately $326 of additional state income taxes for the years ended
December 31, 1992 through 1995. This assessment relates to the State of
Arkansas taking a different position than the federal income tax treatment
regarding dividends from less than 95% owned subsidiaries. The Company is
contesting this assessment. The full assessment has been recorded as income
tax expense during the year ended December 31, 1996. In addition,
approximately $93 of interest charged on this assessment was also recorded
during the year ended December 31, 1996.
The types of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts that give rise to deferred
income tax assets and liabilities and their approximate tax effects are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1995 1996
------------------ ------------------
TEMPORARY TAX TEMPORARY TAX
DIFFERENCES EFFECT DIFFERENCES EFFECT
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Deferred tax assets
Allowance for loan losses.............. $1,335 $511 $2,353 $ 901
Valuation of foreclosed assets......... 1,131 433 1,246 477
------ ---- ------ ------
Gross deferred tax assets................ 2,466 944 3,599 1,378
------ ---- ------ ------
Deferred tax liabilities
Unrealized appreciation on securities
available for sale.................... $ 13 $ 5 $ 159 $ 61
Accelerated depreciation on premises
and equipment......................... 452 173 637 244
Other.................................. 29 11 214 82
------ ---- ------ ------
Gross deferred tax liabilities........... 494 189 1,010 387
------ ---- ------ ------
Net deferred tax assets included in other
assets.................................. $1,972 $755 $2,589 $ 991
====== ==== ====== ======
</TABLE>
F-16
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
11. EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan ("ESOP") to provide
benefits to substantially all employees of the Company. The Company makes
annual contributions to the plan as determined solely by the Board of
Directors. Participants in the plan become fully vested after seven years of
service although cash or shares are not distributed until employment is
terminated. The Company contributed $76, $86 and $95 to the plan in the years
ended December 31, 1994, 1995 and 1996, respectively. Accruals for
contributions to the plan totalled $31 in the three months ended March 31,
1997.
12. COMMITMENTS AND CONTINGENCIES
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The
Company has the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since these commitments may expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
The Company had outstanding commitments to extend credit of approximately
$8,241, $10,186 and $18,665 at December 31, 1995 and 1996 and March 31, 1997,
respectively. The commitments extend over varying periods of time with the
majority to be disbursed within a one-year period.
The Company had total outstanding letters of credit amounting to $295, $484
and $454 at December 31, 1995 and 1996 and March 31, 1997, respectively. The
commitment terms generally expire within one year.
The Company grants agribusiness, commercial, residential and consumer
installment loans to customers primarily in northern, western and central
Arkansas. The Company maintains a diversified loan portfolio.
13. RELATED PARTY TRANSACTIONS
The Banks have entered into transactions with its officers, directors,
significant shareholders, and their affiliates (related parties). The
aggregate amount of loans to such related parties at December 31, 1995 and
1996 and March 31, 1997, was $3,654, $3,544 and $2,745, respectively. New
loans made to such related parties were $2,260, $1,780 and $192 for the years
ended December 31, 1995 and 1996 and for the three months ended March 31,
1997, respectively. Repayments of loans made by such related parties were
$727, $1,890 and $991 for the years ended December 31, 1995 and 1996 and for
the three months ended March 31, 1997, respectively.
F-17
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
14. REGULATORY MATTERS
Federal regulatory agencies generally require member banks to maintain core
(Tier 1) capital of at least 3% of total assets plus an additional cushion of
1% to 2%, depending upon capitalization classifications. Tier 1 capital
generally consists of total stockholders' equity. Additionally, these agencies
require member banks to maintain total risk-based capital of at least 8% of
risk-weighted assets, with at least one-half of that total capital amount
consisting of Tier 1 capital. Total capital for risk-based purposes includes
Tier 1 capital plus the lesser of the allowance for loan losses or 1.25% of
risk weighted assets.
The Banks' regulatory capital position was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- -----------------
COMPUTED COMPUTED COMPUTED COMPUTED
CAPITAL PERCENT CAPITAL PERCENT
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Bank of the Ozarks, Inc.
(consolidated)
Total risk-based capital... $19,584 9.70%/(1)/ $20,404 9.53%/(1)/
Tier 1 risk-based capital.. 17,055 8.45/(1)/ 17,737 8.29/(1)/
Leverage ratio............. 6.42 6.40
Bank of the Ozarks, wca:
Total risk-based capital... 16,464 11.99%/(1)/ 17,263 11.91%/(1)/
Tier 1 risk-based capital.. 14,742 10.74/(1)/ 15,445 10.66/(1)/
Leverage ratio............. 8.10 8.27
Bank of the Ozarks, nwa:
Total risk-based capital... 7,584 12.86%/(1)/ 8,072 12.42%/(1)/
Tier 1 risk-based capital.. 6,847 11.61/(1)/ 7,259 11.17/(1)/
Leverage ratio............. 8.22 8.06
</TABLE>
- --------
(1) Stated as a percent of risk-weighted assets are defined in OTS capital
regulations.
At December 31, 1996, the subsidiary banks exceeded their minimum capital
requirements. As of December 31, 1996, the state bank commissioner's approval
was required before the Banks could declare and pay any dividend of fifty
(50%) percent or more of the net profits of the Banks after all taxes for the
year in which the dividend is to be declared and paid.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
the value.
a. Cash and due from banks--For those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
b. Investment securities--For securities held for investment purposes, fair
values are based on quoted market prices or dealer quotes. If a quoted market
price is not available, fair value is estimated using quoted market prices for
similar securities or the carrying amount.
c. Loans--The fair value of loans is estimated by discounting the future
cash flows using the current rate at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
F-18
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
d. Deposit liabilities--The fair value of demand deposits, savings accounts,
NOW accounts and certain money market deposits is the amount payable on demand
at the reporting date. The fair value of fixed maturity certificates is
estimated using the rate currently offered for deposits of similar remaining
maturities. The carrying amount of accrued interest payable approximates its
fair value.
e. Other borrowed funds--For those short-term instruments, the carrying
amount is a reasonable estimate of fair value. The fair value of long-term
debt is estimated based on the current rates available to the Company for debt
with similar terms and remaining maturities.
f. Accrued interest--The carrying amount of accrued interest payable
approximates its fair value.
g. Off-balance sheet instruments--Fair values for off-balance sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
h. Commitments to extend credit and standby letters of credit--The fair
value of these commitments is estimated using the fees currently charged to
enter into similar agreements taking into account the remaining terms of the
agreements and the present credit-worthiness of the counter-parties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit is based on fees currently charged for similar agreements or
on the estimated cost to terminate them or otherwise settle the obligations
with the counter-parties at the reporting date.
F-19
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
The following table presents the estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which involves significant
judgements by management and uncertainties. Fair value is the estimated amount
at which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. Because no market exists for certain of these financial instruments and
because management does not intend to sell these financial instruments, the
Company does not know whether the fair values shown below represent values at
which the respective financial instruments could be sold individually or in
the aggregate.
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks............ $ 9,063 $ 9,063 $ 6,815 $ 6,815
Available-for-sale securities...... 32,550 32,550 36,883 36,883
Held-to-maturity securities........ 4,587 4,606 2,725 2,741
Federal funds sold................. 4,080 4,080 350 350
Loans, net of allowance for loan
losses............................ 151,289 155,581 211,443 215,143
Accrued interest receivable........ 1,988 1,988 2,552 2,552
Financial liabilities:
Demand, NOW and savings account
deposits.......................... $ 58,963 $ 58,963 $ 78,224 $ 78,224
Time deposits...................... 123,500 124,875 153,424 154,148
Notes Payable...................... 3,920 3,920 5,396 5,396
FHLB advances and federal funds
purchased......................... 7,947 7,947 12,727 12,367
Accrued interest and other
liabilities....................... 1,852 1,852 2,282 2,282
Off balance sheet assets
(liabilities):
Standby letters of credit.......... $ (295) $ (484)
Commitments to extend credit....... (5,995) (8,782)
Unfunded credit card loans......... (1,137) (1,395)
</TABLE>
16. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid during the period
for:
Interest.................... $4,623 $6,786 $9,682 $2,233 $2,778
Income taxes................ 1,502 898 2,378 35 33
Supplemental schedule of non-
cash investing and financing
activities:
Sale of foreclosed assets
held for sale.............. 378 32 72 28 162
Real estate acquired in
settlement of debt......... 478 69 236 -- 94
</TABLE>
F-20
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
17. OTHER INCOME
Other income consists of:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------- -----------------------
1994 1995 1996 1996 1997
---- ---- ---- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gain on sale of loans............... $ 44 -- $274 -- $ 68
Gain on sale of previously
foreclosed real estate............. 360 $ 4 14 -- 137
Printed checks sales................ -- 9 90 $19 26
Other............................... 179 93 7 12 55
---- ---- ---- --- ----
Total other income.................. $583 $106 $385 $31 $286
==== ==== ==== === ====
</TABLE>
18. OTHER OPERATING EXPENSES
Other operating expenses consists of:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- -----------------------
1994 1995 1996 1996 1997
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Other real estate and
foreclosure expense......... $ 402 $ 142 $ 49 $ 9 $ 31
Professional services........ 62 56 60 49 40
Postage...................... 111 118 140 27 32
Telephone.................... 93 106 125 23 33
Operating supplies........... 148 214 215 53 73
FDIC and state assessment.... 379 373 47 24 25
Amortization of goodwill..... 64 59 56 14 14
Charitable contributions..... 264 126 126 13 19
Guaranty fees................ -- -- 91 76 76
Advertising and public
relations................... 139 101 123 17 45
Other outside service fees... 20 31 59 13 8
Directors' fees.............. 32 79 96 20 23
Software amortization........ 55 75 69 16 27
Check printing charges....... 11 30 102 22 28
Other........................ 513 367 532 83 122
------ ------ ------ ---- ----
Total other operating
expenses.................... $2,293 $1,877 $1,890 $459 $596
====== ====== ====== ==== ====
</TABLE>
19. NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". SFAS No. 125
is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996. Earlier
application is prohibited. Adoption on January 1, 1997 is not expected to have
a material impact on the Company. The FASB deferred some provisions of SFAS
No. 125, which are not expected to be relevant to the Company.
F-21
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
The FASB issued SFAS No. 128, "Earnings Per Share", and SFAS No. 129,
"Disclosure of Information about Capital Structure" in February 1997. SFAS No.
128 simplifies the earnings per share ("EPS") calculations required by
Accounting Principles Board ("APB") Opinion No. 15, and related
interpretations, by replacing the presentation of primary EPS with a
presentation of basic EPS. SFAS No. 128 requires dual presentation of basic
and diluted EPS by entities with complex capital structures. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution of securities that
could share in the earnings of an entity, similar to the fully diluted EPS of
APB Opinion No. 15. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. When adopted, SFAS No. 128 will require
restatement of all prior-period EPS data presented. However, the Company's
prior years EPS will not be affected by these restatements.
SFAS No. 129 does not change any previous disclosure requirements, but
rather consolidated existing disclosure requirements for ease of retrieval.
20. CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents...................... $ 1,386 $ 964 $ 782
Investment in subsidiaries..................... 17,563 21,915 22,850
Premises and equipment, net.................... 37 27 38
Excess cost over fair value of net assets
acquired, at amortized cost................... 1,451 1,394 1,380
Other.......................................... 53 25 1
------- ------- -------
Total assets................................... $20,490 $24,325 $25,051
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable.................................. $ 3,920 $ 5,396 $ 5,396
Accrued interest and other liabilities......... 276 382 579
------- ------- -------
Total liabilities.............................. 4,196 5,778 5,975
------- ------- -------
Stockholders' equity
Common stock................................. 29 29 29
Additional paid-in capital................... 1,168 1,168 1,168
Retained earnings............................ 15,088 17,251 17,920
Unrealized appreciation (depreciation) on
investment securities....................... 9 99 (41)
------- ------- -------
Total stockholders' equity..................... 16,294 18,547 19,076
------- ------- -------
Total liabilities and stockholders' equity..... $20,490 $24,325 $25,051
======= ======= =======
</TABLE>
F-22
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income
Dividends from
subsidiaries.............. $ 406 $ 905 $ 1,250 $425 $ --
Gain on sale of
subsidiary................ 1,377 -- -- -- --
Other...................... 22 5 1 1 --
------- ------- ------- ---- -----
Total income................. 1,805 910 1,251 426 --
------- ------- ------- ---- -----
Expenses
Interest................... 57 10 468 85 122
Salaries and employee
benefits.................. -- 30 349 60 84
Net occupancy and
equipment................. -- 25 51 11 15
Other operating expenses... 151 78 243 103 110
------- ------- ------- ---- -----
Total expenses............... 208 143 1,111 259 331
------- ------- ------- ---- -----
Income (loss) before income
taxes (benefit) and equity
in undistributed earnings of
subsidiaries................ 1,597 767 140 167 (331)
Income taxes (benefit)..... 442 (219) (183) (92) (125)
Equity in undistributed
earnings of subsidiary.... 1,799 1,184 2,704 522 1,163
------- ------- ------- ---- -----
Net income................... $ 2,954 $ 2,170 $ 3,027 $781 $ 957
======= ======= ======= ==== =====
</TABLE>
F-23
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income................ $ 2,954 $ 2,170 $ 3,027 $ 781 $ 957
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities
Depreciation............ -- 9 16 3 3
Amortization............ 58 58 57 14 14
Gain on sale of
subsidiary............. (1,377) -- -- -- --
Equity in undistributed
earnings of
unconsolidated
subsidiaries........... (1,799) (1,184) (2,704) (522) (1,163)
Change in assets and
liabilities
Accrued interest and
other liabilities.... 150 112 106 (290) 197
Other, net............ 918 (13) (30) 79 112
------- ------- ------- ----- -------
Net cash provided (used) by
operating activities....... 904 1,152 472 65 120
------- ------- ------- ----- -------
Cash flows from investing
activities
Purchases of premises and
equipment................ -- (46) (6) (1) (14)
Liquidating dividend of
subsidiary............... 3,764 -- -- -- --
Additional investment in
subsidiaries and purchase
of minority shares of
stock.................... (160) (3,573) (1,500) -- --
------- ------- ------- ----- -------
Net cash provided (used) by
investing activities....... 3,604 (3,619) (1,506) (1) (14)
------- ------- ------- ----- -------
Cash flows from financing
activities
Proceeds from notes
payable.................. -- 3,920 1,500 -- --
Payments of notes
payable.................. (2,278) -- (24) -- --
Redemption of common
stock.................... -- (537) -- -- --
Dividends paid............ (893) (893) (864) (864) (288)
------- ------- ------- ----- -------
Net cash provided (used) by
financing activities....... (3,171) 2,490 612 (864) (288)
------- ------- ------- ----- -------
Net increase (decrease) in
cash and cash equivalents.. 1,337 23 (422) (800) (182)
Cash and cash equivalents--
beginning of period........ 26 1,363 1,386 1,386 964
------- ------- ------- ----- -------
Cash and cash equivalents--
end of period.............. $ 1,363 $ 1,386 $ 964 $ 586 $ 782
======= ======= ======= ===== =======
</TABLE>
21. SUBSEQUENT EVENTS (UNAUDITED)
a. Effective May 16, 1997, the Company entered into a $10,000 term loan and
revolving credit facility with Union Planters National Bank, Memphis,
Tennessee ("the Credit Facility"). Borrowings under this Credit Facility are
secured by 80% of the Company's stock in the Banks. The proceeds from the
Credit Facility were used to repay outstanding notes payable of $5,300 and to
fund capital investments in the Banks.
The term loan portion of the Credit Facility has a principal balance of
$5,000 payable in equal annual installments of $500 commencing December 21,
1998 plus interest payable annually at 8.804% commencing
F-24
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
December 21, 1997. The term loan matures on December 21, 2007 and provides for
prepayment penalties under certain circumstances.
The Credit Facility also provides for a revolving line of credit of up to
$5,000. Advances remaining unpaid for any consecutive period of 365 days are
converted to term loans under the facility, with a corresponding reduction in
availability, and are payable in equal annual installments of principal
through December 21, 2007. Interest accrues on outstanding borrowings under
the revolving line of credit, including any amounts converted to term loans,
at a variable rate equal to average prime lending rate reported from time to
time by the Wall Street Journal minus 0.25% payable quarterly commencing June
21, 1997. The revolving line of credit commitment is effective through
December 21, 2007, subject to an annual compliance review by the lender.
The Credit Facility requires that the Banks, among other things, maintain a
minimum return on average assets, a minimum ratio of primary capital to assets
and maximum charges for loan losses.
b. On May 22, 1997, the Company's stockholders approved an amendment to the
Articles of Incorporation that, among other things, changed the Company's name
to Bank of the Ozarks, Inc. from Ozark Bankshares, Inc., changed the par value
of the preferred and common stock, and increased the number of authorized
shares of common stock. The Company's Board of Directors also approved a
common stock dividend of 99 shares for every one share of issued and
outstanding common stock.
The unissued authorized preferred stock of 1,000,000 shares had its par
value changed from $0.10 to $0.01 per share. The 100,000 authorized shares of
common stock was increased to 10,000,000 authorized shares of common stock and
the par value of the common stock was also changed from $0.10 to $0.01 per
share.
The accompanying financial statements for all periods presented have been
restated to reflect these changes.
c. In May 1997 the Company's Board of Directors adopted a Stock Option Plan
to provide an additional incentive to executive officers and employees. Under
this plan, the Company may grant options to purchase shares of common stock at
prices not less than the fair market value of such shares on the date of
grant. 285,000 shares of common stock will be reserved and available for
issuance under this plan.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Under the
provisions of SFAS No. 123, companies can elect to account for stock-based
compensation plans using a fair value based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". SFAS No. 123 requires that companies electing to
continue using the intrinsic value method must make pro forma disclosures of
net income and earnings per shares as if the fair value based method of
accounting had been applied. SFAS No. 123 will be effective for all options
granted under the plan described above. The Company intends to account for
stock-based compensation using the intrinsic value method, and accordingly,
this pronouncement will not have an effect on the Company's reported financial
position or results of operations.
d. In May 1997 the Company established a qualified retirement plan, with a
salary deferral feature designed to qualify under Section 401 of the Internal
Revenue Code ("the 401(k) Plan"). The 401(k) Plan will permit the employees of
the Company to defer a portion of their compensation in accordance with the
provisions of Section 401(k) of the Code. Matching contributions may be made
in amounts and at times determined by the Company. The 401(k) Plan provides
for Company matching contributions, if determined by the Company to be made,
up to a maximum of two percent of the participant's salary per year. No other
Company matching contributions are
F-25
<PAGE>
BANK OF THE OZARKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)
contemplated at this time. Certain other statutory limitations with respect to
the Company's contribution under the 401(k) Plan also apply. Amounts
contributed by the Company for a participant will vest over five years and
will be held in trust until distributed pursuant to the terms of the 401(k)
Plan.
Employees of the Company will be eligible to participate in the 401(k) Plan
if they meet certain requirements concerning minimum age and period of
credited service. All contributions to the 401(k) Plan will be invested in
accordance with participant elections among certain investment options.
Distributions from participant accounts will not be permitted before age 65,
except in the event of death, permanent disability, certain financial
hardships or termination of employment.
e. The Arkansas State Bank Department currently limits the amount of
dividends that the Banks can pay the Company to 50% of their respective
current year earnings. The Arkansas State Bank Department has proposed
regulations which would increase this dividend limit to 75% of the Bank's net
profits after taxes for the current year plus 75% of their net profits after
taxes for the immediately preceding year.
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF
ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Forward-Looking Information.............................................. 6
Risk Factors............................................................. 6
The Company.............................................................. 11
Dividend Policy.......................................................... 11
Dilution................................................................. 12
Use of Proceeds.......................................................... 13
Capitalization........................................................... 14
Selected Consolidated Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 32
Supervision and Regulation............................................... 40
Management............................................................... 47
Certain Transactions..................................................... 54
Principal and Selling Stockholders....................................... 55
Description of Capital Stock............................................. 56
Shares Eligible for Future Sale.......................................... 57
Underwriting............................................................. 58
Legal Matters............................................................ 59
Experts.................................................................. 59
Additional Information................................................... 59
Index to Consolidated Financial Statements............................... F-1
</TABLE>
-----------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECU-
RITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
[LOGO OF BANK OF THE OZARKS, INC. APPEARS HERE]
COMMON STOCK
-----------------
PROSPECTUS
-----------------
STEPHENS INC.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses of this offering in connection with this registration
statement, other than underwriting compensation, are estimated as follows
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 7,426
Nasdaq Listing Fees............................................... 23,898
NASD Filing Fee................................................... 2,950
Blue Sky Fees and Expenses........................................ 10,000
Accounting Fees and Expenses...................................... 72,000
Legal Fees and Expenses........................................... 140,000
Printing and Engraving............................................ 112,500
Transfer Agent's Fees and Expenses................................ 5,000
Miscellaneous..................................................... 26,226
---------
Total........................................................... $ 400,000
=========
</TABLE>
The foregoing expenses shall be borne pro rata by the Company and the
Selling Stockholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ninth of the Company's Amended and Restated Articles of
Incorporation provides that the Company's directors will not be personally
liable to the Company or any of its stockholders for monetary damages
resulting from breaches of their fiduciary duty as directors expect (a) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Arkansas Code
Annotated (S)4-27-833, as the same exists or hereafter may be amended, (d) for
any transaction from which the director derived an improper personal benefit,
or (e) for any action, omission, transaction, or breach of a director's duty
creating any third party liability to any person or entity other than the
Company or stockholder.
Section 4-27-850 of the Arkansas Business Corporation Act empowers Arkansas
corporations to indemnify any director or officer against expenses, judgments,
fines and amounts paid in settlements actually and reasonably incurred by him
in connection with any action, suit or proceeding, if such director or officer
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal proceeding had no reasonable cause to believe his conduct was
unlawful, except that no indemnification shall be made in connection with any
action by or in the right of the corporation if such person is adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless the court determines that despite that adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses actually and reasonably incurred by him.
Article Tenth of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall, to the full extent permitted by
Section 4-27-850 of the Arkansas Business Corporation Act, indemnify all
persons whom it may indemnify pursuant thereto.
The effect of the indemnification provisions contained in the Company's
Amended and Restated Articles of Incorporation is to require the Company to
indemnify its directors and officers under circumstances where such
indemnification would otherwise be discretionary.
II-1
<PAGE>
The Company's Amended and Restated Articles of Incorporation specify that
the indemnification rights granted thereunder are enforceable contract rights
which are not exclusive of any other indemnification rights that the director
or officer may have under any by-law, vote of stockholders or disinterested
directors or otherwise. As permitted by Section 4-27-850 of the Arkansas
Business Corporation Act, the Company's Amended and Restated Articles of
Incorporation also authorize the Company to purchase directors' and officers'
insurance for the benefit of its past and present directors and officers,
irrespective of whether the Company has the power to indemnify such persons
under Arkansas law. The Company currently maintains such insurance as allowed
by these provisions.
The Company's Amended and Restated Articles of Incorporation also provide
that expenses incurred by a director or officer in defending a civil or
criminal lawsuit or proceeding arising out of actions taken in his official
capacity, or in certain other capacities, will be paid by the Company in
advance of the final disposition of the matter upon receipt of an undertaking
from the director or officer to repay the sum advanced if it is ultimately
determined that he is not entitled to be indemnified by the Company pursuant
to applicable provisions of Arkansas law.
As noted above, the Company's directors and officers have certain indemnity
rights under the Company's Amended and Restated Articles of Incorporation and
are protected from certain other liabilities by the Company's existing
directors' and officers' insurance. The Company has also entered into
supplemental indemnification agreements with its directors and with certain
officers designated by the Board of Directors (collectively the
"Indemnitees"), which broaden the scope of indemnity that would otherwise be
provided by the Company to such persons under the terms of its Amended and
Restated Articles of Incorporation.
The indemnification agreements with the Indemnitees provide that, subject to
certain important exceptions, the Indemnitees shall be indemnified to the
fullest possible extent permitted by law against any amount which they become
legally obligated to pay because of any act or omission or neglect or breach
of duty. Such amount includes all expenses (including attorneys' fees),
damages, judgments, costs and settlement amounts, actually and reasonably
incurred or paid by them in any action or proceeding, including any action by
or in the right of the Company, on account of their service as a director or
officer of the Company or any subsidiary of the Company. The indemnification
agreements further provide that expenses incurred by the Indemnitees in
defending such actions, in accordance with the terms of the agreements, shall
be paid in advance, subject to the Indemnitees' obligation to reimburse the
Company in the event it is ultimately determined that they are not entitled to
be indemnified for such expenses under any of the provisions of the
indemnification agreements.
No indemnification is provided under the indemnification agreements on
account of conduct which is adjudged to be deliberately dishonest and material
to establishing the liability for which indemnification is sought. In
addition, no indemnification is provided if a final court adjudication shall
determine that such indemnification is not lawful, or in respect of any suit
in which judgment is rendered for an accounting of profits made from a
purchase or sale of securities of the Company in violation of Section 16(b) of
the Securities Exchange Act of 1934, or of any similar statutory provision, or
on account of any remuneration, personal profit or advantage which is adjudged
to have been obtained in violation of law. The indemnification agreements also
contain provisions designed to protect the Company from unreasonable
settlements or redundant legal expenditures.
The indemnification agreements also provide for contribution by the Company,
with certain exceptions, to amounts paid by the Indemnitees in any situation
in which the Company and such individuals are jointly liable (or would be if
the Company were joined in the litigation) if for any reason indemnification
is not available. Such contribution would be based on the relative benefits to
the Company and the individuals of the transaction from which liability arose,
and on the relative fault in the transaction of the Company and the
individuals. This provision could be applicable in the event a court found
that indemnification under the federal securities laws is against public
policy and thus not enforceable, as well as under state laws.
II-2
<PAGE>
The indemnification agreements provide for substantially broader indemnity
rights than those currently granted to the directors and officers of the
Company under the Company's Amended and Restated Articles of Incorporation,
which afforded directors and officers only those express indemnification
rights set forth in Section 4-27-850 of the Arkansas Business Corporation.
They are not intended to deny or otherwise limit third party or derivative
suits against the Company or its directors or officers. However, to the extent
a director or officer were entitled to indemnification or contribution
thereunder, the financial burden of a third party suit would be borne by the
Company, and the Company would not benefit from derivative recoveries since
the amount of such recoveries would be repaid to the director or officer
pursuant to the agreements.
Section 8 of the form of Underwriting Agreement filed as Exhibit 1.1
provides that the Underwriter will indemnify and hold harmless the Company,
each of its directors and officers who have signed this registration
statement, and each controlling person of the Company from and against certain
liabilities, including liabilities under the Securities Act published rules
and regulations adopted by the SEC under the Securities Act and the Securities
Exchange Act of 1934, as amended, and provides that the Underwriter will
reimburse any legal or other expenses reasonably incurred by such persons in
connection with such liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 Amended and Restated By-Laws of the Company.
*4.1 Form of the Company's Common Stock Certificate.
*5.1 Opinion of Rose Law Firm, a Professional Association.
10.1 The Company's Stock Option Plan.
10.2 The Company's Non-Employee Director Stock Option Plan.
10.3 Loan Agreement, dated May 16, 1997, between the Company and Union
Planters National Bank, Memphis, Tennessee.
10.4 Real Estate Contract (Unimproved Property), dated February 6, 1997, by
and between Ozark WCA, and Toy's Inc., and General Addendum, dated
April 7, 1997 relating to real estate in Fort Smith, Sebastian County,
Arkansas.
10.5 Commercial Offer and Acceptance (Unimproved Real Property), dated
December 9, 1996, by and between Ozark WCA, and American Taekwondo
Association, Inc. relating to real estate in Little Rock, Pulaski
County, Arkansas.
10.6 Commercial Ground Lease, dated November 10, 1993, by and among Newton
County Bank (now Ozark NWA) and James W. OBryan, Rose Mary Horton
OBryan, Jerry L. Horton, and Mary Horton relating to real estate in
Marshall, Searcy County, Arkansas.
10.7 Commercial Ground Lease, dated September 7, 1994, by and among the
Company and David L. Taylor and Carolyn L. Taylor relating to real
estate in Harrison, Boone County, Arkansas.
10.8 Commercial Ground Lease, dated September 7, 1994, by and among the
Company and David L. Taylor and Carolyn L. Taylor relating to real
estate in Clarksville, Johnson County, Arkansas.
10.9 Employment Agreement, dated May 22, 1997, between the Company and
George G. Gleason, II.
10.10 Form of Indemnification Agreement.
21.1 List of Subsidiaries of the Company.
*23.1 Consent of Rose Law Firm, a Professional Association (contained in
Exhibit 5.1 hereto).
23.2 Consent of Moore Stephens Frost, P.A., Independent Certified Public
Accountants.
23.3 Consent of Baird, Kurtz and Dobson, Independent Certified Public
Accountants.
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LITTLE ROCK, STATE OF
ARKANSAS, ON MAY 22, 1997.
BANK OF THE OZARKS, INC.
(Registrant)
By: /s/ George G. Gleason, II
---------------------------------
GEORGE G. GLEASON, II
Chairman of the Board of Directors
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ George G. Gleason, II Chairman of the May 22, 1997
- ------------------------------------- Board of Directors
GEORGE G. GLEASON, II and Chief Executive
Officer (Principal
Executive Officer)
/s/ Linda D. Gleason Director May 22, 1997
- -------------------------------------
LINDA D. GLEASON
/s/ Mark D. Ross President-Bank May 22, 1997
- ------------------------------------- Services and
MARK D. ROSS Director
/s/ Paul E. Moore Chief Financial May 22, 1997
- ------------------------------------- Officer (Principal
PAUL E. MOORE Financial and
Accounting Officer)
II-5
<PAGE>
EXHIBIT 1.1
BANK OF THE OZARKS, INC.
1,331,700 Shares*
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
___________, 1997
STEPHENS INC.
As Representative of the Several Underwriters
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
Bank of the Ozarks, Inc., an Arkansas corporation (the "Company") together
with the Company's shareholders named on the signature page hereof (collectively
the "Selling Stockholders") confirm their agreement with the several
underwriters (the "Underwriters") for whom you are acting as representative
(the "Representative") to issue and sell an aggregate of 1,331,700 shares of
the Company's common stock, par value $.01 per share (the "Underwritten
Shares") to the Underwriters. The common stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
For the sole purpose of covering over-allotments in connection with the sale
of the Underwritten Shares, the Company proposes to grant to the Underwriters
the option (the "Option") described in Section 2 hereof to purchase all or any
part of 199,755 shares of common stock (the "Option Shares") owned by it. The
Underwritten Shares and the Option Shares purchased pursuant to this
Underwriting Agreement are herein called the "Shares" and the proposed offering
of the Shares by the Underwriters is hereinafter referred to as the "Public
Offering."
The Company has filed with the Securities and Exchange Commission (the
"Commission"), pursuant to the Securities Act of 1933, as amended (the "Act"),
and published rules and regulations adopted by the Commission under the Act (the
"Rules"), a registration statement on Form S-1 ("Form S-1") (File No. 333-
________), including a preliminary prospectus, relating to the Shares, and such
amendments to such registration statement as may have been filed with the
Commission to the date of this Agreement. The term "preliminary prospectus "
means any preliminary prospectus (as referred to in Rule 430 or Rule 430A of the
Rules) included at any time as a part of the
- ----------------------------
* Plus up to 199,755 additional shares to cover over-allotments; if any.
<PAGE>
registration statement. The Company has furnished to the Representative copies
of such registration statement, each amendment to it filed by the Company with
the Commission and each preliminary prospectus filed by the Company with the
Commission and any other offering materials used by the Company. If such
registration statement has not become effective, a further amendment (the "Final
Amendment") to such registration statement, including a form of final
prospectus, if necessary to permit such registration statement to become
effective, will promptly be filed by the Company with the Commission. If such
registration statement has become effective, a final prospectus (the "Rule 430A
Prospectus") containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules will promptly be filed by the Company
with the Commission in accordance with the Rules. The registration statement as
amended at the time it becomes or became effective (the "Effective Date"),
including financial statements and all exhibits and any information deemed to be
included by Rule 430A, is called the "Registration Statement." The term
"Prospectus" means the prospectus as first filed with the Commission pursuant to
Rule 424(b) of the Rules, or if no such filing is required, the form of final
prospectus included in the Registration Statement at the Effective Date.
Any reference herein to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include any
documents incorporated by reference therein on or before the Effective Date or
the date of such preliminary prospectus or the Prospectus, as the case may be.
Any reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Securities Exchange Act of 1934 (the "Exchange Act") after the
Effective Date or the date of any preliminary prospectus or the Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Underwriting Agreement on behalf of the several
Underwriters and (b) the Underwriters are willing, acting severally and not
jointly, to purchase the amounts of the Underwritten Shares set forth opposite
their respective names in Schedule I hereto, plus their pro rata portion of the
Option Shares if you elect to exercise the over-allotment Option in whole or in
part for the accounts of the several Underwriters.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the Company
and the Underwriters hereby agree as follows:
1. Representations, Warranties and Agreements of the Company.
(a) The Company and George G. Gleason, II, individually, jointly and
severally represent and warrant to, and agree with, each Underwriter as follows:
(i) The Company has been duly organized, is in compliance with its
Amended and Restated Articles of Incorporation, and is validly existing as a
corporation in good standing under the laws of the State of Arkansas, with full
power and authority (corporate and other) to own
2
<PAGE>
its properties and conduct its business as described in the Registration
Statement and Prospectus; all significant subsidiaries (as defined by the Act)
of the Company (each, a "Subsidiary" and collectively, the "Subsidiaries") have
been duly incorporated, will be, and are validly existing as a banking
association or corporation, as the case may be, in good standing under the laws
of the jurisdiction of its association or incorporation, as the case may be,
with full power and authority (corporate and other) to own or lease its
properties and conduct its business; the Company and the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business or the ownership or lease of their properties requires such
qualifications; all of the outstanding shares of capital stock of each
Subsidiary are owned by the Company and have been duly and validly authorized
and issued, are fully paid and non-assessable.
(ii) The outstanding shares of common stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable;
the Shares are duly and validly authorized, and, to the extent any portion of
the Shares has not yet been issued, when issued and paid for as contemplated
herein, will be fully paid and non-assessable; and no preemptive or other
restrictive rights of any holder of any class of the Company's stock exist with
respect to the Shares or the issue and sale thereof, except where the same shall
have been waived in writing by the holders thereof prior to the date hereof.
(iii) The Shares conform with the statements concerning them in
any preliminary prospectus, the Prospectus and the Registration Statement. As
of the Closing Date (as defined below) and any Option Closing Date (as defined
below), if applicable, the Company will have the authorized capitalization set
forth under the caption "Use of Proceeds and Capitalization" and "Description of
Capital Stock" in the Prospectus. No further corporate approval or authority on
behalf of the Company will be required for the issuance and sale of the Shares
to be sold by the Company as contemplated herein.
(iv) Any preliminary prospectus, the Prospectus and the Registration
Statement have been carefully prepared by the Company in conformity with the
requirements of the Act and the Rules, including Form S-1. The Registration
Statement has been filed with the Commission under the Act.
