<PAGE> 1
As filed with the Securities and Exchange Commission on November 12, 1998
Registration No. 333-_______
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
HEARTLAND BANCSHARES, INC.
(Name of small business issuer in its charter)
------------------------------
FLORIDA 6712 65-0854929
State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or ------------------------------
organization)
325 CENTRAL AVENUE
LAKE PLACID, FLORIDA 33852
(941) 465-0472
(Address and telephone number
of principal executive offices)
---------------------------------
JAMES C. CLINARD
325 CENTRAL AVENUE
LAKE PLACID, FLORIDA 33852
(941) 465-0472
(Name, address and telephone
number of agent for service)
---------------------------------
Copies Requested to:
ROBERT C. SCHWARTZ, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP
SUITE 3100, PROMENADE II
1230 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
(404) 815-3758
---------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, check
the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) 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 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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, check
the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum aggregate Amount of
securities to be registered registered offering offering price(1) registration fee
price per share(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.10 par value 650,000 $10.00 $6,500,000 $1807.00
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the fee pursuant to Rule
457(a) under the Securities Act of 1933, as amended.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
===============================================================================
<PAGE> 2
600,000 SHARES (MINIMUM)
650,000 SHARES (MAXIMUM)
COMMON STOCK
HEARTLAND BANCSHARES, INC.
A BANK HOLDING COMPANY FOR
HEARTLAND NATIONAL BANK, SEBRING, FLORIDA
A PROPOSED NATIONAL BANK
This is an initial public offering of shares of Common Stock of
Heartland Bancshares, Inc. (the "Company"). The Company is offering a minimum
of 600,000 shares and a maximum of 650,000 shares at a public offering price of
$10.00 per share. The shares are being offered on a best efforts basis by
certain directors and executive officers of the Company. The directors and
executive officers will not receive any commissions for these sales.
We will deposit all subscription funds in an interest-bearing escrow
account with SunTrust Bank, Central Florida, N.A. until subscriptions for
600,000 shares have been received. If subscriptions for 600,000 shares have not
been received by ________, 199_, we will terminate the offering and promptly
return all subscription funds to subscribers, with any interest earned on the
funds. We may, however, at our option, extend the offering for three
consecutive 90-day periods until ___________, 199_ , without giving notice to
subscribers. We may reject all or part of any subscription for any reason.
There is currently no public market for our Common Stock. The offering
price was arbitrarily determined by the Organizers of the Company and does not
bear any relationship to the Company's assets, book value, net worth or any
other recognized criteria of value. At this time, we do not intend to list the
Common Stock on a national securities exchange or the Nasdaq Stock Market.
<TABLE>
<CAPTION>
Per Share Minimum Maximum
<S> <C> <C> <C>
Price to Public ...................... $10.00 $6,000,000 $6,500,000
Underwriting Discounts and Commissions $ 0 $ 0 $ 0
Proceeds to the Company .............. $10.00 $6,000,000 $6,500,000
</TABLE>
Upon completion of the offering, the Organizers will own 145,000 shares
of Common Stock. Any purchases made by the Organizers will be made on the same
terms as purchases made by other investors and will count towards the
achievement of the minimum offering. The Organizers have represented that all
purchases of Common Stock will be made for investment purposes only and not
with a view to resell the shares.
Investing in these Securities Involves Certain Risks
See "Risk Factors" beginning on page 4 for a discussion of certain factors that
you should consider before you invest in the Common Stock being sold with this
Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense.
These securities are not savings accounts or savings deposits and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
The date of this Prospectus is _____________, 1998.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Prospectus Summary .................................................. 1
Risk Factors ........................................................ 4
The Company ......................................................... 8
Terms of the Offering ............................................... 9
Use of Proceeds ..................................................... 12
Dividend Policy ..................................................... 14
Management's Discussion and Analysis of Financial
condition and Results of Operations ................................. 14
Business of the Company ............................................. 15
Business of the Bank ................................................ 15
Supervision and Regulation .......................................... 20
Organizers and Principal Shareholders ............................... 24
Management .......................................................... 25
Security Ownership of Certain Beneficial Owners and Management ...... 29
Certain Transactions ................................................ 29
Description of Capital Stock ........................................ 30
Legal Proceedings ................................................... 32
Legal Matters ....................................................... 33
Experts ............................................................. 33
Additional Information .............................................. 33
Index to Financial Statements ....................................... F-1
</TABLE>
Appendix A - Escrow Agreement
Appendix B - Subscription Materials
THE ONLY INFORMATION AUTHORIZED BY THE COMPANY REGARDING THIS OFFERING IS
CONTAINED IN THIS PROSPECTUS. ANY OTHER STATEMENTS OR REPRESENTATIONS MADE TO
YOU BY A DEALER, SALESMAN, ORGANIZER OF THE COMPANY, OR ANY OTHER INDIVIDUAL
MUST NOT BE RELIED UPON AS BEING AUTHORIZED BY THE COMPANY. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT AS OF ___________, 1998.
THIS PROSPECTUS DOES NOT OFFER TO SELL, OR SOLICIT OFFERS TO BUY, SHARES OF
STOCK OF THE COMPANY IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
UNTIL ____________ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN
ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS.
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It may
not contain all of the information that is important to you. To fully
understand this offering, you should read the entire Prospectus carefully,
including the risk factors and the financial statements.
THE COMPANY
Heartland Bancshares, Inc. (the "Company") was incorporated in the
State of Florida on August 3, 1998, to operate as a bank holding company under
the federal Bank Holding Company Act of 1956, as amended. The proceeds of this
offering will be used to purchase all of the common stock to be issued by
Heartland National Bank, a national bank to be formed under the laws of the
United States of America (the "Bank"), to provide working capital to the Bank to
commence its operations, to pay organizational expenses, and for other corporate
purposes. Neither the Company nor the Bank has commenced business operations,
and neither will do so until this offering is completed and the necessary
approvals of certain regulatory agencies have been obtained. These regulatory
agencies include the Office of the Comptroller of the Currency ("OCC"), the
Federal Deposit Insurance Corporation ("FDIC"), and the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). The Company's and the
Bank's main office will be located in Sebring, Highlands County, Florida and the
Bank's branch office will be located in Lake Placid, Florida, which is also
situated in Highlands County. We anticipate that the Bank will commence business
operations out of its main office and branch office in August of 1999, or as
soon as practicable after that time. The Bank will operate as a full service
commercial bank, without trust powers, with a primary emphasis on providing high
quality service to meet the financial needs of the individuals and businesses
residing and located in and around Highlands County, Florida.
Our temporary mailing address is 325 Central Avenue, Lake Placid,
Florida 33852, and our temporary telephone number is (941) 465-0472.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock Offered................ 650,000 shares. A minimum of 600,000 shares are required
to be sold in this offering. See "TERMS OF THE
OFFERING."
Common Stock to be Outstanding
after this Offering................. Minimum - 600,000 shares
Maximum - 650,000 shares
Price............................... $10.00 per share
</TABLE>
1
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Offering Conditions................. The following conditions must be met for this offering to be
completed:
- at least $6,000,000 must be deposited with the Escrow
Agent
- the Company must receive
approval from the Federal
Reserve Board of its
application to become a
bank holding company
- the Organizers must receive preliminary approval from
the OCC to charter the Bank
- the proposed Bank must receive approval of its
application for deposit insurance from the FDIC
- the Company must not have
canceled this offering
prior to the time funds
are withdrawn from the
Subscription Escrow
Account
Until all of the Offering
Conditions have been met, all
subscription funds will be
placed in a Subscription Escrow
Account with the Escrow Agent.
The Escrow Agent may invest
subscription funds in certain
short-term investments upon
instruction by the President of
the Company. If the Offering
Conditions are not satisfied,
all subscription funds that
have been placed in the
Subscription Escrow Account,
and any interest earned on the
funds, will be returned
promptly to the subscribers.
If all of the Offering
Conditions are met, the Escrow
Agent will release all funds to
the Company. The funds of any
person subscribing for shares
after the Offering Conditions
are satisfied will not be
placed in escrow, but will be
immediately available to the
Company. At this point, all
subscribers face the risk of
loss of a portion of their
subscription funds regardless
of whether the Company and the
Bank receive final regulatory
approvals. See "TERMS OF THE
OFFERING."
Plan of Distribution................ Shares of the Common Stock of the Company will be
marketed on a best-efforts, 600,000 share minimum basis
exclusively through certain directors and executive officers
of the Company. The directors and executive officers will
not receive any commissions for these sales. If the Offering
Conditions are not satisfied by ______________, 1999, the
Company may engage an underwriter to sell the shares on a
best-efforts basis and the underwriter would receive a
commission on such sales not to exceed 10%. See "TERMS
OF THE OFFERING -- Plan of Distribution."
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
Use of Proceeds..................... The proceeds of the offering will be used:
- to purchase all of the issued and outstanding capital stock
of the Bank
- to provide working capital
for the Bank to commence
its business operations
(including officers' and
employees' salaries and
construction of the
Company's permanent office
facilities)
- to pay expenses in connection with the formation of the
Company, the organization of the Bank, and this
securities offering
- for other general corporate purposes
See "USE OF PROCEEDS."
RISK FACTORS........................ YOU SHOULD READ THE "RISK FACTORS" SECTION, BEGINNING ON
PAGE 4, AS WELL AS THE OTHER CAUTIONARY STATEMENTS
THROUGHOUT THE ENTIRE PROSPECTUS, TO ENSURE YOU
UNDERSTAND THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE
COMPANY'S COMMON STOCK.
</TABLE>
3
<PAGE> 7
RISK FACTORS
Before you invest in the Company's Common Stock, you should be aware
that there are various risks, including but not limited to those described
below. You should consider carefully these risk factors together with all of
the other information included in this Prospectus before you decide to purchase
shares of our common stock.
This Prospectus contains forward-looking statements. Such statements
can be identified by the use of forward-looking words such as "may," "will,"
"expect," "anticipate," "estimate," "continue," or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in this Prospectus.
The risk factors noted in this section and other factors noted throughout this
Prospectus, including certain risks and uncertainties, could cause our actual
results to differ materially from those described in any forward-looking
statement.
NO OPERATING HISTORY
Both the Company and the Bank are newly organized entities, and neither
has commenced business operations.
POSSIBLE LOSS OF A PORTION OF SUBSCRIPTION FUNDS
Before the Bank can begin operations, it must obtain several regulatory
approvals and must meet certain requirements. We expect the OCC to grant
preliminary approval of the Bank's charter application on or around February 6,
1999. We expect the Bank to receive approval of its application for deposit
insurance from the FDIC on or around February 6, 1999. Upon receipt of
preliminary approval from the OCC, the Company will file its application with
the Federal Reserve Board to become a bank holding company. Once preliminary
charter approval is obtained from the OCC, the Bank must obtain final approval
to commence banking operations within eighteen months. There can be no
assurance that these approvals will be obtained or that the Bank's opening will
occur within eighteen months after receiving preliminary approval from the OCC.
In the event that we have satisfied the Offering Conditions, broken
escrow and issued the shares of Common Stock, but final approval to commence
banking operations has not been granted within eighteen months after receipt of
preliminary approval from the OCC, we will seek shareholder approval to
dissolve and liquidate the Company. If the shareholders approve a dissolution
or a liquidation of the Company, we will return to subscribers all subscription
funds with interest, less all expenses incurred by the Company, including
offering expenses, organizational and pre-opening expenses of the Company and
the Bank, and claims of creditors. In short, if you invest in the Common Stock
and the Company breaks escrow and incurs start-up expenses, but final
regulatory approval is not granted, you may lose part of your initial
investment. See "TERMS OF THE OFFERING -- Failure of Bank to Commence
Operations."
RELIANCE ON KEY MANAGEMENT
Regulatory approval to establish and operate a national bank partially
depends upon the OCC's approval of the bank's proposed chief executive officer.
Generally, the chief executive officer of a start- up financial institution is
considered vital to the potential success of the new institution. In our
charter application to the OCC, we proposed James C. Clinard as the Bank's
chief executive officer. If
4
<PAGE> 8
Mr. Clinard were to become unavailable for any reason, final regulatory
approval to commence banking operations would be delayed until the OCC approved
a suitable replacement. It is possible that we would not be able to find a
suitable replacement for Mr. Clinard. See "MANAGEMENT."
FINANCIAL POSITION OF THE COMPANY
Initially, the Company will merely act as the sole shareholder of the
Bank. Thus, the profitability of the Company will be dependent upon the
successful operation of the Bank. Typically, new banks are not profitable in
the first year of operation and sometimes are not profitable for several years.
The Bank will incur substantial expenses in establishing itself as a going
concern, and we can offer no assurance that the Bank will be profitable or that
future earnings, if any, will meet the levels of earnings prevailing in the
banking industry.
COMPETITION
The Bank will be a full service commercial bank, without trust powers,
in Highlands County, Florida. Competition among financial institutions in
Highlands County is intense, and the Bank will compete with other state and
national banks, savings and loan associations, consumer finance companies,
credit unions, money market mutual funds, and other financial institutions
which have far greater financial resources than those available to the Bank.
For example, as a start-up financial institution, the Bank's relatively small
capital base may affect its ability to compete for loans due to regulatory
lending limitations. In addition, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 has further increased competition by
eliminating interstate branching barriers for certain financial institutions.
The Bank's size may also impact its ability to compete effectively with larger
institutions in offering other financial services. If the Bank is unable to
compete for deposits effectively, it would likely have an adverse effect on the
Bank's potential for growth and profitability. See "BUSINESS OF THE BANK --
Market Area and Competition."
UNPREDICTABLE ECONOMIC CONDITIONS
Commercial banks and other financial institutions are affected by
economic and political conditions, both domestic and international, and by
governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply, scarce natural
resources, international disorders and other factors beyond the control of the
Company may adversely affect its profitability. See "BUSINESS OF THE BANK --
Monetary Policies."
INTEREST RATE SENSITIVITY
The Bank will attempt to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing, and capital policies. The Bank's
asset/liability mix will likely be monitored on a daily basis with a monthly
report reflecting interest-sensitive assets and interest-sensitive liabilities
being prepared and presented to the Bank's Board of Directors. The objective of
this policy is to control interest-sensitive assets and liabilities to attempt
to minimize the impact of substantial movements in interest rates on the Bank's
earnings. Nevertheless, rapidly rising or falling interest rates may adversely
affect the Bank's performance.
GOVERNMENT REGULATION
Both the Company and the Bank will operate in a highly regulated
environment and will be subject to supervision by several governmental
regulatory agencies, including the Federal Reserve Board, the OCC, the FDIC and
the Securities and Exchange Commission (the "SEC"). The Company and the Bank
are vulnerable to future legislation and government policy, including bank
deregulation and interstate
5
<PAGE> 9
expansion, which could adversely affect the banking industry as a whole. In
particular, the Bank will be subject to regulatory capital requirements.
Although we believe that the Bank's initial capitalization will be sufficient
to support the Bank's anticipated growth for its first five years of operation,
these regulatory capital requirements may restrict future growth without the
infusion of additional capital. See "SUPERVISION AND REGULATION."
PURCHASES BY ORGANIZERS
Upon completion of the offering, the Organizers will own 145,000
shares, which will equal 24.2% of the 600,000 shares to be outstanding upon
completion of the minimum offering. See "ORGANIZERS AND PRINCIPAL
SHAREHOLDERS." All purchases by the Organizers will be made on the same terms
as the purchases made by other investors and will count towards the achievement
of the minimum offering. The Organizers have represented to the Company that
all purchases of Common Stock will be made for investment purposes only and not
with a view to resell the shares.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation contain provisions requiring
supermajority (66 2/3%) shareholder approval to effect certain extraordinary
corporate transactions without the approval of the Board of Directors. These
provisions could make it more difficult for a third party to bring about a
merger, sale of control or similar transaction, even if the owners of a
majority of the Common Stock vote in favor of such a transaction. In addition,
the Company's Articles of Incorporation establish a classified Board of
Directors, which means that only one-third of the members of the Board of
Directors is elected each year and each director serves for a term of three
years. The Company's Articles of Incorporation also authorize the Board of
Directors to issue a series of preferred stock without shareholder action. The
issuance of preferred stock by the Company could discourage a third party from
attempting to acquire, or make it more difficult for a third party to acquire, a
controlling interest in the Company, and could adversely affect the voting power
or other rights of holders of the Common Stock. These provisions also make it
more difficult for a third party to achieve a change in control of the Company
through the acquisition of a large block of the Company's Common Stock without
approval of the Board of Directors. These provisions may reduce the trading
price of the Common Stock.
The State of Florida has statutory provisions relating to business
combinations with so-called "interested shareholders" but the Company has
elected, as allowed by Florida law, not to be governed by these provisions. See
"DESCRIPTION OF COMMON STOCK."
NO ESTABLISHED MARKET
Since the size of the offering is relatively small, it is unlikely that
an active and liquid trading market will develop and be maintained. You should
only invest in the Common Stock if you have a long-term investment intent. If
an active market does not develop, you may not be able to sell your shares
promptly or perhaps at all. Even if you can sell your shares, you may not be
able to sell them at a price equal to or above the price you paid for them. At
this time, we do not intend to list the Common Stock on any national securities
exchange or on the Nasdaq Stock Market.
NO DIVIDENDS
The Company does not expect to pay dividends on the Common Stock now or
in the future. Rather, we intend to retain future earnings (if any) to enhance
the Bank's capital structure or to defray its operating costs. Dividend
distributions of national banks are restricted by statute and regulation. See
"DIVIDEND POLICY."
6
<PAGE> 10
ARBITRARY DETERMINATION OF OFFERING PRICE
There is no established market for shares of the Company's Common
Stock, nor was there an established market prior to this offering. The offering
price was arbitrarily determined by the Organizers, and does not bear any
relationship to the Company's assets, book value, net worth, or any other
recognized criteria of value. In determining the offering price of the Common
Stock, the Organizers considered the OCC bank capital requirements and general
market conditions for the sale of securities. Should a market develop for the
Common Stock after this offering is complete, the market price may be less than
the public offering price.
ABSENCE OF PREEMPTIVE RIGHTS AND CUMULATIVE VOTING RIGHTS
The Company's shareholders will not have any preemptive rights with
respect to the issuance of additional shares of Common Stock or any other class
of stock, which means that if the Company decides to issue additional shares of
Common Stock, existing shareholders will not automatically be entitled to
purchase additional shares to maintain their percentage ownership. In addition,
the Company's shareholders will not have cumulative voting rights which means
that, in the election of directors, the Company's shareholders will be entitled
to cast one vote per share for each director position to be filled. Under a
cumulative voting scheme, each shareholder would be entitled to cast a total
number of votes equal to the number of shares owned by the shareholder
multiplied by the number of director positions being filled, and to cast these
votes for any one director or divide the votes among several nominated
directors. One effect of cumulative voting is to prevent a majority shareholder
from necessarily being able to determine the make-up of the entire board of
directors.
The authorized Common Stock of the Company consists of 10,000,000
shares. If, in the future, the Board of Directors of the Company should decide
to issue additional shares of the authorized Common Stock of the Company, your
ownership interest in the Company would be diluted.
POSSIBLE DILUTIVE EFFECT OF STOCK OPTION PLANS
The Company intends to establish an Incentive Stock Option Plan which
will allow the Company to grant stock options to employees who are contributing
significantly to the management or operation of the business of the Company or
its subsidiaries. Under this plan, the President of the Bank, James C. Clinard,
will annually receive options to purchase 3,000 shares of the Company's common
stock. In addition, the Board of Directors intends to establish a directors
stock option plan, which will be designed to provide incentive compensation to
directors in the event that the Company's common stock increases in value
during the term of such options. Upon completion of the offering, each
Organizer will receive options to purchase 5,000 shares of Common Stock at an
exercise price of $10.00 per share. The grant of options under the Incentive
Stock Option Plan and the directors stock option plan would dilute your
ownership interest in the Company. See "MANAGEMENT--Stock Option Plans."
FUTURE CAPITAL NEEDS
We intend to capitalize the Bank at $5,600,000, regardless of whether
the minimum or maximum number of shares of Common Stock of the Company are
sold. Based on a capitalization of $5,600,000, we believe that the Bank will be
a "well capitalized" institution. See "SUPERVISION AND REGULATION." Any funds
in addition to the $5,600,000 capitalization will be reserved for the growth of
the Bank in compliance with OCC regulations. Although we anticipate that the
minimum amount of capital to be raised by this offering (i.e., $6,000,000) will
be sufficient to support the Bank's immediate capital needs, the Board of
Directors of the Company may, from time to time, issue additional shares of the
authorized Common Stock of the Company to obtain additional capital. These
additional shares may
7
<PAGE> 11
be offered on terms different from the terms of this offering. Future issuance
of additional shares would dilute your ownership interest in the Company.
YEAR 2000
We are currently evaluating the computer systems of our data processing
vendor to determine whether modifications and expenditures will be necessary to
make our systems compliant with Year 2000 requirements. These requirements have
arisen due to the widespread use of computer programs that rely on two-digit
date codes to perform computations or decision-making functions. Many of these
programs may fail as a result of their inability to properly interpret date
codes beginning January 1, 2000. For example, such programs may misinterpret
"00" as the year 1900 rather than 2000. In addition, some equipment being
controlled by microprocessor chips may not deal appropriately with the year
"00." The Company's data processing vendor has been certified as being Year
2000 compliant. As the Company expects that any computer systems or software
purchased for the Bank's operations will be Year 2000 compliant, we do not
anticipate that the Company or the Bank will incur significant operating
expenses or be required to incur material costs to be Year 2000 compliant. The
Company and the Bank will, however, form a committee which will continue to
analyze and modify their systems and requirements. In addition, the Company and
the Bank will have relationships with third parties other than their data
processing vendor that have computer systems that may not be Year 2000
compliant. To the extent such third parties' systems are not fully Year 2000
compliant, there can be no assurance that potential systems interruptions or
the cost necessary to update software would not have a material adverse effect
on the Company's or the Bank's business, financial condition, results of
operations, or business prospects. See "BUSINESS OF THE BANK - YEAR 2000."
NO UNDERWRITER OF THIS OFFERING
There is no underwriter involved in this offering. Sales will be
solicited only by certain executive officers and directors of the Company.
Accordingly, there can be no assurance that the shares will be sold. See "TERMS
OF THE OFFERING."
THE COMPANY
The Company was incorporated under the laws of the State of Florida on
August 3, 1998, to operate as a bank holding company pursuant to the federal
Bank Holding Company Act of 1956, as amended, and to purchase all of the
authorized capital stock of the Bank, which will conduct a general banking
business in Highlands County, Florida. All of the Organizers reside in Highlands
County, except for Mr. Grigsby who resides in Okeechobee County, Florida. All of
the Organizers will serve on the initial Board of Directors of the Company and
the Bank. See "ORGANIZERS AND PRINCIPAL SHAREHOLDERS." See "MANAGEMENT."
The Organizers expect to receive preliminary approval from the OCC to
charter the Bank on or around February 6, 1999. The Company also expects the
Bank to receive approval of its application for deposit insurance from the FDIC
on or around February 6, 1999. Upon receipt of preliminary approval from the
OCC, the Company will file an application to become a bank holding company with
the Federal Reserve Board. Upon obtaining regulatory approval, the Company will
be a registered bank holding company subject to regulation by the Federal
Reserve Board. See "BUSINESS OF THE BANK."