(v) Neither the Commission nor any other agency, body, authority,
court or arbitrator of competent jurisdiction has, by order or otherwise,
prohibited or suspended the use of any preliminary prospectus or the Prospectus
relating to the proposed offering of the Shares or instituted proceedings for
that purpose. The Registration Statement, the Prospectus and any preliminary
prospectus and any amendments or supplements thereto at the time they became or
become effective or were filed or are filed with the Commission contained or
will contain all statements which are required to be stated therein by, and in
all material respects conformed or will conform to the requirements of, the Act
and the Rules. Neither the Registration Statement, nor any preliminary
prospectus nor any amendment thereto, and neither the Prospectus nor any
supplement thereto, as of its date contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company makes no
-------- -------
representations or warranties as to information contained in or omitted from the
3
<PAGE>
Registration Statement or any preliminary prospectus or the Prospectus, or any
such amendment or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter through
the Representative, expressly for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the consolidated financial position and
the consolidated results of operations of the Company and the Subsidiaries
consolidated, at the indicated dates and for the indicated periods. Such
financial statements have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
and all adjustments necessary for a fair presentation of results for such
periods have been made. The Summary Consolidated Financial Data and the
Selected Consolidated Financial Data included in the Prospectus present fairly
the information shown therein and have been compiled on a basis consistent with
that of the audited and unaudited financial statements from which they were
derived.
(vii) There is no action or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any Subsidiary before any court
or administrative or governmental agency or other body which might (A) result in
any material adverse change in the condition (financial or otherwise), or in the
earnings, business, affairs, properties, business prospects or results of
operations of the Company and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, or (B) affect the performance of
this Agreement or the consummation of the transactions herein contemplated,
except as disclosed in the Registration Statement and for which the Company
maintains a reserve in an amount which is adequate to cover potential
liabilities.
(viii) The Company and each Subsidiary has good and marketable title to
all of the material properties and assets reflected in the financial statements
hereinabove described or as described in the Prospectus as being owned by them,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those securing indebtedness described in such financial statements or as
described in the Prospectus or which do not materially affect the present or
proposed use of such properties or assets. The Company and the Subsidiaries
occupy their leased properties under valid, subsisting and binding leases with
only such exceptions as in the aggregate are not material and do not interfere
with the conduct of the business of the Company.
(ix) The Company and each Subsidiary have filed all Federal, State
and foreign tax returns which have been required to be filed and have paid all
taxes indicated by said returns and all assessments received by them or any of
them to the extent that such taxes have become due.
(x) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, as they may be amended or
supplemented, (A) there has not been any material adverse change in the
condition (financial or otherwise), or in the earnings, business, affairs,
properties, business prospects or results of operations of the Company and the
Subsidiaries taken as a whole nor does the Company have knowledge of any such
change that is threatened, (B) there has
4
<PAGE>
not been any transaction entered into by the Company or the Subsidiaries that is
material to the earnings, business, affairs, properties, business prospects or
operations of the Company, other than transactions in the ordinary course of
business and changes and transactions contemplated by the Registration Statement
and the Prospectus, as they may be amended or supplemented, and (C) there has
not been any material change in the capital stock, long term debt or material
liabilities of the Company. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Registration Statement and
the Prospectus.
(xi) Neither the Company nor any of the Subsidiaries individually or
in the aggregate are in breach or violation of or default under any indenture,
mortgage, deed of trust, lease, contract, note or other agreement or instrument
to which it is a party or by which it or any of its properties is bound and
which default may result in a material adverse change in the condition
(financial or otherwise) or in the earnings, business, affairs, properties,
business prospects or results of operations of the Company and the Subsidiaries
taken as a whole. The consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not result in a breach or violation of
any of the material terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease, contract, note or other agreement or
instrument to which the Company or any Subsidiary is a party, or of the
Company's Articles of Incorporation or by-laws or any law, decree, order, rule,
writ, injunction or regulation applicable to the Company or any Subsidiary of a
court or of any regulatory body or administrative agency or other governmental
body having jurisdiction.
(xii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and performance of its obligations hereunder (except
such additional steps as may be necessary to qualify the Shares for public
offering by the Underwriters under state securities or Blue Sky laws) have been
obtained or made and is in full force and effect.
(xiii) The Company and each Subsidiary hold all material licenses,
authorizations, charters, certificates and permits from governmental authorities
which are necessary to the conduct of their businesses and neither the Company
nor any Subsidiary has received notice of any proceeding relating to the
revocation or modification of any of such licenses, authorizations, charters,
certificates or permits. The Company and the Subsidiaries own or otherwise
possess rights to use the licenses, inventions, copyrights, trademarks, service
marks and trade names presently employed by them in connection with the business
now operated by them, and neither the Company nor any Subsidiary has infringed
or received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing.
(xiv) Each of Moore Stephens Frost and Baird, Kurtz & Dobson, who
have certified certain of the financial statements filed with the Commission and
included as part of the Registration Statement and Prospectus, are independent
public accountants within the meaning of the Act, the Rules and Regulation S-X
of the Commission and Rule 101 of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
5
<PAGE>
(xv) There are no agreements, contracts or other documents of a
character required to be described in the Registration Statement or the
Prospectus or required by Form S-1 to be filed as exhibits to the Registration
Statement which are not described or filed as required.
(xvi) No labor dispute exists or is imminent with the Company's
employees or with employees of any Subsidiary which could materially adversely
affect the condition (financial or otherwise), earnings, business, affairs,
properties, business prospects or results of operations of the Company.
(xvii) Except as contemplated by Section 2 hereof and as disclosed in
the Prospectus and permitted by the Rules, the Company has not (itself or
through any person) taken and will not take, directly or indirectly, any action
designed to or which might reasonably be expected to, cause or result in a
violation of Section 5 of the Act or Rule 10b-6 under the Exchange Act ("Rule
10b-6") or in stabilization or manipulation of the price of the Company's common
stock.
(xviii) This Agreement has been duly authorized, executed and
delivered by the Company and is enforceable against the Company in accordance
with its terms, subject to all applicable bankruptcy, insolvency, moratorium,
receivership, and other laws relating to or affecting the rights of creditors
generally and subject to the discretion of a court of equity in administering
any such rights or remedies.
(xix) Neither the Company nor any Subsidiary is in violation of any
law, ordinance, governmental rule or regulation or court decree to which it may
be subject, which violation might have a material adverse effect on the
condition (financial or otherwise), earnings, business, affairs, properties,
business prospects or the results of operations of the Company and its
Subsidiaries taken as a whole.
(b) Each Selling Stockholder further represents and warrants to,
and agrees with each Underwriter as follows:
(i) As of the Effective Date, the Selling Stockholder shall
be the lawful owner of the number of Shares to be sold by him, her or it, and
has or at such time or times, as required, will have, good and marketable title
to all such Shares, free of all restrictions on transfer (other than those
imposed by the Act, the Company's Articles of Incorporation and by-laws and the
securities or Blue Sky laws of certain jurisdictions), liens, encumbrances,
security interests and claims whatsoever, except where the same shall have been
waived in writing prior to the date hereof.
(ii) The Selling Stockholder has full legal right, power and
authority, and has obtained any approvals required by law or pursuant to any
agreement or instrument to which the Selling Stockholder is a party, to enter
into this Underwriting Agreement, and this Underwriting Agreement has been duly
executed and delivered by the Selling Stockholder.
6
<PAGE>
(iii) Upon delivery of payment for the Shares to be sold by
the Selling Stockholder pursuant to this Underwriting Agreement, good and
marketable title to such Shares will pass, free of all restrictions on transfer
(other than those imposed by the Act, the Company's Articles of Incorporation
and the securities or Blue Sky laws of certain jurisdictions), liens,
encumbrances, security interests and claims whatsoever, to the several
Underwriters.
(iv) The Selling Stockholder has not taken, nor will he, she
or it take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares owned by the Selling Stockholder pursuant to the distribution
contemplated by this Underwriting Agreement.
(v) The Selling Stockholder will pay or cause to be paid all
transfer taxes, if any, with respect to the Shares to be sold by the Selling
Stockholder.
(c) Any certificate signed by any officer of the Company or any
Selling Stockholder, as the case may be and delivered to you or counsel for the
Representative shall be deemed a representation and warranty by the Company or
such Selling Stockholder to the Underwriters as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Underwritten Shares. On the
basis of the representations, warranties and covenants herein contained, and
subject to the terms and conditions herein set forth, the Company and the
Selling Stockholders agree, severally, and not jointly, to sell to each
Underwriter, severally and not jointly, and each Underwriter agrees, severally
and not jointly, to purchase, at a price of $________ per share, the number of
the Underwritten Shares set forth opposite the name of each Underwriter in
Schedule I attached hereto, subject to adjustment in accordance with Section 10
hereof. Subject to the above, the Company has hereby agreed to sell to the
Underwriters 700,000 of said Underwritten Shares and the Selling Stockholders
have agreed to sell to the Underwriters 631,700 of said Underwritten Shares, all
as specifically set forth in Schedule I.
Payment for the Underwritten Shares shall be made by certified or bank
cashier's checks in clearing house funds (which will be next day funds) or, upon
mutual agreement of the parties, by wire transfer of U.S. Funds to designated
accounts of the Company and the Selling Stockholders, as appropriate, drawn to
the order of the Company and the Selling Stockholders, respectively, against
delivery of certificates for the Shares to the Representative for the accounts
of the several Underwriters. Delivery of certificates shall be to the
Representative at 111 Center Street, Little Rock, Arkansas 72201 or such other
place as the Representative may reasonably request. Payment will be made at 111
Center Street, Little Rock, Arkansas 72201, or at such other place as shall be
agreed upon by the Representative and the Company, at 8:00 A.M., Central Time,
on the fourth business day after the Effective Date (assuming that the time of
effectiveness is after 3:00 P.M., Central Time on the Effective Date) and
otherwise, at 10:00 A.M., Central Time, on the third business day after the
Effective Date, or at such other time and date not later than six days after the
Effective Date as you and the Company shall agree upon, such time and date of
payment being
7
<PAGE>
herein referred to as the "Closing Date." The certificates for the Underwritten
Shares will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full business day
prior to the Closing Date, and will be made available for inspection in the
offices of the Representative in Little Rock, or such other place as the
Representative may reasonably request, at least one full business day prior to
the Closing Date.
In addition, on the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an Option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section 2. The Option may be exercised in whole
or in part at any time upon written notice (or oral notice, subsequently
confirmed in writing) given not less than 30 days following the date of this
Underwriting Agreement, by you, as the Representative of the several
Underwriters, to the Company setting forth the number of Option Shares as to
which the several Underwriters are exercising the Option and the names and
denominations in which the Option Shares are to be registered. Closing of the
purchase of the Option Shares, if any, shall occur no later than four business
days following the date upon which notice of exercise of the Option is given to
the Company. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion as the total number of Underwritten Shares being
purchased by such Underwriter bears to the total number of Underwritten Shares
being purchased by all Underwriters as a group, as more particularly indicated
on Schedule I, subject to adjustment in accordance with Section 10 and as
adjusted by you in such manner to avoid fractional shares. The Option may be
exercised only to cover over-allotments in the sale of the Underwritten Shares
by the Underwriters. You, as the Representative, may cancel such Option at any
time prior to its expiration by giving written notice (or oral notice,
subsequently confirmed in writing) of such cancellation to the Company. To the
extent, if any, that the Option is exercised, payment for the Option Shares
shall be made at such closing by certified or bank cashier's checks in clearing
house funds (which will be next day funds) or, upon mutual agreement of the
parties, by wire transfer of U.S. Funds to a designated account of the Company,
drawn to the order of the Company.
3. Offering by the Underwriters. It is understood that the Public
Offering of the Underwritten Shares is to be made as soon as the Representative
deems it advisable to do so after the Registration Statement has become
effective. The Underwritten Shares are to be initially offered to the public at
the public offering price set forth in the Prospectus. The Representative may
from time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representative for
the Underwriters in the offering and sale of the Shares, in accordance with an
Agreement Among Underwriters which has been entered into among you and the
several other Underwriters.
4. Covenants of the Company.
(a) The Company covenants and agrees with the several Underwriters
that:
8
<PAGE>
(i) The Company will use its best efforts to cause the Registration
Statement to become effective and will not, either before or after
effectiveness, file any amendment thereto or supplement to the Prospectus
(including a Prospectus filed pursuant to Rule 424(b) which differs from the
Prospectus on file at the time the Registration Statement becomes effective) of
which the Representative shall not previously have been advised and furnished
with a copy or to which the Representative shall have reasonably objected in
writing or which is not in compliance with the Act or Rules.
(ii) The Company will advise the Representative promptly of any
request of the Commission or other securities regulatory agency ("Other
Securities Regulator") for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose, or comparable action taken or initiated by any
Other Securities Regulator, and the Company will use its best efforts to prevent
the issuance of any stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions (including foreign jurisdictions) as the Representative reasonably
may have designated in writing, and will make such applications, file such
documents and furnish such information as may be reasonably required for that
purpose; provided however, the Company shall not be required to qualify as a
-------- -------
foreign corporation or to file a general consent to service of process in any
jurisdiction where it is not so qualified or required to file such a consent.
The Company will, from time to time, prepare and file such statements, reports,
and other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representative may reasonably request for
distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any preliminary prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative on the Effective Date and thereafter from
time to time during the period when delivery of a Prospectus is required under
the Act as many copies of the Prospectus in final form, or as thereafter amended
or supplemented, as the Representative may reasonably request. The Company will
deliver to the Representative at or before the Closing Date, one signed copy of
the Registration Statement and all amendments thereto including all exhibits
filed therewith, and will deliver to the Representative such number of copies of
the Registration Statement, and of all amendments thereto, as the Representative
may reasonably request.
(v) If during the period in which a Prospectus is required by law to
be delivered by an Underwriter or dealer any event shall occur as a result of
which, in the judgment of the Company or in the opinion of counsel for the
Underwriters, with the concurrence of the Company and its counsel, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered
9
<PAGE>
to a purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
notify the Representative and, subject to the Representative's prior review,
prepare and file with the Commission and any appropriate Other Securities
Regulator an appropriate amendment or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not, in light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will comply
with the law.
(vi) The Company will make generally available to its security
holders in the manner contemplated by Rule 158(b) under the Act, as soon as it
is practicable to do so, but in any event not later than the forty-fifth day
after the fiscal quarter first occurring one year after the Effective Date, an
earnings statement (which need not be audited) in reasonable detail covering a
period of at least twelve consecutive months beginning after the Effective Date,
which earnings statement shall satisfy the requirements of Section 11(a) of the
Act and will advise you in writing when such Statement has been so made
available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and information
furnished by the Company to its shareholders or filed with any securities
exchange pursuant to the requirements of such exchange or with the Commission
pursuant to the Act or the Exchange Act, as amended. The Company will deliver to
the Representative similar reports with respect to any significant subsidiaries,
as that term is defined in the Rules, which are not consolidated in the
Company's financial statements.
(viii) As soon as the Company is advised thereof, it will advise
the Representative, and confirm the advice in writing, that the Registration
Statement and any amendments shall have become effective.
(ix) The Company will use the net proceeds from the sale of the
Shares in the manner forth in the Prospectus under the caption "Use of
Proceeds."
(x) Other than as permitted by the Act and the Rules, the Company
will not distribute any prospectus or offering materials in connection with the
offering and sale of the Shares.
(xi) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for its
common stock.
(xii) Except as contemplated hereby or by the Prospectus, the Company
will not, for a period of 180 days after the Effective Date of the Registration
Statement, offer to sell, contract to sell, sell or otherwise dispose of any
shares of the Company's common stock or securities convertible into shares of
the Company's common stock without your prior written consent. Furthermore, the
Company will cause each officer and director of the Company (as set forth in the
Prospectus) to furnish to you, on or prior to the execution of this Underwriting
Agreement, a letter or letters, in form and substance satisfactory to counsel
for Underwriters, pursuant to which each such person shall agree not to offer
for sale, sell, distribute or otherwise dispose of any shares of common stock of
the Company during the 180 days following the Effective Date, except with your
written consent.
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The foregoing covenants and agreements shall apply to any successor of
the Company, including without limitation, any entity into which the Company
might convert or merge.
5. Costs and Expenses. Whether or not the Registration Statement
becomes effective, the Company and the Selling Stockholders (to the extent of
their prorata share based on the number of Shares sold by each) will pay all
costs, expenses and fees incident to the performance of the obligations of the
Company under this Underwriting Agreement, including, without limiting the
generality of the foregoing, the following: accounting fees of the Company; the
fees and disbursements of counsel for the Company; the cost of printing and
delivering to Underwriters copies of the Registration Statement, preliminary
prospectus, the Prospectus, this Underwriting Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, Underwriters' Questionnaire and
Power of Attorney, and the Blue Sky Survey and any supplements thereto; the
filing fees of the Commission; the filing fees and expenses incident to securing
any required review by the NASD of the terms of the sale of the Shares; the
filing or listing fees imposed with respect to listing of the Shares on The
Nasdaq Stock Market's National Market, and the expenses, including the
reasonable fees and disbursements of counsel for the Underwriters, incurred in
connection with the qualification of the Shares under State securities or Blue
Sky laws and the laws of any foreign jurisdiction. Any transfer taxes imposed
on the sale of the Shares to the Underwriters will be paid by the Company.
Neither the Company nor the Selling Stockholders shall be required to pay for
any of the Underwriters' expenses (other than those related to qualification
under State securities or Blue Sky laws) except that, if this Underwriting
Agreement shall not be consummated because the conditions in Section 7 hereof
are not satisfied, or because this Underwriting Agreement is terminated by the
Representative pursuant to Section 6 hereof (other than by reason of the failure
of the events described in the first sentence of Section 6(d)), or by reason of
any failure, refusal or inability on the part of the Company or any of the
Selling Stockholders to perform any undertaking or satisfy any condition of this
Underwriting Agreement or to comply with any of the terms hereof on their part
to be performed, unless such failure to satisfy said condition or to comply with
said terms is due to the default or omission of any Underwriter, then the
Company shall reimburse the several Underwriters for all of their actual,
accountable out-of-pocket costs and expenses, including reasonable attorneys'
fees and out-of-pocket expenses, reasonably incurred in connection with
investigating, marketing and proposing to market the Shares or in contemplation
of performing their obligations hereunder, but the Company shall not in any
event be liable to any of the several Underwriters for damages on account of
loss of anticipated profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters. The obligations
of the several Underwriters are subject to the accuracy, as of the Closing Date,
of the representations and warranties of the Company and the Selling
Stockholders contained herein, and to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective not later
than _____ P.M., Central Time, on ___________, 1997, unless a later time and
date is agreed to by the
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Representative, and no stop order or other order suspending the effectiveness
thereof or the qualification of the Shares under the state securities or Blue
Sky laws of any jurisdiction shall have been issued and no proceeding for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated or threatened by the Commission or any Other Securities Regulator.
If the Company has elected to rely upon Rule 430A of the Rules, the price of the
Shares and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing Pursuant to Rule 424(b) of the Act within the
prescribed time period, and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
under the Act. All requests for additional information on the part of the
Commission or any other government or regulatory authority with jurisdiction (to
be included in the Registration Statement or Prospectus or otherwise) shall be
complied with to the satisfaction of the Commission or such authorities.
(b) The Representative shall have received on the Closing Date and
any Option Closing Date the opinion of Rose Law Firm, a Professional
Association, counsel for the Company and the Selling Stockholders, dated the
Closing Date and any Option Closing Date, addressed to the Underwriters in form
and substance satisfactory to Giroir, Gregory, Holmes & Hoover, PLC, counsel to
the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Arkansas with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; each of the Subsidiaries is validly
existing as a state banking corporation in good standing under the laws of the
jurisdiction of its organization, and has corporate power and authority to own
its properties and conduct its business as described in the Prospectus; each of
the Company and the Subsidiaries is duly qualified to transact business in all
jurisdictions in which the conduct of its business or the location of the
properties owned or leased by it requires such qualification; and all of the
outstanding shares of capital stock of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable, and except as
set forth in the Prospectus and the Registration Statement and except for
directors' qualifying shares, if any, no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of ownership interests in
the Subsidiaries are outstanding.
(ii) The Company has authorized or outstanding the capital stock
set forth under the caption "Use of Proceeds and Capitalization" in the
Prospectus; the outstanding shares of its capital stock have been duly
authorized and validly issued and are fully paid and non-assessable; all of the
Shares conform to the description thereof contained in the Prospectus; the
certificates for the Shares are in due and proper form, the portion of the
Underwritten Shares and the Option Shares, if any, to be sold pursuant to this
Underwriting Agreement have been duly authorized and will be validly issued,
fully paid and non-assessable when issued and paid for as contemplated by this
Underwriting Agreement; no preemptive or other restrictive rights of any holder
of any class of the Company's capital stock exist with respect to any of the
Shares or the issue and sale thereof, except
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<PAGE>
as has been waived in writing by such persons prior to the date of this
Underwriting Agreement, and the issued and outstanding common stock of each
Subsidiary of the Company is owned as described in the Registration Statement
and is validly issued, fully paid and nonassessable.
(iii) The Registration Statement has become effective under the
Act and to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(iv) The Registration Statement, all preliminary prospectuses,
the Prospectus and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the Rules, except that
such counsel need express no opinion as to the financial statements, schedules
and other statistical and financial information included therein.
(v) The statements under the caption "Description of Capital
Stock" in the Prospectus that constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly and correctly
represent the material information required with respect to such documents and
matters.
(vi) Any holders of securities of the Company who have rights
to the registration of shares of common stock or other securities because of the
filing of the Registration Statement by the Company have waived such rights in
writing.
(vii) To the best knowledge of such counsel, after due inquiry,
except as set forth in the Registration Statement and Prospectus, no holders of
common stock or other securities of the Company have registration rights with
respect to such securities.
(viii) To the best knowledge of such counsel, after due inquiry,
there are no contracts or documents required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or Prospectus
which are not so filed or described as required, and such contracts and
statements as are summarized in the Registration Statement or Prospectus are
fairly summarized in all material respects consistent with the requirements of
the Act and Rules.
(ix) To the best knowledge of such counsel, after due inquiry,
there are no legal, regulatory or administrative proceedings pending or
threatened against the Company or any Subsidiary which may be material to the
earnings, business, affairs, properties, business prospects or operations of the
Company and its Subsidiaries considered as a whole, except as set forth in the
Prospectus.
(x) This Underwriting Agreement has been duly authorized,
executed and delivered by the Company and the Selling Stockholders and is a
valid and binding obligation of the Company and the Selling Stockholders
enforceable against the Company and the Selling Stockholders in accordance with
its terms, subject to all applicable bankruptcy, insolvency, moratorium,
receivership and other laws relating to or affecting the rights of creditors
generally and subject to the discretion of a court of equity in administering
any such rights or remedies.
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(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Underwriting Agreement and the consummation of the transactions
herein contemplated (other than required by state securities and Blue Sky laws
as to which such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xii) The Company and the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities that are
necessary for the conduct of their respective businesses.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that the Registration Statement or any
amendment thereto at the time the Registration Statement or amendment became
effective or the Prospectus or any amendment or supplement thereto as of their
respective dates contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and other financial information included therein). With
respect to such statement, such firm may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(c) The Representative shall have received from Giroir, Gregory,
Holmes and Hoover, PLC, counsel to the Underwriters, an opinion dated the
Closing Date, substantially to the effects specified in subparagraphs (iii) and
(iv) of paragraph (b) of this Section 6, and that the Company is a validly
organized and existing corporation under the laws of the State of Arkansas. In
rendering such opinion, Giroir, Gregory, Holmes & Hoover, PLC may rely as to all
matters governed other than by the Federal laws on the opinion of counsel
referred to in paragraph (b) of this Section 6. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that the Registration Statement, the Prospectus or any amendment or supplement
thereto as of their respective dates contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading (except that such counsel need express no view as
to financial statements, schedules and other financial information included
therein). With respect to such statement, such firm may state that their belief
is based upon the procedures set forth therein, but is without independent check
and verification.
(d) The Representative shall have received at or prior to the
Closing Date from Giroir, Gregory, Holmes & Hoover, PLC a memorandum or summary,
in form and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Underwritten
Shares under the state securities or Blue Sky laws of such jurisdictions as the
Representative may reasonably have requested.
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<PAGE>
(e) The Representative shall have received on the Closing Date and
any Option Closing Date signed letters from each of Moore Stephens Frost and
Baird, Kurtz & Dobson addressed to the Underwriters dated as of the Effective
Date and again dated as of the Closing Date and any Option Closing Date, with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus. All such letters shall be in
form and substance satisfactory to the Representative and Giroir, Gregory,
Holmes & Hoover, PLC, counsel to the Underwriters.
(f) The Representative shall have received on the Closing Date and
any Option Closing Date a certificate of the Chairman of the Board of Directors
and the Chief Financial Officer of the Company, respectively, to the effect
that, as of the Closing Date and any Option Closing Date, each of them severally
represents as follows:
(i) (1) the representations and warranties of the Company
in this Agreement are true and correct on and as of the Closing Date and any
Option Closing Date, as the case may be, and (2) the Company has complied with
all the agreements and has satisfied all of the conditions on its part to be
performed or satisfied at or prior to the Closing Date and any Option Closing
Date, as the case may be.
(ii) (1) the Registration Statement has become effective
under the Act; (2) no stop order suspending the effectiveness of the
Registration Statement or the use or effectiveness of the Prospectus has been
issued; (3) no proceedings for such purpose have been taken or, to his
knowledge, are contemplated by the Commission or any Other Securities Regulator;
and (4) all requests for additional information on the part of the Commission or
any Other Securities Regulator have been complied with.
(iii) He has carefully examined the Registration Statement
and the Prospectus and, in his opinion, since the Effective Date, no event has
occurred which should have been set forth in a supplement to or an amendment to
the Prospectus which has not been so set forth in such supplement or amendment
(g) The Underwriters shall have received from each of the Selling
Stockholders on the Closing Date, certificates dated as of the Closing Date, to
the effect as follows:
(i) The representations and warranties of the Selling
Stockholder in this Underwriting Agreement are true and correct as of the
Closing Date; and
(ii) The Selling Stockholder has in all material respects
complied with all the agreements and have satisfied all of the conditions on
his, her or its part to be performed or satisfied at or prior to the Closing
Date.
(h) The Company and the Selling Stockholders shall have furnished
to the Representative such additional information and further certificates and
documents confirming the
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representations and warranties contained herein and related matters as the
Representative may reasonably have requested.
(i) Since the respective dates as of which information is given in
the Prospectus, there shall not have occurred any material adverse change in the
condition (financial or otherwise), or in the earnings, business, affairs,
properties, business prospects or results of operations of the Company or any
Subsidiary, whether or not arising in the ordinary course of business.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and Giroir, Gregory, Holmes
& Hoover, PLC, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
confirmed telefax at or prior to the Closing Date. In such event, the Company,
the Selling Stockholders and the Underwriters shall not be under any obligation
to each other (except to the extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Company and the Selling
Stockholders. The obligations of the Company and the Selling Stockholders to
sell and deliver the Shares are subject to the conditions that (a) at or before
_____ P.M., Central Time, on _________________, or such later time and date as
the Company and the Representative may from time to time consent to in writing
or by confirmed telefax, the Registration Statement shall have become effective,
and (b) at the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued or proceedings therefor initiated
or threatened. If either of the Conditions hereinabove provided for in this
Section 7 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, this Agreement may be terminated by the Company and the Selling
Stockholders by notifying the Representative of such termination in writing or
by confirmed telefax at or prior to the Closing Date.
8. Indemnification.
(a) The Company and George G. Gleason, II, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, the Rules and the
Exchange Act from and against any and all losses, claims, damages, liabilities,
joint or several, and all expenses (including costs of investigation and legal
expenses) to which such Underwriter or such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company and Mr.
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Gleason will reimburse each Underwriter and each such controlling person for
legal and other expenses incurred in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided,
--------
however, that neither the Company nor Mr. Gleason will be liable in any such
- -------
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement, or alleged untrue statement, or omission
or alleged omission made in the Registration Statement, any preliminary
prospectus, the Prospectus, or such amendment or supplement, in reliance upon or
in conformity with written information furnished to the Company by or through
the Representative specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company or
the Selling Stockholders may otherwise have.
Notwithstanding the above, Mr. Gleason shall be liable to all persons
under the indemnity agreement contained in this Section 8(a) and for breaches of
the representations and warranties contained in Section 1 hereof only for an
aggregate amount not exceeding the net proceeds received by him from the sale of
Shares hereunder.
(b) The Selling Stockholders, other than Mr. Gleason in light of
his agreement pursuant to Section 8(a) above, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter, within the meaning of the Act, the Rules and the
Exchange Act, from and against any losses, claims, damages, or liabilities,
joint or several (or actions or proceedings in respect thereof) and all expenses
(including costs of investigation and legal expenses) to which such Underwriters
or such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, liabilities or expenses arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission either (A) was made in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use therein
or (B) such Selling Stockholder, as of the date of any Registration Statement,
any preliminary prospectus, the Prospectus, or any amendment or supplement
thereto in issue, possessed actual knowledge that such statement was untrue or
possessed actual knowledge of the information that had been omitted or was
alleged to be omitted; provided, however, that the Selling Stockholders will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement, or alleged untrue
statement, or omission or alleged omission made in the Registration Statement,
any preliminary prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representative specifically for use in the preparation
thereof.
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Notwithstanding the above, each Selling Stockholder shall be liable
to all persons under the indemnity agreements contained in this Section 8(b) and
for breaches of its representations contained in Section 1 hereof only for an
aggregate amount not exceeding the net proceeds received by such Selling
Stockholder from the sale of Shares hereunder.
(c) Each Underwriter will indemnify and hold harmless the Selling
Stockholders, the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company, within the meaning of the Act, the Rules and the Exchange Act, from and
against any losses, claims, damages, liabilities or expenses to which the
Selling Stockholders, the Company or any such director, officer, or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
and will reimburse any legal or other expenses reasonably incurred by the
Selling Stockholders, the Company or any such director, officer, or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that each
-------- -------
Underwriter will be liable in such case only to the extent that such untrue
statement, or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any preliminary prospectus, the Prospectus,
or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative expressly
for use in the preparation thereof. This indemnity agreement will be in addition
to any liability which such Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 8, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action or proceeding is
brought against any party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding the foregoing, the
indemnified party, at any time after such assumption of defense by the
indemnifying party, shall be entitled to participate in such defense and to
engage separate counsel (at the indemnifying party's expense) if, in the
indemnified party's reasonable belief, a conflict of interest exists with
counsel engaged by the indemnifying party.
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(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 8 is for
any reason held to be unavailable to an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the parties in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities, expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Stockholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Stockholders bears to the
underwriting discounts and commissions received by the Underwriters. The
relative fault of a party shall be determined by reference to, among other
things, whether the true or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by each party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any such action or claim.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriters have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute shall be several in proportion to their respective
underwriting obligations and not joint.
(f) In any proceeding relating to the Registration Statement, any
preliminary prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process
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and agrees that any other contributing party may join him or it as an additional
defendant in any such proceeding in which such other contributing party is a
party.
9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements of the Selling Stockholders, the
Company and officers of the Company herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriters or any controlling
person, or by or on behalf of the Selling Stockholders, the Company or any of
its officers, directors or controlling persons, and shall survive delivery of
the Underwritten Shares and, if applicable, the Option Shares to the
Representative or termination of this Underwriting Agreement.
10. Default by Underwriters. If any Underwriter shall fail to
purchase and pay for the Shares which such Underwriter has agreed to purchase
and pay for hereunder (otherwise than by reason of any default on the part of
the Company or any of the Selling Stockholders), you, as the Representative of
the Underwriters, shall use your best efforts to procure within twenty-four
hours thereafter one or more of the other Underwriters, or any others, to
purchase from the Company and the Selling Stockholders such amounts as may be
agreed upon and upon the terms set forth herein, the Shares which the defaulting
Underwriter or Underwriters failed to purchase. If during such twenty-four hours
you, as such Representative, shall not have procured such other Underwriters, or
any others, to purchase the Shares agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Shares with
respect to which such result shall occur does not exceed 10% of the Shares which
the Underwriters are obligated to purchase hereby, the other Underwriters shall
be obligated, severally, in proportion to the respective number of shares which
they are obligated to purchase hereunder, to purchase the Shares which such
defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Shares with respect to which such default shall occur
exceeds 10% of the Company's and the Selling Stockholders' common stock covered
hereby, the Company and the Selling Stockholders or you, as the Representative
of the Underwriters will have the right, by written notice given within the next
twenty-four hour period to the parties to this Underwriting Agreement, to
terminate this Underwriting Agreement without liability on the part of the non-
defaulting Underwriters or of the Company and the Selling Stockholders except to
the extent provided in Section 8 hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Section 10, the time of
closing may be postponed for such period, not to exceed seven days, as you, as
the Representative, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriters" includes any person
substituted for a defaulting Underwriter. Any action taken under Section 10
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Underwriting Agreement.
11. Notices. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered or telefaxed and
confirmed as follows: if to the Underwriters, to Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201, Attention: Michael
20
<PAGE>
R. Smith; with a copy to H. Watt Gregory, III, Giroir, Gregory, Holmes & Hoover,
PLC, 111 Center Street, Suite 1900, Little Rock, Arkansas, 72201; if to the
Company or the Selling Stockholders, to Bank of the Ozarks, Inc., 425 West
Capitol Avenue, Suite 3100, Little Rock, Arkansas 72201, Attention: George G.
Gleason, II; with a copy to Les R. Baledge, Rose Law Firm, a Professional
Association, 120 East Fourth Street, Little Rock, Arkansas 72201.
12. Termination. This Agreement may be terminated by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M.,
Central Time, on the first business day following the date on which the
Registration Statement becomes effective;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or a
development involving a prospective material adverse change in or affecting
particularly the condition, financial or otherwise, of the Company or the
earnings, affairs or business prospects of the Company, whether or not arising
in the ordinary course of business, which would, in your reasonable judgment,
materially impair the investment quality of the Shares, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change on the financial markets of the United States would, in your
reasonable judgment, make the offering or delivery of the Shares impracticable,
(iii) suspension of trading or general trading halts in securities on the New
York Stock Exchange, the American Stock Exchange, The Nasdaq Stock Market or the
over-the-counter market or limitation on prices (other than limitations on hours
or numbers of days or trading) for securities on either such Exchange, The
Nasdaq Stock Market or the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company, (v) declaration of a
banking moratorium by either federal or New York State authorities, or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 10 of this Agreement.
13. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Selling Stockholders, the Company and their
respective successors, executors, administrators, heirs, and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "Successors" shall
not include any purchaser of the Shares merely because of such purchase.
14. Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Underwriting Agreement and the
representations, warranties and
21
<PAGE>
covenants of the Company and the Selling Stockholders in this Underwriting
Agreement shall remain in full force and effect regardless of (a) any
termination of this Underwriting Agreement, (b) any investigation made by or on
behalf of the Underwriters or controlling person or (c) delivery of any payment
for the Shares under this Underwriting Agreement.
This Underwriting Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
This Underwriting Agreement shall be governed by, and construed in
accordance with, the laws of the State of Arkansas applicable to contracts made
and performed within such State.
22
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Very truly yours,
BANK OF THE OZARKS, INC.
By:
---------------------------------
Its:
--------------------------------
23
<PAGE>
SELLING STOCKHOLDERS:
----------------------------------------
George G. Gleason, II
HOLT-ROSS CHILDREN'S TRUST #1
HOLT-ROSS CHILDREN'S TRUST #2
HOLT-ROSS CHILDREN'S TRUST #3
HOLT-ROSS CHILDREN'S TRUST #4
HOLT-ROSS CHILDREN'S TRUST #5
HOLT-ROSS CHILDREN'S TRUST #6
HOLT-ROSS GRANDCHILDREN'S TRUST
By:
--------------------------------------
George G. Gleason, II, Trustee for all
of the above-referenced Trusts
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
STEPHENS INC., As Representative of the
Several Underwriters named in Schedule I
By:
----------------------------------
Authorized Officer
24
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
No. of Underwritten
Name Shares
- ---- -------------------
<S> <C>
Stephens Inc.
-----------------
TOTAL
=================
<CAPTION>
SHARES BEING SOLD BY SELLING STOCKHOLDERS
-----------------------------------------
Name of Selling Stockholder No. of Underwritten
- --------------------------- Shares
-------------------
<S> <C>
George G. Gleason, II
-----------------
Holt-Ross Children's Trust #1
-----------------
Holt-Ross Children's Trust #2
-----------------
Holt-Ross Children's Trust #3
-----------------
Holt-Ross Children's Trust #4
-----------------
Holt-Ross Children's Trust #5
-----------------
Holt-Ross Children's Trust #6
-----------------
Holt-Ross Grandchildren's Trust
-----------------
-----------------
TOTAL 631,700
=================
</TABLE>
25
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BANK OF THE OZARKS, INC.
(Formerly named Ozark Bankshares, Inc.)
The undersigned Chairman and Chief Executive Officer and Secretary of Ozark
Bankshares, Inc., a corporation duly organized and existing under the laws of
the State of Arkansas, hereby certify that the stockholders of said corporation,
pursuant to the provisions of the Arkansas Business Corporation Act of 1965, as
amended (the "1965 Act") have duly adopted these Amended and Restated Articles
of Incorporation as set forth below:
FIRST. The name of this corporation is changed from OZARK BANKSHARES, INC.
-----
to BANK OF THE OZARKS, INC. (hereinafter referred to as the "Corporation").
SECOND. The nature of the business of the Corporation and the objects or
------
purpose to be transacted, promoted or carried on by it, and for which it is
organized, are as follows:
(a) To acquire, purchase, own, hold, operate, develop, lease, mortgage,
pledge, exchange, sell, transfer or otherwise invest, trade or deal in, in any
manner, securities, stocks, mortgages, bonds, and real and personal property of
every kind and description or in any interest therein.
(b) To engage in any activities which are permissible for bank holding
companies, and to do all things incidental to any such business, and to do and
perform all other things necessary or beneficial to the Corporation or to the
general public which the Board of Directors may from time to time determine
should be done.
(c) To issue notes, bond, debentures, or other obligations of the
Corporation, and to secure the same by mortgage, pledge, deed or trust, or
otherwise.
(d) To purchase, acquire, own and hold securities of other corporations,
limited liability companies, associations, trusts and other forms of businesses,
whether incorporated or unincorporated, and to provide services to such
businesses, or engage in businesses related to any such businesses, and to do
any and all lawful acts necessary, convenient, advisable or desirable which may
be incidental or pertinent to such businesses.
(e) To engage in any lawful business and to exercise all of the powers
enumerated in the Arkansas Business Corporation Act of 1987, as amended (the
"1987 Act").
THIRD. The period of existence of this Corporation shall be perpetual.
-----
FOURTH. The principal office or place of business of this Corporation
------
shall be located at 425 West Capitol Avenue, Suite 3100, Little Rock, Arkansas,
72201, County of Pulaski.
<PAGE>
FIFTH. The name of the registered agent and registered office of this
-----
Corporation is George G. Gleason, II, 425 West Capitol Avenue, Suite 3100,
Little Rock, Arkansas, 72201, County of Pulaski.
SIXTH. (a) The total amount of the authorized capital stock of the
-----
Corporation is as follows:
<TABLE>
<CAPTION>
SHARES CLASS PAR VALUE
------ ----- ---------
<S> <C> <C>
10,000,000 Common $.01
(previously designated
as "Series A Voting
Common")
1,000,000 Preferred $.01
</TABLE>
(b) The preferences, limitations and relative rights of each class of
shares is as follows:
1. PREFERRED STOCK:
----------------
The Preferred Stock may be issued in one or more series. The Board of
Directors of the Corporation is hereby authorized to issue shares of Preferred
Stock in such series and to fix from time to time before issuance the number of
shares to be included in any such series and the designation, relative powers,
preferences, and rights and qualifications, limitations, or restrictions of all
shares of such series. The authority of the Board of Directors of the
Corporation with respect to each such series will include, without limiting the
generality of the foregoing, the determination of any or all of the following:
A. The number of shares of any series and the designation to distinguish
the shares of such series from the shares of all other series, if any.
B. The voting powers, if any, applicable to such series and whether such
voting powers are full or limited.
C. The redemption provisions, if any, applicable to such series,
including the redemption price or prices to be paid.
D. Whether dividends, if any, will be cumulative or non-cumulative, the
dividend rate of such series, and the dates and preferences of dividends on
such series.
E. The rights of such series upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the Corporation.
F. The provisions, if any, pursuant to which the shares of such series
are convertible into or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock, or any other security, of the
<PAGE>
Corporation or any other corporation or other legal entity, and the price
or prices or the rates of exchange applicable thereto.
G. The right, if any, to subscribe for or to purchase any securities of
the Corporation or any other corporation or other legal entity.
H. The provisions, if any, of a sinking fund applicable to such series.
I. Any other relative, participating, optional, or special powers,
preferences, rights, qualifications, limitations, or restriction thereof.
The foregoing may be determined from time to time by the Board of Directors
of the Corporation and stated in a resolution or resolutions providing for the
issuance of such Preferred Stock.
2. COMMON STOCK
------------
A. Voting Rights. The holders of the Common Stock shall be entitled to
-------------
vote on all matters any stockholder is entitled to vote upon pursuant to
these Articles or by statute or constitutional provisions. The holders of
the Common Stock shall not be entitled to cumulate votes for the election
of directors. Each share of Common Stock shall be entitled to one vote in
the election of each director.
B. No Redemption or Conversion Rights. The Common Stock shall have no
----------------------------------
redemption or conversion rights or provisions.
C. Dividends. Whenever cash dividends upon the Preferred Stock at the
---------
time outstanding, if any, to the extent of the preference to which such
stock is entitled, shall have been paid in full or declared and set apart
for payment, such dividends, payable in cash, stock, or otherwise, as may
be determined by the Board of Directors, may be declared by the Board of
Directors and paid from time to time to the holders of the Common Stock out
of the remaining net profits or surplus of the Corporation.
D. Liquidation. In the event of any liquidation, dissolution, or
-----------
winding up of the affairs of the Corporation, whether voluntary, or
involuntary, all assets and funds of the Corporation remaining after the
payment to the holders of the Preferred Stock, if any, of the full amounts
to which they shall be entitled, as hereinbefore provided, shall be divided
and distributed among the holders of the Common Stock according to their
respective shares.
The issued and existing capital stock of the Corporation, previously
denoted as "Series A Voting Common Stock", now designated as "Common Stock",
shall not require the issuance of replacement certificates and the issuance of
additional shares, if any, may be made on certificates identical to the existing
certificates or on other forms as may from time to time be approved by the Board
of Directors.
<PAGE>
SEVENTH. No holder of any of the shares of the capital stock of the
-------
Corporation shall be entitled as of right to purchase or to subscribe for any
unissued stock of any class, or any additional shares of any class, to be issued
by reason of any increase of the authorized capital stock of the Corporation of
any class, or bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the Corporation or carrying any right to
purchase stock of any class, but any such unissued stock, or such additional
authorized issue of any stock, or of other securities convertible into stock or
carrying any right to purchase stock, may be issued and disposed of, pursuant to
resolutions of the Board of Directors, to such persons, firms, corporations, or
associations and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its discretion.
EIGHTH. (a) Except as set forth in these Articles of Incorporation, the
------
number of directors of the Corporation shall be fixed from time to time by
resolution of the Board of Directors in accordance with the provisions set forth
in the Bylaws and may be increased or decreased from time to time in the manner
specified therein. No director of the Corporation need be a resident of the
State of Arkansas or a stockholder.
(b) Except as otherwise required by law, a director may be removed only for
cause, and then only by the affirmative vote of stockholders holding of record
two-thirds (2/3) of the outstanding shares of the series and classes of stock of
the Corporation which were, by these Articles or by action of the Board of
Directors pursuant to the Articles, entitled to vote at the election of such
director, given at a special meeting of such stockholders called for such
purpose.
(c) A vacancy on the Board of Directors, including a vacancy created by an
increase in the number of directors, shall be filled for the remainder of the
term by the vote of a majority of directors then in office in accordance with
the provisions set forth in the Bylaws. In case of any increase in the number
of directors of any class, any additional directors elected to such class shall
hold office for a term which shall coincide with the full term or the remainder
of the term, as the case may be, of such class. No reduction in the number of
directors shall, of itself, shorten the term or result in the removal of any
incumbent director.
(d) By resolution of the Board of Directors, the Board of Directors may at
such time as the Corporation has nine (9) or more directors be divided into two
or three groups, with each group containing one-half (1/2) or one-third (1/3) of
the total, as equal in number as may be possible. In that event, the terms of
directors in the first group expire at the first annual shareholders' meeting
after their election, the terms of the second group expire at the second annual
shareholders' meeting after their election, and the terms of the third group, if
any, expire at the third annual shareholders' meeting after their election. At
each annual meeting of shareholders held thereafter, directors shall be elected
to the class whose terms shall expire in that year and shall hold office for a
term of two (2) or three (3) years, as the case may be, and until their
respective successors are elected. A separate election shall be held with
respect to each class of directors at any meeting of stockholders at which a
member or members of more than one class of directors is being elected. The
number of directors within each class may be fixed or changed from time to time
by resolution of the Board of Directors in accordance with the provisions set
forth in these Articles and the Bylaws.
<PAGE>
(e) The affirmative vote of stockholders holding of record two-thirds (2/3)
of the outstanding shares of the series and classes of stock of the Corporation
which were, by these Articles or by action of the Board of Directors pursuant to
the Articles, entitled to vote at a meeting of such stockholders called for such
purpose, is required to amend, repeal or modify any provision of this Article
Eighth.
NINTH. To the fullest extent permitted by the 1987 Act, as it now exists
-----
or may hereafter be amended, a director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. However, this provision shall not be construed to
eliminate or limit in any way the liability of a director for:
(a) any breach of the Director's duty of loyalty to the Corporation or its
stockholders;
(b) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) liability under Ark. Code Ann. Section 4-27-833;
--- ---- ---
(d) any transaction from which the Director derived an improper personal
benefit; or
(e) any action, omission, transaction or breach of a director's duty
creating any third-party liability to any person or entity other than the
Corporation or its stockholders.
TENTH. (a) The Corporation shall indemnify any person who was or is a
-----
party or is threatened to be made a party to any threatened, pending or
completed actions, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding, by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and
<PAGE>
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation,
unless and only to the extent that the court of chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court of chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) or (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsections (a) or (b) (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) or (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this section.
(f) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such 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.
<PAGE>
(h) The powers and duties of the Corporation to indemnify any person
under this Article shall apply with equal force whether an action, suit or
proceeding is threatened or commenced in this State or outside this State.
ELEVENTH. The affairs of the Corporation shall be governed by the Arkansas
--------
Business Corporation Act of 1987, as amended.
IN WITNESS WHEREOF, we have hereunto set our hands on this 22nd day of May,
1997.
BANK OF THE OZARKS, INC.
(f/k/a OZARK BANKSHARES, INC.)
/s/ George G. Gleason, II
---------------------------------
George G. Gleason, II,
Chairman and Chief Executive Officer
Attest:
/s/ Donna Quandt
- ----------------------------------
Donna Quandt, Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS OF
OZARK BANKSHARES, INC.
(Restated as of March 13, 1997)
ARTICLE I. OFFICES
SECTION 1. The principal office of Ozark Bankshares, Inc. (referred to
herein as the "corporation") in the State of Arkansas shall be located in the
City of Little Rock, County of Pulaski.
SECTION 2. The corporation may have such other offices, either within or
without the State of Arkansas, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
--------------
be held at 1:00 p.m. on such date between the first Tuesday of January and the
first Tuesday of April, or at any other date and time, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the day fixed for
the annual meeting shall be a legal holiday, the meeting shall be held on the
next succeeding business day. If the election of directors shall not be held on
the day designated for any annual meeting of Shareholders, or at any adjournment
thereof, the Board of Directors shall cause the election to be held at a special
meeting of the Shareholders as soon thereafter as may be convenient.
Other than business placed on the agenda by the Board of Directors, no
business shall be deemed to have been properly brought before the annual meeting
unless a written proposal for the consideration of such business shall have been
delivered to the Secretary of the corporation at least 30 days in advance of the
end of the fiscal year of the corporation. The Board of Directors may waive the
requirement of timely written notice if the party proposing the business is the
record owner at the time of proposal of more than 25% of the voting stock of the
corporation.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
----------------
any purpose or purposes, may be called by the Chairman of the Board, Chief
Executive Officer, the President, the Board of Directors, or by a committee of
the Board of Directors that has been duly designated by the Board of Directors
and whose power and authority, as expressly provided in these Bylaws or in a
resolution of the Board of Directors, include the power to call such meetings,
and a special meeting shall be called by the Chairman, Chief Executive Officer,
or President at the
<PAGE>
request of the holders of at least ten percent (10%) of all the votes entitled
to be cast on any issue proposed to be considered at such special meeting, if
such holders have signed, dated, and delivered to the Secretary of the
corporation one or more written demands for the meeting describing the purpose
or purposes for which it is to be held.
SECTION 3. Place of Meeting. The Board of Directors may designate any
----------------
place, either within or without the State of Arkansas, as the place of meeting
for any annual or special meeting of the shareholders. If no designation is
made, the place of meeting shall be the principal office of the corporation in
the State of Arkansas.
SECTION 4. Notice of Meeting. Unless otherwise prescribed by applicable
-----------------
law, written notice stating the place, date and time of the meeting, and in case
of a special meeting the purpose or purposes for which the meeting is called,
shall be given either by mail or in person to each shareholder of record
entitled to vote at such meeting, not less than sixty (60) days nor more than
seventy five (75) days before the date of the meeting if a proposal to increase
the authorized capital stock or bond indebtedness of the corporation is to be
submitted, and not less than ten (10) days nor more than sixty (60) days before
the date of the meeting, in all other cases. If mailed, such notice shall be
deemed to have been given and delivered when deposited in the United States
mail, postage prepaid, and addressed to the shareholder at the shareholder's
address as it appears on the stock transfer books of the corporation.
SECTION 5. Date for Determination of Shareholders of Record. In order
------------------------------------------------
that the corporation may determine the shareholders (i) entitled to notice of or
to vote at any meeting of shareholders or any adjournment thereof or to express
consent to corporate action in writing without a meeting, (ii) entitled to
receive payment of any dividend or other distribution or allotment of any
rights, (iii) entitled to exercise any rights in respect of any change,
conversion, or exchange of stock or (iv) for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than seventy (70) days before the date of any such meeting or other
action. If no record date is fixed: (i) the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (ii) the record date for
determining shareholders for any other purpose shall be at the close of business
on the date on which the Board of Directors adopts a resolution relating
thereto. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, the Board of Directors may fix a new record date for the
- -------- -------
adjourned meeting, which it must do if the meeting is adjourned to a date more
than one hundred twenty (120) days after the date fixed for the original
meeting.
SECTION 6. Voting Lists. After fixing the record date for a meeting, the
------------
Secretary shall prepare an alphabetical listing of the names of all of the
shareholders of the corporation who are entitled to notice of the shareholders
meeting, which list must be arranged by voting-group and must show the address
of and number of shares held by each such shareholder. The shareholders list
must be made available for inspection by any shareholder beginning two (2)
business days after notice of the meeting is given for which the list was
prepared and continuing through the
<PAGE>
meeting at the corporation's principal office or at a place identified in the
meeting notice in the city where the meeting will be held. A shareholder, and
the agents and attorneys of shareholders, shall be entitled on written demand to
inspect and, subject to the requirements of Ark. Code Ann. 4-27-1602C, to copy
the list, at the shareholder's expense, during regular business hours during the
period the list is available for inspection. The corporation shall make the
shareholders list available at the meeting, and any shareholder, and any agent
or attorney of any shareholder, shall be entitled to inspect the list at any
time during the meeting or any adjournment thereof.
SECTION 7. Quorum; Vote Required For Action. Unless otherwise provided by
--------------------------------
applicable law, a majority of the votes entitled to be cast on a matter by the
shareholders of the corporation represented in person or by proxy shall
constitute a quorum for purposes of such matter at any meeting of shareholders.
Unless otherwise provided by applicable law, the Articles of Incorporation, or
these Bylaws, (i) a plurality of the votes cast at a meeting at which a quorum
is present is required for election of directors and (ii) a majority of the
votes cast at a meeting at which a quorum is present shall decide every question
or matter (other than election of directors) submitted to the shareholders at
such meeting.
SECTION 8. Proxies. Each shareholder entitled to vote at a meeting of
-------
shareholders may authorize another person or persons to act for such shareholder
by proxy, but no such proxy shall be voted or acted upon after eleven (11)
months from its effective date, unless the proxy expressly provides for a longer
period. A duly executed proxy shall be revocable unless the appointment form
conspicuously states that it is irrevocable and is coupled with an interest
sufficient at law to support an irrevocable power. An irrevocable proxy is
revoked when the interest with which it is coupled is extinguished. A
shareholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing with the Secretary of the corporation
an instrument in writing revoking the proxy or another duly executed proxy
bearing a later date. Proxies shall be dated and shall be filed with the
Secretary of the Corporation before or at the time of the meeting.
SECTION 9. Voting of Shares. Subject to the provisions of these Bylaws,
----------------
and particularly the following section hereof, each outstanding share of any
class or series of stock entitled to vote with respect to a particular matter
shall be entitled to one vote upon such matter when submitted to a vote of
shareholders.
SECTION 10. Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe, or, in
the absence of such provision, as the board of directors of such corporation may
determine.
(b) Shares held by an administrator, executor, guardian or conservator may
be voted by such fiduciary, either in person or by proxy, without a transfer of
such shares into the fiduciary's name. Shares standing in the name of a trustee
may be voted by the trustee, either in person or by proxy.
<PAGE>
(c) Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into the receiver's name, if authority so
to do is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Shares of the corporation's own stock held as treasury shares or
otherwise belonging to the corporation shall not be voted, directly or
indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares at any given time.
SECTION 11. No Cumulative Voting. No Shareholder of any class or series
--------------------
of stock shall have any right of cumulative voting in the election of directors.
SECTION 12. Action by Shareholders. Shareholder action on proposals to
----------------------
increase the capital stock or bond indebtedness of the corporation may be taken
without a meeting if one or more written consents, setting forth the action so
taken, shall be signed by all of the shareholders of the corporation. Any other
action required or permitted to be taken at a meeting of shareholders may be
taken without a meeting if one or more written consents, setting forth the
action so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. All written consents executed by one or more shareholders
shall be included in the minutes or otherwise filed with the corporate records.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing. In addition, if by law notice of the proposed action must
be given to non-voting shareholders and the action is to be taken by written
consent of the voting shareholders, the corporation shall give its non-voting
shareholders written notice of the proposed action at least ten (10) days before
the action is taken.
SECTION 13. No Preemptive Rights. No Shareholder of any class or series
--------------------
of stock shall have any preemptive rights to purchase or subscribe for any
unissued stock of any class or series of stock now existing or hereafter
authorized.
SECTION 14. Adjournments. Any meeting of shareholders, annual or special,
------------
at which a quorum is present may adjourn from time to time to reconvene at the
same or some other place, and notice need not be given of any such adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting in the manner provided in these Bylaws.
<PAGE>
SECTION 15. Organization. Meetings of shareholders shall be presided over
------------
by the Chairman of the Board of Directors or the President, or in their absence
by a Vice President, or in the absence of the foregoing persons by a presiding
officer designated by the Board of Directors, or in the absence of such
designation by a presiding officer chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in the absence of the Secretary the
presiding officer of the meeting may appoint any person to act as secretary of
the meeting.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
--------------
shall be managed by its Board of Directors and in the management of the business
and affairs of the Corporation, the Board of Directors shall have, without
limitation, all the powers accorded Boards of Directors by law and the powers
accorded the Board of Directors in the Amended and Restated Articles of
Incorporation.
SECTION 2. Number Tenure and Qualifications. The Board of Directors of
--------------------------------
the corporation shall consist of not less than three (3) nor more than fifteen
(15) individuals, as the number is fixed from time to time by resolution of the
Board of Directors. Each director shall hold office until the next annual
meeting of shareholders and until his or her successor shall have been duly
elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of Directors
----------------
may be held without other notice than this bylaw immediately before or after the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by or at the request of the Chairman, Chief Executive Officer, or
President or two-thirds (2/3) of the then authorized number of directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Place of Meetings. Regular meetings of the Board of Directors
-----------------
which coincide with meetings of the shareholders shall be held at the same place
as the shareholders' meeting. Other meetings of the Board of Directors shall be
held at such place as is designated in the notice of the meeting, either within
or without the State of Arkansas. A waiver of notice signed by all directors
entitled to vote at a meeting may designate any place, either within or without
the State of Arkansas, as the place for holding such meeting. If no designation
is made, the Board of Directors' meeting shall be held at the principal office
of the corporation.
SECTION 6. Notice. Notice of the date, time and place of any special
------
meeting of the Board of Directors shall be given at least two (2) days prior to
the meeting by written notice delivered personally or mailed to each director at
his or her business address, or by facsimile or telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by facsimile, such
notice shall be deemed to be delivered when verbal communication of receipt is
obtained. If
<PAGE>
notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is dispatched by the telegraph company. Any director may waive
notice of any meeting. The attendance by a director at a meeting shall
constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or the transaction of business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
SECTION 7. Quorum; Vote Required for Action. At all meetings of the Board
--------------------------------
of Directors or any committee designated by the Board of Directors, a majority
of directors at a meeting of the Board of Directors or a majority of the members
of a committee of the Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors or committee as the case may be, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors or
committee thereof, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 8. Organization. Meetings of the Board of Directors shall be
------------
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman, by a Vice Chairman of the Board, if any, or in the absence of the Vice
Chairman by the President, or in the absence of all of the foregoing, by a
chairman chosen at the meeting. The Chairman shall appoint a Secretary of the
Board, who may or may not be a member of the Board, to act as secretary of the
meeting, but in the absence of the Secretary of the Board, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
SECTION 9. Vacancies. Any vacancy occurring on the Board of Directors may
---------
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors, unless otherwise provided
by applicable law. A director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office. Any directorship to be
filled by reason of an increase in the number of directors may be filled by
election by the Board of Directors for a term of office continuing only until
the next election of directors by the shareholders. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
SECTION 10. Compensation. By resolution of the Board of Directors, each
------------
director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a stated fee as director or a fixed
sum for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 11. Presumption of Assent. A director of the corporation who is
---------------------
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
the director's dissent or abstention shall be
<PAGE>
entered in the minutes of the meeting, or unless the director (i) objects at the
beginning of the meeting (or promptly upon his or her arrival) to the holding of
the meeting or to the transaction of business at the meeting, or (ii) delivers a
written dissent or abstention to such action to the presiding officer of the
meeting before the adjournment thereof or to the Secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent or
abstain shall not apply to a director who voted in favor of such action.
SECTION 12. Informal Action by Directors. Unless the Articles of
----------------------------
Incorporation or these Bylaws otherwise expressly provide, any action required
or permitted to be taken at any meeting of the Board of Directors, or any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the consents
are filed with the minutes of the proceedings of the Board or such committee.
Action taken under this section is effective when the last director signs the
consent, unless the consent specifies a different effective date.
SECTION 13. Committees. Unless otherwise provided by the Articles of
----------
Incorporation or these Bylaws, the Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of any such committee. Any committee, to the extent allowed by law and provided
in the resolution establishing such committee, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation. Each committee shall keep regular
minutes and report to the Board of Directors when required. A committee may
not, however:
(a) authorize distributions;
(b) approve or propose to stockholders actions for which stockholder
approval is required by law;
(c) fill vacancies on the Board of Directors or on any of its committees;
(d) amend articles of incorporation;
(e) adopt, amend, or repeal bylaws;
(f) approve a plan of merger not requiring stockholder approval;
(g) authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except that the Board of Directors
may authorize a committee (or a senior
<PAGE>
executive officer of the Corporation) to do so within the limits
specifically prescribed by the Board of Directors.
Each committee shall serve at the pleasure of the Board of Directors and
shall act only in intervals between meetings of the Board of Directors, and
shall in all respects be subject to the control and direction of the Board of
Directors. Any act or authorization of any act by any committee, within the
authority delegated above, shall be as effective for all purposes as the act or
authorization of the Board of Directors; provided that the designation of such
committees and the delegation of authority to them shall not operate to relieve
the Board of Directors of any responsibility imposed upon it by law.
SECTION 14. Advisory Directors. The Board of Directors may appoint one or
------------------
more advisory directors who will not actually serve as members of the Board.
Such advisory directors shall only act in an advisory capacity and shall have no
power of final decision in any matters concerning the corporation.
SECTION 15. Telephonic Meetings Permitted. Members of the Board of
-----------------------------
Directors, or any committee designated by the Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment through which all persons participating in the meeting
can simultaneously hear each other, and participation in a meeting pursuant to
this section shall constitute presence in person at such meeting.
SECTION 16. Resignations. A director may resign at any time by filing a
------------
written resignation with the Secretary.
SECTION 17. Proxies. Directors may not vote by proxy.
-------
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a President,
------
one or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer/Chief Financial Officer, each of whom
shall be elected by the Board of Directors. Such other officers as may be
deemed necessary may be elected or appointed by the Board of Directors,
including but not limited to a Chairman or a Chief Executive Officer. Any
number of offices may be held by the same person.
SECTION 2. Election and Term of Office. The officers of the corporation
---------------------------
shall be elected by the Board of Directors at its first meeting after each
annual meeting of the shareholders. If the election of officers is not held at
such meeting, such election shall be held as soon thereafter as is reasonably
practical. Each officer shall hold office until his or her successor is duly
elected and qualified, or until death, resignation or removal from office in the
manner provided herein.
SECTION 3. Removal. Any officer or agent of the corporation may be
-------
removed by the Board of Directors, with or without cause, whenever in its
judgment the best interest of the corporation will be served thereby, but such
removal shall be without prejudice to the contractual
<PAGE>
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create any contractual rights whatsoever.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board. The Board of Directors may, in its
----------------------
discretion, elect a separate Chairman who shall be an officer of the corporation
and shall have responsibility for presiding at all meetings of shareholders and
the Board of Directors, executing certificates for shares of the corporation,
and taking such other action on behalf of the corporation as shall be
specifically authorized by the Board of Directors. Should the Board of
Directors fail to elect a separate Chairman or in the absence or incapacity of
the Chairman, the ranking executive officer of the corporation shall serve as
Chairman.
SECTION 6. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
be specifically designated by the Board of Directors, shall be the ranking
executive officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He may sign with the Secretary or any other proper
officer of the corporation, thereunto authorized by the Board of Directors
certificates for shares of the corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties as may be prescribed
by the Board of Directors from time to time.
SECTION 7. President. The President shall serve as an executive officer
---------
of the corporation subordinate only to the Chief Executive Officer and, subject
to the control of the Chief Executive Officer and the Board of Directors, shall
in general supervise and control all of the business and affairs of the
corporation. The Board of Directors may establish separate and distinct areas
of responsibility for the president. The President may sign with the Secretary
or any other proper officer of the corporation, thereunto authorized by the
Board of Directors, certificates for shares of the corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties as may be prescribed by the Board of Directors from time to time.
SECTION 8. The Vice Presidents. In the absence of the President or in the
-------------------
event of his death, inability or refusal to act, the highest ranking Vice
President shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Vice Presidents shall perform such duties, and shall have such
varying degrees of rank and responsibilities, as from time to time may be
assigned to them by the Chief Executive Officer or the President or by the Board
of Directors.
<PAGE>
SECTION 9. The Secretary. The Secretary shall: (a) keep the minutes of
-------------
the Shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each Shareholder which shall be furnished to the
Secretary by such Shareholder; (e) sign with the Chairman, Chief Executive
Officer or President certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the corporation; and (g) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to the Secretary by the Chief
Executive Officer, President or by the Board of Directors.
SECTION 10. Treasurer/Chief Financial Officer. If required by the Board
---------------------------------
of Directors, the Treasurer/Chief Financial Officer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine. He shall (a) have charge and custody of
and be responsible for all funds and securities of the corporation; receive and
give receipts for moneys due and payable to the corporation from any source
whatsover, and deposit all such moneys in the name of the corporation in such
books, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and (b) in general perform all
of the duties incident to the office of Treasurer/Chief Financial Officer and
such other duties from time to time may be assigned to him by the Chief
Executive Officer, President or by the Board of Directors.
SECTION 11. Assistant Secretary. The Assistant Secretary, or if there be
-------------------
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
SECTION 12. Salaries. The salaries of the officers shall be fixed from
--------
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the corporation.
SECTION 13. Voting Shares in Other Corporation. In the absence of other
----------------------------------
arrangements by the Board of Directors, shares of stock issued by any other
corporation and owned or controlled by this corporation may be voted at any
shareholders' meeting of the other corporation by the Chief Executive Officer of
this corporation or, if he is not present at the meeting, the shares may be
voted by the President of the corporation or by such person as the Chief
Executive Officer or the President, along with the Secretary, shall have duly
designated in writing as proxy to represent the corporation at the meeting.
<PAGE>
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to credit of the corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES
AND THE TRANSFER THEREOF
SECTION 1. Certificates for Shares. Certificates representing shares of
-----------------------
stock in the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the Chairman, Chief
Executive Officer or President and by the Secretary or by an Assistant
Secretary. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new certificate may be issued therefor upon
such terms and indemnity to the corporation as these Bylaws and the Board of
Directors may prescribe.
SECTION 2. Transfer of Shares. Upon surrender to the corporation or the
------------------
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 3. Lost, Destroyed or Mutilated Stock Certificates; Issuance of
------------------------------------------------------------
New Certificates. The Board of Directors may direct 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 Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate
<PAGE>
or certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 4. Classes of Stock Designation. If the corporation shall be
----------------------------
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences or rights shall
be set forth in full or summarized on the face or back of the certificate which
the corporation shall issue to represent such class or series of stock;
provided, however, except as otherwise provided by Arkansas law, in lieu of the
- -------- -------
foregoing requirements there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
shareholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
or rights.
ARTICLE VII. INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 1. Right to Indemnification. Every person who was or is a party
------------------------
or is threatened to be made a party to, or is involved in, any action, suit or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, or as its
enterprise, shall be indemnified and held harmless to the fullest extent legally
permissible under and pursuant to any procedure specified in the Arkansas
Business Corporation Act of 1987, as amended and as the same may be amended
hereafter, against all expenses, liabilities, and losses (including attorneys'
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. Such right of
indemnification shall be a contract right that may be enforced in any lawful
manner by such person. Such right of indemnification shall not be exclusive of
any other right which such director or officer may have or hereafter acquire
and, without limiting the generality of such statement, he shall be entitled to
his rights of indemnification under any agreement, vote of stockholders,
provision of law, or otherwise, as well as his rights under this paragraph.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the corporation shall begin on
-----------
the first day of January and end on the last day of December in each year.
SECTION 2. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Articles of Incorporation.
<PAGE>
Before payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the directors from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Corporate Seal. The Board of Directors may provide a corporate
--------------
seal which shall be circular in form and shall have inscribed thereon the name
of the corporation, the state of incorporation and the words "Corporate Seal."
A corporate seal shall not be mandatory for the validity of any contract,
instrument or other document properly executed by any authorized officer or
officers of the corporation.
SECTION 4. Waiver of Notice. Any written waiver of notice, signed by the
----------------
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, unless the person at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting. In addition, attendance of a person at a meeting shall
constitute a waiver of objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the person objects to considering the matter when it is
presented. All waivers of notice shall be filed with the minutes of the
meeting.
SECTION 5. Interested Directors; Quorum. No contract or transaction
----------------------------
between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's votes
are counted for such purposes, if: (1) the material facts regarding such
person's relationship or interest in the contract or transaction are disclosed
or known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested directors, even though the number of
disinterested directors constitutes less than a quorum; or (2) the material
facts as to such person's relationship or interest in the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by a vote of the shareholders; or (3) the contract or transaction is fair to the
corporation. If a majority of the disinterested directors vote to authorize,
approve, or ratify the contract or transaction, a quorum shall be deemed present
for purpose of taking action under this Section 5. If the contract or the
transaction is approved by shareholders, the shares owned by or voted under the
control of an interested director or an interested corporation, partnership,
association, or other organization in which one or more of the corporation's
directors or officers are directors or officers, or have a financial interest,
shall not be counted in the vote of shareholders. The vote of such shares,
however, shall be counted in determining whether the transaction or contract is
approved under the Articles of Incorporation or the Arkansas Business
Corporation Act of 1987. A majority of the shares that are entitled to
<PAGE>
be counted in a vote on the transaction or contract under this Section 5
constitutes a quorum for the purpose of taking action under this Section 5.
SECTION 6. Form of Records. Any records maintained by the corporation in
---------------
the regular course of its business, including a stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, computer diskette or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
SECTION 7. Amendments of Bylaws. Subject to the laws of the State of
--------------------
Arkansas and the provisions of the Articles of Incorporation, these Bylaws may
be altered, amended or repealed at any regular meeting of shareholders (or at
any special meeting thereof duly called for that purpose) by a vote of the
shareholders in accordance with Article II, provided that in the notice of such
meeting, notice of such purpose shall be given. Subject to the laws of the
State of Arkansas, the Articles of Incorporation and these Bylaws, the Board of
Directors may by a majority vote of the entire Board of Directors amend these
Bylaws, or waive any provisions hereof, or enact such other Bylaws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the corporation.
SECTION 8. Savings. Prior to the effective date (the "Opt-In Date") of
-------
any amendment to the articles of incorporation of the corporation pursuant to
which the corporation elects to be governed by the provisions of the Arkansas
Business Corporation Act of 1987, the affairs of the corporation addressed by
these Bylaws shall continue to be conducted in accordance with the provisions of
the Arkansas Business Corporation Act of 1965, as amended. If prior to the Opt-
In Date, any provision of these Bylaws conflicts with the 1965 Act, the
provisions of said act shall control; provided that, any such conflicting
provision shall be severable and shall not effect other provisions of these
Bylaws that can be given effect without the conflicting provision.
ADOPTED by the Board of Directors of the corporation effective as of the
13th day of March, 1997.
/s/ Donna Quandt
-----------------------------------
Donna Quandt, Secretary
<PAGE>
EXHIBIT 10.1
BANK OF THE OZARKS, INC.
STOCK OPTION PLAN
1. Purpose. The purpose of the Stock Option Plan is to attract and
-------
retain the best available talent and encourage the highest level of performance
by executive officers and key employees of Bank of the Ozarks, Inc. (the
"Company") and its Subsidiaries (as defined) and to provide them with incentives
to put forth maximum efforts for the success of the Company's business and to
serve the best interests of the Company's stockholders. All options granted
under the Plan are intended to be nonstatutory stock options.
2. Definitions. The following capitalized terms, when used in the Plan,
-----------
will have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as in effect from
time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(d) "Common Stock" means the common stock, par value $.01 per share,
of the Company or any security into which such common stock may be changed
by reason of any transaction or event of the type described in Paragraph 6.
(e) "Compensation Committee" means the Compensation Committee which is
a committee of the Board whose members are appointed by the Board from time
to time. All of the members of the Compensation committee, which may not
be less than two, are intended at all times to qualify as "outside
directors" within the meaning of Section 162(m) of the Code and as "Non-
Employee Directors" within the meaning of Rule 16b-3; provided, however,
that the failure of a member of such committee to so qualify shall not be
deemed to invalidate any Stock Option granted by such committee.