The principal offices of the Company and the Bank will be located at
320 U.S. Highway 27 North, Sebring, Florida 33870. The Bank will also operate a
branch office which will be located at 600 U.S. Highway 27 North, Lake Placid,
Florida 33852. The Company has entered into contracts for the purchase of land
for each location. Construction on the two offices is expected to begin in
February of 1999, and it
8
<PAGE> 12
is anticipated that the Bank will commence operations in August of 1999, or as
soon thereafter as practicable. See "BUSINESS OF THE COMPANY -- Premises." The
mailing address of the Company's present temporary office is Heartland
Bancshares, Inc., 325 Central Avenue, Lake Placid, Florida 33852 and its
temporary telephone number is (941) 465-0472.
TERMS OF THE OFFERING
GENERAL
The Company is offering hereunder 650,000 shares of its Common Stock
for cash at a price of $10.00 per share. A minimum subscription of 500 shares
is required for each subscription hereunder. Investors may subscribe to a
maximum of 50,000 shares, or 7.7% of the total number of shares being offered.
The purchase price shall be paid in full upon execution and delivery of the
Subscription Agreement. All subscriptions tendered by investors are subject to
acceptance by the Board of Directors of the Company, and the Company reserves
the absolute and unqualified right to reject or reduce any subscription for any
reason prior to acceptance. Subscriptions which are rejected by the Company
will be returned to the subscriber without interest. Investors whose
subscription is reduced by the Company may withdraw their subscription within
ten days after being notified of such reduction by the Company. The Company
reserves the right to cancel this offering at any time prior to the time it
withdraws funds from the Subscription Escrow Account, for any reason
whatsoever.
Prior to this offering there has been no established public market for
the shares of the Common Stock and there can be no assurance that an
established market for such stock will develop. The offering price has been
arbitrarily determined and is not a reflection of the Company's book value, net
worth or any other such recognized criteria of value. In determining the
offering price of the Common Stock, the capital requirements imposed by the OCC
and general market conditions for the sale of such securities were considered.
There can be no assurance that, if a market should develop for the Common
Stock, the post-offering market price will equal or exceed the offering price.
CONDITIONS OF THE OFFERING
This offering will expire at 5:00 p.m. Eastern Time, on _______, 199__
(90 days from the date of this Prospectus) (the "Expiration Date"), unless such
date is extended by the Company. The Expiration Date may be extended by the
Company without notice to subscribers for up to three consecutive 90-day
periods, or not later than __________, 19__. The offering is expressly
conditioned upon fulfillment of the following conditions (the "Offering
Conditions") on or prior to the Expiration Date, as extended. The Offering
Conditions, which may not be waived, are as follows:
(a) not less than $6,000,000 shall have been deposited with the Escrow
Agent in the Subscription Escrow Account;
(b) the Company shall have received approval from the Federal Reserve
Board of its application to become a bank holding company;
(c) the Organizers shall have received preliminary approval from the
OCC to charter the Bank;
(d) the proposed Bank shall have received approval of its application
for deposit insurance from the FDIC; and
(e) the Company shall not have canceled this offering prior to the time
funds are withdrawn from the Subscription Escrow Account.
9
<PAGE> 13
ESCROW OF SUBSCRIPTION FUNDS
Until the Offering Conditions above have been met, all subscription
funds and documents tendered by investors will be placed in an escrow account
(the "Subscription Escrow Account") with SunTrust Bank, Central Florida, N.A.
(the "Escrow Agent"). Pursuant to the terms of the Escrow Agreement (the form
of which is attached to this Prospectus as Appendix A), if all of the Offering
Conditions are met, the Company may certify such fact to the Escrow Agent and
the Escrow Agent will release all subscription funds, and any profits thereon,
to the Company. Subscription funds are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency.
Pending disposition of the Subscription Escrow Account under the Escrow
Agreement, the Escrow Agent is authorized, upon instructions to be given by the
President of the Bank, to invest subscription funds in investments of the
United States Government, United States Government-backed securities, and/or in
repurchase agreements collateralized by United States Government-backed
securities. The Company will invest the subscription funds and any additional
funds obtained after breaking escrow and prior to the time that the Company
infuses capital into the Bank in a similar manner. The offering proceeds will
be used to purchase capital stock of the Bank and to repay expenses incurred in
the organization of the Company and the Bank. See "USE OF PROCEEDS."
In the event the Offering Conditions are not met by the Expiration
Date, as extended, the Escrow Agent shall promptly return to the subscribers
their subscription funds, together with their allocated share of profits, if
any, earned on the investment of the Subscription Escrow Account. Each
subscriber's proportionate share of Subscription Escrow Account earnings shall
be that fraction (i) the numerator of which is the dollar amount of such
subscriber's tendered subscription multiplied by the number of days between the
date of acceptance of the investor's subscription and the date of the offering
termination, inclusive (the subscriber's "Time Subscription Factor"), and (ii)
the denominator of which is the aggregate Time Subscription Factors of all
investors depositing subscription funds in the Subscription Escrow Account. If
the Offering Conditions are not satisfied, the expenses incurred by the Company
will be borne by the Organizers and not by the subscribers.
NO ASSURANCE CAN BE GIVEN THAT SUBSCRIPTION FUNDS CAN OR WILL BE
INVESTED AT THE HIGHEST RATE OF RETURN AVAILABLE OR THAT ANY PROFITS WILL BE
REALIZED FROM THE INVESTMENT OF SUBSCRIPTION FUNDS.
If all Offering Conditions are satisfied, and the Company withdraws the
subscription funds from the Subscription Escrow Account, all profits and
earnings on such account shall belong to the Company.
SunTrust Bank, Central Florida, N.A., by accepting appointment as
Escrow Agent under the Escrow Agreement, in no way endorses the purchase of the
Company's securities by any person.
FAILURE OF BANK TO COMMENCE OPERATIONS
The OCC requires that a new national bank open for business (i.e.,
obtain a charter) within 18 months after receipt of preliminary approval from
the OCC. The Organizers anticipate that the Bank will open for business in
August of 1999. Because final approval of the Bank's charter is conditioned on
the Company's raising $6,000,000 of funds to capitalize the Bank, the Company
expects to issue the shares of Common Stock before it has obtained all final
regulatory approvals for the Bank. In the event that the Company issues the
shares of Common Stock and the OCC does not grant the Bank final regulatory
approval to commence banking operations by 18 months after the Bank's receipt
of preliminary approval from the OCC, the Company will solicit shareholder
approval for its dissolution and liquidation, in which event the Company will
promptly return to subscribers all subscription funds and interest earned
thereon, less all expenses incurred by the Company, including the expenses of
the offering and the organizational and pre-opening expenses of the Company and
the Bank. Therefore, if the Company and the Bank do not
10
<PAGE> 14
receive final regulatory approvals, subscribers whose funds were originally
placed in escrow and subscribers whose funds were immediately available to the
Company face the risk of loss of a portion of their subscription funds. It is
possible that this return may be further reduced by amounts paid to satisfy
claims of creditors, as discussed in the following paragraph.
Once the Company issues the shares of Common Stock offered hereby, the
offering proceeds may be considered part of general corporate funds and thus
may be subject to the claims of creditors of the Company, including claims
against the Company that may arise out of actions of the Company's officers,
directors, or employees. It is possible, therefore, that one or more creditors
may seek to attach the proceeds of the offering prior to the Bank's
commencement of banking operations. If such an attachment occurred and it
became necessary to pay the subscription funds to shareholders because of
failure to obtain all necessary regulatory approvals, the payment process might
be delayed, and if it became necessary to pay creditors from the subscription
funds, the payment to shareholders might be further reduced.
PURCHASES BY ORGANIZERS OF THE COMPANY
Upon completion of the offering, the Organizers will own 145,000 shares
of the Company's Common Stock, or 24.2% of the 600,000 shares to be outstanding
upon completion of the minimum offering. All purchases by the Organizers will
be made on the same terms as those made by other investors and will count
toward the achievement of the minimum offering. The Organizers have represented
to the Company that any such purchases will be made for investment purposes
only and not with a view to resell such shares. See "MANAGEMENT."
PLAN OF DISTRIBUTION
The Company may cancel this offering for any reason at any time prior
to the release of subscription funds from the Subscription Escrow Account, and
accepted subscriptions are subject to cancellation in the event that the
Company elects to cancel the offering in its entirety. In the event that the
Offering Conditions have not been satisfied by the Expiration Date, this
offering will be terminated and subscription funds promptly returned to the
subscribers, together with their allocated share of profits, if any, earned on
the investment of the Subscription Escrow Account as described above. See
"TERMS OF THE OFFERING -- Escrow of Subscription Funds."
Shares of the Common Stock of the Company will be marketed on a
best-efforts, 600,000 share minimum basis exclusively through certain directors
and executive officers of the Company, none of whom will receive any
commissions or other form of remuneration based on the sale of the shares.
However, in the event that the Offering Conditions have not been satisfied by
___________________, the Company may engage an underwriter to sell the shares
on a best-efforts basis and such underwriter would receive a commission based
upon such sales. It is anticipated that commissions paid to such underwriter,
if retained, will not exceed 10% of the $10.00 per share sales price and that
other expenses of such underwriting will not exceed an aggregate of $50,000. In
the event that the Offering Conditions have not been satisfied by the
Expiration Date, this offering will be terminated and subscription funds
promptly returned to the subscribers, together with their allocated share of
profits, if any, earned on the investment of the Subscription Escrow Account as
described above. See "TERMS OF THE OFFERING -- Escrow of Subscription Funds."
Subscriptions to purchase shares of Common Stock can be made by
completing the Subscription Agreement attached to this Prospectus and
delivering the same to the Company at Heartland Bancshares, Inc., 325 Central
Avenue, Lake Placid, Florida 33852 or mailing the same in the enclosed
self-addressed, stamped envelope. Full payment of the purchase price must
accompany the subscription. Unless otherwise agreed by the Company, all
subscription amounts must be paid in United States currency by
11
<PAGE> 15
check, bank draft or money order payable to "SunTrust Bank, Central Florida,
N.A., Escrow Agent for Heartland Bancshares, Inc." Failure to pay the full
subscription price shall entitle the Company to disregard the subscription.
No Subscription Agreement is binding until accepted by the Company. The
Company may refuse to accept any subscription for shares, in whole or in part,
for any reason whatsoever. As soon as practicable, but no more than ten
business days after receipt of a subscription, the Company will accept or
reject such subscription. Subscriptions not rejected by the Company within this
ten day period shall be deemed accepted. If the Company refuses to accept all
or part of a subscription, a refund, without interest, of the payment for
shares in excess of the number of shares allocated to the subscriber will be
issued by mail to the subscriber within ten days of the date of the rejection.
After a subscription is accepted and proper payment received, the
Company will not cancel such subscription unless all accepted subscriptions are
canceled. Once a subscription is accepted by the Company, it cannot be
withdrawn by the subscriber. A subscription will be accepted in writing by the
Company in the Form of Acceptance attached to this Prospectus.
Certificates representing shares of Common Stock of the Company, duly
authorized and fully paid, will be issued as soon as practicable after
subscription funds are released to the Company from the Subscription Escrow
Account.
USE OF PROCEEDS
The gross proceeds from the sale of shares of Common Stock offered by
the Company are estimated to be $6,000,000 assuming the sale of a minimum of
600,000 shares, and $6,500,000 assuming the sale of a maximum of 650,000
shares. The estimated expenses of this offering are as follows:
<TABLE>
<CAPTION>
<S> <C>
Registration fees, including state securities
registrations fees and expenses............................................ $ 2,307
Legal fees and expenses........................................................ 18,000
Accounting fees and expenses................................................... 1,500
Printing and engraving expenses................................................ 5,000
Advertising.................................................................... 3,500
Mailing and distribution....................................................... 5,000
Entertainment.................................................................. 5,000
Miscellaneous.................................................................. 1,000
----------
Total expenses ........................................................... $ 41,307
==========
Net proceeds (minimum offering).......................................... $5,958,693
Net proceeds (maximum offering).......................................... $6,458,693
</TABLE>
The net proceeds of this offering as well as any interest earned on the
subscription funds will be used by the Company, after breaking escrow,
primarily for the purchase all of the issued and outstanding capital stock of
the Bank. The Bank will, in turn, use the funds as capital to commence its
business operations (including officers' and employees' salaries and
construction of the Bank's permanent facilities) and to repay expenses incurred
in the organization of the Company and the Bank.
As indicated in the charter application of the Bank filed by the
Company with the OCC, the Company intends to capitalize the Bank at $5,600,000.
Accordingly, any net proceeds of this offering in excess of $5,600,000 will be
retained by the Company for growth of the Bank in compliance with OCC
12
<PAGE> 16
regulations regarding the ratio that the Bank's total assets may bear to its
total capital. Although management of the Company anticipates that the proceeds
of this offering will be sufficient to support the Bank's immediate capital
needs, if the Bank experiences greater growth than anticipated it may require
the infusion of capital in addition to the proceeds of this offering. In that
event, management of the Company would seek to support such growth through debt
financing; however, such financing might not be available, or, if available,
might not be on terms acceptable to management.
The following is a schedule of the estimated use by the Bank of the
proceeds from the sale of the Common Stock of the Company, including the Bank's
estimated operating expenses for its first 12 months of operation.
<TABLE>
<CAPTION>
<S> <C>
Organizational and pre-opening expenses
of Bank including salaries,
legal and accounting fees(1)....................... $ 208,481 *
Land purchase and construction of
Sebring bank facility(2)........................... 1,175,000 *
Land purchase and construction of
Lake Placid bank facility(2)....................... 796,000 *
Salaries and benefits(3).............................. 784,920 +
Directors' fees....................................... 7,200 +
Occupancy expenses(4)
(utilities, property insurance, etc.).............. 106,400 +
General and administrative expenses,
composed primarily of data processing,
marketing and advertising, telephone
and casualty and deposit insurance(5).............. 174,030 +
Furniture, fixtures and equipment(5).................. 461,865 *
Working capital....................................... 1,886,104
-----------
$ 5,600,000
===========
</TABLE>
- -----------------
* Represents expenses which will be incurred prior to commencement of
operations of the Bank.
+ Represents operating expenses which will be incurred during the Bank's
first 12 months of operations.
(1) These expenses will be incurred prior to the commencement of
operations of the Bank and are being funded from the proceeds of a
line of credit the Company has obtained from SunTrust Bank, Central
Florida, N.A.
(2) Costs for construction of the Bank's offices are based on an
architect's estimate. The land upon which the facility will be located
will be purchased. The construction is expected to begin in February
of 1999, and be completed in August of 1999. See "BUSINESS OF THE BANK
-- Premises."
(3) Salaries and benefits are based on management's estimates of the
number and types of employees which will be required during the first
12 months of operations of the Bank. It is presently anticipated that
the Bank will initially employ 19 individuals, including five
officers.
(4) These expenses are based on the experiences of similar size banks in
the region and on management's previous banking experience.
(5) Furniture and equipment cost is based on the Organizers' estimates and
upon information from suppliers of bank equipment of the costs
required to furnish and equip the Company for the expected level of
operations.
The expenses described above are estimates only and assume the Company
will commence operations in August of 1999, or as soon thereafter as
practicable. Actual expenses may exceed these
13
<PAGE> 17
amounts. A portion of these expenses will be offset by revenues generated by
the Company during its first year of operation.
DIVIDEND POLICY
As the Company and the Bank are both start-up operations, the Board of
Directors of the Company intends to reinvest earnings for such period of time
as is necessary to ensure the success of the operations of the Company and the
Bank. There are no current plans to initiate payment of cash dividends, and
future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered relevant by the
Board of Directors of the Company.
The Bank will be restricted in its ability to pay dividends by the
national banking laws and OCC regulations. Pursuant to 12 U.S.C. ss. 56, a
national bank may not pay dividends from its capital. In addition, no dividends
may be made in an amount greater than a national bank's undivided profits,
subject to other applicable provisions of law. Payments of dividends out of
undivided profits is further limited by 12 U.S.C. ss. 60(a), which prohibits a
bank from declaring a dividend on its shares of common stock until its surplus
equals its stated capital, unless there has been transferred to surplus not
less than 1/10 of the Bank's net income of the preceding two consecutive half
year periods (in the case of an annual dividend). Pursuant to 12 U.S.C. ss.
60(b), the approval of the OCC is required if the total of all dividends
declared by the Bank in any calendar year exceeds the total of its net income
for that year combined with its retained net income for the preceding two
years, less any required transfers to surplus or a fund for the retirement of
any preferred stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is still in the development stage, and will remain in that
stage until the offering of the Common Stock is complete. The Company initially
funded its start-up and organization costs through capital contributions of the
Organizers in the amount of $10,000 and advances from the Organizers in the
amount of $40,000. The Company subsequently obtained a $300,000 line of credit
from SunTrust Bank, Central Florida, N.A., a portion of the proceeds of which
were used to repay, without interest, the $40,000 advanced by the Organizers.
In return for the $1,000 capital contribution made by each Organizer, the
Company has issued each Organizer 100 shares of Common Stock. See "USE OF
PROCEEDS." Total organizational costs paid and accrued as of September 30, 1998
amounted to approximately $40,215. These costs include consultant fees, legal
fees and regulatory application fees.
Subscription funds during the offering contemplated herein will be
placed in the Subscription Escrow Account and invested in investments of the
United States Government, United States Government-backed securities and/or in
repurchase agreements collateralized by United States Government-backed
securities.
In the opinion of the Company, the minimum net proceeds of $6,000,000
from the minimum offering will be adequate capital to support the growth of the
Company for its first five years of operation and the Bank for its first five
years of operation. It is not anticipated that the Company will find it
necessary to raise additional funds to meet expenditures required to operate
the business of the Company and the Bank over the next 12 months. All
anticipated material expenditures for such period have been identified and
provided for out of the proceeds of this offering. See "USE OF PROCEEDS."
The plan of operations for the Company and the Bank is described in
detail elsewhere in this Prospectus. See "BUSINESS OF THE COMPANY" and
"BUSINESS OF THE BANK."
14
<PAGE> 18
BUSINESS OF THE COMPANY
GENERAL
The Company was incorporated under the laws of the State of Florida on
August 3, 1998, for the purpose of organizing the Bank and purchasing all of
the outstanding capital stock of the Bank. The Organizers expect to receive
preliminary approval from the OCC to charter the Bank by February 6, 1999. The
Company also expects the Bank to receive approval of its application for
deposit insurance from the FDIC by February 6, 1999. Upon receipt of
preliminary approval from the OCC, the Company will file an application with
the Federal Reserve Board to become a bank holding company. The Company has
been organized as a mechanism to enhance the Bank's ability to serve its future
customers' requirements for financial services. The holding company structure
will provide flexibility for expansion of the Company's banking business
through acquisition of other financial institutions and provision of additional
banking-related services which the traditional commercial bank may not provide
under present laws. For example, banking regulations require that the Bank
maintain a minimum ratio of capital to assets. In the event that the Bank's
growth is such that this minimum ratio is not maintained, the Company may
borrow funds, subject to the capital adequacy guidelines of the Federal Reserve
Board, and contribute them to the capital of the Bank and otherwise raise
capital in a manner which is unavailable to the Bank under existing banking
regulations.
The Company has no present plans to acquire any operating subsidiaries
other than the Bank; however, it is expected that the Company may make
additional acquisitions in the event that the Bank becomes profitable and such
acquisitions are deemed to be in the best interests of the Company and its
shareholders. Such acquisitions, if any, will be subject to certain regulatory
approvals and requirements.
See "SUPERVISION AND REGULATION."
BUSINESS OF THE BANK
GENERAL
The Organizers expect preliminary approval from the OCC to charter the
Bank on or around February 6, 1999. The Organizers expect approval of the
Bank's application for deposit insurance from the FDIC on or around February 6,
1999.
The Bank anticipates that it will commence business operations in
August of 1999. The Bank plans to be a full service commercial bank, without
trust powers. The Bank will offer a full range of interest bearing and
non-interest bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, regular
interest bearing statement savings accounts, certificates of deposit,
commercial loans, real estate loans, home equity loans and consumer/installment
loans. In addition, the Bank will provide such consumer services as U.S.
Savings Bonds, travelers checks, cashiers checks, safe deposit boxes, bank by
mail services, direct deposit, credit cards and automatic teller services.
The philosophy of management of the Bank with respect to its initial
operations will emphasize prompt and responsive personal service to members of
the business and professional community of Highlands County, Florida, in order
to attract customers and acquire market share now controlled by other financial
institutions in the Bank's market area. The Bank's prime location and range of
banking services, as well as its emphasis on personal attention and service,
prompt decision making and consistency in banking personnel, will be major
tools in the Bank's efforts to capture such market share. In addition, the
Bank's executive officers have substantial banking experience, which will be an
asset in providing both products and services designed to meet the needs of the
Bank's customer base. All of the Organizers are active members of the business
community in and around the Highlands County area, and
15
<PAGE> 19
continued active community involvement will provide an opportunity to promote
the Bank and its products and services. The Organizers intend to utilize target
marketing and superior selling efforts in order to build a distinct
institutional image for the Bank and to capture a customer base.
MARKET AREA AND COMPETITION
The primary service area ("PSA") for the Bank will be all of Highlands
County. Highlands County is located in the central part of Florida,
approximately 100 miles from the east and west coasts. The county consists of
three major communities, Sebring, Lake Placid and Avon Park. These communities
are geographically located from the northern border of Highlands County to the
south, a distance of approximately twelve miles apart. Each has its own
municipal government, schools and identity.
Highlands County represents a diverse market with a stable economy.
Agriculture (citrus), health services and small retail service businesses are
the major industries in the county. The county is also a major retirement
community and continues to attract retirees due to the lower cost of living as
compared to the coastal areas of Florida. Approximately 46% of the population
of Highlands County is over the age of 55. According to the Bureau of Economic
and Business Research of the University of Florida, the 1997 population for
Highlands County was 79,536, representing an increase of 16.32% from 1990. The
population is projected to increase to 107,295 by 2000.
The Bank proposes to operate two locations in Highlands County. One
location will be in Sebring and the other in Lake Placid. These two cities
represent the major business and retail activity for the county and the Bank
expects to generate over 95% of its business from these two cities. The Bank
will service the needs of the low to moderate income areas, while targeting
households with $25,000 in annual income and businesses with up to $10 million
in sales, including agriculture businesses, attorneys, physicians, and small
retail and service businesses.
Competition in the Bank's PSA is intense. Total commercial bank and
thrift deposits in Highlands County as of June of 1997 were $1,028,757 with an
average annual growth rate for the preceding five years of 5.85%. The Highlands
County market consists of seven commercial banks with 27 branches. The four
regional holding company banks operating in Highlands County possess 88% of the
market share in the county. Barnett Bank has historically held the dominant
market share in the county with 34.9% market share as of June, 1997. One
locally owned independent bank also operates in Highlands County, and two
independent banks each have one branch office in the county.