(f) "Date of Grant" means the date specified by the Compensation
Committee or the Board, as applicable, on which a grant of Stock Options
will become effective (which date will not be earlier than the date on
which such committee or the Board takes action with respect thereto).
(g) "Market Value per Share" means the fair market value per share of
the Common Stock on the Date of Grant determined on the basis of the
average of the highest asked price and the lowest reported bid price
reported on The Nasdaq Stock Market Inc's. National Market; provided,
however, that for purposes of any options granted on the effective date of
the Company's initial public offering, Market Value Per Share shall mean
the initial public offering price of the shares sold by the Company on such
date.
<PAGE>
(h) "Option Price" means the purchase price per share payable upon
exercise of a Stock Option.
(i) "Participant" means a person who is selected by the Compensation
Committee or the Board, as applicable, to receive Stock Options under
Paragraph 5 of the Plan and who is at that time an executive officer or
other key employee of the Company or any Subsidiary.
(j) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Act, as such
Rule is in effect from time to time.
(k) "Stock Option" means the right to purchase a share of Common Stock
upon exercise of an option granted pursuant to Paragraph 5.
(l) "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly,
not less than 50% of the total combined voting power or equity interests
represented by all classes of stock issued by such corporation,
partnership, joint venture or other entity.
3. Shares Available Under Plan. The shares of Common Stock which may be
---------------------------
issued under the Plan will not exceed in the aggregate 285,000 shares, subject
to adjustment as provided in this Paragraph 3.
(a) Any shares of Common Stock which are subject to Stock Options that
are terminated unexercised, forfeited or surrendered or that expire for any
reason will again be available for issuance under the Plan.
(b) The shares available for issuance under the Plan also will be
subject to adjustment as provided in Paragraph 6.
4. Individual Limitation on Stock Options. The maximum aggregate number
--------------------------------------
of shares of Common Stock with respect to which Stock Options may be granted to
any Participant during any calendar year will not exceed 35,000 shares.
5. Grants of Stock Options. The Compensation Committee or the Board may
-----------------------
from time to time authorize grants to any Participant of Stock Options upon such
terms and conditions as such committee or the Board, as applicable, may
determine in accordance with the provisions set forth below.
(a) Each grant will specify the number of shares of Common Stock to
which it pertains.
(b) Each grant will specify the Option Price, which will not be less
than 100% of the Market Value per Share on the Date of Grant.
2
<PAGE>
(c) Each grant will specify whether the Option Price will be payable
(i) in cash or by check acceptable to the Company, (ii) by the transfer to
the Company of shares of Common Stock owned by the Participant for at least
six months (or, with the consent of the Compensation Committee or Board, as
applicable, for less than six months) having an aggregate fair market value
per share at the date of exercise equal to the aggregate Option Price,
(iii) with the consent of the Compensation Committee or the Board, as
applicable, by authorizing the Company to withhold a number of shares of
Common Stock otherwise issuable to the Participant having an aggregate fair
market value per share on the date of exercise equal to the aggregate
Option Price or (iv) by a combination of such methods of payment; provided,
however, that the payment methods described in clauses (ii) and (iii) will
not be available at any time that the Company is prohibited from purchasing
or acquiring such shares of Common Stock. Any grant may provide for
deferred payment of the Option Price from the proceeds of sale through a
bank or broker of some or all of the shares to which such exercise relates.
(d) Successive grants may be made to the same Participant whether or
not any Stock Options previously granted to such Participant remain
unexercised.
(e) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary
and/or any other conditions to be satisfied before the Stock Options or
installments thereof will vest and become exercisable, and any grant may
provide, for the earlier exercise of the Stock Options in the event of a
change in control of the Company (as defined in the stock option agreement
evidencing such grant or in any agreement referred to in such stock option
agreement) or upon the occurrence of any other transaction or event deemed
appropriate by the Compensation Committee.
(f) Each Stock Option granted pursuant to this Paragraph 5 may be made
subject to such transfer restrictions as the Compensation Committee or the
Board, as applicable, may determine, including such restrictions as may be
necessary to comply with applicable federal and state securities law.
(g) Each grant will be evidenced by a stock option agreement executed
on behalf of the Company by the Chief Executive Officer (or another officer
designated by the Compensation Committee or the Board, as applicable,) and
delivered to the Participant and containing such further terms and
provisions, consistent with the Plan, as such committee or the Board, as
applicable may approve.
6. Adjustments. Each grant will provide for such adjustments in the
-----------
maximum number of shares specified in Paragraph 3 and Paragraph 4, in the number
of shares of Common Stock covered by outstanding Stock Options granted
hereunder, in the Option Price applicable to any such Stock Options, and/or in
the kind of shares covered thereby (including shares of another issuer), as is
equitably required to prevent dilution or enlargement of the rights of
Participants that otherwise would result from any stock dividend, stock split,
combination of
3
<PAGE>
shares, recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
Any fractional shares resulting from the foregoing adjustments will be
eliminated.
7. Withholding of Taxes. To the extent that the Company is required to
--------------------
withhold federal, state or local taxes in connection with any benefit realized
by a Participant under the Plan, or is requested by a Participant to withhold
additional amounts with respect to such taxes, and the amounts available to the
Company for such withholding are insufficient, it will be a condition to the
realization of such benefit that the Participant make arrangements satisfactory
to the Company for payment of the balance of such taxes required or requested to
be withheld. In addition, if permitted by the Compensation Committee or the
Board, as applicable, a Participant may elect to have any withholding obligation
of the Company satisfied with shares of Common Stock that would otherwise be
transferred to the Participant on exercise of the Stock Option.
8. Administration of the Plan.
--------------------------
(a) The Plan will be administered by the Compensation Committee and
the Board.
(b) Each of the Compensation Committee and the Board has the full
authority and discretion to administer the Plan and to take any action that
is necessary or advisable in connection with the administration of the
Plan, including without limitation the authority and discretion to
interpret and construe any provision of the Plan or of any agreement,
notification or document evidencing the grant of a Stock Option. The
interpretation and construction by the Compensation Committee or the Board,
as applicable, of any such provision and any determination by the
Compensation Committee or the Board, as applicable, pursuant to any
provision of the Plan or of any such agreement, notification or document
will be final and conclusive. No member of the Compensation Committee will
be liable for any such action or determination made in good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Compensation Committee will have the exclusive authority and discretion to
administer or otherwise take any action required or permitted to be taken
under the provisions of Paragraph 6, 8(a), 8(b), 9(a) and 9(b) hereof with
respect to Stock Options granted under the Plan that are intended to comply
with the requirements of Section 162(m) of the Code.
9. Amendments, Etc.
----------------
(a) The Compensation Committee or the Board, as applicable, may
without the consent of the Participant, amend any agreement evidencing a
Stock Option granted under the Plan, or otherwise take action, to
accelerate the time or times at which the Stock
4
<PAGE>
Option may be exercised, to extend the expiration date of the Stock Option,
to waive any other condition or restriction applicable to such Stock Option
or to the exercise of such Stock Option, to reduce the exercise price of
such Stock Option, to amend the definition of a change in control of the
Company (if such a definition is contained in such agreement) to expand the
events that would result in a change in control of the Company and to add a
change in control provision to such agreement (if such provision is not
contained in such agreement) and may amend any such agreement in any other
respect with the consent of the Participant.
(b) The Plan may be amended from time to time by the Board or any duly
authorized committee thereof. If required by any law, or any rule or
regulation issued or promulgated by the Internal Revenue Service, the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., The Nasdaq, Inc's. National Market (or any other stock
exchange upon which the Common Stock is listed for trading), or any other
governmental or quasi-governmental agency having jurisdiction over the
Company, the Common Stock or the Plan (collectively the "Legal
Requirements"), any such amendment will also be submitted to and approved
by the requisite vote of the stockholders of the Company. If any Legal
Requirement requires the Plan to be amended, or in the event Rule 16b-3 is
amended or supplemented (e.g., by addition of alternative rules) or any of
the rules under Section 16 of the Act are amended or supplemented, in
either event to permit the Company to remove or lessen any restrictions on
or with respect to Stock Options, the Board and the Compensation Committee
each reserves the right to amend the Plan to the extent of any such
requirement, amendment or supplement, and all Stock Options then
outstanding will be subject to such amendment.
(c) The Plan may be terminated at any time by action of the Board.
The termination of the Plan will not adversely affect the terms of any
outstanding Stock Option.
(d) The Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary, nor will it interfere in any way with any right the Company
or any Subsidiary would otherwise have to terminate a Participant's
employment or other service at any time.
10. Condition to Effectiveness of Plan. This Plan shall be effective upon
----------------------------------
the effective date of the Company's initial public offering.
5
<PAGE>
EXHIBIT 10.2
BANK OF THE OZARKS, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. The purpose of the Non-Employee Stock Option Plan (the
-------
"Plan") is to attract and retain the services of qualified non-employee
directors of Bank of the Ozarks, Inc. (the "Company") and to provide them with
incentives to put forth maximum efforts for the success of the Company's
business and to serve the best interests of the Company's stockholders. All
options granted under the Plan are intended to be nonstatutory stock options.
2. Eligibility.
-----------
(a) Each person who is not otherwise an employee of the Company, or
any subsidiary, and who shall have been elected, appointed or serving as a
director of the Company on the effective date of the Company's initial
public offering for its shares of Common Stock (as defined) (the "IPO
Date") shall be granted on such IPO Date (the "Initial Grant Date") options
to purchase 1,000 shares of the Company's common stock, $.01 par value (the
"Common Stock").
(b) Each person who is not otherwise an employee of the Company, or
any subsidiary, and who shall have been elected a director of the Company
at each annual meeting of stockholders shall automatically be granted
options to purchase 1,000 shares of Common Stock on the first business day
immediately following such annual meeting (each a "Subsequent Grant Date"),
commencing with the Company's annual meeting of stockholders held in 1998.
(c) Each person who is not otherwise an employee of the Company, or
any subsidiary, and who shall have been elected or appointed for the first
time as a director of the Company on a date other than the IPO Date or an
annual meeting date, shall be granted options to purchase shares of Common
Stock (in an amount not to exceed 1,000 shares) as the Board of Directors
of the Company (the "Board") may determine in its discretion.
3. Grants of Stock Options. The grants of stock options under this Plan
-----------------------
shall be made in accordance with the provisions set forth below:
(a) Each grant will specify the purchase price per share payable on
exercise of an option granted pursuant to this Plan. Such purchase price
shall not be less than 100% of the "fair market value" per share of the
Common Stock on the date of grant. For purposes of this Plan, "fair market
value" shall be determined (i) with respect to options granted on the IPO
Date, based upon the initial public offering price of the shares sold by
the Company on such IPO Date or (ii) with respect to options granted on any
other date, on the basis of the average of the highest reported asked price
and the lowest reported bid price on The Nasdaq Stock Market, Inc.'s
National Market, or any successor market.
<PAGE>
(b) Each stock option granted under this Plan shall immediately vest
on the date on which such stock option is granted.
(c) No stock option granted under this Plan shall be exercisable after
the expiration of ten (10) years from the date of its grant.
(d) Each stock option granted under this Plan (and the shares of
Common Stock to be received upon exercise of such stock option) may be
subjected to such transfer and other restrictions as the Board may
determine, including such restrictions as may be necessary to comply with
applicable federal and state securities law.
(e) Each grant will be evidenced by a stock option agreement executed
on behalf of the Company by the Chief Executive Officer (or another officer
designated by the Board) and delivered to the optionee and containing such
further terms and provisions, consistent with the Plan, as the Board may
approve.
4. Termination. If an optionee ceases to be a director for any reason,
-----------
any option held by such person may be exercised at any time within 90 days after
the date on which such person ceased to be a director. After such 90 day
period, the option shall terminate without notice.
5. Adjustments. Each grant will make or provide for such adjustments in
-----------
the number of shares of Common Stock covered by outstanding stock options
granted hereunder, in the option price applicable to any such stock options,
and/or in the kind of shares covered thereby (including shares of another
issuer), as is equitably required to prevent dilution or enlargement of the
rights of optionees under the Plan that otherwise would result from any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of rights or warrants
to purchase securities or any other corporate transaction or event having an
effect similar to any of the foregoing. Any fractional shares resulting from
the foregoing adjustments will be eliminated.
6. Withholding of Taxes. To the extent that the Company is required to
--------------------
withhold federal, state, local or foreign taxes in connection with any benefit
realized by an optionee under the Plan, or is requested by an optionee to
withhold additional amounts with respect to such taxes, and the amounts
available to the Company for such withholding are insufficient, it will be a
condition to the realization of such benefit that the optionee make arrangements
satisfactory to the Company for payment of the balance of such taxes required or
requested to be withheld. In addition, if permitted by the Board, an optionee
may request to have any withholding obligation of the Company satisfied with
shares of Common Stock that would otherwise be transferred to the optionee on
exercise of the stock option.
2
<PAGE>
7. Effectiveness of Plan. This Plan shall be effective upon the
---------------------
effective date of the Company's initial public offering.
Adopted by the undersigned Board of Directors this 22nd day of May, 1997.
/s/ George G. Gleason, II
------------------------------------
George G. Gleason, II
/s/ Linda D. Gleason
------------------------------------
Linda D. Gleason
/s/ Mark Ross
------------------------------------
Mark Ross
3
<PAGE>
EXHIBIT 10.3
LOAN AGREEMENT
THIS AGREEMENT made and entered into this 16th day of May, 1997, by and
between UNION PLANTERS NATIONAL BANK, a national banking association with
offices at 6200 Poplar Avenue, Memphis, Tennessee 38119 (hereinafter referred to
as the "Lender"), and OZARK BANKSHARES, INC., an Arkansas corporation
(hereinafter referred to as the "Borrower"), having as an address for purposes
of notice of TCBY Tower Building, Suite 3100, 425 West Capitol Avenue, Little
Rock, Arkansas, 72201.
W I T N E S S E T H:
WHEREAS, the Borrower has applied to the Lender for a loan and the
Lender is willing to make available such funds to the Borrower subject to the
terms, provisions and conditions provided for herein; and
WHEREAS, this Agreement has been entered into by the parties for the
purpose of confirming the terms and conditions under which funds will be
advanced to Borrower; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
SECTION 1.0 DEFINITION OF TERMS
- ---------------------------------
As used herein, the following terms shall have those meanings ascribed
thereto below:
1.1 "Agreement" shall mean this Loan Agreement.
1.2 "Bank Stock" shall, unless otherwise indicated, mean the common stock
of Bank of the Ozarks, wca, P.O. Box 196, Ozark, Arkansas 72949 and Bank of the
Ozarks, nwa, P.O. Box 437, Jasper, Arkansas.
1.3 "Capital" shall mean the average of all equity capital, surplus,
undivided profits and 50% of reserves for loan losses shown on quarterly call
reports of the Subsidiary Banks during or for each calendar year.
1.4 "Closing" shall mean that date on which the Lender and Borrower
execute this Loan Agreement and the Lender advances the proceeds of the Loan to
Borrower.
1
<PAGE>
1.5 "Collateral" shall mean 80% of the common stock of Bank of the Ozarks,
nwa, and Bank of the Ozarks, wca, now owned by Borrower, and any additional
common stock now or hereafter owned or acquired by the Borrower necessary to
maintain 80% of the outstanding stock of Subsidiary Banks.
.
1.6 "Debt" shall mean the Loan and all liabilities, obligations and
indebtedness (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or which may hereafter be contracted or acquired, of the
Borrower to the Lender incurred under or pursuant to this Loan Agreement, and
including without limitation the Loan, the Notes, and any security agreement or
other agreement, instrument or document executed to evidence, secure or govern
the terms of the Loan.
1.7 "Event of Default" shall mean the occurrence of any one of those
events described in Section 11.1 hereof
1.8 "Line of Credit Note" shall mean that certain promissory note of the
Borrower, and any promissory note delivered in substitution or replacement
thereof, evidencing the Line of Credit and incorporating the terms of Section 3
of this Agreement.
1.9 "Line of Credit" shall mean the revolving credit facility and any
Advances made by Lender in accordance with the terms of Section 3 hereof.
1.10 "Loans" shall mean borrowings and advances to the Borrower by the
Lender pursuant to the terms of this Loan Agreement and shall include all sums
advanced to or for the benefit of the Borrower pursuant hereto under the Line of
Credit or the Term Loan.
1.11 "Notes" shall mean the promissory notes of the Borrower executed and
delivered to the Lender pursuant to this Loan Agreement, including the Line of
Credit Note, the Term Note, and any Additional Term Notes, as well as any
replacements thereof, to evidence the Borrower's obligation to repay the Loans.
1.12 "Prime Rate" shall mean the average prime lending rate reported from
time to time by the Wall Street Journal under its column "Money Rates".
Effective on the date on which any change in the prime rate shall occur, any
interest adjustment required hereby shall be adjusted upward or downward by a
number of percentage points (and fractional parts thereof) equal to the
adjustment upward or downward in the Wall Street Journal reported Prime Rate;
provided however, that the rate of interest, as adjusted, shall not exceed the
maximum rate of interest which the Lender, as a national bank, is permitted by
law to contract for and charge. Interest shall be calculated on the basis of a
365 day year unless calculations on that basis would result in Lender receiving
interest at a rate in excess of the maximum rate of interest which Lender is
permitted by law to contract for and charge, in which case the principal debt
evidenced hereby shall bear interest at such maximum rate.
2
<PAGE>
1.13 "Security Agreement" shall mean that certain security agreement of
even date herewith executed by the Borrower and Lender providing for the pledge
of and the grant of a security interest by the Borrower to Lender in the
Collateral.
1.14 "Subsidiary Banks" shall mean the Bank of the Ozarks, wca, Ozark,
Arkansas and the Bank of the Ozarks, nwa, Jasper, Arkansas.
1.15 "Term Loan" shall mean the term loan made by the Lender to the
Borrower in accordance with the terms of Section 2 hereof.
1.16 "Term Note" shall mean the term promissory note executed by the
Borrower and delivered to the Lender incorporating the terms of Section 2
hereof.
1.17 All accounting terms used herein shall have such meaning ascribed
thereto by application of generally accepted accounting principles applied
consistently.
1.17.1 "Assets", as that term is used herein, or as any
computation shall be made with reference thereto, shall not include
goodwill.
1.17.2 "Liabilities", as that term is used herein, or as any
computation shall be made with reference thereto, shall include, (a)
guaranties, repurchase agree ments and endorsements (other than for
purposes of collection in the ordinary course of Borrower's business); and
(b) indebtedness secured by assets of the Borrower, regardless of any
limitation on recourse against Borrower.
1.17.3 "Net Worth" shall mean Assets minus Liabilities.
.
SECTION 2.0 THE TERM LOAN
- -------------------------
2.1 The Term Loan. Subject to the conditions provided for herein, the
-------------
Lender agrees to lend and the Borrower agrees to borrow from the Lender the
principal sum of $5,000,000.00 (the "Term Loan").
2.2 Promissory Note. The Term Loan and the Borrower's obligation to repay
---------------
the Term Loan shall be evidenced by the Borrower's promissory note in form and
content acceptable to the Lender and payable, together with interest at a fixed
rate of interest equal to 8.804% per annum, as follows:
As to Interest: Accrued interest on the principal balance outstanding
shall be due and payable annually commencing on December 21, 1997 and
continuing on the same day of each year thereafter. Interest shall be
calculated on the basis of a 365 day year unless calculations on that basis
would result in Lender receiving interest at a rate in
3
<PAGE>
excess of the maximum rate of interest which Lender is permitted by law to
contract for and charge, in which case the principal debt evidenced hereby
shall bear interest at such maximum rate.
As to Principal: The outstanding principal balance of the Term Loan shall
be repaid in annual installments of $500,000.00 each commencing on December
21, 1998 and continuing on the same day of each year thereafter.
Each payment received shall be applied first to the payment of all accrued and
unpaid interest under the Note, and the balance shall be applied to the
outstanding principal balance.
2.3 Maturity. The entire outstanding principal balance of the Term Loan
--------
together with accrued but unpaid interest shall be due and payable in full on
December 21, 2007.
2.4 Late Payment Charge. The Borrower shall pay a late payment charge
-------------------
equal to one-half of one percent of the amount of any payment that is more than
fifteen (15) days past the due date thereof.
SECTION 3.0 TERMS OF THE LINE OF CREDIT.
- ----------------------------------------
3.1 The Revolving Line of Credit. Upon the terms and conditions set forth
----------------------------
in this Agreement, Lender agrees to fund advances from time to time requested by
Borrower in an aggregate outstanding amount not to exceed at any time Five
Million Dollars ($5,000,000.00), subject however to any reductions for
Additional Term Loans extended by Lender to Borrower and any reductions required
by Section 8.5 hereof.
3.2 Making the Revolving Loans. Each advance shall be made either: (i)
--------------------------
on written notice given by the Borrower to the Lender; or (ii) in a telephonic
request, which request shall be followed by written notice from the Borrower to
Lender within five days from the telephonic request; and in either event not
later than noon (Central Standard Time) one business day prior to the business
day upon which the advance is to be made.
3.3 Funding of Revolving Loans. The Lender agrees on each advance date
--------------------------
to make available to the Borrower the amount of the requested advance (provided
that the aggregate amount of all Advances does not exceed the limitation set
forth in Section 3.1) by transfer of immediately available funds to a deposit
account maintained by Borrower. The revolving credit advances made by the
Lender from time to time to the Borrower under this Agreement shall be made
against, evidenced by and repaid with interest thereon in accordance with the
Line of Credit Note of the Borrower.
3.4 Interest. Interest shall accrue on the outstanding balance of all
--------
advances made under the Line of Credit at a per annum rate of one-quarter of
one percentage point
4
<PAGE>
(.25%) less than the Prime Rate. Accrued interest shall be payable quarterly
commencing on the twenty-first day of June, 1997 and continuing on the same day
of each September, December, March and June thereafter.
3.5 Term. Lender's commitment to fund advances under the Line of Credit
----
shall terminate on December 21, 2007. Lender shall have the opportunity on each
anniversary date of the execution of this Agreement to review the terms and
agreements applicable to the Line of Credit, provided however that Lender will
not require the modification of such terms and agreements unless: (i) there has
been a material adverse change in the financial condition of the Borrower or the
Subsidiary Banks; or (ii) the occurrence of any other Event of Default and the
expiration of any applicable cure period under Section 11.1 of this Agreement.
3.6 Additional Term Loans. Advances under the Line of Credit remaining
---------------------
unpaid for a period of three hundred sixty-five (365) days shall thereafter be
administered as an additional term loan hereunder (each an "Additional Term
Loan"). Additional Term Loans shall be evidenced by a term promissory note of
the Borrower having a maturity date of December 21, 2007. Interest shall accrue
on an Additional Term Loan at a per annum rate of one-quarter of one
percentage point (.25%) less than the Prime Rate and shall be payable in the
full amount thereof on each December 21 during the term of an Additional Term
Loan. The principal balance of an Additional Term Loan shall be repaid in equal
annual installments, calculated to fully amortize the Additional Term Loan on
the maturity date thereof, payable on each December 21 during the term thereof.
3.7 One Obligation. All Loans, whether denominated as the Line of Credit
--------------
or the Term Loan or the Additional Term Loans for administrative purposes,
shall constitute one general obligation of Borrower, and shall be secured by
Lender's security interest in and lien upon all of the Collateral, and by all
other security interests and liens heretofore, now or at any time or times
hereafter granted by any Borrower to Lender.
SECTION 4.0 PREPAYMENT
- ----------------------
4.1 Voluntary Prepayment of the Line of Credit. The Borrower shall have
------------------------------------------
the right and privilege of prepaying the Line of Credit and any Additional Term
Loans, in whole or in part, at any time and from time to time without penalty.
4.2 Voluntary Prepayment of the Term Loan. The Borrower shall have the
-------------------------------------
right and privilege of prepaying the Term Loan in whole but not in part, at any
time upon prior written notice to Lender. Borrower acknowledges that the Term
Loan has been funded in part by certain advances obtained by participating
lenders (the "Participating Lenders") from the Federal Home Loan Bank of Dallas,
as follows:
Participating Lender: First National Bank of Mena, Mena, Arkansas
5
<PAGE>
Federal Home Loan Bank of Dallas
Advance Number: 55004568
Amount: $836,000.00
Date of Advance: December 21, 1995
Interest Rate: 6.304%
Term: Twelve years
Participating Lender: Bank of Montgomery County, Mt. Ida, Arkansas
Federal Home Loan Bank of Dallas
Advance Number: 55004570
Amount: $570,000.00
Date of Advance: December 21, 1995
Interest Rate: 6.304%
Term: Twelve years
Participating Lender: Caddo First National Bank, Glenwood, Arkansas
Federal Home Loan Bank of Dallas
Advance Number: 55004571
Amount: $570,000.00
Date of Advance: December 21, 1995
Interest Rate: 6.304%
Term: Twelve years
In the event that a prepayment of any of the foregoing Federal Home Loan Bank
advances requires the payment by a Participating Lender of a prepayment penalty
or premium (the "FHLB Premium"), Borrower shall, at its option, either: (i) pay
a prepayment penalty or premium to Lender in an amount equal to the applicable
FHLB Premium, or (ii) assume, or cause one or more of the Subsidiary Banks to
assume, the Participating Lender's obligation to the Federal Home Loan Bank to
repay the advance without further obligation on the part of any Participating
Lender. In the event that the Borrower cannot obtain a release from the Federal
Home Loan Bank for the Participating Lenders, Borrower shall pay the prepayment
premium to Lender. Notwithstanding the foregoing, the Participating Banks may
elect, following notice from the Lender of the Borrower's intent to prepay the
Term Loan, not to repay the Federal Home Loan Bank advances and, in such event,
no prepayment penalty or premium shall be payable by Borrower.
4.3 Effect of Prepayment. Each prepayment of the Line of Credit or
--------------------
Additional Term Loan shall be applied, first to the payment of all accrued and
unpaid interest to the date of prepayment, and the balance shall be applied (i)
if the Line of Credit, to the outstanding principal balance; or (ii) if an
Additional Term Loan in reduction of the unpaid principal installments on the
Loan, in inverse order of their maturity.
6
<PAGE>
SECTION 5.0 COLLATERAL
- -----------------------
The Loans and Notes shall be secured by a pledge of and a first and prior
security interest in not less than 80% of the Bank of the Ozarks, wca, capital
stock and not less than 80% of the Bank of the Ozarks, nwa, capital stock,
whether such capital stock is now owned directly or indirectly, or hereafter
acquired by Borrower.
SECTION 6.0 REPRESENTATIONS AND WARRANTIES
- -------------------------------------------
To induce the Lender to make the Loan provided for herein, the Borrower
represents and warrants unto the Lender (which representations and warranties
will survive the delivery of the Notes and the making of the Loans) that:
6.1 Non-Violation. The execution, delivery and performance of this
-------------
Agreement, the borrowings hereunder, and the execution and delivery of the Notes
executed pursuant hereto will not violate any provision of law, or any order of
any court or governmental agency, any provision of any trust agreement,
indenture, agreement or other instrument to which the Borrower or any Subsidiary
Bank is a party, or be in conflict with, result in a breach of, or constitute
(with or without notice and/or lapse of time) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower or any Subsidiary Bank, except as
otherwise expressly granted to Lender pursuant hereto.
6.2 Binding Obligation. This Agreement and the Notes, when executed and
------------------
delivered pursuant hereto for value received, will constitute the valid and
legally binding obligation of the Borrower in accordance with their terms
(subject, as to enforcement of remedies, to applicable bankruptcy, moratorium,
or other laws affecting the enforcement of creditors' rights).
6.3 Financial Condition. All financial statements or information
-------------------
furnished to the Lender in connection herewith are, to the best of the
Borrower's knowledge, in all material respects, true and correct and accurately
represent the financial condition and operations of the person or corporation
shown therein including the statements of the Subsidiary Banks furnished
herewith, as of their date, and since such date there has been no material or
adverse changes in the said financial condition or operations.
6.4 Litigation. There is no action, suit or proceeding at law or in
----------
equity, or by or before any governmental instrumentality or other agency, now
pending, or, to the knowledge of the Borrower, threatened against or affecting
the Borrower, the collateral described in Section 5 hereof, or the Subsidiary
Banks which, if adversely determined, would materially impair the right,
capacity, ability or authority of Borrower or the Subsidiary Banks to carry on
business
7
<PAGE>
substantially as now conducted, or would materially adversely affect the
condition, financial or otherwise, of the Borrower, or of the Subsidiary Banks.
6.5 Existing Defaults. Borrower has no knowledge of the existence of any
-----------------
condition or event which would, with or without notice and/or lapse of time,
constitute an Event of Default hereunder.
6.6 Taxes. Except as to the pending tax dispute with the State of
-----
Arkansas for tax years 1992 through 1995, which has been disclosed to Lender and
Lender has agreed has been adequately provided for, the Borrower and the
Subsidiary Banks have filed all required federal, state and local tax returns
and have paid all taxes as shown on such returns as they have become due.
6.7 Priority of Liens. The liens to be provided the Lender pursuant to
-----------------
the provisions of Section 5 and the Security Agreement shall be of such dignity
and priority as may be provided for herein, and there shall hereafter be no
additional lien, charge, or encumbrance at any time existing with respect
thereto without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
6.8 Use of Proceeds. The proceeds of the Loan shall be used exclusively
---------------
as set forth in Section 10 hereof.
6.9 Ownership of Shares. The shares of stock pledged to secure the Loan
-------------------
shall, at the time of delivery to the Lender of certificates evidencing same, be
owned by the Borrower free and clear of any lien, charge, security interest or
restriction. The Borrower shall be the registered owner of not less than 100%
of the common stock of each Subsidiary Bank, except for directors qualifying
shares, on the date of Closing, all of which are validly issued, fully paid and
non-assessable.
SECTION 7.0 AFFIRMATIVE COVENANTS
- ----------------------------------
Unless waived by the Lender in writing, Borrower covenants and agrees that
from the date hereof until payment in full of the principal of and interest on
the Note:
7.1 Corporate Existence and Properties. The Borrower will do or cause to
----------------------------------
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights and franchises of both itself and of the Subsidiary
Banks, and comply, in all material respects, with all laws applicable thereto;
and continue to conduct and operate the business of the Subsidiary Banks in
accordance with sound banking practices.
7.2 Financial Reports. The Borrower will furnish or cause to be furnished
-----------------
to the Lender the following:
8
<PAGE>
7.2.1 Within ninety (90) days after each fiscal year of each
Subsidiary Bank, a copy of the Subsidiary Bank's operating and financial
statements, including a copy of the Consolidated Report of Condition and
Income.
7.2.2 Within ten (10) days after their preparation, a copy of all
quarterly call reports, quarterly balance sheets and operating statements
and such other information regarding the operations, properties, capital,
condition and business affairs of each Subsidiary Bank as the Lender may
reasonably request.
7.2.3 Within ninety (90) days after each fiscal year of the Borrower,
a copy of the Borrower's audited consolidated financial statements, with
details of consolidation reflecting the Subsidiary Banks and parent only.
7.2.4 Promptly, from time to time, such other information regarding
the operations, properties, business affairs and conditions, financial or
otherwise, of the Subsidiary Banks or of the Borrower as the Lender may
reasonably request including copies of any examinations conducted by
federal or state bank regulatory agencies, which Lender agrees shall be
furnished to it in accordance with applicable rules and regulations of the
regulatory agency compiling such report.
7.3 Taxes and Other Liens. The Borrower will duly pay and discharge, and
---------------------
cause to be discharged, all taxes, assessments and governmental charges in any
material amount upon it or its properties or upon the Subsidiary Banks or its
property prior to the date on which penalties are attached thereto, and shall
pay all claims for labor, supplies, rent and other obligations which, if unpaid,
might become a lien against the property unless and to the extent only that the
same shall be contested in good faith by appropriate proceedings and adequate
reserves are set aside with respect thereto. The Borrower shall maintain the
collateral provided for herein to secure the Debt free and clear of all liens,
charges and encumbrances of any nature whatsoever except those granted and
conveyed to the Lender pursuant to the terms hereof.
7.4 Expenses. The Borrower will pay all out-of-pocket expenses incurred
--------
by the Lender in connection with the preparation of Loan Documents and taking of
collateral, and in the event of default, in connection with the enforcement of
the rights of the Lender under this Agreement and the Notes, including without
limitation reasonable attorney fees owing to Lender counsel by reason thereof.
7.5 Inspections. The Borrower will permit the Lender, and will cause the
-----------
Subsidiary Banks from time to time during reasonable business hours to permit
the Lender to inspect any business properties or premises of the Borrower or the
Subsidiary Banks or inspect books and records relating to any thereof, as well
as those relating to their general business affairs and financial condition.
7.6 Loan Loss Reserves. Borrower shall cause the Subsidiary Banks to
------------------
maintain a reserve for loan losses in an amount acceptable to all applicable
regulatory agencies.
9
<PAGE>
7.7 Financial Requirement of Borrower. The Borrower shall conduct the
---------------------------------
affairs of the Subsidiary Banks in a businesslike and lawful manner, and shall
(based on sound accounting principles consistently applied) cause the Subsidiary
Banks to continuously meet the following required standards:
7.7.1 Borrower shall cause the Subsidiary Banks to maintain a return
on average assets for each year (beginning with calendar year 1997, and
recomputed at the close of each calendar year thereafter) equal to at least
1.0%.
7.7.2 Borrower shall cause each Subsidiary Bank to maintain a ratio of
primary capital to assets at a level at all times acceptable to the
applicable bank regulatory authorities but in no event shall such ratio be
less than seven percent (7.0%) at each calendar year-end.
7.7.3 Net charges to the Subsidiary Bank' reserve for loan losses
shall not exceed one percent (1.0%) of Net Loans during any calendar year.
7.8 Compliance with Regulatory Agencies. Borrower shall comply and shall
-----------------------------------
also cause the Subsidiary Banks to comply with all notices, orders, and
memoranda of applicable regulatory agencies. Borrower shall and shall also
cause the Subsidiary Banks to furnish to Lender copies of any cease and desist
orders, memoranda of understanding, or any other regulatory actions or orders
against Borrower, the Subsidiary Banks or any officer, director or shareholder
of same upon Borrower or the Subsidiary Banks' receipt of same.
SECTION 8.0 NEGATIVE COVENANTS
- -------------------------------
From the date hereof until payment in full of the principal of, and
interest on, the Notes, the Borrower shall not and shall not allow the
Subsidiary Banks to, without the Lender's prior written consent which consent
shall not be unreasonably withheld:
8.1 Contingent Liabilities. Assume, guarantee, endorse, contingently
----------------------
agree to purchase or to provide funds for the payment of, agree to maintain or
otherwise become liable upon, the obligations for borrowed money of any other
person, firm or corporation, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of its
banking business.
8.2 Redemptions and Recapitalization of Borrower or the Subsidiary Banks.
--------------------------------------------------------------------
Make or commit to make any purchase or acquisition of shares of its outstanding
capital stock, with the exception of redemptions of shares of stock required
under the terms of Borrower's Employee Stock Ownership Plan, or in any way to
modify Borrower's capital structure or the capital structure of any Subsidiary
Bank. Borrower may, however, purchase additional stock of the Subsidiary Banks
and issue additional shares of its common stock.