Financial institutions primarily compete with one another for
deposits. In turn, a bank's deposit base directly affects such bank's loan
activities and general growth. Primary methods of competition include interest
rates on deposits and loans, service charges on deposit accounts and the
designing of unique financial services products. The Bank will be competing
with financial institutions which have much greater financial resources than
the Bank, and which may be able to offer more and unique services and possibly
better terms to their customers. However, the Organizers believe that the Bank
will be able to attract sufficient deposits to enable it to compete effectively
with other area financial institutions. The Organizers believe that the Bank
will have the advantage of being locally owned and managed, enabling it to
benefit from the high visibility and excellent business contacts of its
Organizers.
The Bank will be in competition with existing area financial
institutions other than commercial banks and savings and loan associations,
including insurance companies, consumer finance companies, brokerage houses,
credit unions and other business entities which have recently been invading the
traditional banking markets. Due to the growth of the Bank's PSA, it is
anticipated that additional competition will continue from new entrants to the
market.
16
<PAGE> 20
DEPOSITS
The Bank will offer a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, regular interest bearing
statement savings accounts and certificates of deposit with fixed and variable
rates and a range of maturity date options. The sources of deposits will be
residents, businesses and employees of businesses within the Bank's market
area, obtained through the personal solicitation of the Bank's officers and
directors, direct mail solicitation and advertisements published in the local
media. The Bank will pay competitive interest rates on time and savings
deposits up to the maximum permitted by law or regulation. In addition, the
Bank will implement a service charge fee schedule competitive with other
financial institutions in the Bank's market area, covering such matters as
maintenance fees on checking accounts, per item processing fees on checking
accounts, returned check charges and the like.
LOAN PORTFOLIO
The Bank will engage in a full complement of lending activities,
including commercial, consumer/installment (including credit cards) and real
estate loans. Initially, the Bank will have a legal lending limit for unsecured
loans of up to $840,000 to any one person. See "SUPERVISION AND REGULATION."
Commercial and Industrial Loans
Commercial lending will be directed principally towards businesses
whose demands for funds fall within the Bank's legal lending limits and which
are potential deposit customers of the Bank. This category of loans includes
loans made to individual, partnership, or corporate borrowers, for a variety of
business purposes. Particular emphasis will be placed on loans to small and
medium-sized businesses and professionals.
Consumer Loans
The Bank's consumer loans will consist primarily of installment loans
to individuals for personal, family and household purposes, including
automobile loans to individuals and pre-approved lines of credit, separate from
and including credit cards. This category of loans will also include lines of
credit and term loans secured by second mortgages on the residences of
borrowers for a variety of purposes including home improvements, education, and
other personal expenditures.
Real Estate Loans
The Bank's real estate loans will consist of residential first and
second mortgage loans, residential construction loans and commercial real
estate loans to a limited degree. These loans will be made consistent with the
Bank's appraisal policy and real estate lending policy which will detail
maximum loan to value ratios and maturities. These loan to value ratios will be
sufficient to compensate for fluctuations in the real estate market to minimize
the risk of loss to the Bank.
The Organizers believe the Bank's market offers a significant
opportunity for residential real estate mortgage lending. This opportunity
includes residential construction loans to buyers and owners as well as to
creditworthy contractors for custom built homes with purchase contracts in
place. The Bank anticipates that permanent mortgage loans would be offered with
terms that parallel purchase commitments from permanent investors.
While risk of loss in the Bank's loan portfolio is primarily tied to
the credit quality of the various borrowers, risk of loss may also increase due
to factors beyond the Bank's control, such as local, regional
17
<PAGE> 21
and/or national economic downturns. General conditions in the real estate
market may also impact the relative risk in the Bank's real estate portfolio.
Of the Bank's target areas of lending activities, commercial loans are
generally considered to have greater risk than real estate loans or consumer
installment loans.
The Organizers intend to originate loans and to participate with other
banks with respect to loans which exceed the Bank's lending limits. Management
of the Bank does not believe that loan participations will necessarily pose any
greater risk of loss than loans which the Bank originates.
INVESTMENTS
In its first year of operation, management of the Bank anticipates that
investment securities will comprise approximately 48% of the Bank's assets,
loans will comprise approximately 42% of the Bank's assets, and other
investments will comprise approximately 10% of the Bank's assets. The Bank
intends to invest primarily in direct obligations of the United States,
obligations guaranteed as to principal and interest by the United States,
obligations of agencies of the United States and certificates of deposit issued
by commercial banks. In addition, the Bank will enter into Federal Funds
transactions with its principal correspondent banks, and anticipates that it
will primarily act as a net seller of such funds. The sale of Federal Funds
amounts to a short-term loan from the Bank to another bank.
ASSET/LIABILITY MANAGEMENT
It is the objective of the Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan investment, borrowing and capital policies. Certain
of the officers of the Bank will be responsible for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by individuals, partnerships and
corporations. Management of the Bank will seek to invest the largest portion of
the Bank's assets in commercial, consumer and real estate loans.
The Bank's asset/liability mix will likely be monitored on a daily
basis with a monthly report reflecting interest-sensitive assets and
interest-sensitive liabilities being prepared and presented to the Board of
Directors. The objective of this policy is to control interest-sensitive assets
and liabilities so as to minimize the impact of substantial movements in
interest rates on the Bank's earnings.
CORRESPONDENT BANKING
Correspondent banking involves the providing of services by one bank to
another bank which cannot provide that service for itself from an economic or
practical standpoint. The Bank will be required to purchase correspondent
services offered by larger banks, including check collections, purchase of
Federal Funds, security safekeeping, investment services, coin and currency
supplies, over line and liquidity loan participations and sales of loans to or
participations with correspondent banks.
The Bank anticipates that it will sell loan participations to
correspondent banks with respect to loans which exceed the Bank's lending
limit. As compensation for services provided by a correspondent, the Bank may
maintain certain balances with such correspondents in non-interest bearing
accounts.
DATA PROCESSING
The Bank expects to enter a data processing servicing agreement with
________. This servicing agreement is expected to provide for the Bank to
receive a full range of data processing services,
18
<PAGE> 22
including an automated general ledger, deposit accounting, commercial, real
estate and installment lending data processing and central information file.
The Bank also anticipates entering into an agreement with _______ to provide
payroll services, with _______ to provide ATM processing services and with
_______ to provide investment portfolio accounting.
YEAR 2000
The Company is currently evaluating the computer systems of its data
processing vendor to determine whether modifications and expenditures will be
necessary to make our systems compliant with Year 2000 requirements. These
requirements have arisen due to the widespread use of computer programs that
rely on two-digit date codes to perform computations or decision-making
functions. Many of these programs may fail as a result of their inability to
properly interpret date codes beginning January 1, 2000. For example, such
programs may misinterpret "00" as the year 1900 rather than 2000. In addition,
some equipment being controlled by microprocessor chips may not deal
appropriately with the year "00." The Company's data processing vendor has been
certified as being Year 2000 compliant. As the Company expects that any
computer systems or software purchased for the Bank's operations will be Year
2000 compliant, we do not anticipate that the Company or the Bank will incur
significant operating expenses or be required to incur material costs to be
Year 2000 compliant. The Company and the Bank will, however, form a committee
which will continue to analyze and modify their systems and requirements. In
addition, the Company and the Bank will have relationships with third parties
other than their data processing vendor that have computer systems that may not
be Year 2000 compliant. To the extent such third parties' systems are not fully
Year 2000 compliant, there can be no assurance that potential systems
interruptions or the cost necessary to update software would not have a
material adverse effect on the Company's or the Bank's business, financial
condition, results of operations, or business prospects.
An area of concern to the Company, the Bank, and its primary regulator,
the OCC, is the effect of Year 2000 issues on its deposit and loan customers.
Failure to address Year 2000 related issues could have significant impact on
the ability of certain customers of the Bank to continue operations. The Bank's
loan portfolio could be negatively impacted if customers are unable to honor
loan agreements and defaults occur as a result of failure to address Year 2000.
These customer relationships will be monitored to ensure that the necessary
modifications to systems will be made on a timely basis. In addition, the Bank
will review Year 2000 related issues as part of its normal underwriting
criteria and loan approval process. The Bank also will include Year 2000
compliance requirements and covenants requiring compliance within its standard
loan agreements. Although the Company and Bank have taken extensive steps to
address Year 2000 customer related issues, there can be no assurance that these
customers will be Year 2000 compliant. Failure of certain customers to
adequately address these issues could result in loan defaults which would
negatively impact the Company's earnings.
Although the Company and Bank will take extensive steps to address Year
2000 related issues, there can be no assurance that all necessary modifications
will be identified and corrected or that unforeseen difficulties or costs will
not arise. In addition, there can be no assurance that the failure of the
Bank's internal systems or the systems provided by its data processing vendor
or other companies on which the Company's systems rely will not negatively
impact the Bank's systems or operations.
EMPLOYEES
In its first year of operation, the Company and the Bank expect to
employ 19 individuals on a full-time basis, including five officers. The Bank
will hire additional persons as needed, including additional tellers and
financial service representatives.
19
<PAGE> 23
MONETARY POLICIES
The results of operations of the Bank will be affected by credit
policies of monetary authorities, particularly the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. In view of changing conditions in the national economy
and in the money markets, as well as the effect of action by monetary and
fiscal authorities, including the Federal Reserve Board, no prediction can be
made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of the Bank.
PREMISES
The Company has entered into contracts to purchase land for each of the
Bank's offices. The headquarters building for both the Company and the Bank, a
1.9-acre of land parcel of land at 320 U.S. Highway 27 North, Sebring, Florida
33870, will be purchased for a price of $625,000. The Bank's branch office in
Lake Placid will be located on a 1.167-acre parcel of land at and will be
purchased for a price of $246,000. The proposed property to be purchased for
the Bank's branch office in Lake Placid is currently owned by Edward L. Smoak,
an Organizer of the Company and the Bank. See "CERTAIN TRANSACTIONS."
Construction of the Bank's facilities is expected to begin in February
of 1999. Each facility will consist of a 5,000 square foot office facility
containing a vault, four offices, five teller stations, four drive-in windows,
a boardroom conference facility and a loan operations area.
SUPERVISION AND REGULATION
GENERAL
The Company and the Bank will operate in a highly regulated
environment, and the business activities of the Company and the Bank will be
supervised by a number of federal regulatory agencies, including the Federal
Reserve Board, the OCC, the Florida Banking Department and the FDIC.
The Company will be regulated by the Federal Reserve Board under the
federal Bank Holding Company Act of 1956, which requires every bank holding
company to obtain the prior approval of the Federal Reserve Board before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, and before merging or consolidating with another
bank holding company. The Federal Reserve Board (pursuant to regulation and
published policy statements) has maintained that a bank holding company must
serve as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, the Company may be required to provide
financial support to its subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company may not deem it advisable to provide such
assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, which became effective in November 1994, the restrictions on
interstate acquisitions of banks by bank holding companies were repealed as of
September 29, 1995, such that the Company and any other bank holding company
located in Florida is able to acquire a bank located in any other state, and a
bank holding company located outside Florida can acquire any Florida-based
bank, in either case subject to certain deposit percentage and other
restrictions. Beginning on June 1, 1997, the legislation provides that unless
an individual state has elected to prohibit out-of-state banks from operating
interstate branches within its territory, adequately capitalized and managed
bank holding companies will be able to consolidate their multi-state bank
operations into a single bank subsidiary and to branch interstate through
acquisitions. De
20
<PAGE> 24
novo branching by an out-of-state bank would be permitted only if it is
expressly permitted by the laws of the host state. Florida does not permit de
novo banking by an out-of-state bank. Therefore, the only method by which an
out-of-state bank or bank holding company may enter Florida is through an
acquisition. The authority of a bank to establish and operate branches within a
state will continue to be subject to applicable state branching laws.
A bank holding company is generally prohibited from acquiring control
of any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to
be so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies. Effective April 21, 1997, the Federal
Reserve Board revised and expanded the list of permissible non-banking
activities, which includes the following activities: extending credit and
servicing loans; acting as investment or financial advisor to subsidiaries and
certain outside companies; leasing personal and real property or acting as a
broker with respect thereto; providing management and employee benefits
consulting advice and career counseling services to nonaffiliated banks and
nonbank depository institutions; operating certain nonbank depository
institutions; performing certain trust company functions; providing certain
agency transactional services, including securities brokerage services,
riskless principal transactions, private placement services, and acting as a
futures commission merchant; providing data processing and data transmission
services; acting as an insurance agent or underwriter with respect to limited
types of insurance; performing real estate appraisals; arranging commercial
real estate equity financing; providing check-guaranty, collection agency and
credit bureau services; engaging in asset management, servicing and collection
activities; providing real estate settlement services; acquiring certain debt
which is in default; underwriting and dealing in obligations of the United
States, the states and their political subdivisions; engaging as a principal in
foreign exchange trading and dealing in precious metals; providing other
support services such as courier services and the printing and selling of
checks; and investing in programs designed to promote community welfare.
In determining whether an activity is so closely related to banking as
to be permissible for bank holding companies, the Federal Reserve Board is
required to consider whether the performance of such activities by a bank
holding company or its subsidiaries can reasonably be expected to produce such
benefits to the public as greater convenience, increased competition and gains
in efficiency that outweigh such possible adverse effects as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices. Generally, bank holding companies are
required to obtain prior approval of the Federal Reserve Board to engage in any
new activity not previously approved by the Federal Reserve Board.
The Company is also regulated, to a limited extent, by the Florida
Banking Department under the Florida Financial Institutions Code, which
requires every bank holding company to obtain the prior approval of the Florida
Commissioner of Banking before acquiring more than 5% of the voting shares of
any Florida bank or all or substantially all of the assets of a Florida bank,
or before merging or consolidating with any Florida bank holding company. A
bank holding company is generally prohibited from acquiring ownership or
control of 5% or more of the voting shares of any Florida bank or Florida bank
holding company unless the Florida bank or all subsidiaries of the Florida bank
holding company to be acquired have been in existence and continuously
operating, on the date of such acquisition, for a period of three years or
more. However, approval of the Florida Banking Department is not required if
the bank to be acquired or all bank subsidiaries of the Florida bank holding
company to be acquired are national banks.
The Bank, as a subsidiary of the Company, is subject to restrictions
under federal law in dealing with the Company and other affiliates, if any.
These restrictions apply to extensions of credit to an affiliate, investments
in the securities of an affiliate and the purchase of assets from an affiliate.
21
<PAGE> 25
Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank's total outstanding
loans and extensions of credit to one borrower may not exceed 15% of its
capital and surplus, plus an additional 10% of its capital and surplus, if such
additional amount is fully secured by readily marketable collateral. Loans and
extensions of credit may exceed the general lending limit if they qualify under
one of several exceptions. Such exceptions include certain loans or extensions
of credit arising from the discount of commercial or business paper, the
purchase of bankers' acceptances, loans secured by documents of title, loans
secured by U.S. obligations and loans to or guaranteed by the federal
government.
CAPITAL ADEQUACY REQUIREMENTS
Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the OCC. The Federal
Reserve Board and the OCC have issued risk-based capital guidelines for bank
holding companies and banks which make regulatory capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis with the banks owned by the
holding company. The OCC's risk capital guidelines apply directly to national
banks regardless of whether they are a subsidiary of a bank holding company.
Both agencies' requirements (which are substantially similar), provide that
banking organizations must have capital equivalent to 8% of risk weighted
assets. The risk weights assigned to assets are based primarily on credit
risks. Both the Federal Reserve Board and the OCC have also implemented new
minimum capital leverage ratios to be used in tandem with the risk-based
guidelines in assessing the overall capital adequacy of banks and bank holding
companies. Under these rules, banking institutions are required to maintain a
ratio of 4% "Tier 1" capital to total assets (net of goodwill). Tier 1 capital
includes common shareholders equity, noncumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
less certain intangible assets.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking institutions.
Institutions operating at or near these levels are expected to have
well-diversified risk, high asset quality, high liquidity, good earnings and in
general, have to be considered strong banking organizations, rated composite 1
under the CAMEL rating system for banks. Institutions with lower ratings and
institutions with high levels of risk or experiencing or anticipating
significant growth would be expected to maintain ratios 100 to 200 basis points
above the stated minimums.
The OCC has amended the risk-based capital guidelines applicable to
national banks in an effort to clarify certain questions of interpretation and
implementation, specifically with regard to treatment of originated and
purchased mortgage servicing rights and other intangible assets. The OCC's
guidelines provide that intangible assets are generally deducted from Tier 1
capital in calculating a bank's risk-based capital ratio. However, certain
intangible assets which meet specified criteria ("qualifying intangibles") such
as mortgage servicing rights are retained as a part of Tier 1 capital. The OCC
currently maintains that only mortgage servicing rights and purchased credit
card relationships meet the criteria to be considered qualifying intangibles.
The OCC's guidelines formerly provided that the amount of such qualifying
intangibles that may be included in Tier 1 capital was strictly limited to a
maximum of 25% of total Tier 1 capital. The OCC has amended its guidelines to
increase the limitation on such qualifying intangibles from 25% to 50% of Tier
1 capital and further to permit the inclusion of purchased credit card
relationships as a qualifying intangible asset.
In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Fannie Mae, Freddie Mac and
Farmer Mac programs. The rules clarify that even though those transactions are
22
<PAGE> 26
treated as asset sales for bank Call Report purposes, those assets will still
be subject to a capital charge under the risk-based capital guidelines.
The OCC, the Federal Reserve Board and the FDIC recently adopted final
regulations revising their risk-based capital guidelines to ensure that the
guidelines take adequate account of interest rate risk. Interest rate risk is
the adverse effect that changes in market interest rates may have on a bank's
financial condition and is inherent to the business of banking. Under the new
regulations, when evaluating a bank's capital adequacy, the agency's capital
standards now explicitly include a bank's exposure to declines in the economic
value of its capital due to changes in interest rates. The exposure of a bank's
economic value generally represents the change in the present value of its
assets, less the change in the value of its liabilities, plus the change in the
value of its interest rate off-balance sheet contracts. Concurrently, the
agencies issued a joint policy statement, effective June 26, 1996, to provide
guidance on sound practices for managing interest rate risk. In the policy
statement, the agencies emphasize the necessity of adequate oversight by a
bank's Board of Directors and senior management and of a comprehensive risk
management process. The policy statement also describes the critical factors
affecting the agencies' evaluations of a bank's interest rate risk when making
a determination of capital adequacy. The agencies' risk assessment approach
used to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors. Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for the development of a
regulatory monitoring system requiring prompt corrective action on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While the FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. The FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., holding companies) must
guarantee compliance with the plan until the institution has been adequately
capitalized for four consecutive calendar quarters. The liability of the
holding company is limited to the lesser of five percent of the institution's
total assets or the amount which is necessary to bring the institution into
compliance with all capital standards. In addition, "undercapitalized"
institutions will be restricted from paying management fees, dividends and
other capital distributions, will be subject to certain asset growth
restrictions and will be required to obtain prior approval from the appropriate
regulator to open new branches or expand into new lines of business.
As an institution's capital levels decline, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
In order to comply with the FDICIA, the Federal Reserve Board, the OCC
and the FDIC have adopted regulations defining operational and managerial
standards relating to internal controls, loan documentation, credit
underwriting criteria, interest rate exposure, asset growth, and compensation,
fees and benefits.
23
<PAGE> 27
In response to the directive issued under the FDICIA, the regulators
have established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the FDICIA.
The following table reflects the capital thresholds:
<TABLE>
<CAPTION>
TOTAL RISK - TIER 1 RISK - TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
Well capitalized(1)............................. > 10.0% > 6.0% > 5.0%
- - -
Adequately Capitalized(1)....................... > 8.0% > 4.0% > 4.0%(2)
- - -
Undercapitalized(3)............................. < 8.0% < 4.0% < 4.0%(4)
Significantly Undercapitalized(3)............... < 6.0% < 3.0% < 3.0%
Critically Undercapitalized..................... -- -- < 2.0%(5)
</TABLE>
- ---------------------------
(1) An institution must meet all three minimums.
(2) 3.0% for composite 1-rated institutions, subject to appropriate
federal banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
(4) Less than 3.0% for composite 1-rated institutions, subject to
appropriate federal banking agency guidelines.
(5) Ratio of tangible equity to total assets.
The scope of regulation and permissible activities of the Company and
the Bank is subject to change by future federal and state legislation. In
addition, regulators sometimes require higher capital levels on a case-by-case
basis based on such factors as the risk characteristics or management of a
particular institution. The Company and the Bank are not aware of any
attributes of their operating plan that would cause regulators to impose higher
requirements.
ORGANIZERS AND PRINCIPAL SHAREHOLDERS
The following individuals comprise the Organizers of the Company and
the Bank: James C. Clinard, William R. Grigsby, William R. Handley, Bert J.
Harris, III, Issac G. Nagib, Perumalswamy Rajaram, S. Allen Skipper, Edward L.
Smoak, Malcolm C. Watters, Jr., and Lawrence B. Wells. All of the Organizers
reside in Highlands County, except for Mr. Grigsby who resides in Okeechobee
County, Florida.
Upon completion of the minimum offering, the Organizers will own
144,000 shares in the offering or 24.2% of the 600,000 shares outstanding. The
number of the shares of common stock intended to be purchased by each Organizer
is set forth in the table appearing in the section entitled "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," which also specifies the
percentage of Common Stock owned by the Organizers before and after completion
of the minimum offering. Upon completion of the offering, each Organizer will
receive options to purchase 5,000 shares of Common Stock at an exercise price
of $10.00 per share. These options will become exercisable over a period of
three years and will be exercisable for a period of ten years.
Over the term of his employment agreement, James C. Clinard will
receive options annually to purchase 3,000 shares of the Company's common stock
at an exercise price of $10.00 per share. These options will become exercisable
over a period of five years commencing on the date of the grant and will be
exercisable for a period of ten years. See "MANAGEMENT -- Executive
Compensation."
24
<PAGE> 28
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK
The Company's directors and executive officers and the Bank's proposed
directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Position with Company Position with Bank
---- --------------------- ------------------
<S> <C> <C>
James C. Clinard President, Chief Executive Officer President, Chief Executive Officer
and Director and Director
William R. Grigsby Director Director
William R. Handley Director Director
Bert J. Harris, III Director Director
Issac G. Nagib Director Director
Perumalswamy Rajaram Director Director
S. Allen Skipper Director Director
Edward L. Smoak Director Director
Malcolm C. Watters, Jr. Director Director
Lawrence B. Wells Director Director
</TABLE>
Each of the above persons has been a director of the Company since
August 4, 1998. The Company has a classified Board of Directors whereby
one-third of the members will be elected each year at the Company's Annual
Meeting of Shareholders. Upon such election, each director of the Company will
serve for a term of three years. See "DESCRIPTION OF COMMON STOCK -- Board of
Directors." The Company's officers are appointed by the Board of Directors and
hold office at the will of the Board.
Each of the Bank's proposed directors will, upon approval of the OCC,
serve until the Bank's first shareholders' meeting, which meeting will be held
shortly after the Bank receives its charter. Each of the proposed directors is
also an Organizer. It is anticipated that each interim director will be
nominated to serve as director of the Bank at that meeting. After the first
shareholders' meeting, directors of the Bank will serve for a term of one year
and will be elected each year at the Bank's Annual Meeting of Shareholders. The
Bank's officers will be appointed by its Board of Directors and will hold
office at the will of the Board.