10
<PAGE>
8.3 Loans and Advances. Other than in the normal course of business, make
------------------
any loans, advances or extensions of credit to, or purchase or make any
commitment to purchase any stock, bonds, notes, debentures or other securities
of, any person, firm, corporation or enterprise except (a) purchases of
certificates of deposit issued by a national bank or otherwise insured by a
federal agency; (b) deposits required by government agencies or public
utilities; (c) obligations fully guaranteed by the U.S. government; (d) tax
exempt securities; and (e) such other financial instruments or securities as the
applicable federal and state regulatory agencies may approve from time to time.
8.4 Consolidation, Merger or Sale. Consolidate with or merge into any
-----------------------------
other corporation or entity, or sell all or a substantial part of its assets.
Lender agrees that Borrower may merge its Subsidiary Banks, provided that the
Net Worth of the surviving bank following the merger transaction is equal to the
combined Net Worth of the Subsidiary Banks. In the event of the merger of the
Subsidiary Banks, Borrower agrees to substitute not less than 80% of the capital
stock of the surviving bank for the Bank Stock pledged to Lender.
8.5 Indebtedness. Incur, create, assume or permit to exist any
------------
indebtedness for borrowed money except Indebtedness evidenced by the Notes, if
such indebtedness would cause the aggregate indebtedness of the Borrower to
exceed sixty percent (60%) of the Borrower's Net Worth, provided further that
Loans hereunder shall at not time exceed fifty percent (50%) of the tangible
book value (Net Worth) of the Collateral.
8.6 Liens. Incur, assume or permit to exist any encumbrance, pledge or
-----
lien against any of its profits, property or assets, except:
a. An encumbrance provided to secure the Loans and Notes.
b. Pledges or deposits made in connection with or to secure deposits
of public funds, deposits of trust accounts, workmen's compensation,
unemployment insurance, pensions or other employee benefits, performance
and payment bonds or appeal bonds.
c. Liens of judgments which are discharged and released within
thirty (30) days from their date.
d. Tax liens or mechanics', materialmen's or furnisher's liens which
are being contested in good faith by appropriate proceedings with adequate
reserves set aside therefor.
e. An encumbrance on stock of the Subsidiary Banks not pledged to
Lender under the Security Agreement.
8.7 Loan Participations. Borrower will allow Lender to review
-------------------
participations from unaffiliated financial institutions, from time to time, and
Lender, at its discretion, may limit the
11
<PAGE>
Subsidiary Banks' purchase of participations from unaffiliated financial
institutions as Lender may deem advisable under sound banking practices.
8.8 Insider Transactions. Neither Borrower, any corporation, firm or
--------------------
association owned by the Borrower, nor any officer, director, or shareholder of
the foregoing shall hereafter obtain or maintain, directly or indirectly: (a)
any loan or extension of credit from a Subsidiary Bank, if such loan or
extension of credit is criticized by any applicable regulatory agency unless
payment is made in full within ninety (90) days; or (ii) any unsecured loan or
extension of credit in an amount exceeding 3% of the Subsidiary Bank's capital,
as to any one borrower, or 10% when aggregated with all such unsecured credits
extended by the Subsidiary Banks.
SECTION 9.0 CONDITIONS OF LENDING
- ----------------------------------
The obligation of the Lender to make the Loans is and shall be subject to
existence of the following conditions precedent on the date of Closing:
9.1 Warranties. Representations and warranties of the Borrower herein
----------
contained shall be true and accurate in all material respects on and as of the
date of Closing (except to the extent that such representations and warranties
relate solely to an earlier date in which event no material adverse change shall
have occurred with respect thereto).
9.2 No Default. No condition or event shall have occurred or be
----------
continuing which would constitute an Event of Default hereunder or which, after
notice or lapse of time, or both, would constitute an Event of Default
hereunder, or with respect to any indebtedness for borrowed money secured by a
lien or security interest upon any property of Borrower.
9.3 Loan Documents. The Borrower shall deliver, or shall have delivered,
--------------
to the Lender such documents, certificates, instruments, resolutions and
opinions, in form and content required by the Lender, including without
limitation the following:
a. Notes of Borrower.
b. This Agreement.
c. The Pledge and Security Agreement.
d. Such financial statements of the Borrower and of the Subsidiary
Banks as the Lender may require.
e. A certificate signed by the Borrower dated the date of Closing
that, to the best of its knowledge no Event of Default or event which might
(with or without the
12
<PAGE>
giving of notice and/or lapse of time) mature into an Event of Default
exists or is imminent.
f. Certificates evidencing 21,919 shares of the common stock of the
Bank of the Ozarks, WCA, and 1,872 shares of the common stock of the Bank
of the Ozarks, NWA, together with stock powers signed by the Borrower.
g. Federal Reserve Form U-1 (Statement of Purpose).
h. Corporate resolutions of Borrower authorizing the borrowing
described herein, together with the Secretary's certificate setting forth
the officers and authorized signatories for the Borrower.
i. A Certificate of Existence/Good Standing issued by the Secretary
of State for the state of Arkansas.
j. Copies of the Borrower's and Subsidiary Bank's corporate charters
and bylaws, certified by the respective corporate secretaries as being true
and copies of each.
SECTION 10.0 USE OF PROCEEDS
- ----------------------------
The Borrower covenants, represents and warrants unto the Lender that the
proceeds of the Loan shall be used for the refinance of certain existing loans
and additional capital contributions to the Subsidiary Banks.
SECTION 11.0 DEFAULT AND REMEDIES
- -----------------------------------
11.1 Events of Default. Upon the occurrence of any of the following, and
-----------------
the expiration of applicable periods for notice and cure, there shall be deemed
to have occurred an Event of Default:
a. Any representation or warranty made herein, or any report,
certificate, financial statement or other instrument furnished in
connection with any of the foregoing, shall prove to be false and
misleading in any material respect; or
b. Default in payment when due of the principal of or interest on
any promissory note of Borrower to Bank within ten (10) days after the due
date thereof and failure to cure same within ten (10) days from the date on
which notice of default is given by Lender to Borrower; or
13
<PAGE>
c. Failure to duly observe or perform any covenant, agreement, or
condition to be observed or performed in connection with this Agreement,
any agreement executed herewith as security for the Debt and failure to
cure same within thirty days (30) from the date on which notice of default
is given by Lender to Borrower; or
d. The Borrower or any Subsidiary Bank shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself
or its properties or assets; (ii) admit in writing its inability to pay its
debts as they mature; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated a bankrupt or insolvent; or, (v) file a
voluntary petition in bankruptcy or a petition seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation under law or statute, or file an answer admitting the material
allegations of a petition filed against it in any such proceeding; or
e. An order, judgment or decree shall be entered without the
application, approval or consent of the Borrower or the Subsidiary Banks by
any court of competent jurisdiction approving a petition seeking
reorganization thereof, or of all or a substan tial part of its properties
or assets, or a receiver, trustee or liquidator thereof; or
f. The occurrence of a material adverse change in the financial
condition of the Borrower and the failure to take measures reasonably
demanded by Lender to cure same within thirty days (30) from the date of
notice of same from Lender to Borrower; or
g. Any Subsidiary Bank shall surrender, forfeit or otherwise lose
its charter as a state chartered bank (except upon the merger of the two
Subsidiary Banks as permitted hereunder), or shall have any portion of its
properties or operations sold or seized by or at the direction of any
regulatory or governmental agency; or
h. Failure by the Borrower to take such measures reasonably demanded
by Lender to cure any cease and desist orders or memoranda of understanding
or any other regulatory actions or orders between the Borrower or any
Subsidiary Bank and its regulatory agencies, within thirty (30) days from
the date of written notice of the same from Lender to Borrower; or
i. The Borrower shall surrender, forfeit or otherwise lose its
charter, or shall fail to maintain its status as an Arkansas corporation in
good standing, or shall have any portion of its properties or operations
sold or seized by or at the direction of any regulatory or governmental
agency; or
j. The Borrower shall fail to lawfully continue to be a bank holding
company within the meaning of the Bank Holding Company Act, 12 U.S.C.
Section 1841 et seq.
-- ---
k. Any event of default in any promissory note or loan agreement
evidencing or governing any additional indebtedness of the Borrower
permitted hereunder.
14
<PAGE>
11.2 Acceleration and Remedies Upon Default. Upon the occurrence of an
--------------------------------------
Event of Default the indebtedness arising hereunder shall at the absolute option
of Lender, become immediately due and payable, or upon the non-performance by
Borrower of any of the agreements or conditions contained in any of the
documents or instruements related to the indebtedness arising hereunder or in
connection herewith, the said Loans and indebtedness shall at the absolute
option of the Lender become immediately due and payable, and in any such event
Lender shall have full power and authority at any time or times thereafter to
exercise all or any one or more of the remedies and shall have all of the rights
of a secured party under the applicable law, including the Uniform Commercial
Code of Tennessee (Code), if applicable, and is hereby authorized immediately to
sell the whole or any part of the collateral for the indebtedness evidenced
hereby and by the Note or any substitute therefor or additions thereto or at
public or private sale, at the option of Lender without notice of the amounts
due or claimed to be due, in accordance with the provisions of the Code, and to
apply the net proceeds of such sale after deduction of expenses for collection,
sale or delivery to the payment of the indebtedness to Lender specifically
secured hereby and of any other liability or liabilities, whether due or not
due, of Borrower to Lender, returning the surplus, if any to Borrower unless
other disposition thereof is required by said Code. Upon any sale by virtue
hereof, Lender may repurchase, unless otherwise prohibited by said Code, the
whole or any part of the aforesaid collateral discharged from any statutory
right of redemption, equity of redemption exemption from execution, or similar
rights all of which are hereby expressly waived and released. Any requirement
of said Code for reasonable notice shall be met if such notice is mailed,
postage prepaid, to Borrower at the address of Borrower as shown on the records
of Lender at least ten (10) days prior to the time of the sale, disposition or
other event or thing giving rise to the requirement of notice.
11.3 Offset of Deposits. Upon the occurrence of an Event of Default,
------------------
Lender may apply toward payment of the Debt all balances of any deposit accounts
of the Borrower with the Lender then or any time thereafter existing.
SECTION 12.0 MISCELLANEOUS
- ----------------------------
12.1 Closing. Subject to the terms and conditions set forth herein,
-------
closing of the Loan and other matters required herein will take place at the
offices of Lender on or before May 31, 1997.
12.2 Non-Waiver. No omission or delay by the Lender in exercising any
----------
right, remedy or power it may have under this Agreement, the Notes, the loan
documents or governing law will impair such right, remedy or power, or be
construed to be a waiver of any default or an acquiescence therein, and any
single or partial exercise of any such right or power will not preclude other or
further exercise thereof or the exercise of any right or power, and no waiver
will be valid unless in writing and signed by the Lender, and then only to the
extent specified. All remedies herein and by law afforded will be cumulative
and available to Lender until the Debt is paid or satisfied in full.
15
<PAGE>
12.3 Binding Effect. Whenever any of the parties to this Agreement are
--------------
referred to, such reference shall be deemed to include the successors, assigns
and personal representatives of said parties, and all covenants by or on behalf
of the Borrower shall bind and inure to the benefit of successors and assigns of
the Lender.
12.4 Notices. Any notice permitted or required by this Agreement shall be
-------
in writing and delivered by hand delivery or by depositing it in the U.S. Mail,
postage prepaid, or by telegram, charges prepaid, addressed to the parties as
follows:
If to Borrower:
George Gleason
Chairman
Ozark Bankshares, Inc.
TCBY Tower Building, Suite 3100
425 Capitol Avenue
Little Rock, Arkansas 72201
If to Lender:
Wayne Massing
Vice President
Union Planters National Bank
P.O. Box 387
Memphis, Tennessee 38147
Any party may designate in writing any other person or address in which such
notice or demand shall be delivered and such shall become effective upon receipt
by the other party.
12.5 Expenses of Enforcement. Borrower agrees to pay all reasonable
-----------------------
attorneys' fees and other costs and charges incurred in collection of any
indebtedness arising under this Agreement, in the enforcement of the Bank's
rights hereunder, in the protection and preserva tion of any property securing
any indebtedness hereunder and in the perfection of any security interest or
lien contemplated hereby and in maintaining the perfected status of the same.
12.6 Headings. Whenever in this Agreement headings are used to denote
--------
para graphs, such headings shall not be referred to in interpreting the terms
thereof or hereof, but are used merely for convenience.
12.7 Governing Law. This Agreement, the Notes and associated documents,
-------------
will be governed by and construed in accordance with the laws of the State of
Tennessee, except with respect to interest which shall be governed by applicable
provisions of federal law.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement as of
the day and year first above written.
UNION PLANTERS NATIONAL BANK
By:/s/ Wayne F. Massing
--------------------------------
Wayne Massing
Vice President
OZARK BANKSHARES, INC.
By:/s/ George G Gleason
--------------------------------
George Gleason
Chairman
17
<PAGE>
EXHIBIT 10.4
REAL ESTATE CONTRACT
(UNIMPROVED PROPERTY)
1. PARTIES: BANK OF THE OZARKS, wca (individually, or collectively, the
"Buyer") offers to purchase, subject to the terms and conditions set forth
herein, from the undersigned (individually or collectively, the "Seller"), the
property described in paragraph 2 of this contract (the "Property"):
2. LEGAL DESCRIPTION AND ADDRESS: APPROX. 2.1 ACRES LOCATED IN THE
NORTHEAST CORNER OF THE INTERSECTION OF ROGERS AVENUE AND WALDRON ROAD, FORT
SMITH, SEBASTIAN COUNTY, ARKANSAS. COMPLETE LEGAL DESCRIPTION TO FOLLOW.
3. PURCHASE PRICE: Subject to the following conditions the buyer shall pay
the following to the Seller for the Property (the "Purchase Price")
...................................................................$1,100,000.00
-------------
CASH: Cash at closing in the [X] exact
[_] approximate sum of.........................................$1,100,000.00
-------------
FINANCING AS FOLLOWS: N/A
4. LOAN AND CLOSING COSTS: Unless otherwise specified, all Buyer's closing
costs, including origination fee, assumption fees, loan costs, prepaid items and
loan discount points, are to be paid by Buyer. Seller to pay Seller's closing
costs. REVENUE STAMPS AND CLOSING FEE TO BE EQUALLY SPLIT BETWEEN BUYER AND
SELLER.
5. APPLICATION FOR FINANCING: If applicable, Buyer agrees to make complete
application for new loan or for loan assumption within N/A business days from
---
the execution date of this Real Estate Contract and to request that the loan or
the assumption be approved on or about N/A calendar days after application.
---
Complete loan application includes ordering and paying for any credit reports or
appraisals that are required to make the loan. In order to timely complete the
application required by this Paragraph 5, Buyer agrees to provide lender with
all requested information. Unless otherwise specified, if said loan is not
closed or assumed, Buyer agrees to pay for loan costs incurred, including
appraisal and credit report, unless failure to close is caused by Seller, in
which case such expenses will be paid by Seller. Buyer understands that failure
to timely make loan application as defined above constitute a breach of this
Real Estate Contract.
6. EARNEST MONEY: Buyer herewith tenders a check for $10,000.00 to be
deposited by Listing Agent Firm upon acceptance as earnest money which shall
apply toward the Purchase Price or closing costs. This Real Estate Contract
shall serve as a receipt for said Earnest Money deposited. If title
requirements are not fulfilled or if Buyer is unable to obtain financing or
approval of assumption as specified in Paragraph 3, the earnest money shall be
promptly refunded to Buyer. If Buyer fails to fulfill his
<PAGE>
obligations under this contract or after all conditions have been met, Buyer
fails to close this transaction, the earnest money may, at the sole and
exclusive option of the Seller, be retained by the Seller as liquidated damages.
Alternatively, Seller may return the earnest money and assert all legal or
equitable rights which may exist as a result of Buyer breaching the contract.
Buyer warrants, represents and acknowledges that the check tendered will be
honored upon presentation to Buyer's bank, and that Buyer shall be in default of
this Real Estate Contract if the check is not honored in a timely manner. Buyer
and Seller agree that, in the event of any dispute concerning entitlement to the
Earnest Money, Listing Agent Firm may interplead the Earnest Money into a court
of competent jurisdiction, and upon such interpleader, both Listing Agent Firm
and Selling Agent Firm shall be released from liability to Buyer and Seller.
Listing Agent Firm shall be reimbursed any attorneys fees or costs from the
interplead Earnest Money.
7. CONVEYANCE: Unless otherwise specified, conveyance shall be made to
Buyer by general warranty deed, in fee simple absolute, except it shall be
subject to recorded instruments and easements, if any, which do not materially
affect the value of the Property. Unless expressly reserved herein, SUCH
CONVEYANCE SHALL INCLUDE ALL MINERAL RIGHTS OWNED BY SELLER, IF ANY. Seller
warrants and represents only those signatures set forth below are required to
transfer legal title to the Property.
8. TITLE REQUIREMENTS: Unless otherwise specified, the Seller shall
furnish, at Seller's cost title insurance in the amount of the Purchase Price.
If objections are made to Title, Seller shall have a reasonable time to cure the
objections. Also unless otherwise specified, if the Buyer is obtaining
financing to purchase the Property, Buyer shall furnish at Buyer's cost
mortgagee's title policy in the amount of the loan to be obtained, if required
by the lender.
9. SURVEY:
[_] A. No survey shall be provided.
[X] B. A current survey in a form satisfactory to Buyer (and Buyer's
lender, if applicable), certified within 30 days of closing by a
registered land surveyor, will be provided and paid for by:
[_] Buyer [X] Seller.
[_] C. Other: ___________________________________________
10. PERCOLATION/SOIL TEST:
[X] A. No percolation or other soil test shall be provided.
-2-
<PAGE>
[_] B. A current percolation or other soil test in a location
satisfactory to Buyer (and Buyer's lender, if applicable),
certified within _____ days of closing will be provided and paid
for by:
_____ Buyer _____ Seller.
11. PRORATIONS: Taxes and special assessments due on or before closing
shall be paid by Seller. Any deposits on rental property are to be transferred
to buyer at closing. Insurance, general taxes, special assessments, rental
payments and interest on any assumed loan shall be prorated as of closing,
unless otherwise specified herein.
12. CLOSING: Closing is the date and time at which the Seller delivers the
executed and acknowledged deed. The closing date is designated to be no later
than seven (7) calendar days after APRIL 14, 1997. The closing date may be
extended only by written agreement of Buyer and Seller. Buyer and Seller agree
that time is of the essence. If the sale is not consummated by the closing date
(or any written extension thereof), the parties shall have the remedies
available to them in equity or at law, including the remedies provided to Seller
in Paragraph 6.
13. OTHER CONTINGENCY:
[X] A. No Other Contingency, (Except for those conditions listed
elsewhere in this Real Estate Contact.)
[_] B. This Real Estate Contract is contingent upon ____________________
__________________________________________________ on or before
_______________, 19____.
During the term of this Real Estate Contract:
[_] (i)NON-BINDING CLAUSE: It is understood and agreed that every
effort will be made to obtain another Real Estate Contract on the
Property and that in the event another offer is accepted, this
Real Estate Contract is null and void and earnest money shall be
promptly refunded to Buyer.
[_] (ii)BINDING WITH ESCAPE CLAUSE: Seller has the right to continue
to show the Property and solicit and enter into another Real
Estate Contract on this Property. However, all contracts shall be
subject to termination of this Real Estate Contract. Upon receipt
of written notice of an additional Real Estate Contract being
accepted by Seller (the "Notice"), Buyer shall be deemed in
receipt of the Notice upon the earlier of (a) actual receipt of
the Notice or (b) two (2) business days after Seller or Listing
Agent Firm deposits the Notice in the United States mail,
certified for delivery to
-3-
<PAGE>
Buyer at ______________________________________ with sufficient
postage to ensure delivery. Removal of this contingency shall
occur only by delivery of written notice, in a manner ensuring
actual receipt, to Seller or Listing Agent Firm within ____ hours
after Buyer received the Notice. Time is of the essence. Buyer
further agrees to forfeit all earnest monies in the event Buyer
does not perform on this Real Estate Contract for any reason
concerning this contingency, if the same is removed. If this
contingency is removed, a closing date shall be agreed upon by
the parties. If a closing date is not agreed upon closing shall
occur _____ calendar days from removal. Should Buyer not remove
this contingency as specified, then this Real Estate Contract
shall be deemed null and void.
[_] (iii) BINDING WITHOUT ESCAPE CLAUSE: It is understood and agreed
that the Seller has the right to enter into backup contracts and
other contracts shall not affect this Real Estate Contract.
14. POSSESSION: Possession of the Property shall be delivered to Buyer:
[X] A. Upon the closing (Seller's delivery of executed and acknowledged
Deed).
[_] B. Upon Buyer's completion, signing and delivery to Seller (or to
the Listing Agent Firm or the closing agent agreed to by the
Buyer and Seller) of all loan and closing documents required to
be executed by Buyer.
[_] C. After the closing (Seller's deliver of executed and acknowledged
Deed), but no later than _____ days after closing, Seller agrees
to pay $__________ per day from the day after closing through the
date possession is delivered. Receipt and acceptance of such
daily rental shall not extend the time of Seller's requirement to
deliver possession at the time set forth herein. The rental sum
shall be paid:
[_] (i) by depositing this sum with Listing Agent Firm (or the
closing agent agreed to by the Buyer and Seller) to be disbursed
to the parties entitled thereto on the date possession is
delivered.
[_] (ii) directly to Buyer on the date possession is delivered.
-4-
<PAGE>
Seller will be responsible for all damages caused to the Property
during the period between the closing date and the date possession is
delivered to Buyer, only if caused by Seller's intentional or
negligent actions.
[_] D. Prior to Closing. (See attached addendum)
15. FIXTURES AND ATTACHED EQUIPMENT: Unless specifically excluded herein,
all fixtures and attached equipment, if any, are included in the Purchase Price.
16. BUYER'S DISCLAIMER OF RELIANCE: BUYER CERTIFIES THAT BUYER HAS
PERSONALLY INSPECTED, OR HAD A REPRESENTATIVE INSPECT, THE PROPERTY AS FULLY AS
BUYER DESIRES AND IS NOT RELYING AND SHALL NOT HEREAFTER RELY UPON ANY
WARRANTIES, REPRESENTATIONS OR STATEMENTS OF THE LISTING AGENT FIRM, THE SELLING
AGENT FIRM, OR ANY AGENT, INDEPENDENT CONTRACTOR OR EMPLOYEE ASSOCIATED WITH
THOSE ENTITIES, REGARDING THE AGE, SIZE, QUALITY, VALUE OR CONDITION OF THE
PROPERTY, INCLUDING WITHOUT LIMITATION ALL IMPROVEMENTS, ELECTRICAL OR
MECHANICAL SYSTEMS, PLUMBING OR APPLIANCES, OTHER THAN THOSE SPECIFIED HEREIN,
IF ANY, WHETHER OR NOT ANY EXISTING DEFECTS IN ANY SUCH REAL OR PERSONAL
PROPERTY MAY BE REASONABLY DISCOVERABLE BY BUYER OR A REPRESENTATIVE HIRED BY
BUYER. NEITHER LISTING AGENT FIRM NOR SELLING AGENT FIRM CAN GIVE LEGAL ADVICE
TO BUYER OR SELLER. LISTING AGENT FIRM AND SELLING AGENT FIRM STRONGLY URGE
THAT STATUS OF TITLE, PROPERTY CONDITION, QUESTIONS OF SURVEY AND ALL
REQUIREMENTS OF SELLER AND BUYER HEREUNDER SHOULD EACH BE INDEPENDENTLY VERIFIED
AND INVESTIGATED.
17. SELLER PROPERTY DISCLOSURE:
[_] A. Buyer has neither received nor requested from Seller a written
disclosure concerning the condition of the Property prior to the
execution of this contract, but this fact neither limits nor
restricts in any way the Buyer's Disclaimer of Reliance set forth
in Paragraph 16 of this contract. BUYER IS STRONGLY URGED BY THE
SELLING AGENT FIRM AND THE LISTING AGENT FIRM TO MAKE ALL
INDEPENDENT INSPECTIONS DEEMED NECESSARY PRIOR TO SIGNING THIS
CONTRACT.
[_] B. Buyer and Seller acknowledge that upon the instruction of the
Seller, either the Selling Agent Firm or the Listing Agent Firm
have delivered to Buyer prior to the execution of this contract,
a written disclosure prepared by Seller concerning the condition
of the Property, but this fact neither limits nor restricts the
Buyer's Disclaimer of Reliance set forth in Paragraph 16 of this
contract. The written disclosure prepared by Seller is dated
____________________, 19____ and is
-5-
<PAGE>
warranted by Seller to be the latest disclosure and the answers
contained in the disclosure are true and correct to the best of
the Seller's knowledge.
[X] C. Seller will provide to Buyer a written disclosure about the
condition of the Property which will contain information that is
true and correct to the best of the Seller's knowledge. The
disclosure should be presented to Buyer in a timely manner after
the acceptance of this Real Estate Contract and Buyer has three
(3) business days after receipt of disclosure to accept or reject
said disclosure. If Seller fails to provide the disclosure in a
timely manner, Buyer may request in writing for the Seller to
provide a disclosure within three (3) business days and if the
Seller does not provide the disclosure the Buyer may declare the
contract null and void, with Buyer to receive a refund of the
earnest money. If Buyer finds the disclosure unacceptable within
three (3) business days after receipt of disclosure, this
contract may be declared null and void by the Buyer, with Buyer
to receive a refund of the earnest money. Receipt of this
disclosure neither limits nor restricts in any way the Buyer's
Disclaimer of Reliance set forth in Paragraph 18 of this
contract.
18. OTHER: THIS CONTRACT IS SUBJECT TO THE ADDITIONAL CONDITIONS EACH OF
WHICH MUST BE SATISFIED BY BUYER WITHIN SIXTY (60) DAYS OF THIS CONTRACT DATE AS
FOLLOWS:
A. BUYER'S REVIEW AND DETERMINATION OF SITE SUITABILITY FOR BUYER'S INTENDED
USE;
B. BUYER OBTAINING ALL REQUIRED REGULATORY APPROVAL FOR THIS SITE; AND
C. BUYER OBTAINING A CURRENT SATISFACTORY PHASE I ENVIRONMENTAL STUDY,
SATISFACTORY SOIL ANALYSIS AND OTHER TEST. IN THIS REGARD, BUYER'S AGENT
OR OTHER CONTRACTORS SHALL BE ALLOWED ACCESS TO THE SITE TO COMPLETE THESE
TESTS DURING THE CONTINGENCY PERIOD.
EACH OF THE BUYER'S CONTINGENCIES ARE AT BUYER'S SOLE EXPENSE AND COST.
THE SELLER'S OBLIGATION TO SELL UNDER THIS CONTRACT IS CONDITIONED UPON
SELLER'S ABILITY TO SATISFY EACH OF THE FOLLOWING:
1. SELLER'S ABILITY TO ACQUIRE AND TRANSFER TO BUYER AT CLOSING UNDER THIS
CONTRACT THE LAND LOCATED AT THE CORNER OF ROGERS
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<PAGE>
AVENUE AND WALDRON ROAD CONSISTING OF APPROXIMATELY 10,000 SQ. FT. MORE OR
LESS WHICH IS NOT PRESENTLY OWNED BY SELLER.
2. SELLER SHALL HAVE RECEIVED A WRITTEN AGREEMENT FROM THE PRESENT LESSEES OF
THE PROPERTY CANCELLING THE LEASES IN EFFECT ON THIS PROPERTY AND THAT
BUILDING VACATED; AND
3. THE TOTAL COST TO SELLER TO SATISFY ITEMS 1 AND 2 ABOVE SHALL NOT EXCEED
THE SUM OF TWO HUNDRED THOUSAND AND 00/00 ($200,000.00) DOLLARS.
IN THE EVENT SELLER IS UNABLE TO SATISFY ANY OF THE SELLER'S CONDITIONS
WITHIN THIRTY (30) DAYS FOLLOWING RECEIPT OF WRITTEN NOTICE FROM BUYER OF
THE SATISFACTION OF BUYER'S CONTINGENCIES SET FORTH HEREINABOVE, THEN
SELLER SHALL HAVE THE RIGHT TO CANCEL THIS CONTRACT WITHOUT ANY FURTHER
OBLIGATION TO THE BUYER.
19. AGENCY:
[_] A. LISTING AGENT FIRM AND SELLING AGENT FIRM REPRESENT SELLER: Buyer
acknowledges that the Listing Agent Firm and the Selling Agent
Firm, and all licensees associated with those entities are the
agents of the Seller and that it is the Seller who employed them,
whom they represent, and to whom they are responsible. Buyer
acknowledges that before eliciting or receiving confidential
information from the Buyer, the Selling Agent Firm, which may be
the same as the Listing Agent Firm, verbally disclosed that the
Selling Agent Firm represents the Seller.
[_] B. LISTING AGENT FIRM REPRESENTS SELLER AND SELLING AGENT FIRM
REPRESENTS BUYER. Buyer and Seller acknowledge that the Listing
Agent Firm is employed by the Seller and the Selling Agent Firm
is employed by the Buyer. All licensees associated with the
Listing Agent Firm are employed by, represent, and are
responsible to the Seller. All licensees associated with the
Selling Agent Firm are employed by, represent, and are
responsible to the Buyer. Buyer acknowledges the Selling Agent
Firm verbally disclosed that the Listing Agent Firm represents
the Seller. Seller acknowledges the Listing Agent Firm verbally
disclosed that the Selling Agent Firm represents the Buyer.
[_] C. LISTING AGENT FIRM AND SELLING AGENT FIRM ARE THE SAME AND
REPRESENT BOTH BUYER AND SELLER. Seller and Buyer hereby
acknowledge and agree that the
-7-
<PAGE>
Listing and the Selling Agent Firm are the same and all licensees
associated with the Listing and the Selling Agent Firm are
representing both Buyer and Seller in the purchase and sale of
the above referenced Property and that Listing/Selling Agent firm
has been and is now the agent of both Seller and Buyer with
respect to this transaction. Seller and Buyer have both consented
to, and hereby confirm their consent to agency representation of
both parties. Further, Seller and Buyer:
(i) agree that the Listing/Selling Agent Firm shall not be
required to and shall not disclose to either Buyer or Seller any
personal, financial or other confidential information concerning
the other party without the express written consent of that
party. This restriction excludes information related to defects
in the Property which should, at Listing/Selling Agent Firms'
discretion, be disclosed. Confidential information shall include
but not be limited to any price Seller is willing to accept that
is less than the offering price or any price the Buyer is willing
to pay that is higher than that offered in writing.
(ii) by selecting this option 19C, Buyer and Seller acknowledge
that when Listing/Selling Agent Firm represents both parties, a
conflict of interest exists, and Seller and Buyer further agree
to forfeit their individual right to receive the undivided
loyalty of Listing/Selling Agent Firm.
(iii) waive any claim now or hereafter arising out of any
conflicts of interest from Listing/Selling Agent Firm
representing both parties, Buyer and Seller acknowledge the
Listing/Selling Agent Firm verbally disclosed that the
Listing/Selling Agent Firm represents both parties in this
transaction, and Buyer and Seller have given their written
consent to this representation before entering into this Real
Estate Contract.
[X] D. SELLING AGENT FIRM REPRESENT BUYER (NO LISTING AGENT FIRM):
Seller acknowledges that the Selling Agent Firm and all licensees
associated with the Selling Agent Firm are the agents of the
Buyer and that it is the buyer who employed them, whom they
represent, and to whom they are responsible. Seller acknowledges
that at first contact, the Selling Agent Firm verbally disclosed
that the Selling Agent Firm represents the Buyer. Any
-8-
<PAGE>
reference to "Listing Agent Firm" in this Real Estate Contract
will be considered to mean the Selling Agent Firm, both Buyer and
Seller acknowledging that all agents involved in this Real Estate
Contract only represent the Buyer.
20. RISK OF LOSS: Risk of loss or damage to the Property by fire or other
casualty occurring prior to the time Seller delivers an executed and
acknowledged deed to Buyer is expressly assumed by Seller.
21. GOVERNING LAW: This contract shall be governed by the laws of the
State of Arkansas.
22. MERGER CLAUSE: This contract, when executed by both Buyer and Seller,
shall contain the entire understanding and agreement between the Buyer and
Seller with respect to all matters referred to herein and shall supersede all
prior or contemporaneous agreements, representations, discussions and
understandings oral or written, with respect to such matters. This contract
shall not supersede any agency agreements entered into by Buyer or Seller and
Listing Agent Firm or Selling Agent Firm.
23. ASSIGNMENT: This Real Estate Contract may not be assigned by Buyer
without the prior consent of Seller, such consent not to be unreasonably
withheld. It shall not be considered unreasonable for Seller to withhold
consent if Seller is to provide financing for Buyer in any amount.
24. EXPIRATION: This contract expires if not accepted on or before
FEBRUARY 7, 1997, at 10:00 AM.
THIS IS A LEGALLY BINDING CONTRACT WHEN SIGNED BY THE PARTIES BELOW. READ
IT CAREFULLY. IF YOU DO NOT UNDERSTAND THE EFFECT OF ANY PART, CONSULT YOUR
ATTORNEY BEFORE SIGNING. REAL ESTATE AGENTS CANNOT GIVE YOU LEGAL ADVICE. THE
PARTIES SIGNED BELOW WAIVE THEIR RIGHT TO HAVE AN ATTORNEY DRAFT THIS FORM.
THIS FORM IS PRODUCED AND COPYRIGHTED BY THE ARKANSAS REALTORS ASSOCIATION.
THE SERIAL NUMBER BELOW IS A UNIQUE NUMBER NOT USED ON ANY OTHER FORM. THE
SERIAL NUMBER BELOW SHOULD BE AN ORIGINAL PRINTING, NOT MACHINE COPIED,
OTHERWISE THE FORM MAY HAVE BEEN ALTERED. DO NOT SIGN THIS FORM IF IT IS BEING
EXECUTED PAST DECEMBER 31, 1997.
FORM SERIAL NUMBER: Arkansas Land Agency, Inc. #10062
-9-
<PAGE>
The above contract is executed on FEBRUARY 6, 1997 at 7 PM.
ARKANSAS LAND AGENCY /s/ Cliff Warnock
-------------------- -----------------------
Selling Agent Firm Supervising Broker
/s/ Cliff Warnock
-----------------------
Selling Agent Firm
Bank of the Ozarks, WCA.
/s/ R. Darrel Russell
__________________________ ----------------------------
Buyer (Sr. Vice President) Social Security or Tax ID#
The above contract is executed on FEBRUARY 7, 1997 at 9:00 am.
ARKANSAS LAND AGENCY /s/ Cliff Warnock
- -------------------- ----------------------------
Listing Agent Firm Supervising Broker
/s/ Cliff Warnock
----------------------------
Listing Agent
/s/ Toy's Inc. /s/ Charles Palmer
- -------------------- ----------------------------
Print Seller's Name Seller (President)
__________________________
Social Security or Tax ID#
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<PAGE>
The above offer was:
_____ rejected
_____ counteroffered (Form Serial Number _______________)
on _______________, 19____, __________(a.m.)(p.m.)