JAMES C. CLINARD, 45, was employed by Barnett Bank of Highlands County
from 1976 until Barnett Bank was acquired by NationsBank earlier this year. Mr.
Clinard served as Executive Vice President / Senior Retail Executive in his
last six years with Barnett Bank. He has also served in numerous civic
capacities including Chamber of Commerce Board of Directors, Rotary Club Board
of Directors and Florida Hospital - Lake Placid Foundation Board. He currently
serves on the Highlands County Hospital District Board and the Highlands County
Citrus Growers Association Associate Member Committee.
25
<PAGE> 29
WILLIAM R. GRIGSBY, 65, has been involved since 1972 in citrus
production in Highlands County, Florida. He is currently a Managing Partner in
the following operations: Southern Farms, a 7,000 acre citrus development in
Highlands County, Florida; SunRay Farms, a 3,600 acre citrus development in
Highlands County, Florida; and Florida Juice, a citrus processing plant in Polk
County, Florida.
WILLIAM R. HANDLEY, 44, is the owner of Homes by Handley, Inc., a
construction company he founded in 1984. The focus of the company is
single-family and small commercial projects in Highlands County. Mr. Handley
served on the Barnett Bank of Highlands County Board of Directors from 1995 to
1997 and the NationsBank Advisory Board of Directors from January 1998 to June
1998. Mr. Handley has served in numerous civic capacities including Sertoma,
Dixie Youth Sports, Highlands County Builders Association, Sebring Fireman,
Chamber of Commerce, City of Sebring Code Enforcement Board and City of Sebring
Planning and Zoning Board.
BERT J. HARRIS, III, 46, has practiced law as a partner in the law
firm of Swaine, Harris, Sheehan and McClure, P.A. since 1990. Mr. Harris and
his firm served as bank counsel for Barnett Bank of Highlands County for over
ten years and also represented NationsBank/Highlands County, SunTrust
Bank/Central Florida and Community Bank of Lake Placid. Mr. Harris has served
in many civic organizations including Rotary Club, Lake Placid Jaycees and is a
past president of the Lake Placid Chamber of Commerce.
ISSAC G. NAGIB, 44, began his career in physical therapy as Senior
Physical Therapist at Mercy Hospital, Champaign, Illinois in 1980. In 1984, Dr.
Nagib moved to Highlands County, Florida to serve in the position of Director
of Physical Therapy at Highlands Regional Hospital in Sebring. In 1987, Dr.
Nagib left Highlands Regional Hospital and founded Heartland Rehabilitation &
Associates, Inc. Today, he operates offices in Sebring, Lake Placid, and in the
Highlands Regional Medical Center in Sebring. Dr. Nagib serves on the LifeLine
Home Health Advisory Board and is a member of the Board of Directors of the St.
Mary's Celtic Orthodox Church.
PERUMALSWAMY RAJARAM, 50, received his medical degree from Madurai
Medical College in Tamilnad, India in 1972. He began practicing as a General
and Vascular Surgeon in Sebring, Florida in 1983, founding Heartland
Professional Plaza, a consortium of fourteen doctors practicing in the same
plaza in Sebring, Florida, where he still practices. Dr. Rajaram donates time
to the Highlands County Welfare Department providing medical care to low income
patients.
S. ALLEN SKIPPER, 45, earned his Bachelor of Science degree in 1976
and his Medical Degree in 1980, both from the University of South Florida. Dr.
Skipper began his practice in Sebring, Florida in 1987 as a General and
Vascular Surgeon and currently serves as Chief of Surgery and Trustee at
Highlands Regional Medical Center. Dr. Skipper has served in numerous civic
capacities including YMCA Children's/Youth Sports, Highlands County Middle
School Sports and Highlands County ARC.
EDWARD L. SMOAK, 52, has been a managing partner in his family citrus
and cattle business since 1970, as well as owning substantial citrus properties
individually. He served as a Commissioner on the Florida Citrus Commission for
eight years and as a Director in the Lake Placid Citrus Cooperative since 1985.
Mr. Smoak was a member of the Board of Directors of Barnett Bank of Highlands
County from 1974 to 1997 and a member of the Advisory Board of
NationsBank/Highlands County from January 1998 to June 1998. Mr. Smoak also
served on the Atlanta Federal Reserve Bank, 6th District: Small Business,
Agriculture and Labor Advisory Council from 1994 to 1996. Mr. Smoak has held
leadership roles in many organizations including Lake Placid Chamber of
Commerce, Florida Citrus Mutual, Florida Orange Marketers (President), Florida
Fruit and Vegetable Association, Gulf Coast Citrus Association and Highlands
County Citrus Growers Associations.
26
<PAGE> 30
MALCOLM C. WATTERS, JR., 50, has been self-employed in the citrus
business since 1970. Mr. Watters serves as Vice President and Director of Lake
Placid Citrus Cooperative, a cooperative of citrus growers in Highlands County.
He has served in many community service organizations including the Agriculture
Stabilization & Conservation Committee, Farmers Home Administration County
Committee, Lake Placid Chamber of Commerce, Lake Placid High School Academic
Boosters, and Highlands County Citrus Growers Association.
LAWRENCE B. WELLS, 44, began a career in the insurance field in 1974
with Florida Farm Bureau and formed his own independent agency in Lake Placid,
Florida in 1983, which today has offices in Lake Placid and Sebring. Mr. Wells
served as a Director with Barnett Bank of Highlands County from 1995 to 1997
and as an Advisory Director with NationsBank from January 1998 to April 1998.
Mr. Wells has served in numerous civic capacities including Rotary Club Board
of Directors, President of the Lake Placid Chamber of Commerce, Highlands
County YMCA Board of Directors, Highlands County Scholarship Recognition, Inc.
Board of Directors, Children's Advocacy Council Board of Directors, Florida
Hospital - Lake Placid Foundation and Highlands County Citrus Growers
Association Board of Directors.
There are no family relationships between any director or executive
officer and any other director or executive officer of the Company.
EXECUTIVE COMPENSATION
On October 2, 1998, the Company and Organizers entered into an
employment agreement with James C. Clinard pursuant to which Mr. Clinard shall
be employed as President and Chief Executive Officer of the Bank while the Bank
is being organized and for a period of five years commencing on the date the
Bank opens for business. Under the employment agreement, Mr. Clinard will
receive a salary at an annual rate of $100,000, which may be increased from
time to time in the sole discretion of the Board of Directors of the Bank.
The employment agreement provides that Mr. Clinard will receive
annually, commencing on the first anniversary of the bank's opening for
business, options to purchase 3,000 shares of Common Stock of the Company at a
price of $10.00 per share pursuant to an Incentive Stock Option Plan to be
adopted by the Company. Twenty percent of these options will become exercisable
on each of the five successive anniversaries after the date the options are
granted. All options shall be exercisable for a period of ten years.
The employment agreement also provides that Mr. Clinard shall receive
health, hospitalization, disability, and term life insurance, and participation
in the Bank's incentive compensation plan, in the event one is adopted by the
Board of Directors of the Bank.
The employment agreement contains a non-compete provision pursuant to
which Mr. Clinard may not, without the prior written consent of the Bank,
either directly or indirectly serve as an executive officer of any bank, bank
holding company, or other financial institution within Highlands County or any
other county in which the Bank operates a branch facility. The non-compete
provision is in effect through the date of termination of the employment
agreement and for a period of twelve months thereafter.
The Agreement provides that the Bank may terminate the employment of
Mr. Clinard with or without cause, but that in the latter case Mr. Clinard will
receive a severance payment equal to 12 months salary.
27
<PAGE> 31
No other officers or directors of the Board have received compensation
in excess of $100,000 for services to the Company.
STOCK OPTION PLANS
The Company's Board of Directors will adopt an Incentive Stock Option
Plan (the "Plan") to provide for the issuance of stock options to Mr. Clinard
and to other employees who are contributing significantly to the management or
operation of the business of the Company or its subsidiaries as determined by
the committee administering the Plan. The Plan will be contingent upon approval
by the shareholders of the Company. The Plan will provide for the grant of
options at the discretion of a committee designated by the Board of Directors
to administer the Plan. The committee must at all times consist of at least two
non-employee directors. The option exercise price must be at least 100% (110%
in the case of a holder of 10% or more of the Common Stock) of the fair market
value of the stock on the date the option is granted and the options are
exercisable by the holder thereof in full at any time prior to their expiration
in accordance with the terms of the Plan. Stock options granted pursuant to the
Plan will expire on or before (1) the date which is the tenth anniversary of
the date the option is granted, or (2) the date which is the fifth anniversary
of the date the option is granted in the event that the option is granted to a
key employee who owns more than 10% of the total combined voting power of all
classes of stock of the Company or any subsidiary of the Company.
The Board of Directors may, at the Company's first Annual Meeting of
Shareholders after the Bank opens for business, propose for shareholder
approval a directors stock option plan, which will be designed to provide
incentive compensation to directors in the event that the Company's common
stock increases in value during the term of such options. Upon completion of
the offering, each Organizer will receive options to purchase 5,000 shares of
Common Stock at an exercise price of $10.00 per share. These options will
become exercisable over a period of three years and will expire if not
exercised within ten years from the date on which they became exercisable. The
remaining details of this directors option plan have not yet been determined,
but, if the Board of Directors chooses to submit the plan for shareholder
approval, these details will be disclosed to shareholders in the Company's
Proxy Statement issued in connection with solicitation of shareholder approval
of such plan.
28
<PAGE> 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of the Common Stock of
the Company by the Organizers, both before and after completion of the minimum
offering of 600,000 shares.
<TABLE>
<CAPTION>
Before Offering After Completion of
--------------- -------------------
Minimum Offering
----------------
Name of Beneficial Owner Number of Percent of Number of Percent of
- ------------------------ --------- ---------- --------- ----------
Shares Total Shares Total
------ ----- ------ -----
<S> <C> <C> <C> <C>
James C. Clinard 100 10% 15,000 2.5%
William R. Grigsby 100 10% 25,000 4.2%
William R. Handley 100 10% 15,000 2.5%
Bert J. Harris, III 100 10% 10,000 1.7%
Issac G. Nagib 100 10% 15,000 2.5%
Perumalswamy Rajaram 100 10% 10,000 1.7%
S. Allen Skipper 100 10% 10,000 1.7%
Edward L. Smoak 100 10% 25,000 4.2%
Malcolm C. Watters, Jr. 100 10% 10,000 1.7%
Lawrence B. Wells 100 10% 10,000 1.7%
--- --- ------ ----
TOTAL 1,000 100% 145,000 24.2%
</TABLE>
CERTAIN TRANSACTIONS
The proposed property to be purchased for the Bank's branch site in
Lake Placid is owned by Organizer Edward L. Smoak. The Organizers believe that
the location represents the most desirable location for the Bank and that the
price of $246,000 being paid for the land is competitive. The Organizers have
obtained independent appraisals from each of two state certified general
appraisers. The first of these appraisals valued the land at $260,000 as of
August 13, 1998, and the second valued the land at $272,000 as of August 17,
1998.
The Organizers expect to analyze at least three proposals for the
construction of the Bank's offices. It is anticipated that one of the proposals
will be received from Homes by Handley, Inc., of which one of the Organizers,
William R. Handley, is the sole owner. Mr. Handley will abstain from voting on
the decision of which contractor to choose. If the Board of Directors decides
to accept the bid of Homes by Handley, the Board of Directors will ensure that
the transaction is conducted at arm's length.
Once the Bank opens for business, it may from time to time extend
loans to certain of the Company's directors, their associates, and members of
the immediate families of the directors and executive officers of the Company.
These loans will be made in the ordinary course of business on substantially
the same terms, including interest rates, collateral requirements, and
repayment terms, as those prevailing at the time for comparable transactions
with persons not affiliated with the Company or
29
<PAGE> 33
the Bank, and will not involve more than the normal risk of collectibility or
present other unfavorable features.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, $.10 par value, and 1,000,000 shares of Preferred
Stock, $.01 par value per share . There are presently 1,000 shares of Common
Stock issued and outstanding and held by ten shareholders of record. No shares
of the Preferred Stock are issued and outstanding.
COMMON STOCK
The holders of Common Stock are entitled to elect the members of the
Board of Directors of the Company and are entitled to vote as a class on all
matters required or permitted to be submitted to the shareholders of the
Company.
No holder of any class of stock of the Company has preemptive rights
with respect to the issuance of shares of any class of stock, and the Common
Stock does not carry cumulative voting rights with respect to the election of
directors.
The holders of Common Stock are entitled to dividends and other
distributions if, as, and when declared by the Board of Directors out of assets
legally available therefor. Upon the liquidation, dissolution, or winding up of
the Company, the holder of each share of Common Stock will be entitled to share
equally in the distribution of the Company's assets. The holders of Common
Stock are not entitled to the benefit of any sinking fund provision. The shares
of Common Stock of the Company are not subject to any redemption provisions,
nor are they convertible into any other security or property of the Company.
All outstanding shares of each class of Common Stock are, and the shares to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors may, without approval of the Company's
shareholders, from time to time authorize the issuance of Preferred Stock in
one or more series for such consideration and, within certain limits, with such
relative rights, preferences and limitations as the Board of Directors may
determine. The relative rights, preferences and limitations that the Board of
Directors has the authority to determine as to any such series of Preferred
Stock include, among other things, dividend rights, voting rights, conversion
rights, redemption rights and liquidation preferences. Because the Board of
Directors has the power to establish the relative rights, preferences and
limitations of each series of Preferred Stock, it may afford to the holders of
any such series preferences and rights senior to the rights of the holders of
shares of Common Stock. Although the Board of Directors has no intention at the
present time of doing so, it could cause the issuance of Preferred Stock that
could discourage an acquisition attempt or other transactions that some, or a
majority of, the shareholders might believe to be in their best interests or in
which the shareholders might receive a premium for their shares of Common Stock
over the market price of such shares.
BOARD OF DIRECTORS
The initial Board of Directors of the Company consists of ten
directors. The directors are divided into three classes, designated Class I,
Class II and Class III. Each class will consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. The term of the Company's initial Class I directors expires at the
Company's first Annual Meeting of Shareholders; the term of the Company's
initial Class II directors expires at the Company's second Annual Meeting of
30
<PAGE> 34
Shareholders; and the term of the Company's initial Class III directors expires
at the Company's third Annual Meeting of Shareholders. At each Annual Meeting
of Shareholders, successors to the class of directors whose term expires at the
Annual Meeting will be elected for a three-year term. If the number of
directors is changed, an increase or decrease will be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class will hold office for a term that will
coincide with the remaining term of that class, but in no event will a decrease
in the number of directors shorten the term of any incumbent director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors will have the same remaining term as that of his predecessor.
Except in the case of removal from office, any vacancy on the Board of
Directors, will be filled by a majority vote of the remaining directors then in
office.
Any director may be removed, with or without cause, at any regular or
special meeting of shareholders called for that purpose, and his position
filled by another person nominated and elected for that purpose by the holders
of seventy-five percent (75%) of the outstanding shares of the Company's Common
Stock.
The effect of the classified Board of Directors is to make it more
difficult for a person, entity or group to effect a change in control of the
Company through the acquisition of a large block of the Company's voting stock.
REQUIREMENTS FOR SUPERMAJORITY APPROVAL OF TRANSACTIONS
The Company's Articles of Incorporation contain provisions requiring
supermajority shareholder approval to effect certain extraordinary corporate
transactions which are not approved by the Board of Directors. The Articles of
Incorporation require the affirmative vote or consent of the holders of at
least two-thirds (66-2/3%) of the shares of each class of Common Stock of the
Company entitled to vote in elections of directors to approve any merger,
consolidation, disposition of all or a substantial part of the assets of the
Company or a subsidiary of the Company, exchange of securities requiring
shareholder approval or liquidation of the Company ("Covered Transaction"), if
any person who together with his affiliates and associates owns beneficially 5%
or more of any voting stock of the Company ("Interested Person") is a party to
the transaction; provided that three-fourths (75%) of the entire Board of
Directors of the Company has not approved the transaction. In addition, the
Articles of Incorporation require the separate approval by the holders of a
majority of the shares of each class of stock of the Company entitled to vote
in elections of directors which are not beneficially owned, directly or
indirectly, by an Interested Person, of any merger, consolidation, disposition
of all or a substantial part of the assets of the Company or a subsidiary of
the Company, or exchange of securities requiring shareholder approval
("Business Combination"), if an Interested Person is a party to such
transaction; provided, that such approval is not required if (a) the
consideration to be received by the holders of the stock of the Company meets
certain minimal levels determined by a formula under the Articles of
Incorporation (generally the highest price paid by the Interested Person for
any shares which he has acquired), (b) there has been no reduction in the
average dividend rate from that which was obtained prior to the time the
Interested Person became such, and (c) the consideration to be received by
shareholders who are not Interested Persons shall be paid in cash or in the
same form as the Interested Person previously paid for shares of such class of
stock. These Articles of the Company's Articles of Incorporation, as well as
the Article establishing a classified Board of Directors, may be amended,
altered, or repealed only by the affirmative vote or consent of the holders of
at least 75% of the shares of each class of stock of the Company entitled to
vote in elections of directors.
The effect of these provisions is to make it more difficult for a
person, entity or group to effect a change in control of the Company through
the acquisition of a large block of the Company's voting stock.
31
<PAGE> 35
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
As provided under Florida law, the Company's Articles of Incorporation
provide that a director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty of care or any other duty
owed to the Company as a director, except that such provision shall not
eliminate or limit the liability of a director (a) for any appropriation, in
violation of his duties, of any business opportunity of the Company, (b) for
acts or omissions which involve intentional misconduct or a knowing violation
of law, (c) for unlawful corporate distributions, or (d) for any transaction
from which the director received an improper personal benefit.
Article VI of the Company's Bylaws provides that the Company shall
indemnify a director who has been successful in the defense of any proceeding
to which he was a party or in defense of any claim, issue or matter therein
because he is or was a director of the Company, against reasonable expenses
incurred by him in connection with such defense.
The Company's Bylaws also provide that the Company is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred
in the proceeding if he acted in a manner he believed in good faith or to be in
or not opposed to the best interests of the Company and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the Board
of Directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested shareholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company or (ii) in connection with any other proceeding in which
such person was adjudged liable on the basis that personal benefit was
improperly received by him.
The Company may, if authorized by its shareholders by a majority of
votes which would be entitled to be cast in a vote to amend the Company's
Articles of Incorporation, indemnify or obligate itself to indemnify a
director, officer, employee or agent made a party to a proceeding, including a
proceeding brought by or in the right of the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
STATUTORY ANTI-TAKEOVER PROVISIONS
The State of Florida has statutory provisions relating to business
combinations between a Florida corporation and an "interested shareholder" that
outline the statutory requirements to effect such transactions. However, the
law provides that these sections only apply if the corporation specifically
provides in its bylaws that such requirements are applicable. The Company has
not so provided in its Articles of Incorporation and, therefore, these
statutory anti-takeover provisions do not apply to the Company.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
or the Bank is a party or of which any of their properties are subject; nor are
there material proceedings known to the Company or
32
<PAGE> 36
the Bank to be contemplated by any governmental authority; nor are there
material proceedings known to the Company or the Bank, pending or contemplated,
in which any director, officer or affiliate or any principal security holder of
the Company or the Bank, or any associate of any of the foregoing is a party or
has an interest adverse the Company or the Bank.
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock
offered hereby have been passed upon for the Company by Smith, Gambrell &
Russell, LLP, Atlanta, Georgia, counsel to the Company.
EXPERTS
The financial statements of Heartland Bancshares, Inc. as of September
30, 1998 included in this Prospectus have been audited by Osburn, Henning and
Company, P.A., independent auditors, as stated in their report, which is
included herein, and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement (herein, together with all
amendments thereto, called the "Registration Statement") under the Securities
Act of 1933, as amended, with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information included in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto. In addition, the Company will provide, without charge, to each person
who receives a Prospectus, upon written or oral request of such person, a copy
of any of the information that was incorporated by reference in the Prospectus.
Such request shall be directed to the Company either at its temporary mailing
address at 325 Central Avenue, Lake Placid, Florida 33852, or at its temporary
telephone number at (941) 465-0472.
33
<PAGE> 37
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Shareholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
Board of Directors
Heartland Bancshares, Inc.
Lake Placid, Florida
We have audited the accompanying balance sheet of Heartland Bancshares,
Inc. (a development stage Company) as of September 30, 1998, and the related
statements of operations, shareholders' equity and cash flows for the period
from inception (August 3, 1998) through September 30, 1998. 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 financial position of Heartland
Bancshares, Inc. as of September 30, 1998, and the results of its operations
and its cash flows for the period from inception (August 3, 1998) through
September 30, 1998, in conformity with generally accepted accounting
principles.
OSBURN, HENNING AND COMPANY
Orlando, Florida
November 5, 1998
F-2
<PAGE> 39
HEARTLAND BANCSHARES, INC.
BALANCE SHEET
September 30, 1998
<TABLE>
<S> <C>
ASSETS
Cash $ 6,905
Deposits on land contract and other land costs 49,125
Loan costs 2,875
--------
Total Assets $ 58,905
========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities
Accounts payable $ 16,245
Note payable 72,875
--------
Total liabilities 89,120
--------
Commitments and Contingencies (Note 6)
Shareholders' Equity (Deficit)
Common stock - Par value $.10 per share; 10,000,000 shares
authorized; 1,000 shares issued and outstanding 100
Preferred stock - $.01 par value; 1,000,000 shares authorized;
no shares issued or outstanding --
Additional paid-in capital 9,900
Accumulated deficit during development stage (40,215)
---------
Total Shareholders' Equity (Deficit) (30,215)
---------
Total Liabilities and Shareholders' Equity (Deficit) $ 58,905
=========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 40
HEARTLAND BANCSHARES, INC.
STATEMENT OF OPERATIONS
Inception (August 3, 1998) Through September 30, 1998
<TABLE>
<S> <C>
INCOME $ --
--------
EXPENSES
Organizational costs:
Consulting 29,796
Legal and professional 5,000
Other organizational expenses 5,300
Miscellaneous expenses 119
--------
Total expenses (40,215)
--------
Net loss $(40,215)
========
Net loss per share $ (40.22)
=========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 41
HEARTLAND BANCSHARES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
Inception (August 3, 1998) Through September 30, 1998
<TABLE>
<CAPTION>
Accumulated
Deficit
Additional During
Common Paid-in Development
Stock Capital Stage
------ ---------- ------------
<S> <C> <C> <C>
Beginning balance $ -- $ -- $ --
Issuance of 1,000 shares
of common stock at $10
per share 100 9,900 --
Net loss from inception
(August 3, 1998) through
September 30, 1998 -- -- (40,215)
------ ------ --------
Balance, September 30, 1998 $ 100 $9,900 $(40,215)
====== ====== ========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 42
HEARTLAND BANCSHARES, INC.
STATEMENT OF CASH FLOWS
Inception (August 3, 1998) Through September 30, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $(40,215)
Accounts payable 16,245
--------
Net Cash Used In Operating Activities (23,970)
--------
INVESTING ACTIVITIES
Deposits toward acquisition of land (49,125)
--------
Net Cash Used In Investing Activities (49,125)
--------
FINANCING ACTIVITIES
Sale of common stock 10,000
Net proceeds from note payable 70,000
--------
Net Cash Provided By Financing Activities 80,000
--------
Net Increase in Cash 6,905
Beginning Cash --
--------
Ending Cash $ 6,905
========
</TABLE>
See Note to Financial Statements.
F-6
<PAGE> 43
HEARTLAND BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATIONAL BACKGROUND AND PROPOSED TRANSACTION
Heartland Bancshares, Inc. (the Company) is a Florida corporation with
headquarters in Sebring, Florida. Prior to its name change, the Company had
been known as Heartland Investors, Inc. The Company is a development stage
company formed August 3, 1998, for the purpose of raising up to $6.5
million in equity capital through a common stock offering, and investing at
least $5.6 million of proceeds therefrom in the capitalization of a
proposed banking subsidiary, Heartland National Bank (Bank). The Bank would
be organized as a National banking institution. The Company filed its
application for a national bank charter with the Office of the Comptroller
of the Currency (OCC) on October 6, 1998. Funding during the development
stage has come from organizer loans, sale of common stock and a $300,000
line of credit from an unrelated banking institution. The Company has not
realized any revenue during this initial development stage.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Organizational Activities
The Company's efforts have been directed exclusively to obtaining the
necessary regulatory approvals for both the Company and the Bank, and
the raising of capital sufficient to meet other organizational
requirements. During this phase, the Company has incurred, or will
incur, costs generally allocable to either organizational costs or
pre-opening expense. In addition, the Company will acquire, on behalf of
the Bank, banking premises and other capital items necessary for
operating the Bank.
Organizational costs are expected to consist principally of the cost
incurred in raising capital, outside consulting and legal fees, and
regulatory application fees requisite to formation of the Company and
the Bank. These costs are charged to expense as incurred.
Pre-opening costs are costs that would ordinarily be expensed, even if
the Company were not a development stage company. Such costs (none of
which have yet been incurred) are expected to consist principally of
salaries, rent, utilities, dues and memberships and other expenses.
These costs will be expensed as incurred.
F-7
<PAGE> 44
HEARTLAND BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Organizational Activities (Continued)
Capital items are expected to consist of land (currently under contract
for $625,000), a building yet to be constructed, and furnishings and
equipment. It is expected the Company will acquire such items, including
the incurrence of debt therefore, and ultimately transfer such items to
the Bank in return for Bank reimbursement of the Company's costs.
Use of Accounting Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities, revenues
and expenses. For the Company, such estimates affect the amount at which
certain assets are carried and the likelihood and timing of realization
of such assets. Such estimates relate to unsettled transactions and
events as of the date of the financial statements and, accordingly, upon
settlement it is possible that actual amounts will differ from currently
estimated amounts.
Income Taxes
The Company and the Bank (when formed) will use the liability method of
accounting for deferred income tax. Under this method, deferred income
taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes. Deferred tax
assets and liabilities are reflected at currently existing tax rates,
and any net deferred tax asset is evaluated as to its realization
likelihood through a valuation allowance. For the Company, no current
tax is due in view of the absence of taxable income, and the net
deferred tax asset has been fully reserved by a valuation allowance.
Net Loss Per Share
The net loss per share has been computed considering an average of
1,000 common shares outstanding during the period from inception
(August 3, 1998) through September 30, 1998. There were no dilutive
securities as of September 30, 1998.
F-8
<PAGE> 45
HEARTLAND BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - LINE OF CREDIT ARRANGEMENT
The Company has both a $300,000 and a $2,000,000 line of credit with a bank
to be used, respectively, towards the organizational process and to acquire
the land and construct the facilities to be used by the Bank. The lines
bear interest at LIBOR plus 1.7% and require payment of interest monthly
and principal at maturity, August 25, 1999. The lines are guaranteed by the
Company's organizers. The balance outstanding under the $300,000 line is
$72,875 at September 30, 1998. No draws have been made under the $2,000,000
construction line.
NOTE 4 - DIVIDEND RESTRICTIONS
The ability of the Company to pay dividends to its shareholders is
dependent upon the ultimate profitability of the Bank and, in turn, its
ability to pay dividends to its shareholder (the Company). The payment of
dividends by a national bank is subject to regulations of the Comptroller
of the Currency which require, among other things, that dividends be paid
only from net profits, subject to certain limitations, adjustments and
other restrictions. Accordingly, there can be no assurance that either the
Bank or the Company will pay dividends in the foreseeable future, if ever.
NOTE 5 - EMPLOYMENT CONTRACT AND STOCK OPTION PLAN
The Company has entered into a five-year employment agreement with its CEO
to pay an executive salary commencing with the date the Bank receives
preliminary approval. This agreement also grants the CEO options to acquire
3,000 shares per year, at $10 per share, for each of the five years after
the Bank opens. Each 3,000 option grant will vest evenly over a five year
period following the date of grant, and expires ten years after the grant
date if not exercised. The organizers plan to establish, subject to certain
regulatory and shareholder approvals, an Incentive Stock Option plan for
these options, as well as for grants of options to other officers and key
employees.
In addition to the Incentive Stock Option plan discussed above, the
organizers plan to establish, also subject to certain regulatory and
shareholder approvals, a stock option plan under which each of the ten
organizers will be granted options to acquire up to 5,000 shares of the
Company's stock for $10 per share, the initial offering price. Such options
will vest at the rate of 34% the first year, and 33% in each of the second
and third year after grant, and expire after ten years if not exercised.
F-9
<PAGE> 46
HEARTLAND BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements for professional services with
various groups involved in the Company's formation, capital offering and
Bank application process. In addition, as discussed in Note 2, the Company
has entered into a $625,000 contract to purchase land, against which
contract $45,000 has been deposited as of September 30, 1998. After
September 30, 1998, the Company entered into another land contract with a
related party for $246,000 for a branch site. The Company plans to enter
into a construction contract to construct banking facilities upon the
Bank's receipt of preliminary approval from the OCC.
F-10
<PAGE> 47
APPENDIX "A"
ESCROW AGREEMENT
THIS ESCROW AGREEMENT effective as of the 6th day of November, 1998 by
and among:
Heartland Bancshares, Inc., a Florida corporation and bank holding
company for Heartland National Bank, located at Sebring, Florida
(hereinafter referred to as the "Company")
and
SunTrust Bank, Central Florida, National Association, located at
225 East Robinson Street, Suite 250, Orlando, Florida 32801
(hereinafter referred to as the "Escrow Agent")
WITNESSETH:
WHEREAS, the Company intends to offer and sell to various investors
(the "Subscribers") no less than 600,000 shares and no more than 650,000 shares
of its capital stock, par value $0.10 per share (the "Capital Stock"), at a
subscription price of $10.00 per share pursuant to an offering to the public
(the "Offering"); and
WHEREAS, the Company must sell at least 600,000 shares ("Required
Offering") of Capital Stock on or before the date stipulated in Addendum A
attached hereto ("Required Offering Deadline"); and
WHEREAS, the release of the subscription funds to the Company is
contingent upon the grant of the requisite charter (the "Charter") to the Bank
from the U.S. Office of the Comptroller of the Currency ("OCC") on or before
February 5, 1999 unless such date is extended by the OCC (the "Expiration
Date"); and
WHEREAS, the parties hereto wish to agree among themselves as to the
treatment of all subscription proceeds which may be in the form of checks,
cashier's checks and/or money orders (the "Proceeds"), along with properly
executed subscription agreements, from the Subscribers pursuant to the Offering
until such time as the Charter is granted.
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the parties hereto agree as follows:
1. Creation of Escrow Agreement. Pursuant to the terms and conditions of
this Agreement, the parties do hereby agree that the Escrow Agent
shall act as escrow agent in regard to Proceeds received from the
Subscribers for the Capital Stock pursuant to the Offering.
2. Deposit and Delivery of Proceeds and Subscription Agreements. The
Escrow Agent shall deposit and hold in escrow under this Agreement all
Proceeds received by the Company from the Subscribers
A-1
<PAGE> 48
in regard to the purchase of the Capital Stock pursuant to the
Offering. The Escrow Agent shall have no responsibility whatsoever in
regard to Proceeds not received and for funds that have not yet
cleared and become good funds. Subscribers shall make the payment for
the Capital Stock payable to the Escrow Agent. In the event checks are
made payable to the Company, the Company shall promptly endorse said
checks to the order to the Escrow Agent. Simultaneously with the
delivery of the Proceeds, the Company shall deliver to the Escrow
Agent the Subscription Agreements and copies of the written
acceptances for which the Proceeds represents payments. The Escrow
Agent shall hold the Proceeds and Subscription Agreements pursuant to
the terms and conditions of this Agreement.
3. Partial Rejection of Subscription Agreements. Should the Company elect
to accept a subscription for less than the number of shares shown in a
Subscriber's Subscription Agreement by indicating such lesser number
of shares on the written acceptance of the Company transmitted with
the Subscription Agreement and payment therefor, the Escrow Agent
shall deposit such payment in the escrow account and then remit within
thirty (30) days to such Subscriber at the address shown in his
Subscription Agreement that amount of his Proceeds in excess of the
amount which constitutes full payment for the number of subscribed
shares accepted by the Company as shown in the Company's written
acceptance, such amount to be remitted without interest or reduction.
4. Achievement or Failure to Achieve Required Offering. The Escrow Agent
shall notify the Company in writing at such time as it has received
Proceeds totaling at least $6,000,000 exclusive of those which have
been rejected by the Company and shall continue to receive and hold
such funds until either Paragraph 4 or 5 has been satisfied. If, on or
before the Required Offering Deadline, the Escrow Agent shall not have
received Proceeds from the Subscribers for at least $6,000,000, the
Escrow Agent shall return to each Subscriber the appropriate amount of
the Proceeds (plus or minus any net profit, including interest, or
loss incurred through allowable investment) received and collected
from him hereunder.
5. Failure to Obtain Charter. If, by the close of business on the
Expiration Date, the Company shall not have received the Charter from
the OCC, the Escrow Agent shall promptly after receipt of notification
by the Company return to the Subscribers the appropriate amount of the
Proceeds (plus or minus any net profit, including interest, or loss
incurred through allowable investment) received and collected from
them hereunder. In the event that Proceeds are to be returned to the
Subscriber pursuant to Paragraph 4 or this Paragraph 5, the specific
allocation of net profits attributable to each subscriber shall be
determined by the Escrow Agent as follows: each Subscriber's allocated
share of earnings on the Proceeds, after deducting Escrow Agent's
fees, if any, for investments made, shall be that fraction (i) the
numerator of which is the dollar amount of such Subscriber's accepted
subscription multiplied by the number of days between the date of
acceptance of the Subscriber's subscription and the earlier of (a) the
Required Offering Deadline and (b) the Expiration Date, inclusive (the
Subscriber's "Time Subscription Factor"), and (ii) the denominator of
which is the aggregate Time Subscription Factors of all Subscribers
depositing Proceeds with the Escrow Agent.
6. Grant of Charter. Subject to provisions of paragraph 4, hereof, if the
Charter is granted by the OCC, the Escrow Agent shall, within three
(3) days of receiving notification thereof from the Company, pay to
the Company all cleared Proceeds then and thereafter received by it
(including any interest
A-2
<PAGE> 49
earned thereon) after deducting therefrom the fees and costs of the
Escrow Agent as set forth in Paragraph 15 hereof.
7. Return of Proceeds to Subscribers: If instructed in writing to do so
by the Company the Escrow Agent agrees to return to any Subscriber,
whether his Subscription Agreement has been accepted by the Company or
not, Proceeds deposited pursuant to this Agreement by the Subscriber.
Written instruction by the Company to return funds to a Subscriber
must be received by the Escrow Agent prior to the Escrow Agent's
disbursement of Proceeds pursuant to Paragraph 6 of this Agreement.
The Escrow Agent, in returning funds to the Subscribers hereunder, may
rely on the names and addresses furnished to the Escrow Agent by the
Company without the requirement of independent verification. All
returns and deliveries to a Subscriber under this Agreement shall be
mailed, by regular mail, to the residential or business address of
such Subscriber appearing on his Subscription Agreement. Any payment
to a Subscriber will be made by check.
8. Investment of Proceeds by Escrow Agent. The Escrow Agent shall, at the
direction of the President of the Company, invest the Proceeds in one
or more funds or a master repurchase agreement comprised solely of
investments in United States government, United States government
backed securities and repurchase agreements collateralized by United
States government backed securities. Interest and other monies earned
on said investments shall accrue to the benefit of the Company;
provided, however, if the Required Offering is not obtained, interest
and other monies earned on said investments shall be paid to
Subscribers, with the Company remaining obligated to pay the fees of
the Escrow Agent. The Escrow Agent shall advise the Company as to the
form of investments into which the Proceeds have been placed, and
furnish to the Company periodic and final reports of said investments.
The Escrow Agent shall have no liability or obligation whatsoever for
the status of said investments or the failure of said investments.
9. Duties of Escrow Agent. The Escrow Agent undertakes to perform only
such duties as are expressly set forth herein and no implied duties or
obligations shall be read into this Agreements against the Escrow
Agent.
10. Reliance of Escrow Agent on Documents. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein and no
implied duties or obligations shall be read into this Agreement
against the Escrow Agent.
11. Indemnification of Escrow Agent. Unless the Escrow Agent discharges
any of its duties hereunder in a grossly negligent manner or is guilty
of willful misconduct with regard to its duties hereunder, the Company
hereby agrees to indemnify the Escrow Agent and hold it harmless from
any and all claims, liabilities, losses, actions, suits or proceedings
at law or in equity, or any other expenses, fees or charges of any
character or nature which it may incur or with which it may be
threatened by reason of its acting as Escrow Agent under this
Agreement; and in connection therewith, to indemnify the Escrow Agent
against any and all expenses, including reasonable attorneys' fees and
the cost of defending any action, suit or proceeding or resisting any
claim.
12. Discretion of Escrow Agent to File an Interpleader Action in the Event
of Dispute. If the parties shall be in disagreement about the
interpretation of this Agreement, or about the rights and obligations,
or the propriety of any action contemplated by the Escrow Agent
hereunder, the Escrow Agent may,
A-3
<PAGE> 50
but shall not be required to, file an action of interpleader to
resolve the disagreement and may hold all Proceeds until directed by a
court of competent jurisdiction as to the manner or distribution or
until all parties in dispute mutually agree to the distribution. The
Escrow Agent shall be indemnified as set forth in Paragraph 11 for all
cost, including reasonable attorneys' fees incurred by it, in
connection with the aforesaid interpleader action, and shall be fully
protected in suspending all or part of its activities under this
agreement until a final judgment or other appropriate order in the
interpleader action is entered.
13. Consultation with Counsel. The Escrow Agent may consult with
independent counsel of its own choice and shall have full and complete
authorization and protection in accordance with the opinion of such
counsel. The Escrow Agent shall otherwise not be liable for any
mistakes of fact or errors of judgment, or for any acts or omissions
of any kind unless caused by its gross negligence of willful
misconduct.
14. Resignation of Escrow Agent. The Escrow Agent may resign upon thirty
(30) days written notice to the Company. If a successor Escrow Agent
is not appointed by the Company within this thirty (30) day period,
the Escrow Agent may petition a court of competent jurisdiction to
name a successor or, at its option, the Escrow Agent may do nothing
until such time as the Company has furnished the name of a successor
Escrow Agent or otherwise directed the Escrow Agent as to the
disposition of Proceeds provided, however, if the Charter has not been
received the Escrow Agent shall not pay to the Company any of the
Proceeds.
15. Compensation and Expenses. The Escrow Agent shall be entitled to
compensation from the Company for its services hereunder in an amount
of $1,500.00. In the event Escrow Agent must return the escrow funds
to a subscriber, the Company agrees to compensate Escrow Agent by
paying said Agent an additional $10.00 per subscriber.
16. Notices. All notices permitted or required to be given to any party
under this Agreement shall be in writing and shall be deemed to have
been given upon receipt by the party being notified. Either party may
change the address at which said notice is to be given by giving
notice of such to all other parties to Agreement in the manner set
forth herein.
17. Successors and Assigns. The rights created by the Agreement shall
inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of the Escrow Agent.
18. Laws of the State of Florida to Apply. This Agreement shall be
construed in accordance with, and governed by the laws of, the State
of Florida.
19. Termination. This Escrow Agreement shall terminate and the Escrow
Agent shall be discharged of all responsibility hereunder at such time
as the Escrow Agent shall have completed its duties under Paragraphs
4, 5 or 6, as the case may be.
20. Subscribers of the Capital Stock. A Subscriber for the Capital Stock
shall, upon execution of a Subscription Agreement and deposit with the
Escrow Agent of the Proceeds, automatically become a party to this
Agreement.
A-4
<PAGE> 51
21. Complete Agreement. This Agreement constitutes the complete agreement
between the parties hereto and incorporates all prior discussions,
agreements and representations made in regard to the matters set forth
herein. This Agreement may not be amended, modified or changed except
by a writing signed by the party to be charged by said amendment,
change or modification.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HEARTLAND BANCSHARES, INC.
By: /s/ James C. Clinard
---------------------------------------
President
(CORPORATE SEAL) SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION
Attest: /s/ Lawrence B. Wells By: /s/ Deborah Mareyra
----------------------- ---------------------------------------
First Vice President
A-5
<PAGE> 52
ADDENDUM "A"
The "Required Offering Deadline" by which the Company must sell at least
600,000 shares of Capital Stock shall be the later of (i) December 1, 1999; or
(ii) the date which is one year from the date on which the Company's
Registration Statement on Form SB-2 is declared effective by the Securities and
Exchange Commission.
<PAGE> 53
APPENDIX "B"
HEARTLAND BANCSHARES, INC.
SUBSCRIPTION AGREEMENT
To: Heartland Bancshares, Inc.
325 Central Avenue
Lake Placid, Florida 33852
Gentlemen:
You have informed me that Heartland Bancshares, Inc. (the "Company"),
is offering up to 650,000 shares of its $.10 par value common stock (the
"Common Stock") at a price of $10.00 per share as described in and offered
pursuant to the Prospectus furnished to the undersigned herewith (the
"Prospectus"). In addition, you have informed me that the minimum subscription
is 500 shares.
1. SUBSCRIPTION. Subject to the terms and conditions
hereof, the undersigned hereby tenders this subscription,
together with payment in United States currency by check,
bank draft or money order payable to "SunTrust Bank, Central
Florida, N.A., Escrow Agent for Heartland Bancshares, Inc."
or any other consideration satisfactory to the Company (the
"Funds"), representing the payment of $10.00 per share for
the number of shares of the Common Stock indicated below.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and
agreed that the Company shall have the right to accept or
reject this subscription in whole or in part, for any reason
whatsoever. The Company shall reject this subscription, if at
all, in writing within ten business days after receipt of
this subscription. The Company may reduce the number of
shares for which the undersigned has subscribed, indicating
acceptance of less than all of the shares subscribed on its
written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges
that he/she has received a copy of the Prospectus and agrees
to be bound by the terms of this Agreement and the Escrow
Agreement.
4. REVOCATION. The undersigned agrees that once this
Subscription Agreement is accepted by the Company, it may not
be withdrawn by him/her. Therefore, until the earlier of the
expiration of five business days after receipt by the Company
of this Subscription Agreement or acceptance of this
Subscription Agreement by the Company, the undersigned may
withdraw this subscription and receive a full refund of the
subscription price. The undersigned agrees that, except as
provided in this Section 4, he/she shall not cancel,
terminate or revoke this Subscription Agreement or any
agreement of the undersigned made hereunder and that this
Subscription Agreement shall survive the death or disability
of the undersigned.
By executing this Subscription Agreement, the subscriber is not waiving any
rights he/she may have under federal securities laws, including the Securities
Act of 1933 and the Securities Exchange Act of 1934.
B-1
<PAGE> 54
Please fill in the information requested below, make your check payable
to "SunTrust Bank, Central Florida, N.A., Escrow Agent for Heartland
Bancshares, Inc." and mail Subscription Agreement, Stock Certificate
Registration Instructions and check to the attention of James C. Clinard,
President, Heartland Bancshares, Inc., 320 U.S. Highway 27 North, Sebring,
Florida 33870.
- ------------------------ --------------------------------------
No. of Shares Subscribed (Signature of Subscriber)
$------------------------
- --------------------------------------
Funds Tendered ($10.00 Name (Please Print or Type)
per share subscribed)
Date:
---------------------------------
Phone Number:
(Home)
--------------------------------
(Office)
------------------------------
Residence Address:
--------------------------------------
--------------------------------------
--------------------------------------
City, State and Zip Code
--------------------------------------
Social Security Number or other
Taxpayer Identification Number
B-2
<PAGE> 55
STOCK CERTIFICATE REGISTRATION INSTRUCTIONS
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Additional Name if Tenant in Common or Joint Tenant
Mailing Address:
--------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Social Security Number or other Taxpayer Identification Number
---------------
Number of Shares to be registered in above name(s):
-------------
Legal form of ownership:
Individual Joint Tenants with Rights of Survivorship
- --- ---
Tenants in Common Uniform Gift to Minors
- --- ---
Other
- --- ---------------------
INFORMATION AS TO BANKING INTERESTS
1. As a prospective shareholder I would be interested in the following services
checked below:
<TABLE>
PERSONAL BUSINESS
<S> <C> <C> <C>
(a) Checking Account ___ ___
(b) Savings Account ___ ___
(c) Certificates of Deposit ___ ___
(d) Individual Retirement Accounts ___ ___
(e) Checking Account Overdraft Protection ___ ___
(f) Consumer Loans (Auto, etc.) ___ ___
(g) Commercial Loans ___ ___
(h) Equity Line of Credit ___ ___
(i) Mortgage Loans ___ ___
(j) Revolving Personal Credit Line ___ ___
(k) Safe Deposit Box ___ ___
(l) Automatic Teller Machines (ATM's) ___ ___
</TABLE>
2. I would like our new bank to provide the following additional services:
(a)
(b)
B-3
<PAGE> 56
FORM OF ACCEPTANCE
Heartland Bancshares, Inc.
325 Central Avenue
Lake Placid, Florida 33852
To:
Dear Subscriber:
Heartland Bancshares, Inc. (the "Company") acknowledges receipt of
your subscription for _____ shares of its $.10 par value Common Stock and your
check for $__________.
The Company hereby accepts your subscription for the purchase of _____
shares of its Common Stock, at $10.00 per share, for an aggregate of
$__________, effective as of the date of this letter.
Your stock certificate(s) representing shares of Common Stock duly
authorized and fully paid will be issued to you as soon as practicable after
all Subscription Funds are released to the Company from the Subscription Escrow
Account, all as described in the Subscription Agreement executed by you and in
the Prospectus furnished to you. In the event that (i) the offering is
canceled, or (ii) the minimum number of subscriptions (600,000 shares) is not
obtained, or (iii) the Company shall not have received approval from the
Federal Reserve Board to become a bank holding company, or (iv) the Bank shall
not have received charter approval from the Office of the Comptroller of the
Currency and approval for deposit insurance from the Federal Deposit Insurance
Corporation, your Subscription Funds will be returned to you, adjusted for net
profits from the investment of such funds, if any, as described in the
Prospectus.