- ---------------------------------- ----------------------------------
Seller's Signature Seller's Signature
-11-
<PAGE>
GENERAL ADDENDUM
Regarding the Real Estate Contract (Form Serial Number 10062) dated FEBRUARY 7,
1997 between the Buyer, BANK OF THE OZARKS, WCA and the Seller, TOY' INC.
covering the real property knows as 2.1 ACRES LOCATED IN THE NE CORNER OF THE
INTERSECTION OF ROGERS AVE. & WALDRON RD., FORT SMITH, SEBASTIAN COUNTY,
ARKANSAS ("the Property"), the Undersigned Buyer and Seller agree that:
SELLER DOES HEREBY AGREE TO EXTEND FOR AN ADDITIONAL 30 DAYS, BUYERS TIME TO
REMOVE ALL BUYERS CONDITIONS TO THE CONTRACT. FOR THIS ADDITIONAL TIME BUYER
WILL DEPOSIT AN ADDITIONAL $15,000.00 TOGETHER WITH THE PREVIOUSLY DEPOSITED
$10,000.00 ALL OF WHICH SHALL BE NON-REFUNDABLE TO BUYER, HOWEVER IN THE EVENT
THE FOLLOWING CONDITIONS ARE NOT MET, ALL DEPOSITS MADE BY BUYER SHALL BE
REFUNDED.
1. BUYER AND SELLER SHALL OBTAIN ZONING AND RE-PLATTING CHANGES, IF ANY, OR
CONDITIONAL USE PERMITS FOR BUYERS INTENDED USE AS A BRANCH BANK BEING
APPROXIMATELY 20,000 SQUARE FEET, CONTAINING 2 STORIES AND INCLUDING
GENERAL OFFICE SPACE. BUYERS OBLIGATION TO CLOSE IS CONDITIONED UPON
SATISFACTORY ZONING AND RE-PLATTING.
2. ALSO, BUYERS OBLIGATION TO CLOSE IS CONDITIONED UPON A REPORT BY EEG
ENVIRONMENTAL SERVICES CONCERNING THE ASBESTOS CONTENT IN THE STRUCTURES ON
THIS PROPERTY BEING ACCEPTABLE TO BUYER.
3. BUYER SHALL HAVE RECEIVED WRITTEN APPROVAL (ORAL PRELIMINARY HAS BEN
RECEIVED) FOR ABILITY TO ENCROACH AS NECESSARY UPON OG&E EASEMENT.
4. SELLER SHALL SATISFY ALL ITS CONDITIONS AND FULFILL OBLIGATIONS SET FORTH
IN THE CONTRACT.
This addendum, upon its execution by both parties, incorporates by reference all
provisions of the above-referenced Real Estate Contract not expressly modified
herein.
THIS IS A LEGALLY BINDING CONTRACT WHEN SIGNED BY THE PARTIES BELOW, READ IT
CAREFULLY. IF YOU DO NOT UNDERSTAND THE EFFECT OF ANY PART, CONSULT YOUR
ATTORNEY BEFORE SIGNING. REAL ESTATE AGENTS CANNOT GIVE YOU LEGAL ADVICE. THE
PARTIES SIGNED BELOW WAIVE THEIR RIGHT TO HAVE AN ATTORNEY DRAFT THIS FORM.
THIS FORM IS PRODUCED AND COPYRIGHTED BY THE ARKANSAS REALTORS ASSOCIATION. THE
SERIAL NUMBER BELOW IS A UNIQUE NUMBER NOT USED ON ANY OTHER FORM. THE SERIAL
NUMBER BELOW SHOULD BE AN ORIGINAL PRINTING, NOT MACHINE COPIED, OTHERWISE THE
FORM MAY HAVE BEEN
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<PAGE>
ALTERED. DO NOT SIGN THIS FORM IF IT IS BEING EXECUTED PAST
DECEMBER 31, 1997.
FORM SERIAL NUMBER: 22564
The above addendum is executed on APRIL 7, 1997 at 4:00 pm.
ARKANSAS LAND AGENCY, INC. /s/ Cliff Warnock
- -------------------------- -----------------------------------
Selling Agent Firm Supervising Broker
/s/ Cliff Warnock
-----------------------------------
Selling Agent
Bank of the Ozarks
/s/ Betty Thomason
- ------------------ ___________________________________
Buyer Social Security or Tax ID#
The above addendum is executed on 4/7, 1997 at 5:40 pm.
Arkansas Land Agency, Inc. /s/ Cliff Warnock
- -------------------------- -------------------------------------
Listing Agent Firm Supervising Broker
/s/ Cliff Warnock
-------------------------------------
Listing Agent
/s/ Charles Palmer for Toy's Inc.
- --------------------------------- -------------------------------------
Seller Social Security or Tax ID#
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<PAGE>
EXHIBIT 10.5
COMMERCIAL
OFFER AND ACCEPTANCE
(Unimproved Real Property)
1) PARTIES AND PROPERTY. Bank of the Ozarks, WCA ("Purchaser") agrees to
buy, and the undersigned seller ("Seller"), agrees to sell, on the terms and
conditions set forth in this contract, the following described real estate in
the County of Pulaski, Arkansas (the "Property"): known as approximately 2.75
acre tract, triangular in shape, bounded by Chenal Parkway on the north and West
Markham Street on the south, together with all interest of Seller in vacated
streets and alleys adjacent thereto, all easements and other appurtenances
thereto, all improvements thereon and all attached fixtures thereon, except as
herein excluded, and called the Property. (See Attachment "A" & "A1")
2) PURCHASE PRICE AND TERMS. Subject to the adjustments and prorations
hereinafter described, the total purchase price will be $1,916,640.00 based upon
an estimated gross area of 119,790 square feet. The total purchase price shall
be the product of $16.00 per square foot times actual gross area. The term
"gross area" shall mean the total number of square feet contained in the
Property. The actual gross area shall be determined by survey of the property
prepared by a registered surveyor selected and approved by both Seller and
Purchaser. The total purchase price shall be adjusted for the difference
between the estimated and the actual gross area. The purchase price shall be
payable by Purchaser as follows:
(a) Earnest Money. $25,000 to be paid by Purchaser upon acceptance of this
-------------
Contract to be held in escrow by Standard
<PAGE>
Abstract and Title Company of Little Rock, Arkansas ("Escrow Agent").
(b) Cash at Closing. The balance of the Final Purchase Price, subject to
---------------
adjustments and prorations, to be paid by Purchaser at closing in cash,
electronic transfer funds, certified check, or cashier's check.
3) ASSIGNMENT. This contract shall be assignable by Purchaser, but only
to an affiliate or related party of Purchaser, without Seller's prior written
consent. This contract shall inure to the benefit of and be binding upon the
heirs, personal representatives, successors and assigns of the parities.
4) EVIDENCE OF TITLE. Seller shall furnish to Purchaser, at Seller's
expense, a current commitment for owner's title insurance policy in an amount
equal to the purchase price within fifteen (15) calendar days after acceptance
of this Contract. Copies of all documents and instruments shown as exceptions
in the title commitment shall be furnished at the same time as the title
commitment. seller shall have the title insurance policy delivered to Purchaser
as soon as practicable after closing and pay the premium at closing.
Additionally, Seller shall furnish to Purchaser, within thirty (30) days after
acceptance of this contract, and at Seller's expense, a current boundary survey
of the property performed by a registered professional surveyor and complying
with ALTA minimum standards. Such boundary survey shall include a legal
description of all portions of the property unquestionably owned by Seller and
not subject to the current
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<PAGE>
boundary dispute and a second legal description including all property which
Seller believes that it owns but which is subject to a dispute of ownership. In
addition, Purchaser may, at its sole expense, arrange for a current
topographical survey of the property to be preformed by a registered
professional surveyor and complying with ALTA minimum standards. Upon closing,
the cost of said topographical survey shall be credited to Purchaser as part of
the Final Purchase Price. Purchaser agrees that Development Consultants
Incorporated is an acceptable registered professional surveyor.
5) TITLE.
(a) Title Review. Purchaser shall have the right to inspect the title
------------
commitment. Written notice by Purchaser of unmerchantability of title or
of any other unsatisfactory title condition shown by the title commitment
be signed by or on behalf of Purchaser and given to Seller or Listing
company on or before ten (10) calendar days after Purchaser's receipt of
title commitment or, after such ten (10) day period, within five (5)
calendar days after receipt by Purchaser of any documents or endorsements
adding new exceptions to the title commitment. If Seller or Listing
company does not receive Purchaser's notice of unmerchantable or
unsatisfactory title by the date(s) specified above, Purchaser shall be
deemed to have accepted the condition of title as disclosed by the title
commitment as satisfactory. Seller shall provide such affidavits and
information to the title insurance company as
-3-
<PAGE>
required to delete customary exclusions and exceptions for survey matters,
mechanics and materialman lien matters, and rights of parties in
possession.
(b) Matters Not Shown by the Public Record. Seller shall deliver to
--------------------------------------
Purchaser within ten (10) calendar days after acceptance of this Contract
true copies of all lease(s) and survey(s) in Seller's possession pertaining
to the Property and shall disclose to Purchaser all easements, liens or
other instruments not shown by the public records of which Seller has
actual knowledge. Seller shall disclose to Purchaser in writing within ten
(10) calendar days after acceptance of this Contract, any information
actually known, without investigation or duty to investigate, to Seller
that would affect the value of the Property regarding litigation, building
restrictions, zoning, soil conditions, environmental studies, flood plain
or floodway existence. In addition to Seller's assistance and obligations
elsewhere herein, Seller shall cooperate with the Purchaser in obtaining
permits, consents, easements, and other legal processes affecting the
Property necessary for Purchaser to purchase the Property. Purchaser shall
have the right to inspect the Property to determine if any third party(s)
has any right in the property not shown by the public records (such as an
unrecorded easement, unrecorded lease, or boundary line discrepancy).
Written notice of any unsatisfactory condition(s) disclosed by Seller or
revealed by such inspection shall be signed by or on
-4-
<PAGE>
behalf of Purchaser and given to Seller or Listing Company within fifteen
(15) calendar days after receipt of all documents or information regarding
matters not shown in public records.
(c) Right to Cure. If Seller or Listing Company receives notice of
-------------
unmerchantability of title or any other unsatisfactory title condition(s)
or matters as provided in Subsection (a) or (b) above, Seller shall use
best efforts to correct said unsatisfactory title condition(s) on or before
thirty (30) days from the date Seller or Listing Company receives said
notice (the "Cure Period"). If Seller fails to correct said
unmerchantability of title, unsatisfactory title condition(s) or other
matters on or before the last day of the Cure Period, this Contract shall
then terminate; provided, however, Purchaser may, by written notice
received by Seller or Listing Company on or before seven (7) days after the
end of the Cure Period, waive objection to said unsatisfactory title
condition(s) or Purchaser and Seller may elect to extend the Cure Period
for up to a maximum of sixty (60) additional days.
6) DATE OF CLOSING. The date of closing shall be no later than fifteen
(15) days after all conditions of this Offer and Acceptance have been satisfied
or withdrawn, or such earlier date set by mutual agreement, but in no event
shall be later than March 15, 1997.
-5-
<PAGE>
7) TRANSFER OF TITLE. Subject to tender of payment at closing as required
hereon and compliance by Purchaser with the other terms and provisions hereof;
Seller shall execute and deliver a general warranty deed to Purchaser at closing
conveying the Property free and clear of all liens, claims and encumbrances
except the general real property and special improvement district taxes for the
year of closing, except those matters reflected by the title commitment accepted
by Purchaser in accordance with subsection 5(a), and subject to building and
zoning regulations.
8) PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid shall be
paid at or before the time of settlement from the proceeds of this transaction
or from any other source, with evidence of satisfaction furnished to Purchaser
at closing.
9) CLOSING COSTS, DOCUMENTS AND SERVICES. On the closing date, the
parties shall execute and deliver a memorandum of the closing to acknowledge
delivery and acceptance of the items required, the satisfaction of the
conditions precedent to closing and the status of performance of other
provisions of this Contract.
10) PRORATIONS. General and special improvement district taxes for the
year of closing, based on the most recent levy and the most recent assessment,
prepaid contracts, rents, water and sewer charges, owner's association dues, and
interest on continuing loan(s), if any, shall be prorated to date of closing.
The cost of revenue stamps shall be paid equally by Purchaser and Seller. Other
closing costs shall be paid by Seller and Purchaser in
-6-
<PAGE>
accordance with local custom. Except as otherwise provided herein, Purchaser and
Seller shall each bear their own costs and expenses.
11) POSSESSION. Possession of the property shall be delivered to
Purchaser at closing.
12) TIME AND ESSENCE/REMEDIES. Time is of the essence hereof. If any
note or check received as earnest money hereunder or any other payment due
hereunder is not paid, honored or tendered when due, or if any other obligation
hereunder is not performed or waived as herein provided, there shall be the
following remedies:
(a) IF PURCHASER IS IN DEFAULT:
1. Liquidated Damages. All payments and things of value received
------------------
hereunder shall be forfeited by Purchaser and retained on behalf
of Seller and both parties shall thereafter be released from all
obligations hereunder. It is agreed that such payments and
things of value are LIQUIDATED DAMAGES and (except as provided in
Subsection (c)) are SELLER'S SOLE AND ONLY REMEDY for Purchaser's
failure to perform the obligations of this Contract Seller
expressly waives the remedies of specific performance and
additional damages.
(b) IF SELLER IS IN DEFAULT:
Purchaser may elect to treat this contract as canceled, in which case
all payments and things of value received hereunder shall be returned. Purchaser
may exercise all other remedies and
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<PAGE>
rights available at law or in equity, including specifically the remedies of
specific performance and additional damages.
(c) COSTS AND EXPENSES.
Notwithstanding anything to the contrary, in the event of any
litigation or arbitration arising out of this contract, the court or arbitrator
shall award to the prevailing party all reasonable costs and expense, including
attorney fees.
13) CONDITION OF PROPERTY. Purchaser may, at Purchaser's sole cost,
within thirty (30) days from full execution of this Contract, cause to be
prepared a written report of a site assessment and environmental audit, in
scope, form and substance, and prepared by an independent, competent and
qualified party, satisfactory to the Purchaser (the "Environmental Audit"), a
copy of which shall be provided to Seller at no cost to Seller upon receipt by
Purchaser. Purchaser shall have full and complete access to the Property and
all information of Seller with respect thereto for purposes of conducting the
Environmental Audit or any other tests, assessments or inspections of the
Property Purchaser may choose to undertake. Seller shall disclose to Purchaser,
in writing, any information actually known to Seller, without investigation or
duty to investigate, concerning the environmental condition of the Property on
or before ten (10) days after acceptance of this contract.
Seller hereby grants to Purchaser and the Purchaser's agents the right to
enter upon the property at any time during the term of this Contract to make
surface and subsurface inspections or for any
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<PAGE>
other purposes related to Purchaser's requirements to acquisition and use of the
property, provided, however, that Purchaser shall repair any damage made to the
property as a result of said inspection. There will be no tree removal larger
than 3-inch caliper without Seller's prior written approval, which approval will
not be unreasonably withheld. Purchaser will hold Seller harmless from any
injury to property or persons arising as a result of or from Purchaser's or
Purchaser's agent's activities on the property.
Seller acknowledges and agrees that Purchaser shall not be obligated to
purchase the Property if, in Purchaser's sole exclusive judgment based on the
Environmental Audit, or other information received or obtained by Purchaser, the
use or condition of the Property or any part thereof, poses a health or safety
hazard, or subjects the Purchaser to actual or potential financial exposure to
environmental liability, response or remediation cost.
14) AGENCY DISCLOSURES. The selling broker, MOSES-NOSARI Real Estate,
-------------------------
Inc., and its sales agents (Selling Company) represent the Purchaser. Selling
- ----
Company owes duties of trust, loyalty and confidence to Purchaser only. While
the Selling Company has a duty to treat Seller honestly, the Selling Company is
acting on behalf of Purchaser and not Seller. SELLER AND LISTING COMPANY
ACKNOWLEDGE PRIOR TIMELY NOTICE BY SELLING COMPANY THAT IT IS PURCHASER'S AGENT.
Purchaser and Seller acknowledge that Vogel-Jones Realty ("Listing
Company") represents the Seller in this transaction.
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<PAGE>
Vogel-Jones Realty owes duties of trust, loyalty and confidence to Seller only.
PURCHASER AND SELLING COMPANY ACKNOWLEDGE PRIOR TIMELY NOTICE BY LISTING COMPANY
THAT LISTING COMPANY IS SELLER'S AGENT.
15) ADDITIONAL PROVISION.
a) Notwithstanding any other term or provision herein to the contrary,
Purchaser to have forty-five (45) days from full execution of this contract in
which to evaluate the feasibility of the subject site and to arrange financing.
If in Purchaser's sole judgment the subject property is not completely suitable
or financing cannot be arranged, Purchaser shall have the absolute right to
cancel this Contract with written notice to Seller. Seller agrees to assist
Purchaser in any way necessary to obtain the desired rezoning should such
rezoning be necessary. All costs associated with said rezoning shall be borne by
Purchaser. If this contract is canceled by Purchaser, the earnest money (See
Article 2A) less $10.00 shall be returned to Purchaser within five (5) business
days of written cancellation.
b) Should purchaser determine the site to be satisfactory to
Purchaser, then Purchaser shall have an additional forty-five (45) days to
obtain all State and Federal regulatory approvals for Purchaser's intended use.
Written notice, from Purchaser to Seller, of Purchaser's intent to exercise the
additional 45-day approval period shall be provided. If Purchaser is unable to
obtain said regulatory approvals necessary, then, on or before the ninetieth
(90th) day of the total feasibility period,
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<PAGE>
Purchaser shall notify Seller, in writing, of his intent to terminate this
contract and Seller shall return all earnest monies, less $10.00 dollars, to
Purchaser, within five (5) business days.
16) RECOMMENDATION OF LEGAL COUNSEL. By signing this document, Purchaser
and Seller acknowledge that the Selling company or the Listing Company have
recommended that Purchaser and Seller obtain the advice of their own local
counsel regarding examination of title and this Contract.
17) TERMINATION. In the event this Contract is legally terminated without
breach or default by either party, all payments and things of value received
hereunder shall be returned and the parties shall be relieved of all obligations
hereunder.
18) NOTICE OF ACCEPTANCE/COUNTERPARTS. If this Offer and Acceptance is
accepted by Seller in writing and Purchaser receives actual notice of such
acceptance on or before December 13, 1996, this document shall become a contract
between Seller and Purchaser. A copy of this document may be executed by each
party, separately, and when each party has executed a copy thereof, such copies
taken together shall be deemed to be a full and complete contract between the
parties.
19) OTHER NOTICE REQUIREMENTS. Any notice to be given hereunder to the
parties shall be in writing and delivered by certified mail, facsimile
transmission or hand delivery. Notice to each party shall be sufficient if sent
by certified mail, with proper postage affixed, addressed to the party at the
address provided below opposite each signature. In the case of facsimile
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<PAGE>
transmission and hand delivery, notice shall be effective only when actually
received. Each party may change the address for notice by giving notice of such
change in accordance with the provisions of this section.
20) ORGANIZATION IN GOOD STANDING. If either Purchaser or Seller are a
partnership or corporation, each party represents and warrants that it is duly
organized, existing, and in good standing under the laws of the State of
Arkansas. It has full power and authority to carry on its business as presently
conducted, to execute and enter into this contract and, in the case of Purchaser
subject to customary regulatory approvals, to consummate the transactions
contemplated hereby.
21) STATE OF TITLE AND ESCROW. The Purchaser and Seller acknowledge that
the legal description set forth in Attachment A and the topographical map of
Attachment A1 are incorrect as set forth as a result of a dispute regarding the
definitive location of the west boundary line of the property. Notwithstanding
any term of this Contract to the contrary, the Purchaser and Seller acknowledge
that the Property is subject to a dispute regarding the correct property line
for the west boundary of the Property between the Seller and the owners of the
contiguous property to the west (the "Boundary Dispute"). Should this dispute
not be resolved prior to closing, pending resolution of the Boundary Dispute,
the parties agree that an amount equal to the number of square feet in
controversy times the price per square foot under this Contract (the "Escrow
Amount") shall be deposited at the time of closing
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<PAGE>
with Standard Abstract and Guaranty Company (the "Escrow Agent") pursuant to an
escrow agreement. A general warranty deed to the disputed property shall also be
deposited with the Escrow Agent. The terms of the escrow agreement shall provide
that the Purchaser shall be entitled to that portion of the Escrow Account which
equals the number of square feet conveyed to the Purchaser after resolution of
the Boundary Dispute times the price per square foot under this Agreement;
provided, however, that the Seller shall be entitled to no more than the Escrow
Amount regardless of the number of square feet actually conveyed to Purchaser
after resolution of the Boundary Dispute. the Purchaser shall be entitled to the
balance, if any, in said Escrow Account after payment of the above calculated
amount due Seller. Any earnings on the Escrow Account shall be distributed,
after payment of the Escrow Agent's fee, In the same proportion as the Escrow
Account is distributed after resolution of the Boundary Dispute. The warranty
deed held in escrow shall be delivered to the owner as determined upon
resolution for the Boundary Dispute. Should the Boundary Dispute not be resolved
within sixty (60) months of the date of closing, then the escrowed funds, along
with any interest earned thereon, shall be returned to the Purchaser and the
warranty deed shall be returned to the Seller. Purchaser acknowledges that it
will not be entitled to any of the compensation received by Seller from any
third party arising from the Boundary Dispute.
22) TAX-FREE EXCHANGE. Purchaser agrees, upon request of the seller, to
facilitate Seller's effecting tax-free exchange (as that
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<PAGE>
term is defined under Internal Revenue Code *Sec. 1031) and to execute such
documents as may be necessary or appropriate to accomplish such exchange.
PURCHASER
BANK OF THE OZARKS, WCA
/s/ George G. Gleason
-------------------------------------------------
Title: Chairman/CEO
------------------------------------------
Date: 12/9/96
-------------------------------------------
Address: 425 W. Capitol Ave.,
----------------------------------------
Suite 3100, LR, AR 72201
-------------------------------------------------
Fax No. 501-374-6344
-----------------------------------------
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<PAGE>
(TO BE COMPLETED BY SELLER AND LISTING COMPANY)
Seller accepts the above proposal this ____ day of December, 1996.
SELLER
AMERICAN TAEKWONDO ASSOCIATION, INC.
/s/ James E. Wolff, Jr.
-------------------------------------------------
Title: V.P. & C.O.O.
------------------------------------------
Date: 12/12/96
-------------------------------------------
Address: 6210 Baseline Road
----------------------------------------
Little Rock, Arkansas 72209
-------------------------------------------------
Fax No. 501-568-2497
-----------------------------------------
We hereby agree to the commission split set forth above.
VOGEL-JONES REALTY, INC.
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
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<PAGE>
The Selling Company agrees to the commission split set forth above and
confirms the respective agency disclosure set forth in Section 19.
Selling Company:
Moses-Nosari Real Estate, Inc.
-------------------------------------------------
By: /s/ Jim Moses
---------------------------------------------
Date: 12-9-96
-------------------------------------------
Address: 201 E. Markham, Suite 100
----------------------------------------
Little Rock, Arkansas, 72201
----------------------------------------
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<PAGE>
COMMISSION AND INDEMNIFICATION AGREEMENT
Seller agrees to pay Vogel-Jones Realty a brokerage commission for service
pursuant to this Contract in an amount equal to five percent (5%) of the final
purchase price at closing. Said commission shall be shared by Vogel-Jones Realty
and Moses-Nosari Real Estate, Inc. in the ratio of fifty percent (50%) to Vogel-
Jones Realty and fifty percent (50%) to Moses-Nosari Real Estate, Inc. In
consideration for said commission, Moses-Nosari agrees to indemnify and hold
Seller and Vogel-Jones Realty harmless from any and all claims by Barnes Quinn
Flake and Anderson seeking commission, damages or other remedies arising from
the sale of the Property. Vogel-Jones Realty and Moses-Nosari Real Estate, Inc.
agree to jointly and severally hold Seller harmless from any and all claims or
disputes arising from the sale of the Property between their two companies.
SELLER:
American Taekwondo Association, Inc.
By: /s/ James E. Wolff, Jr.
--------------------------------
Title: V.P. & C.O.O.
-----------------------------
We hereby agree to the commission split and indemnification provision set
forth above.
Vogel-Jones Realty Moses-Nosari Real Estate, Inc.
By: Robert Vogel By: Jim Moses
------------------------- ---------------------------------------------
Title: Broker Title: President
---------------------- ------------------------------------------
Date: 12-12-96 Date: 12-13-96
----------------------- -------------------------------------------
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<PAGE>
Exhibit 10.6
COMMERCIAL GROUND LEASE
-----------------------
This is a ground lease of commercial real estate (the "Lease") made and
entered into as of this Lease Date by the following parties as to the property
described herein ("Property"), to-wit:
I. BASIC PROVISIONS
----------------
1. LESSOR: James W. OBryan, Rose Mary Horton OBryan,
Jerry L. Horton and Mary Horton
(Prior to the commencement date hereof, Lessor
shall establish an account at Newton County Bank
into which the rent shall be deposited each month
for the entire term and any extensions. Lessor's
address for all purposes hereunder is 15416
Chestnut, Basehor, Kansas 66007, Attention: Rose
Mary Horton OBryan, who is irrevocably appointed
the agent for Lessor for all purposes hereunder.
Neither the foregoing account of Lessor nor the
agent and address may be changed without Lessee's
consent, and in no event shall Lessee be required
to deal with more than one account, agent and
address for any reason, including the death of any
individual owner/lessor.)
2. LESSEE: Newton County Bank
P.O. Box 437
Jasper, Arkansas 72641
3. PROPERTY: The northwesterly corner which is north of
Highway 65 and west of Duvall Street.
4. LOCATION: Marshall, Searcy County, Arkansas
5. LEGAL DESCRIPTION: A parcel described in the attached
Exhibit "A."
6. LEASE DATE: October 15, 1993.
7. LEASE COMMENCEMENT: This lease shall commence when Lessee takes
possession of the Property, which date shall be the
later of the following dates:
(a) Forty (40) days after Lessee receives
notification that its applications to the Arkansas
Bank Department and Federal Deposit Insurance
Corporation for approval of the Property as a
branch bank site have been approved.
<PAGE>
(b) The day after the last of the existing tenants
on the Property have vacated same, Lessor to proceed
expeditiously to terminate existing month-to-month
tenancies upon notification from Lessee that it has
received the approvals described herein, and to take
all reasonable actions to prevent those month-to-month
tenants from holding over.
Provided, however,that if either of the approvals
referred to above are denied, Lessee may cancel this
Lease, or if either of the approvals have not been
received within 180 days of the date hereof or if the
Property has not been vacated by the current tenants
within 180 days of the date hereof, this Lease shall
automatically be cancelled, without further obligation
of either party. Lessee shall notify Lessor of the
final approval within ten (10) days thereof. Lessor
shall notify Lessee of the date the last of the current
tenants vacate the Property promptly upon such
vacation. The commencement date shall likewise be noted
on Exhibit "A" which completed Lease shall be recorded
in the Real Estate Records of Searcy County, Arkansas.
8. IMPROVEMENTS: Lessee intends to construct a branch banking facility
on the Property, at its sole expense and to remain its
property, Lessor to remove from the Property any mobile
homes or other equipment or improvements at Lessor's
expense within thirty (30) days of receipt of notice
from Lessee and in any event prior to the commencement
date of the term of this Lease.
9. LEASE TERM: The Term of this Lease shall be thirty (30) years,
subject to renewal, as set forth herein.
10. RENEWAL OPTION: This Lease shall be subject to three renewal options of
ten (10) years each, said renewal in each instance to
be automatic absent notice of nonrenewal,
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<PAGE>
said notice of nonrenewal in each instance to be given
in writing by Lessee no less than ninety (90) days nor
more than one year prior to the then-current expiration
date. References herein to "Term" shall include any
such renewals.
11. BASE RENT: Monthly rentals, to be paid in advance on the Lease
Commencement date and the same day of each month
thereafter for the initial 30-year term, in Lessor's
account, as noted above, shall be $500.
12. RENEWAL RENT: Monthly rentals for the first 10-year extension shall
be $550; for the second 10-year extension shall be
$600; and for the third 10-year extension shall be
$650.
II. GRANT AND ACCEPTANCE
--------------------
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the
Property, which consists of real estate legally described in Exhibit "A," for
the Lease Term described above. The Property has been inspected by Lessee and
is accepted in its present condition, with any and all defects, apparent or
otherwise; subject to the provisions of Article I-8 above.
III. ADDITIONAL RENT
---------------
1. Taxes: As additional rent Lessee shall pay annually, before any fine or
-----
penalty is added thereto for the non-payment thereof, all real estate taxes and
special assessments which are levied and assessed against the Property during
the Lease Term (which includes renewals, for the purposes hereof). If the Lease
Term commences and ends other than on the first day of the tax year, the real
estate taxes and special assessments for the first
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<PAGE>
and last partial tax year shall be prorated, and Lessee shall pay only that
portion related to the portion of the tax year after the commencement and before
the end of the Lease Term. Upon request, Lessee shall promptly deliver to Lessor
duplicate receipts or photostatic copies thereof, showing payment of the real
estate taxes and special assessments.
2. Insurance: Lessee shall carry casualty insurance on its improvements in
---------
such amounts as it deems appropriate, which insurance shall be for Lessee's sole
benefit. In addition, Lessee shall carry liability insurance as set out
hereafter in Paragraph IV INDEMNIFICATION, Subparagraph 1 Indemnity.
--------------- ---------
3. Maintenance: After taking possession of the Property, and completion of
-----------
its improvements, Lessee may make such repairs and alterations it deems
appropriate to keep the Property in a good and usable condition and state of
repair for its purposes; and in no event shall Lessor ever be deemed to have any
responsibility whatsoever for such repairs or improvements, including street
improvements.
4. Net Lease: It is mutually agreed and acknowledged between Lessor and
---------
Lessee that this is a Net Lease. For the purpose of this clarification, the term
"Net Lease" shall mean that Lessee shall pay all taxes, insurance, and all other
costs and expenses of every kind and nature in connection with the Property
during the Lease Term and that Lessor shall not be required to expend any sums
whatsoever after delivery of possession.
-4-
<PAGE>
IV. SUBLEASES AND ASSIGNMENTS
-------------------------
Lessee shall not transfer or assign this Lease or sublet the Leased
Premises without prior written consent of the Lessor, which consent shall not be
unreasonably withheld. Any such assignment or subletting shall in no way
relieve Lessee from liability for the obligations imposed by this letter.
Lessee may only be released from liability by a specific written release
executed by Lessor.
V. COVENANT OF TITLE
-----------------
Lessor covenants that Lessor has good, right and lawful authority to lease
the Property and that Lessor will at all times, while this Lease remains in
effect, protect and preserve Lessee's right to possession and peaceful enjoyment
of the Property pursuant to the terms of this Lease. Lessee's obligation to
accept possession of the Property and to commence the Lease Term shall be
dependent on Lessor's ability to provide to Lessee, at Lessee's expense, a title
insurance policy insuring Lessee's leasehold interest in the Property in an
amount, with an insurer, and on terms acceptable to Lessee.
VI. USE.
---
Lessee shall use the Property as a branch banking facility until at least
the first anniversary of the Commencement Date hereunder. Thereafter, it may
use the Property for any lawful purpose. Lessee shall conduct its business,
insofar as the same relates to Lessee's use and occupancy of the Property, in a
lawful manner and in compliance with all governmental laws, rules, regulations
and orders applicable to any business of Lessee conducted in and upon the
Property.
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<PAGE>
VII. LESSEE'S COVENANT OF CARE
-------------------------
Lessee, throughout the Lease Term, shall keep the Property free and clear
of any unnecessary dirt or filth. Lessee agrees not to commit waste nor to
permit waste to result or done to or upon the aforesaid property and premises.
VIII. UTILITIES
---------
Lessee shall pay during the Lease Term promptly when the same become due
any and all charges, including deposits and repairs, made against Lessee or
against the Property for gas, electricity, water, telephone or any other utility
used on or serving the Property. Whenever Lessee desires to make any changes or
additions to existing gas, electricity, water, telephone or other utility
services on or in the Property lawfully requested or reasonably necessary, it
shall pay for all charges assessed in connection with making the same.
IX. INDEMNIFICATION
---------------
1. Indemnity: Lessee covenants and agrees that it will defend, indemnify
---------
and hold harmless Lessor for and from all damages, claims, suits, or causes of
action resulting from injuries to person or persons or damage to property and
arising out of Lessee's use or occupancy of the Property. Lessee shall, during
the term of this Lease, maintain public liability insurance on the
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<PAGE>
premises and on the business operated by the Lessee or any sub-tenant occupying
the Leased Premises. The limits of such public liability insurance shall be not
less than $100,000 per person, $300,000 per occurrence and $50,000 per property
damage. The policy representing such insurance shall name Lessor and their heirs
and assigns as an additional insured. Said policy shall contain a clause that
the insurer will not cancel said policy without first giving Lessor or their
heirs and assigns no less than ten (10) days prior written notice. A certificate
of such insurance shall be delivered to Lessor prior to the inspection of this
Lease and proof of such coverage shall be provided to Lessor at reasonable times
throughout the original or any renewal term hereof.
2. Environmental Laws: Without limiting the foregoing, Lessee covenants
------------------
and agrees that at no time will its occupancy, use or maintenance of the
Property cause or contribute to any violation of local, state or federal
environmental or health laws, orders and regulations ("laws"), including but not
limited to those dealing with hazardous wastes or materials, water or air
pollution, and solid waste disposal.
X. FIRE & CASUALTY
---------------
It shall be Lessee's right to maintain and insure the improvements on the
Property for its own benefit and no failure to do so and no inability to utilize
the Property, whether as a branch banking location or otherwise, as a result of
fire, flood, civil
-7-
<PAGE>
disorder, earthquake or other casualty of any sort whatsoever shall reduce in
any wise Lessee's obligation to pay rent and perform this Lease during the Term
hereof, without reduction or interruption.
XI. EMINENT DOMAIN
--------------
1. Taking: In the event that any portion of the Property is taken by
------
eminent domain or by sale in lieu thereof consented to by Lessee, this Lease
shall not terminate but each party shall be entitled to their respective damages
as allowed by law for their respective interests in the Property and its
improvements. However, in the event that a portion of the property significant
enough to interfere substantially and materially with Lessee's conduct of its
business thereon, in Lessee's judgment, is taken by eminent domain or by sale in
lieu thereof consented to by Lessee, Lessee may terminate this Lease within
sixty (60) days after Lessee has been deprived of possession by such taking or
sale; provided, that Lessor may elect to tender to Lessee for its consideration
additional property adjacent to the Property, which Lessee may, in its judgment,
deem suitable for use in restoring the usefulness to it of the Property, to be
added by amendment of this Lease; and, provided further, that nothing herein
shall prohibit Lessor and Lessee from mutually agreeing to a reduction of the
monthly rent to reflect the continuing lease of less than all of the original
Property.
2. Award: Out of any award for any taking of the Property, Lessor shall be
-----
entitled to receive and retain all amounts awarded
-8-
<PAGE>
to Lessor for the underlying real estate as encumbered by this Lease, and that
Lessee shall be entitled to receive and retain such amounts which are awarded to
Lessee because of the taking of its trade fixtures and leasehold improvements
and its Lessee's leasehold interest in the Property.
XII. RENT ABSOLUTE
-------------
Except as may be otherwise specifically provided herein, Lessee shall have
no right to terminate this Lease or be entitled to any rent abatement or
reduction. Notwithstanding any other provisions contained in this Lease, in the
event the Lessee is closed or taken over by the banking authority of the State
of Arkansas, or other bank supervisory authority, the Lessor may terminate the
Lease only with the concurrence of such banking authority or other bank
supervisory authority, and any such authority shall in any event have the
election either to continue or to terminate the lease: Provided, that in the
event this Lease is terminated, the maximum claim of Lessor for damages or
indemnity for injury resulting from the rejection or abandonment of the
unexpired term of the Lease shall in no event be in an amount not exceeding the
rent reserved by the Lease, without acceleration, for the year next succeeding
the date of the surrender of the premises to the Lessor, or the date of reentry
of the Lessor, whichever first occurs, whether before or after the closing of
the Lessee as a bank, plus an amount equal to the unpaid rent accrued, without
acceleration up to such date.