If this acceptance is for a lesser number of shares than that number
subscribed by you as indicated in your Subscription Agreement, your payment for
shares of Common Stock in excess of the number of shares accepted hereby will
be refunded to you by mail, without interest, within ten days of the date
hereof.
Very Truly Yours,
HEARTLAND BANCSHARES, INC.
By:
-------------------------------
James C. Clinard
President and Chief Executive Officer
<PAGE> 57
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act ("FBCA")
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof) 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.
Section 607.0850(2) of the FBCA permits a Florida corporation to
indemnify any person who may be a party to a derivative action if such person
acted in any of the capacities set forth in the preceding paragraph, against
expenses and amounts paid in settlement not exceeding, in the judgement of the
board of directors, the estimated expenses of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding (including appeals), provided that the person
acted under the standards set forth in he preceding paragraph. However, no
indemnification shall be made for any claim, issue or matter for which such
person is found to be liable unless, and only to the extent that, the court.
determines that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Section 607.0850(4) of the FCBA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the
board of directors, by duly selected independent legal counsel, or by a
majority vote of the disinterested shareholders. The board of directors also
may designate a special committee of disinterested directors to make this
determination.
Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director, or officer, employee or agent of a corporation who has
been successful in the defense of any proceeding referred to in Section
607.0850(1) or (2), or in the defense of any claim, issue or matter therein,
against expenses actually and reasonably incurred by him in connection
therewith.
Expenses incurred by a director or officer in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it is ultimately determined that
such director or officer is not entitled to indemnification under Section
607.0850. Expenses incurred by other employees or agents in such a proceeding
may be paid in advance of final disposition thereof upon such terms or
conditions that the board of directors deems appropriate.
The FBCA further provides that the indemnification and advancement of
payment provisions contained therein are not exclusive and it specifically
empowers a corporation to make any other further indemnification or advancement
of expenses under any bylaw, Agreement, vote of shareholders or disinterested
actions taken in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was unlawful, (b) derived an improper personal benefit from
a transaction, (c) was or is a director in a circumstance where
II-1
<PAGE> 58
the liability under Section 607.0834 (relating to unlawful distributions)
applies, or (d) engages in willful misconduct or conscious disregard for the
best interests of the corporation in a proceeding by or in right of the
corporation to procure a judgment in its favor or in a proceeding by or in
right of a shareholder.
Article XI of the Company's Articles of Incorporation provide that the
Company shall indemnify any director or officer or any former director or
officer against any liability arising from any action or suit to the full
extent permitted by Florida law as referenced above.
Article VI of the Company's By-Laws provides that the Company shall
indemnify a director, officer, employee or agent who has been successful on the
merits or otherwise in the defense of any action, suit or proceeding to which
he was a party or in defense of any claim, issue or matter therein because he
is or was a director, officer, employee or agent of the Company, against
reasonable expenses incurred by him in connection with such defense.
The Company's By-Laws also provide that the Company is required to
indemnify any director, officer, employee or agent made a party to a proceeding
because he is or was a director, employee or agent against liability incurred
in the proceeding if he acted in a manner he believed in good faith or to be in
or not opposed to the best interests of the Company and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Determination concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the Board
of Directors, (b) a majority of a committee of disinterested directors, (c)
independent legal counsel, or (d) an affirmative vote of a majority of shares
held by disinterested shareholders. No indemnification may be made to or on
behalf of a director, officer, employee or agent (i) in connection with a
proceeding by or in the right of the Company in which such person was adjudged
liable to the Company unless the court in which the action, suit or proceeding
was brought, upon application, determines indemnification is fair and
reasonable.
The Company may, if authorized by its shareholders by a majority of
votes which would be entitled to be cast in a vote to amend the Company's
Articles of Incorporation, indemnify or obligate itself to indemnify a
director, officer, employee or agent made a party to a proceeding, including a
proceeding brought by or in the right of the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions. All of the
amounts shown are estimated except for the registration fees of the Securities
and Exchange Commission.
<TABLE>
<S> <C>
Registration Fees, including state securities registrations
fees and expenses........................................... $ 2,307
Printing and Engraving Expenses................................ $ 5,000
Legal Fees and Expenses........................................ $18,000
Accounting Fees and Expenses................................... $ 1,500
Advertising.................................................... $ 3,500
Mail and Distribution.......................................... $ 5,000
Entertainment.................................................. $ 5,000
Miscellaneous.................................................. $ 1,000
-------
Total................................................ $41,307
=======
</TABLE>
II-2
<PAGE> 59
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On August 27, 1998, the Company issued 100 shares to each of the ten
Organizers at a purchase price of $10.00 per share. These shares were issued
without registration under the Securities Act of 1933, as amended (the
"Securities Act") in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1* Specimen Common Stock Certificate.
4.2 Escrow Agreement dated November 6, 1998 between the Company and
SunTrust Bank, Central Florida, N.A.
5.1 Opinion of Smith, Gambrell & Russell, LLP.
10.1 Employment Agreement dated October 2, 1998 between the Organizers of
the Company and James C. Clinard.
23.1 Consent of Osburn, Henning and Company, P.A.
23.2 Consent of Smith, Gambrell & Russell, LLP (contained in their opinion
filed as Exhibit 5.1 hereto)
24 Power of Attorney (included in signature page to this Registration
Statement).
</TABLE>
- ----------
* To be filed by amendment
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
Statement to:
(i) Include any Prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar volume of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of Prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, changes in the
volume and price represent no
II-3
<PAGE> 60
more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration of the
securities offered, and the offering of the securities at the
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "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
Securities and Exchange Commission 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.
II-4
<PAGE> 61
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Sebring, State of Florida on November 10, 1998.
HEARTLAND BANCSHARES, INC.
Date: November 10, 1998 By: /s/James C. Clinard
---------------------------------------------
James C. Clinard
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 10, 1998 By: /s/Lawrence B. Wells
--------------------------------------------
Lawrence B. Wells
(Principal Financial and Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James C. Clinard and Lawrence B. Wells,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him, in his name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/James C. Clinard President, Chief Executive November 10, 1998
- ----------------------------------- Officer and Director
James C. Clinard
/s/William R. Grigsby Director November 10, 1998
- -----------------------------------
William R. Grigsby
/s/William R. Handley Director November 10, 1998
- -----------------------------------
William R. Handley
/s/Bert J. Harris, III Director November 10, 1998
- -----------------------------------
Bert J. Harris, III
/s/Issac G. Nagib Director November 10, 1998
- -----------------------------------
Issac G. Nagib
/s/Perumalswamy Rajaram Director November 10, 1998
- -----------------------------------
Perumalswamy Rajaram
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C>
/s/S. Allen Skipper Director November 10, 1998
- -----------------------------------
S. Allen Skipper
/s/Edward L. Smoak Director November 10, 1998
- -----------------------------------
Edward L. Smoak
/s/Malcolm C. Watters, Jr. Director November 10, 1998
- -----------------------------------
Malcolm C. Watters, Jr.
/s/Lawrence B. Wells Director November 10, 1998
- -----------------------------------
Lawrence B. Wells
</TABLE>
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1* Specimen Common Stock Certificate.
4.2 Escrow Agreement dated November 6, 1998 between the Company and
SunTrust Bank, Central Florida, N.A.
5.1 Opinion of Smith, Gambrell & Russell, LLP.
10.1 Employment Agreement dated October 2, 1998 between the Organizers of
the Company and James C. Clinard.
23.1 Consent of Osburn, Henning and Company, P.A.
23.2 Consent of Smith, Gambrell & Russell, LLP (contained in their opinion
filed as Exhibit 5.1 hereto)
24 Power of Attorney (included in signature page to this Registration
Statement).
</TABLE>
- ----------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HEARTLAND BANCSHARES, INC.
Pursuant to Sections 607.1003, 607.0821 and 607.0704 of the Florida
Business Corporation Act, these Amended and Restated Articles of Incorporation
were recommended by the Board of Directors of Heartland Bancshares, Inc. (the
"Company"), and approved by shareholders of the Corporation, on November 4,
1998.
I.
The corporate name that satisfies the requirements of 607.0401 is
Heartland Bancshares, Inc.
II.
The Corporation is organized for the following purpose or purposes:
To act as a bank holding company and, to the extent permitted under
applicable federal and state laws, now or hereafter existing, to engage in such
business as related to banks and to bank holding companies and their
activities;
To acquire, own, hold, sell, exchange, assign, transfer, create
security interests in, pledge or otherwise dispose of shares, voting trust
certificates, depository receipts for shares, capital stock, bonds, notes,
debentures or other evidence of indebtedness, options, warrants, or other
securities issued by any other business of any lawful character, including, but
not limited to, banks and other businesses providing goods or services related
to banking;
To acquire and hold other investment assets and to engage in any
lawful activities related thereto;
To acquire, own interest in and otherwise participate in and exercise
ownership rights in joint ventures, partnerships, limited partnerships, trusts,
corporations, unincorporated associations and other entities for the
furtherance of all corporate activities; to borrow and to lend money and to
buy, sell, guarantee and otherwise deal in the obligations of others and
conduct financing, brokerage, and discount and factoring businesses in
connection with the foregoing or otherwise;
In general, to carry on any other lawful business whatsoever, and to
have, enjoy and exercise all the rights, powers and privileges which are now or
which may hereafter be conferred upon corporations organized under the Florida
Business Corporation Act.
<PAGE> 2
III.
The corporation shall have authority to issue 11,000,000 shares of
capital stock, which shall be divided into classes and shall have the following
designations, preferences, limitations and relative rights;
A. Common Stock. One class shall consist of 10,000,000 shares of
common stock of $.10 par value, designated "Common Stock." The holders of
Common Stock shall be entitled to elect all of the members of the Board of
Directors of the Corporation, and such holders shall be entitled to vote as a
class on all matters required or permitted to be submitted to the shareholders
of the Corporation.
B. Preferred Stock. One class shall consist of 1,000,000 shares
of preferred stock of $.01 par value, designated "Preferred Stock." The Board
of Directors of the Corporation shall be empowered to divide any and all shares
of the Preferred Stock into series and to fix and determine the relative rights
and preferences of the shares of any series so established in accordance with
Section 607.0602 of the Florida Business Corporation Act, including (i) the
distinctive designation of such series and the number of shares which shall
constitute such series; (ii) the annual rate of dividends payable on shares of
such series, whether dividends shall be cumulative and conditions upon which
and the date when such dividends shall be accumulated on all shares of such
series issued prior to the record date for the first dividend of such series;
(iii) the time or times when and the price or prices at which shares of such
series shall be redeemable at the option of the holder or of the Corporation
and the sinking fund provisions, if any, for the purchase or redemption of such
shares; (iv) the amount payable on shares of such series in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether all or a portion is paid before any amount is paid on the Common Stock;
(v) the rights, if any, of the holders of shares of such series to convert such
shares into, or exchange such shares for, shares of Common Stock or shares of
any other series of Preferred Stock and the terms and conditions of such
conversion or exchange; and (vi) whether the shares of such series have voting
rights and the extent of such voting rights, if any.
The Board of Directors shall have the power to reclassify any unissued
shares of any series of Preferred Stock from time to time by setting or
changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, including but not limited to, but subject to the
limitations described in, the above provisions.
Any action by the Board of Directors in authorizing the issuance of
Preferred Stock and fixing and determining the provisions thereof is hereby
ratified and approved.
IV.
The street address of the registered office of the Corporation is 325
Central Avenue, Lake Placid, Florida 33852, and the name of its initial
registered agent at such address is James C. Clinard.
2
<PAGE> 3
V.
The street address and mailing address of the initial principal office
of the Corporation is 325 Central Avenue, Lake Placid, Florida 33852.
VI.
A. The number of directors of the Corporation shall be fixed from
time to time by resolution of the Board of Directors; provided, however that
the number of directors fixed by the Board of Directors shall not be less than
two or more than twenty-five.
B. Concurrent with the adoption of these Articles of
Incorporation, the Board of Directors, other than those who may be elected by
the holders of preferred stock or any class or series of stock having a
preference over the common stock as to dividends or upon liquidation or any
resolution or resolutions providing for the issue of such class or series of
stock adopted by the Board, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible: (i) one class ("Class I") of directors to be originally elected
for a term expiring at the annual meeting of shareholders to be held in 1999,
(ii) another class of directors ("Class II") to be originally elected for a
term expiring at the annual meeting of shareholders to be held in 2000, and
(iii) another class of directors ("Class III") to be originally elected for a
term expiring at the annual meeting of shareholders to be held in 2001, with
each member of each class to hold office, until his successors are elected and
qualified. At each annual meeting of the shareholders of the Corporation the
date of which shall be fixed by or pursuant to the Bylaws of the Corporation,
the successors of the class of directors whose terms expire at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
shareholders held in the third year following the year of their election.
C. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, if if any vacancy shall occur in the
membership of the Board by reason of newly created directorships or resulting
from the resignation, disqualification, retirement or death of a director, the
remaining directors shall continue to act, and such vacancies may be filled by
the affirmative vote of the majority of the directors then in office, although
less than a quorum of the Board, and if not therefore filled by action of the
directors, may be filled by the shareholders at any meeting held during the
existence of such vacancy. If any vacancy shall occur among the directors by
reason of the removal from office of a director, such vacancy shall be filled
by the vote of three-fourths (3/4) of the outstanding shares of each class of
stock entitled to vote in elections of directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
No decrease in the number of directors constituting the Board shall shorten the
term of any incumbent director. Any increase or decrease in the number of
directors shall be so apportioned among the classes of directors as to make all
classes as nearly equal in number as possible.
D. Notwithstanding the foregoing provisions of this Article VI,
any director whose term of office has expired shall continue to hold office
until his successor shall be elected and qualified.
3
<PAGE> 4
E. Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of the
holders of at least three-fourths (3/4) of the total number of votes entitled to
be cast by the holders of all of the shares of capital stock of the Corporation
then entitled to vote generally in the election of directors shall be required
to amend, alter, change or repeal, or to adopt any provision as part of these
Articles of Incorporation inconsistent with, this Article VI. The holder of each
share of capital stock entitled to vote thereon shall be entitled to cast the
same number of votes as the holder of such shares is entitled to cast generally
in the election of each director.
VII.
The Corporation expressly elects not to be governed by Section
607.0901 of the Florida Business Corporation Act, relating to affiliated
transactions.
VIII.
In addition to any approval of the Board of Directors or any
shareholder vote or consent required by the laws of the State of Florida or any
other provision of these Articles of Incorporation or otherwise, the affirmative
vote or consent of the holders of not less than two-thirds (2/3) of the shares
of each class of stock of the Corporation entitled to vote in elections of
directors shall be required to authorize, adopt or approve a Covered
Transaction; however, the provisions of this Article VIII shall not apply to any
Covered Transaction referred to in this Article VIII with any Interested Person
if the Covered Transaction is approved by three-fourths (3/4) of the entire
membership of the Board of Directors of the Corporation, in which event the
affirmative vote of not less than a majority of the holders of each class of
stock of the Corporation entitled to vote in elections of directors shall be
required.
For the purpose of this Article VIII:
1. "Affiliate and "associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as
amended, as in effect on the date hereof.
2. A person shall be the "beneficial owner" and "beneficially
owns" shares of stock of the Corporation (other than shares
of the Corporation's stock held in its treasury) (a) which
such person and its affiliates and associates beneficially
own, directly or indirectly, whether of record or not, (b)
which such person or any of its affiliates or associates has
the right to acquire, pursuant to any agreement upon the
exercise of conversion rights, warrants or options, or
otherwise, (c) which such person or any of its affiliates or
associates has the right to sell or vote pursuant to any
agreement, or (d) which are beneficially owned, directly or
indirectly, by any other person with which such first
mentioned person or any of its affiliates or associates has
any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of securities of
the Corporation.
4
<PAGE> 5
3. "Covered Transaction" is:
(a) any merger or consolidation of the Corporation or
any subsidiary of the Corporation with or into any
Interested Person (regardless of the identity of the
surviving corporation);
(b) any sale, lease or other disposition of all or any
substantial part (assets having an aggregate fair
market value of twenty-five percent (25%) of the
total assets of the Corporation) of the assets of
the Corporation or any subsidiary of the Corporation
to any Interested Person for cash, real or personal
property, including securities, or any combination
thereof;
(c) any issuance or delivery of securities of the
Corporation or a subsidiary of the Corporation
(which the beneficial owner shall have the right to
vote, or to vote upon exercise, conversion or by
contract) to an Interested Person in consideration
for or in exchange of any securities or other
property (including cash); or
(d) the liquidation of the Corporation.
4. "Interested Person" is any person which, as of the record date
for the determination of shareholders entitled to notice of any
Covered Transaction and to vote thereon or consent thereto, or
as of the date of any such vote or consent, or immediately
prior to the consummation of any Covered Transaction,
beneficially owns, directly or indirectly, five percent (5%) or
more of the shares of stock of the Corporation entitled to vote
in elections of directors.
5. "Person" is any individual, partnership, corporation or other
entity.
6. "Subsidiary of the Corporation" is any corporation of which
fifty percent (50%) or more of any class of stock is
beneficially owned, directly or indirectly, by the Corporation.
No amendment to these Articles of Incorporation shall amend, alter,
change or repeal any of the provisions of this Article VIII, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Florida in effect at the time, shall receive the
affirmative vote or consent of the holders of three-fourths (3/4) of the
outstanding shares of each class of stock of the Corporation entitled to vote
in elections of directors.
IX.
A. In addition to any approval of the Board of Directors or any
shareholder vote or consent required by the laws of the State of Florida or any
other provision of these Articles of Incorporation or otherwise, there shall be
required for the approval, adoption or authorization of a Business Combination
with an Interested Person the affirmative vote or consent of the holders of a
majority of the shares of each class of stock of the Corporation entitled to
vote in elections of
5
<PAGE> 6
directors considered separately for the purposes of this Article IX, which are
not beneficially owned, directly or indirectly, by such Interested Person;
provided, however, that said majority voting requirements shall not be
applicable if all of the conditions specified in subparagraphs (1), (2) and (3)
below are met:
1. The consideration to be received per share for each
class of stock in such Business Combination by holders of the stock of the
Corporation is payable in cash or Acceptable Securities, or a combination of
both, and such consideration has a fair market value per share with respect to
each class of the Corporation's stock of not less than either:
(a) the highest price (including the highest
per share brokerage commissions, transfer tax and soliciting dealers fees) paid
by said Interested Person in acquiring any of the Corporation's stock of that
class; or
(b) a price per share obtained by multiplying
the aggregate earnings per share of stock of the Corporation (appropriately
adjusted for any subdivision of shares, stock dividend or combination of shares
during the period) for the four full consecutive fiscal quarters immediately
preceding the record date for solicitation of votes or consents on such
Business Combination by the figure obtained by dividing the highest per share
price (including the highest per share brokerage commissions, transfer tax and
soliciting dealers fees) paid by such Interested Person in acquiring any of the
Corporation's stock by the aggregate earnings per share of the Corporation for
the four full consecutive fiscal quarters immediately preceding the time when
the Interested Person shall have become the beneficial owner of five percent
(5%) or more of the outstanding stock of the Corporation entitled to vote in
elections of directors.
If any securities were issued by an Interested Person in
exchange for stock of the Corporation prior to the proposed Business
Combination, the fair market value of said securities at the time of issue
shall be used in determining the per share price paid for said stock.
2. After the Interested Person has become the beneficial
owner of five percent (5%) or more of the stock of the Corporation entitled to
vote in the election of directors and prior to the consummation of such
Business Combination, there shall have been no reduction in the rate of
dividends payable on the Corporation's stock which would result in a quarterly
dividend rate per share which is less than the average quarterly dividend rate
per share for the four full consecutive fiscal quarters immediately preceding
the time when the Interested Person shall have become the beneficial owner of
said five percent (5%) or more of the stock of the Corporation, unless such
reduction in the rate of dividends has been approved by three-fourths (3/4) of
the entire membership of the Board of Directors of the Corporation. For the
purposes of this paragraph, "quarterly dividend rate per share" for any
quarterly dividend shall be equal to the percentage said quarterly dividend per
share bears to the earnings per share for the four full fiscal quarters
immediately preceding the declaration of said quarterly dividend.
3. The consideration to be received by shareholders who
are not Interested Persons shall be in cash or in the same form as the
Interested Person has previously paid for shares of such class of stock; if the
Interested Person has paid for shares of any class of any stock with varying
6
<PAGE> 7
forms of consideration, the form of consideration for such class of stock shall
be either cash or the form used to acquire the largest number of shares of such
class of stock previously acquired by it.
B. For the purposes of this Article IX:
1. "Acceptable Securities" shall mean (a) securities of
the same class or series, with the same rights, powers and benefits and of the
same denomination, term and interest, or dividend, if any, as the securities
issued and delivered by the Interested Person in exchange for the majority of
the stock of the corporation acquired by the Interested Person, or (b) the
class of common stock of the Interested Person which is beneficially owned by
most persons.
2. "Affiliate" and "associate" shall have the respective
meanings given those terms in Rule l2b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the date
hereof.
3. A person shall be the "beneficial owner" and
"beneficially own" shares of stock of the Corporation (other than shares of the
Corporation's stock held in its treasury) (a) which such person and its
affiliates or associates beneficially own, directly or indirectly, whether of
record or not, (b) which such person or any of its affiliates or associates has
the right to acquire, pursuant to any agreement upon the exercise of conversion
rights, warrants, or options, or otherwise, (c) which such person or any of its
affiliates or associates has the right to sell or vote pursuant to any
agreement, or (d) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purposes of
acquiring, holding, voting or disposing of securities of the Corporation.
4. "Business Combination" is:
a. any merger or consolidation of the
Corporation or any subsidiary of the Corporation with or into any Interested
Person (regardless of the identity of the surviving corporation);
b. any sale, lease or other disposition of all
or any substantial part (assets having a fair market value of twenty-five
percent (25%) of the total assets of the Corporation) of the assets of the
Corporation or any subsidiary of the Corporation to any Interested Person for
cash, real or personal property, including securities, or any combination
thereof; or
c. any issuance or delivery of securities of the
Corporation or a subsidiary of the Corporation (which the beneficial owner
shall have the right to vote, or to vote upon exercise, conversion or by
contract) to an Interested Person in consideration of or in exchange for any
securities or other property (including cash).
5. "Interested Person" is any person which, as of the
record date for the determination of shareholders entitled to notice of any
Business Combination and to vote thereon or consent thereto, or as of the date
of any such vote or consent, immediately prior to the
7
<PAGE> 8
consummation of any Business Combination, beneficially owns, directly or
indirectly, five percent (5%) or more of the shares of stock of the Corporation
entitled to vote in elections of directors.
6. "Person" is an individual, partnership, corporation
or other entity.
7. "Subsidiary of the Corporation" is any corporation of
which fifty percent (50%) or more of any class of stock is beneficially owned,
directly or indirectly, by the Corporation.
C. No amendment to these Articles of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article IX, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Florida in effect at the time, shall receive the
affirmative vote or consent of the holders of three-fourths (3/4) of the
outstanding shares of each class of stock of the Corporation entitled to vote
in elections of directors.
X.
A. The Board of Directors of the Corporation, when evaluating any
offer of another individual, firm, corporation or other entity ("Person") (a)
to make a tender or exchange offer for any equity security of the Corporation,
(b) to merge or consolidate the Corporation with such other Person, or (c) to
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation (such offers individually referred to as an
"Acquisition Proposal"), shall, in connection with the exercise of its business
judgment in determining what is in the best interest of the Corporation and its
Shareholders, give due consideration to all relevant factors, including without
limitation, the consideration being offered in the Acquisition Proposal in
relation to the then-current market price of the Corporation's stock, but also
in relation to the then-current value of the Corporation in a freely negotiated
transaction and in relation to the Board of Directors' then-estimate of the
future value of the Corporation as an independent entity, the social and
economic effects on the employees, customers, suppliers, and other constituents
of the Corporation and on the communities in which the Corporation operates or
is located and the desirability of maintaining independence from any other
business or business entity; provided, however, that this Article shall be
deemed solely to grant discretionary authority to the directors and shall not
be deemed to provide any constituency any right to be considered.
B. No amendment to these Articles of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article X, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Florida in effect at the time, shall receive the
affirmative vote or consent of the holders of three-fourths (3/4) of the
outstanding shares of each class of stock of the Corporation entitled to vote
in elections of directors.
XI.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director 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; provided, however, that
to the extent required by applicable law,
8
<PAGE> 9
this Article shall not eliminate or limit the liability of a director (i) for a
violation of the criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful, (ii) for any transaction from which the director derived
an improper personal benefit, (iii) for unlawful distributions to shareholders
of the Corporation in violation of Section 607.06401 of the Florida Business
Corporation Act, or (iv) for willful misconduct or a conscious disregard for
the best interests of the Corporation in a proceeding by or in the right of the
Corporation to procure judgment in its favor or in a proceeding by or in the
right of a shareholder. If applicable law is amended to authorize corporate
action further eliminating or limiting the liability of directors, then the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by applicable law, as amended. Neither the
amendment or repeal of this Article, nor the adoption of any provision of these
Articles of Incorporation inconsistent with this Article, shall eliminate or
reduce the effect of this Article in respect of any acts or omissions occurring
prior to such amendment, repeal or adoption of an inconsistent provision.
XII.
Except as otherwise specifically provided herein, these Articles of
Incorporation may be amended, altered, changed or repealed only by the
affirmative vote or consent of the holders of at least one-half (1/2) of the
shares of each class of stock of the Corporation entitled to vote in elections
of directors.
Signed this 4th day of November, 1998
HEARTLAND BANCSHARES, INC.
By:/s/ James C. Clinard
-------------------------------------
James C. Clinard
President and Chief Executive Officer
9
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
HEARTLAND BANCSHARES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS ......................................................................... 1
ARTICLE II. GENERAL PROVISIONS REGARDING NOTICES................................................. 2
Section 1. NOTICES.............................................................................. 2
Section 2. WAIVER OF NOTICE..................................................................... 3
ARTICLE III. SHAREHOLDERS' MEETINGS............................................................... 4
Section 1. PLACE OF MEETING..................................................................... 4
Section 2. ANNUAL MEETING....................................................................... 4
Section 3. SPECIAL MEETINGS..................................................................... 4
Section 4. NOTICE TO SHAREHOLDERS............................................................... 4
Section 5. FIXING OF RECORD DATE................................................................ 5
Section 6. QUORUM AND VOTING REQUIREMENTS....................................................... 6
Section 7. PROXIES.............................................................................. 7
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING............................................. 7
ARTICLE IV. DIRECTORS............................................................................ 7
Section 1. GENERAL POWERS....................................................................... 7
Section 2. NUMBER, TENURE, QUALIFICATIONS....................................................... 8
Section 3. VACANCIES, HOW FILLED................................................................ 8
Section 4. PLACE OF MEETING..................................................................... 8
Section 5. COMPENSATION......................................................................... 8
Section 6. REGULAR MEETINGS..................................................................... 8
Section 7. SPECIAL MEETINGS..................................................................... 8
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER....................................... 9
Section 9. QUORUM............................................................................... 9
Section 10. MANNER OF ACTING..................................................................... 9
Section 11. COMMITTEES........................................................................... 9
Section 12. ACTION WITHOUT FORMAL MEETING........................................................ 10
Section 13. CONFERENCE CALL MEETINGS............................................................. 10
</TABLE>
(i)
<PAGE> 2
<TABLE>
<S> <C> <C>
ARTICLE V. OFFICERS............................................................................ 10
Section 1. GENERALLY........................................................................... 10
Section 2. COMPENSATION........................................................................ 11
Section 3. VACANCIES........................................................................... 11
Section 4. CHAIRMAN OF THE BOARD............................................................... 11
Section 5. CHIEF EXECUTIVE OFFICER............................................................. 12
Section 6. SECRETARY........................................................................... 12
Section 7. THE CHIEF FINANCIAL OFFICER......................................................... 12
Section 8. DEPUTY OFFICERS..................................................................... 12
Section 9. ASSISTANT OFFICERS.................................................................. 13
ARTICLE VI. INDEMNIFICATION..................................................................... 13
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION........................................ 13
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION........................................ 13
Section 3. SUCCESSFUL DEFENSE.................................................................. 14
Section 4. AUTHORIZATION OF INDEMNIFICATION.................................................... 14
Section 5. REASONABLENESS OF EXPENSES.......................................................... 15
Section 6. PREPAYMENT OF EXPENSES.............................................................. 15
Section 7. NON-EXCLUSIVE RIGHT................................................................. 15
Section 8. SUCCESSORS.......................................................................... 16
Section 9. JUDICIAL DETERMINATION.............................................................. 16
Section 10. INSURANCE........................................................................... 16
Section 11. INFORMATION TO SHAREHOLDERS......................................................... 16
ARTICLE VII. FISCAL YEAR......................................................................... 17
ARTICLE VIII. ANNUAL STATEMENTS................................................................... 17
ARTICLE IX. CAPITAL STOCK....................................................................... 17
Section 1. FORM................................................................................ 17
Section 2. TRANSFER............................................................................ 18
Section 3. RIGHTS OF HOLDER.................................................................... 18
Section 4. LOST OR DESTROYED CERTIFICATES...................................................... 18
ARTICLE X. SEAL................................................................................ 19
ARTICLE XI. REGISTERED OFFICE AND REGISTERED AGENT.............................................. 19
ARTICLE XII. AMENDMENTS.......................................................................... 19
Section 1. AMENDMENTS GENERALLY................................................................ 19
Section 2. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS...................................... 19
</TABLE>
<PAGE> 3
BYLAWS
OF
HEARTLAND BANCSHARES, INC.
ARTICLE I.
DEFINITIONS
As used in these Bylaws, the terms set forth below shall have the
meanings indicated, as follows:
"Act" shall mean the Florida Business Corporation Act, as amended from
time to time.
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
"Chairman of the Board" shall mean the Chairman of the Board of
Directors, or such other officer as shall be designated by the Board as having
the duties of the Chairman of the Board, as described in Section 4 of Article V
of these Bylaws.
"Chief Executive Officer" shall mean the President of the Corporation,
or such other officer as shall be designated by the Board as having the duties
of the Chief Executive Officer, as described in Section 5 of Article V of these
Bylaws.
"Corporation" shall mean Heartland Bancshares, Inc., a Florida
corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 6 of Article V of these Bylaws.
"Secretary of State" shall mean the Secretary of State of Florida.
"Voting group" shall have the meaning set forth in subsection (a) of
Section 6 of Article III of these Bylaws.
2
<PAGE> 4
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these Bylaws, or as otherwise required by applicable law:
(a) Any notice required by these Bylaws or by law shall be in
writing unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of electronic communication; or by mail.
(c) Written notice by the Corporation to any shareholder is
effective when deposited in the mail, if mailed with first-class postage
prepaid and correctly addressed to the shareholder's address shown in the
Corporation's current stock transfer books; provided that it may utilize a
class of mail other than first class if the notice of the meeting is mailed,
with adequate postage prepaid, not less than 30 days before the date of the
meeting.
(d) Written notice to the Corporation may be addressed to its
registered agent at its registered office or to the Corporation or its
Secretary at its principal office shown in its most recent annual registration
with the Secretary of State.
(e) Except as provided in subsection (c) of this Section 1, written
notice, if in a comprehensible form, is effective at the earliest of the
following:
(1) When received;
(2) Five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and
correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
(f) Oral notice is effective when communicated if communicated
directly to the person to be notified in a comprehensible manner.
(g) In calculating time periods for notice under these By-Laws,
when a period of time measured in days, weeks, months, years, or other
measurement of time is prescribed for the exercise of any privilege or the
discharge of any duty, the first day shall not be counted but the last day
shall be counted.
3
<PAGE> 5
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required
by the Articles of Incorporation, these Bylaws or applicable law:
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the
meeting; and
(2) Waives 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 shareholder objects to
considering the matter when it is presented.
(c) Neither the business transacted nor the purpose of the meeting
need be specified in the waiver, except that any waiver by a shareholder of the
notice of a meeting of shareholders with respect to an amendment of the
Articles of Incorporation, a plan of merger or share exchange, a sale of assets
or any other action which would entitle the shareholder to exercise statutory
dissenter's rights under the Act and obtain payment for his or her shares shall
not be effective unless:
(1) Prior to the execution of the waiver, the shareholder shall
have been furnished the same material that under the Act would
have been required to be sent to the shareholder in a notice of
the meeting, including notice of any applicable dissenters'
rights as provided in the Act; or
(2) The waiver expressly waives the right to receive the material
required to be furnished.
(d) A director may waive any notice required to be given to such
director by the Act, the Articles of Incorporation, or these Bylaws before or
after the date and time stated in the notice. Except as provided by subsection
(e) of this Section 2, the waiver must be in writing, signed by the director
entitled to the notice, and delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives
any required notice to him of the meeting unless the director at the beginning
of the meeting (or promptly upon his
4
<PAGE> 6
or her arrival) objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within
or outside the State of Florida as the place of meeting for any annual or
special shareholders' meeting. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place within or outside the
State of Florida as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall
be held on the fourth Friday in March of each year, if not a legal holiday (and
if such is a legal holiday, then on the next following business day not a legal
holiday), at such time and place as the Board shall determine, at which time
the shareholders shall elect a Board and transact such other business as may be
properly brought before the meeting. Notwithstanding the foregoing, the Board
may cause the annual meeting of shareholders to be held on such other date in
any year as the Board shall determine to be in the best interests of the
Corporation, and any business transacted at that meeting shall have the same
validity as if transacted on the date designated herein. If the annual meeting
is not held within any 13-month period, the circuit court of the circuit in
which the principal office of the Corporation is located may, on application of
any shareholder, summarily order a meeting to be held.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, except to the extent otherwise prescribed by statute
or the Articles of Incorporation, may be called by the Chief Executive Officer,
or by the presiding officer of the Board, if any. The Chief Executive Officer
or the Secretary shall call a special meeting when: (1) requested in writing by
any three or more of the directors; or (2) requested in writing by shareholders
owning not less than one tenth of all shares entitled to vote. Any such written
request shall be signed and dated and shall state the purpose or purposes of
the proposed meeting.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these Bylaws.
5
<PAGE> 7
(b) The Corporation shall give notice to each shareholder entitled
to vote thereat of the date, time and place of each annual and special
shareholders' meeting not less than ten nor more than sixty days before the
meeting date.
(c) Unless otherwise required by the Act with respect to meetings
at which specified actions will be considered (including but not limited to
mergers, certain share exchanges, certain asset sales by the Corporation, and
dissolution of the Corporation), notice of an annual meeting need not contain a
description of the purpose or purposes for which the meeting is called.
(d) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by
the terms of these Bylaws to be set) therefor, notice of the date, time and
place of any adjourned meeting need not be given otherwise than by the
announcement at the meeting before adjournment. If a new record date for the
adjourned meeting is or must be fixed, however, notice of the adjourned meeting
must be given in accordance with these Bylaws as if such adjourned meeting were
a newly-called meeting.
(f) If any corporate action proposed to be considered at a meeting
of shareholders would or might give rise to statutory dissenters' rights under
the Act, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Act.
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or shareholders entitled to
demand a special meeting of shareholders, or shareholders entitled to take any
other action, the Board may fix in advance (but not retroactively from the date
the Board takes such action) a date as the record date for any such
determination of shareholders, such date in any case to be not more than
seventy (70) days prior to the meeting or action requiring such determination
of shareholders. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, the
close of business on the last business day before the first notice of such
meeting is delivered to shareholders shall be the record date. If no record
date is fixed for determining shareholders entitled to take action without a
meeting, the date the first shareholder signs the consent shall be the record
date for such purpose. If no record date is fixed for determining shareholders
entitled to demand a special meeting, or to take other action, the date of
receipt of notice by the Corporation of demand for such meeting, or the date on
which such other action is to be taken by the shareholders, shall be the record
date for such purpose.
6
<PAGE> 8
(b) A separate record date may be established for each voting group
entitled to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to
vote at a shareholders meeting is effective for any adjournment of the meeting
unless the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting, in which event, a new record date shall be set.
(d) For the purpose of determining shareholders entitled to a
distribution by the Corporation (other than one involving a purchase,
redemption or other acquisition of the Corporation's shares), the record date
shall be the date fixed for such purpose by the Board, or if the Board does not
fix such a date, the date on which the Board authorizes such distribution.
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation
or the Act:
(i) A "voting group" with respect to any given matter
means all shares of one or more class or series which,
under the Articles of Incorporation or the Act, are
entitled to vote and be counted together collectively
on that matter, and unless specified otherwise in the
Articles of Incorporation, the Act or these Bylaws,
all shares entitled to vote on a given matter shall be
deemed to be a single voting group for purposes of
that matter.
(ii) Each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a
shareholders' meeting.
(iii) A majority of the votes entitled to be cast on the
matter by a voting group constitutes a quorum of that
voting group for action on that matter.
(iv) The presence of a quorum of each voting group entitled
to vote thereon shall be the requisite for transaction
of business on a given matter.
(v) Action on a matter other than election of directors is
approved by a voting group if a quorum of such voting
group exists and the number of votes cast within such
voting group in favor of such action exceeds the
number of votes cast within such voting group against
such action.
(vi) Except as otherwise provided in these Bylaws, all
shares entitled to vote for election of directors
shall vote thereon as a single voting group, and
directors shall be elected by a plurality of votes
cast by shares entitled to
7
<PAGE> 9
vote in the election in a meeting at which a quorum
of such voting group is present.
(b) Once a share is represented for any purpose other than solely
to object to holding a meeting or transacting business at the meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these By-Laws to be, set for that adjourned meeting.
(c) If a quorum for transaction of business shall not be present at
a meeting of shareholders, the shareholders entitled to vote thereat, present
in person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock shall be present. No notice
other than announcements at the meeting before adjournment shall be required of
the new date, time or place of the adjourned meeting, unless a new record date
for such adjourned meeting is, or is required by law or these Bylaws to be,
fixed. At such adjourned meeting (for which no new record date is, or is
required to be, set) at which a quorum shall be present in person or by proxy,
any business may be transacted that might have been transacted at the meeting
originally called.
Section 7. PROXIES. At every meeting of the shareholders, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be: (i) effective unless given in writing and signed,
either personally by the shareholder or his or her attorney-in-fact; (ii)
effective until received by the Secretary or other officer or agent authorized
to tabulate votes; or (iii) valid after eleven months from its date, unless
said proxy expressly provides for a longer period.
Section 8. ACTION OF SHAREHOLDERS WITHOUT A MEETING. Unless otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any annual or special meeting of shareholders of the Corporation,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock of each voting group entitled to vote thereon
having not less than the minimum number of votes with respect to each voting
group that would be necessary to authorize or take such action at a meeting at
which all voting groups and shares entitled to vote thereon were present and
voted.
Within 10 days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action and, if the action be such for
which dissenters rights are provided under Florida law, the notice shall
contain a clear statement of the right of shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with further provisions
of Florida law regarding the rights of dissenting shareholders.
8
<PAGE> 10
ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. Except as may be otherwise provided by any
legal agreement among shareholders, the property and business of the
Corporation shall be managed by its Board of Directors. In addition to the
powers and authority expressly conferred by these Bylaws, the Board of
Directors may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law, or by any legal agreement among
shareholders, or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the shareholders.
Section 2. NUMBER, TENURE, QUALIFICATIONS. The Board of Directors shall
consist of not less than two nor more than twenty-five members, the precise
number to be determined from time to time by affirmative vote of a majority of
the entire Board of Directors. Unless otherwise provided in the Articles of
Incorporation, each Director shall be elected at the annual meeting of
shareholders, to hold office until the next succeeding annual meeting of
shareholders held after his or her election and until his or her successor has
been duly elected and has qualified, or until his or her earlier resignation,
removal from office, or death. Directors shall be natural persons who are
eighteen years of age or older, but need not be shareholders or residents of
Florida unless the Articles of Incorporation require otherwise.
Section 3. VACANCIES, HOW FILLED. If any vacancy shall occur in the
membership of the Board by reason of newly created directorships or resulting
from the resignation, disqualification, retirement or death of a director, the
remaining directors shall continue to act, and such vacancies may be filled by
the affirmative vote of the majority of the directors then in office, though
less than a quorum, and if not therefore filled by action of the directors, may
be filled by the shareholders at any meeting held during the existence of such
vacancy. If any vacancy shall occur among the directors by reason of the
removal from office of a director, such vacancy shall be filled by the vote of
seventy-five percent (75%) of the outstanding shares of each class of stock
entitled to vote in elections of directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office.
Section 4. PLACE OF MEETING. The Board may hold its meetings at such
place or places within or without the State of Florida as it may from time to
time determine.
Section 5. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by
resolution of the Board.
9
<PAGE> 11
Section 6. REGULAR MEETINGS. A regular annual meeting of the Board
shall be held, without other notice than this Bylaw, immediately after the
annual meeting of shareholders. The Board may provide, by resolution, the time
and place within or without the State of Florida, for the holding of additional
regular meetings without other notice than such resolution.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chief Executive Officer or the presiding officer of the Board, if
different from the Chief Executive Officer, on not less than two days' notice
to each director by mail, telegram, cablegram or other form of wire or wireless
communication, or personal delivery or other form of communication authorized
under the circumstances by the Act, and shall be called by the Chief Executive
Officer or the Secretary in like manner and on like notice on the written
request of any two or more members of the Board. Such notice shall state the
time, date and place of such meeting, but need not describe the purpose of the
meeting. Any such special meeting shall be held at such time and place as shall
be stated in the notice of the meeting.
Section 8. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these By-Laws.
Section 9. QUORUM. At all meetings of the Board, unless otherwise
provided in the Articles of Incorporation or other provisions of these Bylaws,
the presence of a majority of the Directors shall constitute a quorum for the
transaction of business. In the absence of a quorum a majority of the Directors
present at any meeting may adjourn from time to time until a quorum is
obtained. Notice of the time and place of any adjourned meeting need only be
given by announcement at the meeting at which adjournment is taken.
Section 10. MANNER OF ACTING. Except as expressly otherwise provided by
the Articles of Incorporation or other provisions of these Bylaws, if a quorum
is present when a vote is taken, the affirmative vote of a majority of
directors present is the act of the Board. A director who is present at a
meeting when corporate action is taken is deemed to have assented to the action
unless:
(1) He/she objects at the beginning of the meeting (or promptly
upon his or her arrival) to holding it or transacting business
at the meeting; or
(2) His or her dissent or abstention from the action taken is
entered in the minutes of the meeting and his or her reason(s)
for abstention is submitted in writing to the Board.
10
<PAGE> 12
Section 11. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation,
the Board may create an Executive Committee and one or more committees and
appoint members of the Board to serve on them. Each committee may have two or
more members, who serve at the pleasure of the Board.
(b) The provisions of these Bylaws and of the Act which govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board, shall apply as well to committees created
under this Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these
Bylaws and the resolution of the Board creating such committee, each committee
may exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action
required by the Act to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
(3) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board
of Directors;
(4) Adopt, amend, or repeal the bylaws; or
(5) Authorize or approve the issuance or sale or contract for the
sale of shares, or determine the designation and relative
rights, preferences, and limitations of a voting group except
that the Board of Directors may authorize a committee (or a
senior executive officer of the Corporation) to do so within
limits specifically prescribed by the Board of Directors.
Section 12. ACTION WITHOUT FORMAL MEETING. Except as expressly
otherwise provided in the Articles of Incorporation, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting if written consent thereto (which may take the
form of one or more counterparts) is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of the proceedings of the Board or committee. A consent executed in
accordance herewith has the effect of a meeting vote and may be described as
such in any document.
Section 13. CONFERENCE CALL MEETINGS. Members of the Board, or any
committee of the Board, may participate in a meeting of the Board or committee
by means of conference, telephone or similar communications equipment by means
of which all persons
11
<PAGE> 13
participating in the meeting can simultaneously hear each other during the
meeting, and participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting.
ARTICLE V.
OFFICERS
Section 1. GENERALLY. The Board shall from time to time elect or
appoint such officers as it shall deem necessary or appropriate to the
management and operation of the Corporation, which officers shall hold their
offices for such terms as shall be determined by the Board and shall exercise
such powers and perform such duties as are specified in these Bylaws or in a
resolution of the Board. Except as specifically otherwise provided in
resolutions of the Board, the following requirements shall apply to election or
appointment of officers:
(a) The Corporation shall have, at a minimum, the following
officers, which offices shall bear the titles designated therefor by resolution
of the Board, but in the absence of such designation shall bear the titles set
forth below:
<TABLE>
<CAPTION>
Office Title
------ -----
<S> <C>
Chairman of the Board Chairman
Chief Executive Officer President
Chief Financial Officer Treasurer
Secretary Secretary
</TABLE>
(b) All officers of the Corporation shall serve at the pleasure of
the Board, and in the absence of specification otherwise in a resolution of the
Board, each officer shall be elected to serve until the next succeeding annual
meeting of the Board and the election and qualification of his or her
successor, subject to his or her earlier death, resignation or removal.
(c) Any person may hold two or more offices simultaneously, and no
officer need be a shareholder of the Corporation.
(d) If so provided by resolution of the Board, any officer may be
delegated the authority to appoint one or more officers or assistant officers,
which appointed officers or assistant officers shall have the duties and powers
specified in the resolution of the Board.
12
<PAGE> 14
Section 2. COMPENSATION. The salaries of the officers of the
Corporation shall be fixed by the Board, except that the Board may delegate to
any officer or officers the power to fix the compensation of any other officer.
Section 3. VACANCIES. A vacancy in any office, because of resignation,
removal or death may be filled by the Board for the unexpired portion of the
term, or if so provided by resolution of the Board, by an officer of the
Corporation to whom has been delegated the authority to appoint the holder of
such vacated office.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall, when present, preside at all meetings of the shareholders and
the Board, either annual or special. The Chairman shall assist the Board in the
formulation of policies to be pursued by the executive management of the
Corporation, and he/she shall study and make reports and recommendations with
respect to major problems, policies, and activities of the Corporation, and it
shall be his or her responsibility to see that the policy established by the
Board is carried into effect by the executive officers. The Chairman may sign
and deliver on behalf of the Corporation any deed, mortgages, bonds, contracts,
powers of attorney, or other instruments which the Board have authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board 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 he/she shall perform such other duties as may be prescribed by
the Board from time to time.