-9-
<PAGE>
XIII. REMEDIES
--------
1. Default: Time is of the essence of this agreement and the parties
-------
hereto agree that if any monthly rent installment as herein provided or any
other rent payments to be made by Lessee as required herein are not made when
due, or in case Lessee shall fail to keep and perform every covenant, condition
and agreement herein contained, made and to be performed and kept by Lessee
strictly in accordance with the terms hereof, or in the event that a voluntary
or involuntary petition in bankruptcy or the filing of a petition for the
appointment of a receiver against Lessee or any other bankruptcy or insolvency
proceedings are filed in any state or federal court, or in the event the
interest of Lessee shall be levied upon and sold by virtue of judicial process
of any kind, then and upon the happening of any of the foregoing event, Lessor
may give Lessee notice of such default. Lessee shall commence to cure such
default within ten (10) days following the giving of such notice and having
commenced, shall diligently proceed with and complete the curing of such breach
within a reasonable time. If Lessee fails to cure such default after notice and
opportunity as hereinabove provided, Lessor shall, at its option, have the right
to terminate this Lease and to reenter or to take possession of the Property
without terminating this Lease. However, if Lessor reenters without terminating
this Lease, Lessor may relet the Property or any part thereof upon such terms
and conditions as Lessor in Lessor's sole discretion shall deem advisable.
-10-
<PAGE>
2. Mitigation: All rents received by Lessor as a result of such reletting
----------
shall be applied as follows:
(a) to reimburse Lessor for all expenses incurred in reentering and
reletting, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(b) to reimburse Lessor for costs of curing any breach of this Lease
by Lessee, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(c) to reasonable costs of adapting the Property for the use of the
tenant under such reletting;
(d) to arrearages in rent due hereunder, first being applied to the
first accruing rentals and accrued interest thereon, and last to the most
recently accruing; and
(e) any remainder shall be held for the balance of the Lease term, but
credited to the account of Lessee.
3. Non-Waiver: The foregoing remedies are not intended to limit or qualify
----------
such other remedies as Lessor may have at law or in equity. All remedies shall
be cumulative. The use of one remedy by Lessor shall not preclude or waive
Lessor's right to the use of any or all others.
4. Lessee's Remedies: Lessee may enforce the terms hereof at law or
-----------------
equity, as appropriate.
-11-
<PAGE>
XIV. TERMINATION
-----------
At the end of the Lease Term, or upon its termination at any earlier date
by virtue of any of the provisions hereof, Lessee covenants to surrender and
deliver up possession of the Property.
XV. NON-WAIVER
----------
Neither the failure on the part of the Lessor strictly to enforce all of
the terms and provisions of this Lease nor acceptance of rent by Lessor after
breach of Lessee of any covenant or condition herein contained, nor any delay on
the part of Lessor strictly to enforce the terms and provisions hereof shall
operate or be deemed as a waiver of any rights or remedies which, under the
terms of this Lease or by law, may accrue to Lessor by reason of any subsequent
breach of the terms and conditions hereof by Lessee.
XVI. REMOVAL OF IMPROVEMENTS OR TRADE FIXTURES
-----------------------------------------
Upon the termination of this Lease or any extensions thereof, if Lessee
shall otherwise be current and in good standing hereunder, Lessee shall have the
right to remove from the Property any or all remaining improvements, trade
fixtures and devices, including but not limited to mechanical and security
devices peculiar to the banking business, which it may have installed on the
Property at its expense within sixty (60) days of said termination, but, shall
restore the Property to good order promptly thereafter. Lessee shall continue
to pay rent to Lessor month-to-month until such time as the property is
delivered to Lessor in good order.
-12-
<PAGE>
XVII. ALTERATION OR EXPANSION
-----------------------
Lessee shall be permitted during the term hereof to perform alterations to
the Property at its expense and without any change in the rent called for by
this Lease.
XVIII. MECHANIC'S LIENS
----------------
Lessee agrees to pay when due all sums of money that may become due for any
labor, services, materials, supplies or equipment furnished to or for Lessee in,
and upon or about the Property and which may be secured by any mechanic's,
materialman's or other lien against the Property and will cause any such lien
that may be filed to be immediately discharged and released, or appropriately
bonded against, if Lessee is contesting same.
XIX. GRANTING AND USE OF EASEMENTS
-----------------------------
1. Utilities Easements: Lessor agrees, without payment of consideration,
-------------------
from time to time during the term of this Lease at the request of Lessee to
grant easements, licenses, rights of way and other rights and privileges in the
nature of easements upon or across the Property for utilities necessary for
Lessee's intended use of said premises.
2. Cross Easements: In the event Lessee deems it advisable to enter into
---------------
any cross-easements or similar agreements with occupants of adjoining
properties, it may do so and Lessor agrees to join in any such agreements on
request from Lessee, should Lessee deem such consent necessary, but without any
cost or liability on the part of Lessor, no such agreement to extend beyond the
Lease Term or survive its termination.
-13-
<PAGE>
XX. SIGNS
-----
Lessee shall have the right to install, erect and maintain upon the
Property all signs necessary or appropriate to the conduct of its business.
Lessee shall not install, erect or maintain any sign in violation of any
applicable law, ordinance or use permit of any governmental authority. Lessee
may remove (but shall not be required to remove) the same or any part thereof at
any time during said term or upon the expiration thereof or sooner termination
of this Lease, or within sixty (60) days after such expiration or termination,
as set forth in Article XVI hereof.
XXI. HOLDING OVER
------------
If Lessee continues to occupy the Property after the expiration of the
Lease Term (including any extensions) and Lessor accepts rent thereafter, a
monthly tenancy terminable by either party on one month's notice shall be
created, which shall be upon the then-current rent, terms and conditions as
those herein specified.
XXII. GENERAL CONDITIONS
------------------
Lessee shall not be responsible for the payment of any commissions in
relation to the leasing transaction represented by this Lease. This Lease is
the entire agreement of the parties and may only be modified by a writing signed
by both parties, or the addition of a completed Exhibit "A" in accordance with
the terms hereof.
-14-
<PAGE>
XXIII. CONSTRUCTION
------------
This Lease and all of the terms and conditions herein contained shall be
binding upon the parties hereto and their successors in interest, including
Lessor's heirs, assigns and successors in interest and Lessee's assigns and
subtenants. Words and phrases herein shall be construed as in singular or
plural number and as feminine, masculine or neuter gender, according to the
context.
XXIV. NOTICES
-------
Any notice herein required or permitted to be given shall be deemed given
if and when mailed in a sealed envelope by United States certified mail, return
receipt requested, postage properly prepaid and addressed as set forth in
Article I-1 and 2 hereof.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease the date first
above written.
LESSOR:
/s/ James W. OBryan /s/ Rose Mary Horton OBryan
- --------------------------- -------------------------------------
JAMES W. OBRYAN ROSE MARY HORTON OBRYAN
/s/ Jerry L. Horton /s/ Mary Horton
- --------------------------- -------------------------------------
JERRY L. HORTON MARY HORTON
LESSEE:
NEWTON COUNTY BANK
By: /s/ Mark D. Ross
----------------------------------
Title: President-Bank Services
------------------------------
Date: 11/10/93
-------------------------------
-16-
<PAGE>
STATE OF KANSAS )
) ss: ACKNOWLEDGMENT
--------------
COUNTY OF LEAVENWORTH)
On this day personally appeared before the undersigned, a Notary Public
within and for the County and State aforesaid, duly qualified, commissioned and
acting, the within named JAMES W. OBRYAN and ROSE MARY HORTON OBRYAN, to me
personally well known, who stated that they had so signed, executed and
delivered said foregoing instrument for the consideration and purposes therein
mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
27th day of October, 1993.
/s/ Angela M. Eyerly
-------------------------------------
Notary Public
My Commission Expires:
6-1-97
- ---------------------
(SEAL)
-17-
<PAGE>
STATE OF KANSAS )
)ss. ACKNOWLEDGEMENT
---------------
COUNTY OF WYANDOTTE )
On this day personally appeared before the undersigned, a Notary Public
within and for the County and State aforesaid, duly qualified, commissioned and
acting, the within named JERRY L. HORTON and MARY HORTON, to me personally well
known, who stated that they had so signed, executed and delivered said foregoing
instrument for the consideration and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
1st day of November, 1993.
/s/ Jo Ann Dahlke
-------------------------------------
Notary Public
My Commission Expires:
12-15-94
- ---------------------
(S E A L)
-18-
<PAGE>
STATE OF ARKANSAS )
) ss: ACKNOWLEDGMENT
--------------
COUNTY OF __________)
On this __________ day of ____________________, 1993, before me, the
undersigned, a Notary Public, duly commissioned, qualified and acting, within
and for said County and State, appeared in person the within named
______________________________, to me personally well known, who stated that
he/she was the ____________________ of NEWTON COUNTY BANK, an Arkansas banking
association, and was duly authorized in his/her capacity to execute the
foregoing instruments for and in the name and behalf of said corporation, and
further stated and acknowledged that he/she had so signed, executed and
delivered said foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this __________ day of ____________________, 1993.
----------------------------
Notary Public
My Commission Expires:
- ---------------------
(SEAL)
-19-
<PAGE>
EXHIBIT "A"
-----------
LEGAL DESCRIPTION AND
---------------------
COMMENCEMENT DATE
-----------------
1. The real property located in Marshall, Searcy County, Arkansas, and
described in the attached Schedule A.
2. This lease shall commence on the following date: ___________________
IDENTIFIED & ACCEPTED:
NEWTON COUNTY BANK
By:
---------------------------------
------------------------------------
JAMES W. OBRYAN
------------------------------------
ROSE MARY HORTON OBRYAN
------------------------------------
JERRY L. HORTON
------------------------------------
MARY HORTON
-20-
<PAGE>
SCHEDULE A
----------
A Part of the Northeast Quarter of the Southeast Quarter of Section Twenty-
Six (26), Township Fifteen (15) North, Range Sixteen (16) West, Searcy
County, Arkansas, described as follows:
From the Northeast Corner of said Northeast Quarter of the Southeast
Quarter go along the East line of the forty South 009(degree)24'37" East
1123.03 feet to the North right-of-way of U.S. Highway 65, then go along
the right-of-way South 68(degree)48'00" West 126.90 feet to the Point of
Beginning of the tract being described, then continue along the right-of-
way South 68(degree)48'00" West 230.87 feet, then leaving said right-of-way
go North 14(degree)46'45" West 245.17 feet to the South edge of DuVall
Street, then with the street go North 75(degree)50'19" East 182.47 feet,
South 55(degree)28'29" East 64.59 feet, South 16(degree)25'41" East 168.48
feet to the Point of Beginning, containing 1.18 acres.
-21-
<PAGE>
EXHIBIT 10.7
COMMERCIAL GROUND LEASE
-----------------------
This is a ground lease of commercial real estate (the "Lease") made and
entered into as of this Lease Date by the following parties as to the property
described herein ("Property"), to-wit:
I. BASIC PROVISIONS
----------------
1. LESSOR: Serendipity, Inc., an Arkansas Corporation,
The Hickman Family Trust, dated April 28, 1992, Arlon
O. Hickman, Trustee, Sally Denise Klein (nee Hickman)
and her husband, Wendall Albert Klein, Stephen Otis
Hickman and his wife, Carrie Jean Hickman, and Kristen
Kay Hickman, P.O. Box 1876, Harrison, Arkansas.
2. LESSEE: Bank of the Ozarks, NWA.,
An Arkansas Bank Corporation
P.O. Box 437
Jasper, Arkansas 72641
3. PROPERTY: The Property is located along the Easterly
Side of U. S. Highway No. 62-65, at the intersection of
said Highway and Beene Street, Harrison, Arkansas;
located in the Southwest Quarter of the Southwest
Quarter of Section 33, Township 19 North, Range 20
West, Boone County, Arkansas. Minimum Highway Frontage
200 feet beginning at the intersection of Beene Street
and Highway 62-65; Approximate Shape of Premises:
Parallelogram; Approximate Amount of Acreage: one (1)
acre. Common Street Address, if any:
________________________________________. Lessee shall,
at its expense, furnish a legal survey of the premises.
In the event that such survey indicates that there are
any encroachments of any improvements adjoining the
premises upon the premises, then Lessee may at its sole
option and discretion terminate this Lease. Said
option to terminate must be exercised in writing within
Sixty (60) days of completion of the survey or it shall
expire.
4. LEGAL DESCRIPTION: See Exhibit "A" to be completed
upon completion of survey.
5. LEASE DATE: December 22, 1994.
<PAGE>
6. LEASE COMMENCEMENT: (a) This Lease shall commence
when Lessee takes possession of the property, but no
more than thirty (30) days after Lessee receives
notification that its applications to the Arkansas Bank
Department and Federal Deposit Insurance Corporation
for approval of the Property as a branch bank site have
been approved. Lessee agrees to pursue such approvals
with due diligence. Provided, however, that if those
approvals have not been received within 180 days of the
date hereof, Lessee shall have the option to withdraw
those applications, which shall effect cancellation of
this Lease. Notwithstanding any provisions contained
herein to the contrary this Lease shall not commence
prior to January 1, 1995.
(b) Whether or not the applications have been
withdrawn, if the approvals have not been received in
the aforesaid 180-day period, Lessor may give Lessee
five days to waive that condition and set a
commencement date, failing which Lessor may cancel this
Lease.
(c) The commencement date shall be noted on
Exhibit "A", upon determination of the commencement
date. At that time the parties agree to execute in
recordable form a notice of lease which may be recorded
in the real estate records of Boone County, Arkansas,
at the expense of Lessee.
7. CONTINGENCIES: This Lease is contingent upon and
subject to the following special pre-conditions:
(a) Verification of sewer, water, electric, natural
gas and telephone utilities available at the property
line.
(b) Verification of commercial zoning which would
permit construction and operation of a branchbank.
(c) Approval by Harrison Planning Commission,
Board of Zoning Adjustment, and all other necessary
authorities for
-2-
<PAGE>
construction, operation, maintenance and use of the
premises as a branch banking facility, adequate parking
areas, driveways and means of access, at Lessee's
expense.
(d) Determination by Lessee's engineers and
architects that the anticipated construction is
feasible at this site, at Lessee's expense.
(e) Approval by Arkansas Highway Department for
necessary ways of Highway access to and from the
property, from U.S. Highway 62-65 and other appurtenant
roadways, at Lessee's expense.
(f) Verification that the premises are not located
on a flood plain, at Lessee's expense.
(g) Receipt of soil tests satisfactory to Lessee
and indicating that the property is suitable for the
anticipated construction and use, at Lessee's expense.
(h) Receipt of regulatory approvals of the
purchase and construction plans, including approval by
the State Bank Department, at Lessee's expense.
(i) Receipt of a satisfactory environmental audit
and archaeological study, at Lessee's expense.
If any of the aforesaid contingencies are not
satisfied or waived, then Lessee may at its sole option
and election terminate this Lease. Provided however,
if the aforesaid contingencies are not satisfied or
waived within one-hundred eighty (180) days of the
execution of this Lease then Lessor may cancel this
Lease.
8. COOPERATION: Lessor agrees to cooperate fully with all
of the above referenced applications for permits and
approvals by the various legal authorities, in
connection with Lessee's construction, operation,
maintenance and use of the premises as a
-3-
<PAGE>
branch banking facility, adequate parking areas,
driveways and means of access, and shall file such
applications and execute such documents as are deemed
by Lessee to be necessary to accomplish its purpose.
9. IMPROVEMENTS: Lessee intends to construct a branch banking facility
on the property and shall be limited to the uses set
out in Section VI hereof during the term of this Lease
unless the written consent of the Lessor is obtained
otherwise, which consent shall not be unreasonably
withheld.
10. LEASE TERM: The Term of this Lease shall be six (6) full years,
subject to renewal as set forth herein, beginning on
the commencement date referred to in Section 6 above.
11. RENEWAL OPTION: This Lease shall be subject to one renewal option of
six (6) years, said renewal to be automatic, absent
notice of non-renewal, said notice of non-renewal to be
given in writing by Lessee no less than ninety (90)
days, nor more than one (1) year, prior to the then
current expiration date. References herein to "term"
shall include any such renewal.
12. BASE RENT: The first and last month's monthly rental shall be paid
in advance on the Lease commencement date. All other
monthly rentals shall be paid in advance on the same
day of the month thereafter for the initial six year
term in the amount of $1,800.00 per month.
13. RENEWAL RENT: Monthly rentals for the six year renewal shall be
$2,300.00.
14. PURCHASE OPTION: So long as Lessee is not in default of any of its
obligations under the Lease and has continued the Lease
through the renewal period, the Lessee is granted the
option to purchase the real estate which is the subject
hereof for the sum of Three Hundred Thousand Dollars
($300,000.00) cash, on the terms and conditions set
forth in Exhibit "B"
-4-
<PAGE>
hereto, provided Lessee shall give Lessor notice in
writing of its election to exercise said option to
purchase. Notice of exercise shall be given to Lessor
any time during the original Lease term or any
extension or renewal thereof, except that such notice
shall be given not less than ninety days prior to the
expiration of the renewal term. In any event,
regardless of when such notice of exercise is given,
the closing of the transaction shall not take place
prior to the last day of the renewal period (twelve
years after the commencement of the original lease
term).
15. DRIVEWAY: The Lessee agrees to pay the sum of Two Thousand
Dollars ($2,000.00) towards the construction of a
driveway on Lessor's adjoining property. Such sum
shall be paid together with the first month's rent.
Any easements, permits and any other formalities
required in connection with the construction of such
driveway shall be the Lessor's sole responsibility.
The Lessee shall not be obligated to furnish labor or
materials, nor shall Lessee's contractors, builders or
agents be obligated to participate in the construction
of such driveway.
II. GRANT AND ACCEPTANCE
--------------------
Lessor agrees to lease to Lessee and Lessee agrees to accept from Lessor
the Property, which consists of real estate legally described in Article I-4,
for the Lease Term described above. The Property has been inspected by Lessee
and is accepted in its present condition, with any and all defects, apparent or
otherwise.
III. ADDITIONAL RENT
---------------
1. Taxes: As additional rent Lessee shall pay annually, before any fine or
-----
penalty is added thereto for the non-payment
-5-
<PAGE>
thereof, all real estate taxes and special assessments which are levied and
assessed against the Property during the Lease Term. If the Lease Term commences
other than on the first day of the tax year, the real estate taxes and special
assessments for the first partial tax year shall be prorated, and Lessee shall
pay only that portion related to the portion of the tax year after the
commencement of the Lease Term. Upon request, Lessee shall promptly deliver to
Lessor duplicate receipts or photostatic copies thereof, showing payment of the
real estate taxes and special assessments.
2. Insurance: Lessee shall carry casualty insurance on its improvements in
---------
such amounts as it deems appropriate, which insurance shall be for Lessee's sole
benefit. In addition Lessee shall carry liability insurance as set out hereafter
in Paragraph IX. INDEMNIFICATION, Subparagraph 1.
---------------
3. Maintenance: After taking possession of the Property, and completion of
-----------
its improvements, Lessee shall make all necessary repairs and maintenance at its
expense to keep the Property in a good and usable condition and state of repair.
In no event shall Lessor ever be deemed to have any responsibility whatsoever
for such repairs or improvements, including street improvements.
4. Net Lease: It is mutually agreed and acknowledged between Lessor and
---------
Lessee that this is a Net Lease. For the purpose of this clarification, the term
"Net Lease" shall mean that Lessee shall pay all taxes, insurance, repairs and
maintenance (including reconstruction), and all other costs and expenses of
-6-
<PAGE>
every kind and nature in connection with the Property during the Lease Term and
that Lessor shall not be required to expend any sums whatsoever after delivery
of possession.
IV. SUBLEASES AND ASSIGNMENTS
-------------------------
Lessee may not assign this Lease or sublet any portion of the Property
without Lessor's written consent, not to be unreasonably withheld; provided,
however, that Lessee may assign or sublet on written notice to Lessor to any
business entity or financial institution affiliated with or under common control
with Lessee, and to any financial institution into which Lessee may be merged,
to which Lessor hereby consents. Lessor and Lessee acknowledge that Lessor will
continue to own real estate adjoining the Property and that the protection of
the value of the adjoining property as well as the financial responsibility of
any assignee or subtenant shall be considered in determining the reasonableness
of any consent withheld hereunder by Lessor. It is further provided that if the
Property is vacated or remains closed for business for more than 182 days in any
one year period then the monthly rental shall be doubled for any subsequent
periods of vacancy or closure and if such increased rent be not paid then the
Lessee shall be in a state of default.
V. COVENANT OF TITLE
-----------------
Lessor covenants that Lessor has good, right and lawful authority to lease
the Property subject to all easements and restrictions of record, and that
Lessor will at all times, while
-7-
<PAGE>
this Lease remains in effect, protect and preserve Lessee's right to possession
and use of the Property pursuant to the terms of this Lease. Lessee's obligation
to accept possession of the Property and to commence the Lease Term shall be
dependent on Lessor's ability to provide to Lessee, at Lessee's expense, a title
insurance policy insuring Lessee's leasehold interest in the Property in an
amount, with an insurer, and on terms acceptable to Lessee, and evidence of the
appropriate zoning, as set forth herein.
VI. USE
---
Lessee shall use the Property as a branch banking facility during the term
of this Lease. In addition to the use of the property as a branch banking
facility the Lessee shall be entitled to use the property as business offices,
so long as such use does not attract undesirable clientele (i.e. substance
abusers, brawlers, etc.), or such other uses as may be specifically permitted by
Lessor in writing. In the event of Lessee exercising its option to purchase,
provided for hereunder, then upon its purchase of the Property, Lessee may use
the Property free of any restriction created herein. Lessee shall conduct its
business, insofar as the same relates to Lessee's use and occupancy of the
Property, in a lawful manner and in compliance with all governmental laws,
rules, regulations and orders applicable to any business of Lessee conducted in
and upon the Property. Lessee's construction and maintenance of the branch
banking facility on the
-8-
<PAGE>
Property shall be in a lawful manner and in compliance with all applicable
governmental laws, rules, codes, and regulations.
VII. LESSEE'S COVENANT OF CARE
-------------------------
Lessee, throughout the Lease Term, shall keep the Property free and clear
of any unnecessary dirt or filth. Lessee agrees not to commit waste, nor permit
waste to result or to be done to or upon the Property.
VIII. UTILITIES
---------
During the Lease Term, Lessee shall pay when due all utilities charges.
Whenever Lessee desires to make any changes or additions to existing gas,
electricity, water, telephone or other utility services on or in the Property
lawfully requested or reasonably necessary, it shall pay for all charges
assessed in connection with making the same.
IX. INDEMNIFICATION
---------------
1. Indemnity: Lessee covenants and agrees that it will defend, indemnify
---------
and hold harmless Lessor for and from all damages, claims, suits, or causes of
action resulting from injuries to person or persons or damage to property and
arising on or out of the use, occupancy or condition of the Property. Lessee
shall during the term of the Lease, maintain public liability insurance on the
premises and on the business operated by the Lessee, or any subtenant occupying
the leased premises. The limits of such public liability insurance shall be not
less than Two Hundred Fifty
-9-
<PAGE>
Thousand Dollars ($250,000.00) per person, Five Hundred Thousand ($500,000.00)
per occurrence, and One Hundred Thousand Dollars ($100,000.00) for property
damage. The policy representing such insurance shall name Lessor its successors
and assigns as an additional insured. Said policy shall contain a clause that
the insurer will not cancel said policy without first giving the Lessor or its
successor or assigns ten days prior written notice. A certificate of such
insurance shall be delivered to Lessor prior to the commencement of this Lease
and proof of such coverage shall be provided to Lessor at reasonable times
throughout the original or any renewal term hereof.
2. Environmental Laws: Without limiting the foregoing, Lessee covenants
------------------
and agrees that at no time will its occupancy, use or maintenance of the
Property cause or contribute to any violation of local, state or federal
environmental or health laws, orders and regulations ("laws"), including but not
limited to those dealing with hazardous wastes or materials, water or air
pollution, and solid waste disposal.
X. FIRE & CASUALTY
---------------
It shall be Lessee's sole obligation to maintain and insure the
improvements on the Property for its own benefit and no failure to do so and no
inability to utilize the Property, whether as a branch banking location or
otherwise, as a result of fire, flood, civil disorder, earthquake or other
casualty of any sort whatsoever shall reduce in any way Lessee's obligation to
pay rent and perform
-10-
<PAGE>
this Lease during the Term thereof, without reduction or interruption. In the
event of substantial destruction of improvements on the Property as a result of
fire or other casualty Lessee shall either rebuild and repair the premises or
remove all damaged improvements and debris.
XI. EMINENT DOMAIN
--------------
1. Taking: In the event that any portion of the Property is taken by
------
eminent domain or by sale in lieu thereof consented to by Lessee, this Lease
shall not terminate but each party shall be entitled to their respective damages
as allowed by law for their respective interests in the Property and its
improvements. However, in the event that a portion of the Property significant
enough to interfere substantially and materially with Lessee's conduct of its
business thereon, in Lessee's judgment, is taken by eminent domain or by sale in
lieu thereof consented to by Lessee, Lessee may terminate this Lease within
sixty (60) days after Lessee has been deprived of possession by such taking or
sale; provided, that Lessor may elect to tender to Lessee for its consideration
additional property adjacent to the Property, which Lessee may, in its judgment,
deem suitable for use in restoring the usefulness to it of the Property, to be
added by amendment of this Lease; and, provided further, that nothing herein
shall prohibit Lessor and Lessee from mutually agreeing to a reduction of the
monthly rent to reflect the continuing lease of less than all of the original
Property.
-11-
<PAGE>
2. Award: Out of any award for any taking of the Property, Lessor shall be
-----
entitled to receive and retain all amounts awarded to Lessor for the underlying
real estate as encumbered by this Lease, and that Lessee shall be entitled to
receive and retain such amounts which are awarded to Lessee because of the
taking of its trade fixtures and leasehold improvements and its Lessee's
leasehold interest in the Property, including its option described herein .
XII. RENT ABSOLUTE
-------------
Except as may be otherwise specifically provided herein, Lessee shall have
no right to terminate this Lease or be entitled to any rent abatement or
reduction. Notwithstanding any other provisions contained in this Lease, in the
event the Lessee is closed or taken over by the banking authority of the State
of Arkansas, or other bank supervisory authority, the Lessor may terminate the
Lease only with the concurrence of such banking authority or other bank
supervisory authority, and any such authority shall in any event have the
election either to continue or to terminate the lease: Provided, that in the
event this Lease is terminated, the maximum claim of Lessor for damages or
indemnity for injury resulting from the rejection or abandonment of the
unexpired term of the Lease shall in no event be in an amount exceeding the rent
reserved by the Lease, without acceleration, for the year next succeeding the
date of the surrender of the premises to the Lessor, or the date of reentry of
the Lessor, whichever
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<PAGE>
first occurs, whether before or after the closing of the Lessee as a bank, plus
an amount equal to the unpaid rent accrued, without acceleration up to such
date.
XIII. REMEDIES
--------
1. Default: Time is of the essence of this agreement and the parties
-------
hereto agree that if any monthly rent installment as herein provided or any
other rent payments to be made by Lessee as required herein are not made when
due, or in case Lessee shall fail to keep and perform every covenant, condition
and agreement herein contained, made and to be performed and kept by Lessee
strictly in accordance with the terms hereof, then and upon the happening of any
of the foregoing events, Lessor may give Lessee notice of such default. Lessee
shall commence to cure such default within ten (10) days following the giving of
such notice and having commenced, shall diligently proceed with and complete the
curing of such breach within a reasonable time. If Lessee fails to cure such
default after notice and opportunity as hereinabove provided, Lessor shall, at
its option, have the right to terminate this Lease and the Option to Purchase
granted hereunder and to reenter or to take possession of the Property without
terminating this Lease. However, if Lessor reenters without terminating this
Lease, Lessor may relet the Property or any part thereof upon such terms and
conditions as Lessor in Lessor's sole discretion shall deem advisable.
-13-
<PAGE>
2. Mitigation: All rents received by Lessor as a result of such reletting
----------
shall be applied as follows:
(a) to reimburse Lessor for all expenses incurred in reentering and
reletting, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(b) to reimburse Lessor for costs of curing any breach of this Lease by
Lessee, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(c) to reasonable costs of adapting the Property for the use of the tenant
under such reletting;
(d) to arrearages in rent due hereunder, first being applied to the first
accruing rentals and last to the most recently accruing; and
(e) any remainder shall be held for the balance of the Lease term, but
credited to the account of Lessee.
3. Non-Waiver: The foregoing remedies are not intended to limit or qualify
----------
such other remedies as Lessor may have at law or in equity. All remedies shall
be cumulative. The use of one remedy by Lessor shall not preclude or waive
Lessor's right to the use of any or all others. In the event that Lessee is in
default of any provision of this Lease and Lessor is required to employ an
attorney to obtain enforcement of the terms of the Lease or to enforce any of
its remedies for such default either at law or in equity, then Lessee agrees to
pay a reasonable attorney fee for
-14-
<PAGE>
Lessor's attorney and all other costs of enforcement or pursuit of lawful
remedies.
XIV. TERMINATION
-----------
At the end of the Lease Term, or upon its termination at any earlier date
by virtue of any of the provisions hereof, Lessee covenants to surrender and
deliver up possession of the Property. Except as otherwise agreed in writing by
Lessor, upon termination the premises shall be returned to Lessor in its present
condition or with the improvements constructed thereon in good condition.
XV. REMOVAL OF IMPROVEMENTS OR TRADE-FIXTURES
-----------------------------------------
Upon the termination of this Lease or any extensions thereof, if Lessee
shall otherwise be current and in good standing hereunder, Lessee shall have the
right to remove from the Property any and all improvements, trade fixtures and
devices, including but not limited to mechanical and security devices peculiar
to the banking business, which it may have installed on the Property at its
expense, within sixty (60) days of said termination. All other improvements of
a permanent nature affixed to the realty shall remain with the real estate at
the termination of this Lease and shall be restored to good order. Lessee shall
continue to pay rent to Lessor month-to-month until such time as the Property is
delivered to the Lessor in good order.
-15-
<PAGE>
XVI. ALTERATION OR EXPANSION
-----------------------
Lessee shall be permitted during the term hereof to perform alterations to
the Property at its expense and without any change in the rent called for by
this Lease.
XVII. MECHANIC'S LIENS
----------------
Lessee agrees to pay when due all sums of money that may become due for any
labor, services, materials, supplies or equipment furnished to or for Lessee in,
and upon or about the Property and which may be secured by any mechanic's,
materialman's or other lien against the Property and will cause any such lien
that may be filed to be immediately discharged and released, and if it is being
contested, Lessee will obtain the release even if posting of a bond is required.
XVIII. GRANTING AND USE OF EASEMENTS
-----------------------------
1. Utilities Easements: Lessor agrees, without payment of consideration,
-------------------
from time to time during the term of this Lease at the request of Lessee to
grant easements, licenses, rights of way and other rights and privileges in the
nature of easements upon or across the Property for utilities necessary for
Lessee's intended use of said premises.
2. Cross Easements: In the event Lessee deems it advisable to enter into
---------------
any cross-easements or similar agreements with occupants of adjoining
properties, it may do so and Lessor agrees to join in any such agreements on
request from Lessee, should Lessee deem such consent necessary, but without any
cost or
-16-
<PAGE>
liability on the part of Lessor, no such agreement to extend beyond the Lease
Term or survive its termination.
XIX. SIGNS
-----
Lessee shall have the right to install, erect and maintain upon the
Property all signs necessary or appropriate to the conduct of its business.
Lessee shall not install, erect or maintain any sign in violation of any
applicable law, ordinance or use permit of any governmental authority. Lessee
may remove (but shall not be required to remove) the same or any part thereof at
any time during said term or upon the expiration thereof or sooner termination
of this Lease, or within thirty (30) days after such expiration or termination,
and Lessee at its own expense shall repair any damage caused by the removal
thereof. The parties acknowledge that there is an existing sign on the
premises, to-wit: a Ramada Inn/Moe Bandy billboard. The Lessor shall be
responsible for terminating the agreement under which such sign was placed on
the premises, and for removing such sign, prior to the commencement of this
Lease.
XX. HOLDING OVER
------------
If Lessee continues to occupy the Property after the expiration of the
Lease Term without exercising its purchase option, and Lessor elects to accept
rent thereafter, a monthly tenancy terminable by either party on one month's
notice shall be created, which shall be upon the same rent, terms and conditions
as those herein specified.
-17-
<PAGE>
XXI. GENERAL CONDITIONS
------------------
Lessor shall not be responsible for the payment of any commissions in
relation to the leasing transaction represented by this Lease or the sale of
this land pursuant to the option to purchase granted herein. This Lease is the
entire agreement of the parties and may only be modified by a writing signed by
both parties, or the addition of a completed Exhibit "A" in accordance with the
terms hereof.
XXII. CONSTRUCTION
------------
This Lease and all of the terms and conditions herein contained shall be
binding upon the parties hereto and their successors in interest, including
Lessee's assigns and subtenants accepted by Lessor. Words and phrases herein
shall be construed as in singular or plural number and as feminine, masculine or
neuter gender, according to the context.
XXIII. NOTICES
-------
Any notice herein required or permitted to be given shall be deemed given
if and when mailed in a sealed envelope by United States certified mail, return
receipt requested, postage properly prepaid and addressed as set forth in
Article I-1 and 2 hereof.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease on the dates noted
below, effective as of the date first above written.
LESSOR:
Serendipity, Inc. The Hickman Family Trust,
dated April 28, 1992
By:/s/ Sallie M. Beene By:/s/ Arlon O. Hickman
------------------------- --------------------
Sallie M. Beene, Vice President Arlon O. Hickman, Trustee
Attest:/s/ Arlon O. Hickman
---------------------
Arlon O. Hickman, Secretary
/s/ Sally Denise Klein /s/ Wendell Albert Klein
- ---------------------------- ------------------------
Sally Denise Klein Wendell Albert Klein
/s/ Stephen Otis Hickman /s/ Carrie Jean Hickman
- ---------------------------- -----------------------
Stephen Otis Hickman Carrie Jean Hickman
/s/ Kristen Kay Hickman
- ----------------------------
Kristen Kay Hickman
LESSEE:
Bank of the Ozarks, NWA
By:/s/ Danny Criner
-------------------------
Title: President
----------------------
-19-
<PAGE>
EXHIBIT "A"
COMMENCEMENT DATE
1. This lease shall commence on the following date: May 15, 1995.
2. The Legal description for the PROPERTY is:
A part of the Southwest Quarter of the Southwest Quarter of Section 33,
Township 19 North, Range 20 West, City of Harrison, Boone County, Arkansas,
described as follows: From the Northeast corner of said Southwest Quarter
of the Southwest Quarter, go South 00 degrees 20 minutes 56 seconds West
along the East line 115.50 feet to a point on the South right-of-way of
Beene Street (formerly First Street), leaving the East line go North 89
degrees 39 minutes 04 seconds West along said South right-of-way, also
being the South boundary of Northvale Subdivision, a distance of 269.29
feet to a 3/8 inch rebar, Point of Beginning of the tract being described,
leaving the street right-of-way and subdivision boundary go South 34
degrees 56 minutes 56 seconds East 235.43 feet to a 3/8 inch rebar, North
89 degrees 39 minutes 04 seconds West 231.58 feet to a 3/8 inch rebar on
the East right-of-way of U.S. Highway 62-65, go along the right-of-way
through a 1004.93 foot radius curve to the left 233.78 feet to a concrete
right-of-way marker, North 37 degrees 28 minutes 25 seconds West 2.18 feet
to a 3/8 inch rebar on said South right-of-way of Beene Street, leaving the
right-of-way go South 89 degrees 39 minutes 04 seconds East 231.58 feet to
the Point of Beginning, containing 1.00 acre.
IDENTIFIED & ACCEPTED:
BANK OF THE OZARKS NWA
By:/s/ Danny Criner
--------------------------
Title: President
-----------------------
SERENDIPITY, INC. and
HICKMAN FAMILY TRUST, dated
By:/s/ Arlon O. Hickman
----------------------------
ARLON O. HICKMAN, Secretary and
Trustee, Respectively
-20-
<PAGE>
EXHIBIT "B"
PURCHASE OPTION
1. Lessee shall pay $300,000.00 cash at closing for the property.
2. Lessee shall be responsible for obtaining, at Lessee's expense, any
title insurance policy desired on the transaction.
3. The closing of the transaction shall occur within fifteen days of the
end of the renewal Lease term (twelve years from the commencement of the Lease).
4. Lessor shall pay seller's portion of real property transfer taxes (Deed
Stamps). Lessee to pay buyer's portion.
5. Conveyance shall be by general Warranty Deed as directed by Lessee
subject to all easements and restrictions of record with no warranties
whatsoever as to improvements or condition of premises other than as set forth
in the Lease.
IDENTIFIED & ACCEPTED
BANK OF THE OZARKS NWA
By:/s/ Danny Criner
---------------------------
Title: President
------------------------
SERENDIPITY, INC. and
HICKMAN FAMILY TRUST, dated
By:/s/ Arlon O. Hickman
---------------------------
ARLON O. HICKMAN, Secretary and
Trustee, Respectively
-21-
<PAGE>
EXHIBIT 10.8
COMMERCIAL GROUND LEASE
-----------------------
This is a ground lease of commercial real estate (the "Lease") made and
entered into as of this Lease Date by the following parties as to the property
described herein ("Property"), to-wit:
I. BASIC PROVISIONS
----------------
1. LESSOR: David L. Taylor and Carolyn L. Taylor, husband
and wife or the survivor thereof ("Lessor").
P.O. Box 111
Clarksville, Arkansas 72830-0111
2. LESSEE: Bank of Ozark
P.O. Box 196
Ozark, Arkansas 72949
3. LEGAL DESCRIPTION: Lots 6 and 7, Block 5, Sherwood Addition, Phase II,
Clarksville, Johnson County, Arkansas
4. LEASE DATE: January 1, 1995.
5. LEASE COMMENCEMENT: (a) This Lease shall commence when Lessee takes
possession of the Property, but no more than thirty
(30) days after Lessee receives notification that its
applications to the Arkansas Bank Department and
Federal Deposit Insurance Corporation for approval of
the Property as a branch bank site have been
approved; provided, however, that if those approvals
have not been received within 180 days of the date
hereof, Lessee shall have the option to withdraw
those applications, which shall effect cancellation
of this Lease.
(b) Whether or not the applications have been
withdrawn, if the approvals have not been received in
the aforesaid 180-day period, Lessor may give Lessee
five days to waive that condition and set a
commencement date, failing which Lessor may cancel
this Lease.
(c) The commencement date shall likewise be noted
above and on Exhibit "A", which completed Lease shall
be recorded in the real estate records of Johnson
County, Arkansas.
<PAGE>
6. IMPROVEMENTS: Lessee intends to construct a branch banking facility
on the Property, at its sole expense and to remain
its property, but shall not be limited to such use.
7. LEASE TERM: The Term of this Lease shall be ten (10) full years,
beginning on the commencement date referred to in
Sections 4 and 5 above.
8. BASE RENT: Monthly rentals, to be paid in advance on the Lease
commencement date and the same day of each month
thereafter for the term, as noted above, shall be
$1,417.00.
9. PURCHASE OPTION: Lessee is granted the option to purchase the real
estate which is the subject hereof as of the last day
of the Lease Term for $200,000 cash, on the terms and
conditions set forth in Exhibit "B" hereto. Notice of
exercise shall be given in writing to Lessor at any
time before the expiration of the Lease Term, but
without changing the closing date (i.e., the last day
of the full 10-year Lease Term).
II. GRANT AND ACCEPTANCE
--------------------
Lessor agrees to lease to Lessee and Lessee agrees to accept from Lessor
the Property, which consists of real estate legally described in Article I-3,
for the Lease Term described above. The Property has been inspected by Lessee
and is accepted in its present condition, with any and all defects, apparent or
otherwise.
II. ADDITIONAL RENT
---------------
1. Taxes: As additional rent Lessee shall pay annually, before any fine or
-----
penalty is added thereto for the non-payment thereof, all real estate taxes and
special assessments which are levied and assessed against the Property during
the Lease Term. If
-2-
<PAGE>
the Lease Term commences other than on the first day of the tax year, the real
estate taxes and special assessments for the first partial tax year shall be
prorated, and Lessee shall pay only that portion related to the portion of the
tax year after the commencement of the Lease Term. Upon request, Lessee shall
promptly deliver to Lessor duplicate receipts or photostatic copies thereof,
showing payment of the real estate taxes and special assessments.
2. Insurance: Lessee shall carry casualty insurance on its improvements in
---------
such amounts as it deems appropriate, which insurance shall be for Lessee's sole
benefit.
3. Maintenance: After taking possession of the Property, and completion of
-----------
its improvements, Lessee shall make any and all repairs and alterations it deems
appropriate to keep the Property in a good and usable condition and state of
repair; and in no event shall Lessor ever be deemed to have any responsibility
whatsoever for such repairs or improvements, including street improvements.
4. Net Lease: It is mutually agreed and acknowledged between Lessor and
---------
Lessee that this is a Net Lease. For the purpose of this clarification, the term
"Net Lease" shall mean that Lessee shall pay all taxes, insurance, repairs and
maintenance (including reconstruction), and all other costs and expenses of
every kind and nature in connection with the Property during the Lease Term and
that Lessor shall not be required to expend any sums whatsoever after delivery
of possession.
-3-
<PAGE>
IV. SUBLEASES AND ASSIGNMENTS
-------------------------
Lessee may not assign this Lease or sublet any portion of the Property
without Lessor's written consent, not to be unreasonably withheld; provided,
however, that Lessee may assign or sublet on written notice to Lessor to any
business entity or financial institution affiliated with or under common control
with Lessee, and to any financial institution into which Lessee may be merged,
to which Lessor hereby consents.
V. COVENANT OF TITLE
-----------------
Lessor covenants that Lessor has good, right and lawful authority to lease
the Property, that it is zoned for Lessee's intended use as a branch bank, and
that Lessor will at all times, while this Lease remains in effect, protect and
preserve Lessee's right to possession and use of the Property pursuant to the
terms of this Lease. Lessee's obligation to accept possession of the Property
and to commence the Lease Term shall be dependent on Lessor's ability to provide
to Lessee, at Lessee's expense, a title insurance policy insuring Lessee's
leasehold interest in the Property in an amount, with an insurer, and on terms
acceptable to Lessee, and evidence of the appropriate zoning, as set forth
herein.
VI. USE
---
Lessee may use the Property for any lawful purpose. Lessee shall conduct
its business, insofar as the same relates to Lessee's use and occupancy of the
Property, in a lawful manner and in compliance with all governmental laws,
rules, regulations and orders applicable to any business of Lessee conducted in
and upon the Property.
-4-
<PAGE>
VII. LESSEE'S COVENANT OF CARE
-------------------------
Lessee, throughout the Lease Term, shall keep the Property free and clear
of any unnecessary dirt or filth.
VIII. UTILITIES
---------
During the Lease Term, Lessee shall pay when due all utilities charges.
Whenever Lessee desires to make any changes or additions to existing gas,
electricity, water, telephone or other utility services on or in the Property
lawfully requested or reasonably necessary, it shall pay for all charges
assessed in connection with making the same.
IX. INDEMNIFICATION
---------------
1. Indemnity: Lessee covenants and agrees that it will defend, indemnify
---------
and hold harmless Lessor for and from all damages, claims, suits, or causes of
action resulting from injuries to person or persons or damage to property and
arising on or out of the use, occupancy or condition of the Property.
2. Environmental Laws: Without limiting the foregoing, Lessee covenants
------------------
and agrees that at no time will its occupancy, use or maintenance of the
Property cause or contribute to any violation of local, state or federal
environmental or health laws, orders and regulations ("laws"), including but not
limited to those dealing with hazardous wastes or materials, water or air
pollution, and solid waste disposal.
-5-
<PAGE>
X. FIRE & CASUALTY
---------------
It shall be Lessee's sole obligation to maintain and insure the
improvements on the Property for its own benefit and no failure to do so and no
inability to utilize the Property, whether as a branch banking location or
otherwise, as a result of fire, flood, civil disorder, earthquake or other
casualty of any sort whatsoever shall reduce in any wise Lessee's obligation to
pay rent and perform this Lease during the Term hereof, without reduction or
interruption.
XI. EMINENT DOMAIN
--------------
1. Taking: In the event that any portion of the Property is taken by
------
eminent domain or by sale in lieu thereof consented to by Lessee, this Lease
shall not terminate but each party shall be entitled to their respective damages
as allowed by law for their respective interests in the Property and its
improvements. However, in the event that a portion of the property significant
enough to interfere substantially and materially with Lessee's conduct of its
business thereon, in Lessee's judgment, is taken by eminent domain or by sale in
lieu thereof consented to by Lessee, Lessee may terminate this Lease within
sixty (60) days after Lessee has been deprived of possession by such taking or
sale; provided, that Lessor may elect to tender to Lessee for its consideration
additional property adjacent to the Property, which Lessee may, in
-6-
<PAGE>
its judgment, deem suitable for use in restoring the usefulness to it of the
Property, to be added by amendment of this Lease; and, provided further, that
nothing herein shall prohibit Lessor and Lessee from mutually agreeing to a
reduction of the monthly rent to reflect the continuing lease of less than all
of the original Property.
2. Award: Out of any award for any taking of the Property, Lessor
-----
shall be entitled to receive and retain all amounts awarded to Lessor for the
underlying real estate as encumbered by this Lease, and that Lessee shall be
entitled to receive and retain such amounts which are awarded to Lessee because
of the taking of its trade fixtures and leasehold improvements and its Lessee's
leasehold interest in the Property, including its option described herein.
XII. REMEDIES
--------
1. Default: Time is of the essence of this agreement and the parties
-------
hereto agree that if any monthly rent installment as herein provided or any
other rent payments to be made by Lessee as required herein are not made when
due, or in case Lessee shall fail to keep and perform every covenant, condition
and agreement herein contained, made and to be performed and kept by Lessee
strictly in accordance with the terms hereof, then and upon the happening of any
of the foregoing event, Lessor may give Lessee notice of such default. Lessee
shall commence to cure such default within ten (10) days following the giving of
such notice and having commenced,
-7-
<PAGE>
shall diligently proceed with and complete the curing of such breach within a
reasonable time. If Lessee fails to cure such default after notice and
opportunity as hereinabove provided, Lessor shall, at its option, have the right
to terminate this Lease and to reenter or to take possession of the Property
without terminating this Lease. However, if Lessor reenters without terminating
this Lease, Lessor may relet the Property or any part thereof upon such terms
and conditions as Lessor in Lessor's sole discretion shall deem advisable.
2. Mitigation: All rents received by Lessor as a result of such reletting
----------
shall be applied as follows:
(a) to reimburse Lessor for all expenses incurred in reentering and
reletting, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(b) to reimburse Lessor for costs of curing any breach of this Lease by
Lessee, including but not limited to attorney's fees and any court costs, and
costs of preserving, repairing or restoring the Property;
(c) to reasonable costs of adapting the Property for the use of the tenant
under such reletting;
(d) to arrearages in rent due hereunder, first being applied to the first
accruing rentals and last to the most recently accruing; and
(e) any remainder shall be held for the balance of the Lease term, but
credited to the account of Lessee.
-8-
<PAGE>
3. Non-Waiver: The foregoing remedies are not intended to limit or qualify
----------
such other remedies as Lessor may have at law or in equity.
XIII. TERMINATION
-----------
At the end of the Lease Term, or upon its termination at any earlier date
by virtue of any of the provisions hereof, Lessee covenants to surrender and
deliver up possession of the Property.
XIV. REMOVAL OF IMPROVEMENTS OR TRADE FIXTURES
-----------------------------------------
Upon the termination of this Lease or any extensions thereof, if Lessee
shall otherwise be current and in good standing hereunder, Lessee shall have the
right to remove from the Property any and all improvements, trade fixtures and
devices, including but not limited to mechanical and security devices peculiar
to the banking business, which it may have installed on the Property at its
expense, within sixty (60) days of said termination.
XV. ALTERATION OR EXPANSION
-----------------------
Lessee shall be permitted during the term hereof to perform alterations to
the Property at its expense and without any change in the rent called for by
this Lease.
XVI. MECHANIC'S LIENS
----------------
Lessee agrees to pay when due all sums of money that may become due for any
labor, services, materials, supplies or equipment furnished to or for Lessee in,
and upon or about the Property and which may be secured by any mechanic's,
materialman's or other lien against the Property.
-9-
<PAGE>
XVII. GRANTING AND USE OF EASEMENTS
-----------------------------
1. Utilities Easements: Lessor agrees, without payment of consideration,
-------------------
from time to time during the term of this Lease at the request of Lessee to
grant easements, licenses, rights of way and other rights and privileges in the
nature of easements upon or across the Property for utilities necessary for
Lessee's intended use of said premises.
2. Cross Easements: In the event Lessee deems it advisable to enter into
---------------
any cross-easements or similar agreements with occupants of adjoining
properties, it may do so and Lessor agrees to join in any such agreements on
request from Lessee, should Lessee deem such consent necessary, but without any
cost or liability on the part of Lessor, no such agreement to extend beyond the
Lease Term or survive its termination.
XVIII. SIGNS
-----
Lessee shall have the right to install, erect and maintain upon the
Property all signs necessary or appropriate to the conduct of its business.
Lessee shall not install, erect or maintain any sign in violation of any
applicable law, ordinance or use permit of any governmental authority. Lessee
may remove (but shall not be required to remove) the same or any part thereof at
any time during said term or upon the expiration thereof or sooner termination
of this Lease, or within thirty (30) days after such expiration or termination,
and Lessee at its own expense shall repair any damage caused by the removal
thereof.
-10-
<PAGE>
XIX. HOLDING OVER
------------
If Lessee continues to occupy the Property after the expiration of the
Lease Term without exercising its purchase option, and Lessor elects to accept
rent thereafter, a monthly tenancy terminable by either party on one month's
notice shall be created, which shall be upon the same rent, terms and conditions
as those herein specified.
XX. GENERAL CONDITIONS
------------------
Lessee shall not be responsible for the payment of any commissions in
relation to the leasing transaction represented by this Lease. This Lease is
the entire agreement of the parties and may only be modified by a writing signed
by both parties, or the addition of a completed Exhibit "A" in accordance with
the terms hereof.
XXI. CONSTRUCTION
------------
This Lease and all of the terms and conditions herein contained shall be
binding upon the parties hereto and their successors in interest, including
Lessee's assigns and subtenants accepted by Lessor. Words and phrases herein
shall be construed as in singular or plural number and as feminine, masculine or
neuter gender, according to the context.
-11-
<PAGE>
2. Except as may be otherwise specifically provided herein, Lessee shall
have no right to terminate this Lease or be entitled to any rent abatement or
reduction. Notwithstanding any other provisions contained in this Lease, in the
event the Lessee is closed or taken over by the banking authority of the State
of Arkansas, or other bank supervisory authority, the Lessor may terminate the
Lease only with the concurrence of such banking authority or other bank
supervisory authority, and any such authority shall in any event have the
election either to continue or to terminate the lease: Provided, that in the
event this Lease is terminated, the maximum claim of Lessor for damages or
indemnity for injury resulting from the rejection or abandonment of the
unexpired term of the Lease shall in no event be in an amount not exceeding the
rent reserved by the Lease, without acceleration, for the year next succeeding
the date of the surrender of the premises to the Lessor, or the date of reentry
of the Lessor, whichever first occurs, whether before or after the closing of
the Lessee as a bank, plus an amount equal to the unpaid rent accrued, without
acceleration up to such date.
XXII. NOTICES
-------
Any notice herein required or permitted to be given shall be deemed given
if and when mailed in a sealed envelope by United States certified mail, return
receipt requested, postage properly prepaid and addressed as set forth in
Article I-1 and 2 hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease on the dates noted
below, effective as of the date first above written.
LESSOR:
/s/ David L. Taylor /s/ Carolyn L. Taylor
- ---------------------------- ------------------------------
DAVID L. TAYLOR CAROLYN L. TAYLOR
Date: 9-7-94 Date: 9-7-94
----------------------- -------------------------
LESSEE:
BANK OF OZARK
By:/s/ Mark D. Ross
---------------------------
Title: President
------------------------
Date: 9-7-94
-------------------------
-13-
<PAGE>
STATE OF ARKANSAS )
) ss: ACKNOWLEDGEMENT
---------------
COUNTY OF YELL )
On this day personally appeared before the undersigned, a Notary Public
within and for the County and State aforesaid, duly qualified, commissioned and
acting, the within named DAVID L. TAYLOR and CAROLYN L. TAYLOR, to me personally
well known, who stated that they had so signed, executed and delivered said
foregoing instrument for the consideration and purposes therein mentioned and
set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
__________ day of September, 1994.
--------------------------------
Notary Public
My Commission Expires:
January 4, 2004
- ---------------------
(S E A L)
-14-
<PAGE>
STATE OF ARKANSAS )
) ss: ACKNOWLEDGMENT
--------------
COUNTY OF YELL )
On this 7th day of September, 1994, before me, the undersigned, a Notary
Public, duly commissioned, qualified and acting, within and for said County and
State, appeared in person the within named Mark D. Ross, to me personally well
known, who stated that he/she was the President of BANK OF OZARK, an Arkansas
banking association, and was duly authorized in his/her capacity to execute the
foregoing instruments for and in the name and behalf of said corporation, and
further stated and acknowledged that he/she had so signed, executed and
delivered said foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
7th day of September, 1994.
--------------------------------------
Notary Public
My Commission Expires:
January 4, 2004
- ---------------------
(S E A L)
-15-
<PAGE>
EXHIBIT "A"
COMMENCEMENT DATE
1. This lease shall commence on the following date: January 1, 1995.
IDENTIFIED & ACCEPTED:
BANK OF OZARK
By:/s/ Frank Lawrence, Jr.
-----------------------------
Title: Vice President
--------------------------
/s/ David L. Taylor
--------------------------------
DAVID L. TAYLOR
/s/ Carolyn L. Taylor
--------------------------------
CAROLYN L. TAYLOR
-16-
<PAGE>
EXHIBIT "B"
PURCHASE OPTION
1. Lessor to provide title policy acceptable to Lessee at Lessor's expense.
2. Closing within thirty days of end of the full 10-year Lease Term, as of the
last day of the full 10-year Lease Term.
3. Lessor to pay transfer taxes.
4. No warranties whatsoever as to improvements or condition of premises other
than as set forth in the Lease.
5. Lessee pays all taxes and insurance, no proration.
6. Conveyance by general warranty deed as directed by Lessee.
-17-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
on this 22nd day of May, 1997, by and between Bank of the Ozarks, Inc. (formerly
Ozark Bankshares, Inc.), an Arkansas corporation (the "Corporation"), and George
G. Gleason, II, an individual and resident of Arkansas ("Gleason").
W I T N E S S E T H:
WHEREAS, the Corporation is currently contemplating a proposed initial
public offering of its Common Stock (the "Public Offering");
WHEREAS, the Board of Directors of the Corporation believes that the
future services of Gleason will be of great value to the Corporation and, by
this Agreement, proposes to ensure his continued employment for a certain period
after the Public Offering;
WHEREAS, Gleason hereby expresses his willingness to continue in the
employment of the Corporation as is hereby provided;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Period of Active Employment. Gleason shall continue in the active
---------------------------
employment of the Corporation commencing on the date of the effective date of
the Public Offering and ending on December 31, 2000 (the "Term").
2. Duties. During the period of this contract, and subject to the
------
limitations hereinafter expressed, Gleason agrees to serve the Corporation
faithfully and to the best of his ability, under the direction of the Board of
Directors of the Corporation, devoting his time, energy and skill to the
management of the Corporation's business.
3. Compensation. The Corporation agrees to pay to Gleason during the
------------
period of his active employment, as defined in Section 1 above, as base salary
for his full time services:
(a) The sum of Three Hundred Eighteen Thousand Dollars ($318,000)
per annum, with such base salary to be prorated for the portion of the
1997 calendar year within the Term and to be payable in semi-monthly
installments. The base salary shall be increased (but not decreased)
commencing on January 1, 1998 and annually thereafter by the same
percentage as the percentage increase, if any, in the Consumer Price
Index for the twelve months ending on the preceding October 31st. As
used herein, the term "Consumer Price Index" means the Consumer Price
Index for All Urban Consumers (CPI-U), All Items, U.S. Average (1982-
84=100), which is now compiled with the U.S. Department of Labor, and
shall mean and include such other index or statistics as may succeed
it, as adjusted to account for any change in the standard reference
base year.
<PAGE>
(b) A bonus for each fiscal year of the Corporation, commencing with
the fiscal year ended December 31, 1997, in an aggregate amount equal to 1%
of the Corporation's Net Income (on a consolidated basis) for the fiscal
year. As used herein, the term "Net Income" means, for a fiscal year, the
Corporation's income after federal and state income taxes. Each bonus shall
be payable to Gleason no later than the end of the first quarter of the
succeeding fiscal year.
Additional equity based compensation may be paid Gleason from time to
time by majority vote of the Compensation Committee of the Board of Directors of
the Corporation, with members of the Gleason family or any other interested
director abstaining.
4. Restrictive Covenant. Gleason expressly agrees, as a condition to the
--------------------
performance by the Corporation of its obligations hereunder, that during the
term of this Agreement he will not, directly or indirectly, enter into or in any
manner take part in any business competitive with any business of the
Corporation, without the prior written consent of the Corporation.
5. Prohibition Against Assignment. Gleason shall have no right to
------------------------------
commute, encumber or dispose of the right to receive payments hereunder, which
payments and the right thereto are expressly declared to be non-assignable and
non-transferable and, in the event of any attempted assignment or transfer, the
Corporation shall have no further liability hereunder.
6. Reorganization. The Corporation shall not merge or consolidate with
--------------
any other organization or organizations until such organization or organizations
expressly assume the duties of the Corporation herein set forth.
7. Independence of Other Agreements. This Agreement is hereby declared
--------------------------------
to be independent all other benefits and retirement or deferred compensation
plans now or hereafter adopted by the Corporation, including the ESOP and 401(K)
plan currently existing, and shall not, unless mutually agreed upon in writing,
be supplanted or replaced by any other such plan or agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
original the day and year first above recited.
ATTEST: BANK OF THE OZARKS, INC.
/s/ Donna Quandt By: /s/ Mark Ross
- ----------------------------- ---------------------------------
Donna Quandt, Secretary Mark Ross, President
/s/ George G. Gleason, II
------------------------------------
George G. Gleason, II
2
<PAGE>
EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
-------------------------
This Agreement is made as of the ______ day of ___________, 1997,
among Bank of the Ozarks, Inc. (formerly Ozark Bankshares, Inc.), an Arkansas
corporation (the "Corporation"), and _________________________ ("Indemnitee"),
with reference to the following facts:
RECITALS
A. Indemnitee is currently serving as an [Officer and Director] of
the Corporation and/or as an [Officer and Director] of subsidiaries of the
Corporation, and the Corporation wishes Indemnitee to continue in such capacity.
Indemnitee is willing, under certain circumstances, to continue in such
capacity.
B. The indemnities available under the Corporation's articles of
incorporation, bylaws and available insurance, if any, are not adequate to
protect the Indemnitee against the risks associated with his service to the
Corporation and/or to the Corporation's subsidiaries. Indemnitee may not be
willing to continue such service in the absence of the benefits afforded to
Indemnitee under this Agreement.
AGREEMENT
In order to induce Indemnitee to continue to serve as an [Officer and
Director] for the Corporation and/or any of its subsidiaries, and in
consideration for such continued service, the Corporation hereby agrees to
indemnify Indemnitee as follows:
1. The Corporation will pay on behalf of the Indemnitee and his
executors, administrators and heirs, any amount which he is or becomes legally
obligated to pay because of (i) any claim or claims from time to time threatened
or made against him by any Person (as defined herein) because of any act or
omission or neglect or breach of duty, including any actual or alleged error or
misstatement or misleading statement, which he commits or suffers while acting
in his capacity as a director of the Corporation or its subsidiaries or (ii)
being a party, or being threatened to be made a party, to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that he is or was an
officer, director, employee or agent of the Corporation or its subsidiaries or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other entity. The payments which the Corporation will be obligated to make
hereunder shall include, inter alia, damages, charges, judgments, fines,
----- ----
penalties, settlements and expenses, including attorneys' fees, costs of
investigation and costs of defense of legal or equitable or criminal actions,
claims or proceedings and appeals therefrom, and costs of attachment,
supersedeas, bail, surety or other bonds.
2. In the event of payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including
<PAGE>
the execution of such documents necessary to enable the Corporation effectively
to bring suit to enforce such rights.
3. Notwithstanding the provisions of Section 1, the Corporation shall
not be liable under this Agreement to make any payment in connection with any
claim made against the Indemnitee:
(a) for which payment is actually made to the Indemnitee under a valid
and collectible insurance policy, except in respect of any excess beyond
the amount of payment under such insurance;
(b) for which the Indemnitee is entitled to indemnity and/or payment
by reason of having given notice of any circumstance which might give rise
to a claim under any policy of insurance, the terms of which have expired
prior to the effective date of this Agreement;
(c) for which the Indemnitee is indemnified by the Corporation
otherwise than pursuant to this Agreement;
(d) based upon or attributable to the Indemnitee gaining in fact any
remuneration, personal profit or advantage to which he was not legally
entitled;
(e) for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law;
(f) brought about or contributed to by the dishonesty of Indemnitee;
however, notwithstanding the foregoing, Indemnitee shall be protected under
this Agreement as to any claims upon which suit may be brought against him
by reason of any alleged dishonesty on his part, unless a judgment or other
final adjudication thereof adverse to Indemnitee shall establish that he
committed acts of active and deliberate dishonesty with actual dishonest
purpose and intent which were material to the cause of action so
adjudicated; or
(g) if a final decision by a court having jurisdiction in the matter
shall determine that such payment is not lawful.
4. Contribution. If the indemnification provided hereunder is
------------
unavailable and may not be paid to Indemnitee for any reason other than those
set forth in paragraphs (a) through (f) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), Corporation shall contribute to the amount of damages, judgments,
fines, amounts paid in settlement and expenses paid or payable by Indemnitee in
such proportion as is
2
<PAGE>
appropriate to reflect (i) the relative benefits received by Corporation on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of Corporation on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such damages, judgments, fines, amounts paid in settlement and
expenses, as well as any other relevant equitable considerations. The relative
fault of corporation on the one hand and of Indemnitee on the other shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. Promptly after receipt by Indemnitee of notice of the commencement of
any action, suit or proceedings, Indemnitee will, if a claim in respect thereof
is to be made against Corporation under this Agreement, notify Corporation of
the commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Indemnitee otherwise than
under this Agreement with respect to any such action, suit or proceedings as to
which Indemnitee notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. After notice from Corporation to Indemnitee of
its election so as to assume the defense thereof, Corporation will not be
liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ its counsel in such
action, suit or proceedings but the fees and expenses of such counsel
incurred after notice from Corporation of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has been authorized by Corporation, (ii) Indemnitee
shall have reasonably concluded that there may be a conflict of interest
between Corporation and Indemnitee in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and
expenses of counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or
proceedings brought by or on behalf of Corporation or as to which
Indemnitee shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's written
3
<PAGE>
consent. Neither Corporation or Indemnitee will unreasonably withhold its
consent to any proposed settlement.
6. In the event that Indemnitee employs his own counsel pursuant to
Section 5(b)(i) through (iii) above, Corporation shall advance to Indemnitee,
prior to any final disposition of any threatened or pending claim, action, suit
or proceedings, whether civil, criminal, administrative or investigative, any
and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such claim, action, suit or proceedings within
ten (10) days after receiving copies of invoices presented to Indemnitee for
such expenses. Indemnitee agrees that Indemnitee will reimburse Corporation for
all reasonable expenses paid by Corporation in defending any civil or criminal
claim, action, suit or proceedings against Indemnitee in the event and only to
the extent that a final decision by a court having jurisdiction in the matter
shall determine that it is unlawful for Indemnitee to be indemnified by
corporation for such expenses.
7. If Indemnitee is deceased and is entitled to indemnification under any
provision of this Agreement, the Corporation shall indemnify Indemnitee's estate
and his spouse, heirs, administrators and executors against, and the Corporation
shall assume any and all costs, charges and expenses (including attorneys'
fees), penalties and fines actually and reasonably incurred by or for Indemnitee
or his estate in connection with the investigation, defense, settlement or
appeal of any such action, suit or proceeding. Further, when requested in
writing by the spouse of Indemnitee and/or the heirs, executors or
administrators of Indemnitee's estate, the Corporation shall provide appropriate
evidence of the Corporation's agreement set out herein to indemnify Indemnitee
against and to assume itself such costs, charges, liabilities and expenses.
8. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the cost, charges
and expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement by him in the investigation, defense, appeal or settlement of such
suit, action or proceeding but not, however, for all of the total amount
thereof, the Corporation shall nevertheless indemnify Indemnitee as to the
portion thereof to which Indemnitee is entitled.
9. The indemnification and advance payment of expenses as provided by any
provision of this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may be entitled under any provision of law, any Policy (as
defined herein), the Corporation's articles of incorporation, any bylaw, this or
any other agreement, vote of stockholders or disinterested directors, or
otherwise, as to action in his official capacity, and shall continue after
Indemnitee has ceased to occupy such position and shall inure to the benefit of
the heirs, executors and administrators of Indemnitee.
10. This Agreement shall not be construed so as to give rise to a
"contractual liability" which is excluded by any Policy. Each and every term
hereof is enforceable by the Indemnitee solely as to amounts (i) in excess of
the limits of any Policy with respect to costs, charges and expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement for
which coverage is in effect under any Policy and (ii) used under any Policy as a
"deductible"
4
<PAGE>
amount and (iii) which none of any Policy and the other liability insurance
policies of the Corporation clearly covers for the Indemnitee as insured
thereunder; however, in any case in which the Corporation believes a Policy or
its other insurance should cover a loss, cost or expense, the Corporation may
make a contingent advance of monies pursuant to the terms hereof without
admission, waiver or prejudice to its position that the Policy or the
Corporation's other insurance covers the loss, cost or expense.
11. The Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Indemnitee to continue with the Corporation and/or its
subsidiaries in the capacity or capacities as set forth in the recitals to this
Agreement, and acknowledges that Indemnitee is relying upon this Agreement in
continuing in such capacity or capacities. In the event Indemnitee is required
to bring any action to enforce rights or to collect monies due under this
Agreement and is successful in such action, Corporation shall reimburse
Indemnitee for all of Indemnitee's reasonable fees and expenses in bringing and
pursuing such action.
12. Unless the context otherwise clearly indicates to the contrary, the
following terms as used herein shall have the respective meanings set forth
below:
(i) "Person" means any one (or more) individual or natural person or
any one (or more) corporation, firm, joint venture, partnership,
proprietorship, business venture, government, governmental body, agency or
instrumentality, estate, trust, association or other legal entity
whatsoever or a group of same;
(ii) "Policy" shall refer to any insurance policy or coverage obtained
with respect of potential liabilities of directors and officers of the
Corporation.
13. Each of the provisions of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall
be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof.
14. This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Arkansas.
15. This Agreement shall be binding upon Indemnitee and upon Corporation,
its successors and assigns, and shall inure to the benefit of Indemnitee, his
heirs, personal representatives and assigns and to the benefit of Corporation,
its successors and assigns.
16. No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing, signed by both parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BANK OF THE OZARKS, INC.
(formerly Ozark Bankshares, Inc.)
By:_____________________________________
George G. Gleason, II
Chairman and Chief Executive Officer
________________________________________
_____________________, Indemnitee
6
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Bank of the Ozarks, Inc., wca, an Arkansas state chartered bank, which also
does business as Bank of the Ozarks, Inc.
2. Bank of the Ozarks, Inc., nwa, an Arkansas state chartered bank, which also
does business as Bank of the Ozarks, Inc.
<PAGE>
EXHIBIT 23.2
CONSENT OF MOORE STEPHENS FROST, P.A.
As independent public accountants, we hereby consent to the use in this Form
S-1 of our report dated January 24, 1997. We also consent to the reference to
our firm under "EXPERTS" in the Form S-1.
/s/ Moore Stephens Frost, P.A.
Moore Stephens Frost, P.A.
Little Rock, Arkansas
May 22, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement on Form S-1 of our
report dated January 20, 1995, on our audit of the consolidated statement of
income, stockholders' equity and cash flows of Bank of the Ozarks, Inc.
(formerly Ozark Bankshares, Inc.) for the year ended December 31, 1994. We
also consent to the reference to our firm under "EXPERTS" in the Form S-1.
/s/ Baird Kurtz & Dobson
Baird Kurtz & Dobson
Fort Smith, Arkansas
May 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED IN
THE PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 6,815 8,453
<INT-BEARING-DEPOSITS> 210,353 223,491
<FED-FUNDS-SOLD> 350 100
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 35,530 38,072
<INVESTMENTS-CARRYING> 4,078 4,098
<INVESTMENTS-MARKET> 4,094 4,111
<LOANS> 214,462 224,641
<ALLOWANCE> 3,019 3,240
<TOTAL-ASSETS> 270,600 286,942
<DEPOSITS> 231,648 247,263
<SHORT-TERM> 210 215
<LIABILITIES-OTHER> 2,282 2,975
<LONG-TERM> 17,413 17,413
0 0
0 0
<COMMON> 29 29
<OTHER-SE> 18,518 19,047
<TOTAL-LIABILITIES-AND-EQUITY> 270,600 286,942
<INTEREST-LOAN> 19,089 5,307
<INTEREST-INVEST> 2,433 667
<INTEREST-OTHER> 314 42
<INTEREST-TOTAL> 21,836 6,016
<INTEREST-DEPOSIT> 9,005 2,595
<INTEREST-EXPENSE> 10,031 2,900
<INTEREST-INCOME-NET> 11,805 3,116
<LOAN-LOSSES> 1,486 259
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 7,151 2,119
<INCOME-PRETAX> 5,033 1,494
<INCOME-PRE-EXTRAORDINARY> 3,027 957
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,027 957
<EPS-PRIMARY> 1.05 0.33
<EPS-DILUTED> 1.05 0.33
<YIELD-ACTUAL> 5.36 4.88
<LOANS-NON> 2,057 1,771
<LOANS-PAST> 253 22
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 1,553 1,537
<ALLOWANCE-OPEN> 1,909 3,019
<CHARGE-OFFS> 417 50
<RECOVERIES> 41 12
<ALLOWANCE-CLOSE> 3,019 3,240
<ALLOWANCE-DOMESTIC> 3,019 3,240
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