Section 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have such title or titles designated by the Board and shall be the principal
executive officer of the Corporation. Subject to the control of the Board, the
Chief Executive Officer shall in general manage, supervise and control all of
the business and affairs of the Corporation. He/she shall, when present,
preside at all meetings of all of the stockholders. He/she may sign,
individually or in conjunction with any other proper officer of the Corporation
thereunto authorized by the Board, certificates for shares of the Corporation,
any deeds, mortgages, bonds, policies of insurance, contracts, investment
certificates, or other instruments which the Board has authorized to be
executed, except in cases where the execution thereof shall be expressly
delegated by the Board or by the 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 incident to the office of the Chief
Executive Officer of the Corporation and such other duties as may be prescribed
by the Board from time to time.
Section 6. SECRETARY. The Secretary may be designated by any such title
as determined by resolution of the Board, and shall: (a) attend and keep the
Minutes of the shareholders' meetings and of the Board's 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 otherwise required by
law or the provisions of the Articles of Incorporation; (c) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the
13
<PAGE> 15
Corporation is affixed to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized; (d) maintain, or cause an
agent designated by the Board to maintain, a record of the Corporation's
shareholders in a form that permits the preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares, showing
the number and class of shares held by each; (e) have general charge of the
stock transfer books of the Corporation or responsibility for supervision, on
behalf of the Corporation, of any agent to which stock transfer responsibility
has been delegated by the Board; (f) have responsibility for the custody,
maintenance and preservation of those corporate records which the Corporation
is required by the Act or otherwise to create, maintain or preserve; (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 him by the Board.
Section 7. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer,
unless otherwise determined by the Board, shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; receive and
give receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board;
and (b) in general perform all the duties incident to the office of Chief
Financial Officer and such other duties as from time to time may be assigned by
the Board.
Section 8. DEPUTY OFFICERS. The Board may create one or more deputy
officers whose duties shall be, among any other designated thereto by the
Board, to perform the duties of the officer to which such office has been
deputized in the event of the unavailability, death or inability or refusal of
such officer to act. Deputy officers may hold such titles as designated
therefor by the Board; however, any office designated with the prefix "Vice" or
"Deputy" shall be, unless otherwise specified by resolution of the Board,
automatically a deputy officer to the office with the title of which the prefix
term is conjoined. Deputy officers shall have such other duties as prescribed
by the Board from time to time.
Section 9. ASSISTANT OFFICERS. The Board may appoint one or more
officers who shall be assistants to principal officers of the Corporation, or
their deputies, and who shall have such duties as shall be delegated to such
assistant officers by the Board or such principal officers, including the
authority to perform such functions of those principal officers in the place of
and with full authority of such principal officers as shall be designated by
the Board or (if so authorized) by such principal officers. The Board may by
resolution authorize appointment of assistant officers by those principal
officers to which such appointed officers will serve as assistants.
14
<PAGE> 16
ARTICLE VI.
INDEMNIFICATION
Section 1. ACTION BY PERSONS OTHER THAN THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify any person who was or is a party to any, threatened, pending or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal (other than an
action by or in the right of the Corporation) by reason of the fact that such
person 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 attorney's fees), judgments,
fines, penalties and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
including any appeal thereof, if such person acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to criminal action or
proceeding, such person had no reasonable cause to believe his or her 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 or she reasonably believed to be in
or not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
Section 2. ACTIONS BY OR IN THE NAME OF THE CORPORATION. Under the
circumstances prescribed in Sections 3 and 4 of this Article, the Corporation
shall indemnify and hold harmless any person who was or is a party to any,
threatened, pending or completed action, suit or other type of proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person 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 attorney's fees) and amounts paid in settlement not
exceeding, in the judgment of the Board of Directors, the estimated expense of
litigating the action, suit or proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
action, suit or proceeding, including any appeal thereof. Such indemnification
shall be authorized if such person acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect to 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 in
which such action, suit or proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
15
<PAGE> 17
Section 3. SUCCESSFUL DEFENSE. 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 Sections
1 and 2 of this Article, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorney's fees)
actually and reasonably incurred by him or her in connection therewith.
Section 4. AUTHORIZATION OF INDEMNIFICATION. Except as provided in
Section 3 of this Article and except as may be ordered by a court, any
indemnification under Sections 1 and 2 of this Article 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 such person has met the applicable standard of conduct
set forth in Sections 1 and 2. Such determination shall be made:
(a) 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;
(b) if such a quorum is not obtainable, or, even if
obtainable, by majority vote of a committee duly designated by the
Board of Directors (in which directors who are a party may participate)
consisting solely of two or more directors not at the time parties to
the action, suit or proceeding;
(c) by independent legal counsel (i) selected by the
Board of Directors prescribed in paragraph (a) of this Section or the
committee prescribed in paragraph (b) of this Section; or (ii) if a
quorum of the directors cannot be obtained for paragraph (a) of this
Section and the committee cannot be designated under paragraph (b) of
this Section, selected by a majority vote of the full Board of
Directors (in which directors who are a party may participate); or
(d) by the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such action, suit or
proceeding or, if no such quorum is obtainable, by a majority vote of
shareholders who were not parties to such action, suit or proceeding.
Section 5. REASONABLENESS OF EXPENSES. Evaluation of the reasonableness
of expenses and authorization of indemnification shall be made in the same
manner as the determination that indemnification is permissible. However, if
the determination of permissibility is made by independent legal counsel,
persons specified by Section 4(c) shall evaluate the reasonableness of expenses
and may authorize indemnification.
16
<PAGE> 18
Section 6. PREPAYMENT OF EXPENSES. Expenses incurred by a director or
officer 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 or
officer to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation as authorized in this
Article. Expenses incurred by other employees and agents may be paid in advance
upon such terms or conditions that the Board of Directors deems appropriate.
Section 7. NON-EXCLUSIVE RIGHT. The indemnification and advancement of
expenses provided by this Article are not exclusive, and the Corporation may
make any other or further indemnification or advancement of expenses of any of
its directors, officers, employees or agents, under any Bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
such office. However, indemnification or advancement of expenses shall not be
made to or on behalf of any director, officer, employee or agent if a judgment
or other final adjudication establishes that his or her actions, or omissions
to act, were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee or agent had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful;
(b) A transaction from which the director, officer,
employee or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which
the liability provisions of Florida Business Corporation Act ss.
607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the
best interests of the Corporation in a proceeding by or in the right
of the Corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
(e) Recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner
exhibiting wanton and willful disregard of human rights, safety or
property in a proceeding by or in the right of someone other than the
Corporation or a shareholder.
Section 8. SUCCESSORS. Indemnification and advancement of expenses as
provided in this Article shall continue as, unless otherwise provided when
authorized or ratified, 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, unless otherwise provided when authorized or
ratified.
17
<PAGE> 19
Section 9. JUDICIAL DETERMINATION. Unless the Articles of
Incorporation provide otherwise, notwithstanding the failure of the Corporation
to provide indemnification, and despite any contrary determination of the Board
or of the shareholders in the specific case, a director, officer, employee or
agent of the Corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting
the proceeding, to the circuit court, or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
that it considers necessary, may order indemnification and advancement of
expenses, including expenses incurred in seeking court-ordered indemnification
or advancement of expenses, if it determines that:
(a) The director, officer, employee or agent is entitled
to mandatory indemnification under Section 3, in which case the court
shall also order the Corporation to pay the director reasonable
expenses incurred in obtaining court-ordered indemnification or
advancement of expenses;
(b) The director, officer, employee or agent is entitled
to indemnification or advancement of expenses, or both, by virtue of
the exercise by the Corporation of its power pursuant to Section 7; or
(c) The director, officer, employee or agent is fairly
and reasonably entitled to indemnification or advancement of expenses,
or both, in view of all the relevant circumstances, regardless of
whether such person met the standard of conduct set forth in Section
1, Section 2 or Section 7.
Section 10. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, 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 or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under the
provisions of this Article.
Section 11. INFORMATION TO SHAREHOLDERS. If any expenses or other
amounts are paid by way of indemnification, otherwise than by court order or
action by the shareholders or by an insurance carrier pursuant to insurance
maintained by the Corporation, the Corporation shall report the indemnification
or advance in writing to the shareholders with or before the notice of the next
shareholders meeting, or prior to such meeting if the indemnification or
advance occurs after the giving of such notice but prior to the time such
meeting is held, which report shall include a statement specifying the persons
paid, the amount paid, and the nature and status at the time of such payment of
the litigation or threatened litigation.
18
<PAGE> 20
ARTICLE VII.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board
or, in the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE VIII.
ANNUAL STATEMENTS
No later than 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders the following financial statements:
(a) A balance sheet as of the end of the fiscal year;
(b) An income statement for that year; and
(c) A statement of cash flows for that year.
In addition, upon written request, the Corporation shall mail promptly
to any shareholder of record a copy of the most recent such balance sheet,
income statement and statement of cash flows.
ARTICLE IX.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this
Section 1, the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be
entered in the books of the Corporation as they are issued. Each certificate
shall exhibit the holder's name, the number of shares and class of shares and
series, if any, represented thereby, the name of the Corporation, a statement
that the Corporation is organized under the laws of the State of Florida, the
par value of each share or a statement that the shares are without par value
and a summary of the designations, relative rights, preferences, and
limitations applicable to each class and the variations in rights, preferences,
and limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) or a statement that the
Corporation will furnish the shareholder a full statement
19
<PAGE> 21
of this information on request and without charge. Each certificate shall be
signed by one or more officers of the Corporation specified by resolution of
the Board, but in the absence of such specifications, shall be valid if
executed by the Chief Executive Officer or any Deputy or Assistant thereto, and
such execution is countersigned by the Secretary, or any Deputy or Assistant
thereto. Each stock certificate may but need not be sealed with the seal of the
Corporation.
(b) If authorized by resolution of the Board, the Corporation may
issue some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these By-Laws, or by any legal agreement among the
shareholders of the Corporation.
Section 2. TRANSFER. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been
lost, stolen or destroyed, upon compliance with the provisions of Section 4,
Article IX of these Bylaws.
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat
the holder of record of any share of the Corporation as the person entitled to
vote such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if
the Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
20
<PAGE> 22
ARTICLE X.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
ARTICLE XI.
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the corporation is 325
Central Avenue, Lake Placid, Florida 33852 and the name of the initial
registered agent is James C. Clinard. The corporation may amend this Article XI
at any time to change its registered office or registered agent, without
further action of its officers or directors, by filing with the Secretary of
State a notice of such change, in accordance with Section 607.0502 of the Act,
or any successor statute.
The corporation may have other offices at such places within or without
the State of Florida as the Board may from time to time designate or the
business of the Corporation may require or make desirable.
ARTICLE XII.
AMENDMENTS
Section 1. AMENDMENTS GENERALLY.
(a) Except as otherwise provided in the Articles of Incorporation
or by applicable law, the Bylaws of the Corporation may be altered or amended
and new Bylaws may be adopted by the shareholders or by the Board of Directors
at any regular or special meeting of the Board of Directors; provided, however,
that, if such action is to be taken at a meeting of the shareholders, notice of
the general nature of the proposed change in the Bylaws shall have been given
in the notice of a meeting. Except as otherwise provided in this Article XII,
action by the shareholders with respect to Bylaws shall be taken by an
affirmative vote of seventy-five percent (75%) of each class of stock entitled
to elect directors, and action by the directors with respect to Bylaws shall be
taken by an affirmative vote of a majority of all directors then holding
office.
21
<PAGE> 23
Section 2. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS.
(a) Any Bylaw which sets a greater quorum or voting requirement for
shareholders (or voting groups of shareholders) than the minimum required by
the Act may not be adopted, amended or repealed by the Board.
(b) Except as otherwise provided in the Articles of Incorporation,
a Bylaw that fixes a greater quorum or voting requirement for the Board than
the minimum required by the Act:
(1) May be amended or repealed only by the shareholders if
originally adopted by the shareholders;
(2) May be amended or repealed either by the directors or the
shareholders if originally adopted by the Board of Directors.
(c) A Bylaw adopted or amended by the shareholders that fixes a
greater quorum or voting requirement for the Board may be amended or repealed
only by a specified vote of either the shareholders or the Board, if such Bylaw
provision so provides.
22
<PAGE> 1
EXHIBIT 4.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT effective as of the 6th day of November, 1998 by
and among:
Heartland Bancshares, Inc., a Florida corporation
and bank holding company for Heartland National
Bank, located at Sebring, Florida (hereinafter
referred to as the "Company")
and
SunTrust Bank, Central Florida, National
Association, located at 225 East Robinson Street,
Suite 250, Orlando, Florida 32801 (hereinafter
referred to as the "Escrow Agent")
WITNESSETH:
WHEREAS, the Company intends to offer and sell to various investors
(the "Subscribers") no less than 600,000 shares and no more than 650,000 shares
of its capital stock, par value $0.10 per share (the "Capital Stock"), at a
subscription price of $10.00 per share pursuant to an offering to the public
(the "Offering"); and
WHEREAS, the Company must sell at least 600,000 shares ("Required
Offering") of Capital Stock on or before the date stipulated in Addendum A
attached hereto ("Required Offering Deadline"); and
WHEREAS, the release of the subscription funds to the Company is
contingent upon the grant of the requisite charter (the "Charter") to the Bank
from the U.S. Office of the Comptroller of the Currency ("OCC") on or before
February 5, 1999 unless such date is extended by the OCC (the "Expiration
Date"); and
WHEREAS, the parties hereto wish to agree among themselves as to the
treatment of all subscription proceeds which may be in the form of checks,
cashier's checks and/or money orders (the "Proceeds"), along with properly
executed subscription agreements, from the Subscribers pursuant to the Offering
until such time as the Charter is granted.
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the parties hereto agree as follows:
1. Creation of Escrow Agreement. Pursuant to the terms and
conditions of this Agreement, the parties do hereby agree that the Escrow Agent
shall act as escrow agent in regard to Proceeds received from the Subscribers
for the Capital Stock pursuant to the Offering.
2. Deposit and Delivery of Proceeds and Subscription Agreements.
The Escrow Agent shall deposit and hold in escrow under this Agreement all
Proceeds received by the Company from the
<PAGE> 2
Subscribers in regard to the purchase of the Capital Stock pursuant to the
Offering. The Escrow Agent shall have no responsibility whatsoever in regard to
Proceeds not received and for funds that have not yet cleared and become good
funds. Subscribers shall make the payment for the Capital Stock payable to the
Escrow Agent. In the event checks are made payable to the Company, the Company
shall promptly endorse said checks to the order to the Escrow Agent.
Simultaneously with the delivery of the Proceeds, the Company shall deliver to
the Escrow Agent the Subscription Agreements and copies of the written
acceptances for which the Proceeds represents payments. The Escrow Agent shall
hold the Proceeds and Subscription Agreements pursuant to the terms and
conditions of this Agreement.
3. Partial Rejection of Subscription Agreements. Should the
Company elect to accept a subscription for less than the number of shares shown
in a Subscriber's Subscription Agreement by indicating such lesser number of
shares on the written acceptance of the Company transmitted with the
Subscription Agreement and payment therefor, the Escrow Agent shall deposit
such payment in the escrow account and then remit within thirty (30) days to
such Subscriber at the address shown in his Subscription Agreement that amount
of his Proceeds in excess of the amount which constitutes full payment for the
number of subscribed shares accepted by the Company as shown in the Company's
written acceptance, such amount to be remitted without interest or reduction.
4. Achievement or Failure to Achieve Required Offering. The
Escrow Agent shall notify the Company in writing at such time as it has
received Proceeds totaling at least $6,000,000 exclusive of those which have
been rejected by the Company and shall continue to receive and hold such funds
until either Paragraph 4 or 5 has been satisfied. If, on or before the Required
Offering Deadline, the Escrow Agent shall not have received Proceeds from the
Subscribers for at least $6,000,000, the Escrow Agent shall return to each
Subscriber the appropriate amount of the Proceeds (plus or minus any net
profit, including interest, or loss incurred through allowable investment)
received and collected from him hereunder.
5. Failure to Obtain Charter. If, by the close of business on
the Expiration Date, the Company shall not have received the Charter from the
OCC, the Escrow Agent shall promptly after receipt of notification by the
Company return to the Subscribers the appropriate amount of the Proceeds (plus
or minus any net profit, including interest, or loss incurred through allowable
investment) received and collected from them hereunder. In the event that
Proceeds are to be returned to the Subscriber pursuant to Paragraph 4 or this
Paragraph 5, the specific allocation of net profits attributable to each
subscriber shall be determined by the Escrow Agent as follows: each
Subscriber's allocated share of earnings on the Proceeds, after deducting
Escrow Agent's fees, if any, for investments made, shall be that fraction (i)
the numerator of which is the dollar amount of such Subscriber's accepted
subscription multiplied by the number of days between the date of acceptance of
the Subscriber's subscription and the earlier of (a) the Required Offering
Deadline and (b) the Expiration Date, inclusive (the Subscriber's "Time
Subscription Factor"), and (ii) the denominator of which is the aggregate Time
Subscription Factors of all Subscribers depositing Proceeds with the Escrow
Agent.
6. Grant of Charter. Subject to provisions of paragraph 4,
hereof, if the Charter is granted by the OCC, the Escrow Agent shall, within
three (3) days of receiving notification thereof from the Company, pay to the
Company all cleared Proceeds then and thereafter received by it (including any
interest earned thereon) after deducting therefrom the fees and costs of the
Escrow Agent as set forth in Paragraph 15 hereof.
<PAGE> 3
7. Return of Proceeds to Subscribers: If instructed in writing
to do so by the Company the Escrow Agent agrees to return to any Subscriber,
whether his Subscription Agreement has been accepted by the Company or not,
Proceeds deposited pursuant to this Agreement by the Subscriber. Written
instruction by the Company to return funds to a Subscriber must be received by
the Escrow Agent prior to the Escrow Agent's disbursement of Proceeds pursuant
to Paragraph 6 of this Agreement. The Escrow Agent, in returning funds to the
Subscribers hereunder, may rely on the names and addresses furnished to the
Escrow Agent by the Company without the requirement of independent
verification. All returns and deliveries to a Subscriber under this Agreement
shall be mailed, by regular mail, to the residential or business address of
such Subscriber appearing on his Subscription Agreement. Any payment to a
Subscriber will be made by check.
8. Investment of Proceeds by Escrow Agent. The Escrow Agent
shall, at the direction of the President of the Company, invest the Proceeds in
one or more funds or a master repurchase agreement comprised solely of
investments in United States government, United States government backed
securities and repurchase agreements collateralized by United States government
backed securities. Interest and other monies earned on said investments shall
accrue to the benefit of the Company; provided, however, if the Required
Offering is not obtained, interest and other monies earned on said investments
shall be paid to Subscribers, with the Company remaining obligated to pay the
fees of the Escrow Agent. The Escrow Agent shall advise the Company as to the
form of investments into which the Proceeds have been placed, and furnish to
the Company periodic and final reports of said investments. The Escrow Agent
shall have no liability or obligation whatsoever for the status of said
investments or the failure of said investments.
9. Duties of Escrow Agent. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein and no implied
duties or obligations shall be read into this Agreements against the Escrow
Agent.
10. Reliance of Escrow Agent on Documents. The Escrow Agent
undertakes to perform only such duties as are expressly set forth herein and no
implied duties or obligations shall be read into this Agreement against the
Escrow Agent.
11. Indemnification of Escrow Agent. Unless the Escrow Agent
discharges any of its duties hereunder in a grossly negligent manner or is
guilty of willful misconduct with regard to its duties hereunder, the Company
hereby agrees to indemnify the Escrow Agent and hold it harmless from any and
all claims, liabilities, losses, actions, suits or proceedings at law or in
equity, or any other expenses, fees or charges of any character or nature which
it may incur or with which it may be threatened by reason of its acting as
Escrow Agent under this Agreement; and in connection therewith, to indemnify
the Escrow Agent against any and all expenses, including reasonable attorneys'
fees and the cost of defending any action, suit or proceeding or resisting any
claim.
12. Discretion of Escrow Agent to File an Interpleader Action in
the Event of Dispute. If the parties shall be in disagreement about the
interpretation of this Agreement, or about the rights and obligations, or the
propriety of any action contemplated by the Escrow Agent hereunder, the Escrow
Agent may, but shall not be required to, file an action of interpleader to
resolve the disagreement and may hold all Proceeds until directed by a court of
competent jurisdiction as to the manner or distribution or until all parties in
dispute mutually agree to the distribution. The Escrow Agent shall be
indemnified as set forth in Paragraph 11 for all cost, including reasonable
attorneys' fees incurred by it, in connection
<PAGE> 4
with the aforesaid interpleader action, and shall be fully protected in
suspending all or part of its activities under this agreement until a final
judgment or other appropriate order in the interpleader action is entered.
13. Consultation with Counsel. The Escrow Agent may consult with
independent counsel of its own choice and shall have full and complete
authorization and protection in accordance with the opinion of such counsel.
The Escrow Agent shall otherwise not be liable for any mistakes of fact or
errors of judgment, or for any acts or omissions of any kind unless caused by
its gross negligence of willful misconduct.
14. Resignation of Escrow Agent. The Escrow Agent may resign upon
thirty (30) days written notice to the Company. If a successor Escrow Agent is
not appointed by the Company within this thirty (30) day period, the Escrow
Agent may petition a court of competent jurisdiction to name a successor or, at
its option, the Escrow Agent may do nothing until such time as the Company has
furnished the name of a successor Escrow Agent or otherwise directed the Escrow
Agent as to the disposition of Proceeds provided, however, if the Charter has
not been received the Escrow Agent shall not pay to the Company any of the
Proceeds.
15. Compensation and Expenses. The Escrow Agent shall be entitled
to compensation from the Company for its services hereunder in an amount of
$1,500.00. In the event Escrow Agent must return the escrow funds to a
subscriber, the Company agrees to compensate Escrow Agent by paying said Agent
an additional $10.00 per subscriber.
16. Notices. All notices permitted or required to be given to any
party under this Agreement shall be in writing and shall be deemed to have been
given upon receipt by the party being notified. Either party may change the
address at which said notice is to be given by giving notice of such to all
other parties to Agreement in the manner set forth herein.
17. Successors and Assigns. The rights created by the Agreement
shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of the Escrow Agent.
18. Laws of the State of Florida to Apply. This Agreement shall
be construed in accordance with, and governed by the laws of, the State of
Florida.
19. Termination. This Escrow Agreement shall terminate and the
Escrow Agent shall be discharged of all responsibility hereunder at such time
as the Escrow Agent shall have completed its duties under Paragraphs 4, 5 or 6,
as the case may be.
20. Subscribers of the Capital Stock. A Subscriber for the
Capital Stock shall, upon execution of a Subscription Agreement and deposit
with the Escrow Agent of the Proceeds, automatically become a party to this
Agreement.
21. Complete Agreement. This Agreement constitutes the complete
agreement between the parties hereto and incorporates all prior discussions,
agreements and representations made in regard to the matters set forth herein.
This Agreement may not be amended, modified or changed except by a writing
signed by the party to be charged by said amendment, change or modification.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HEARTLAND BANCSHARES, INC.
By: /s/ James C. Clinard
------------------------------------
President
(CORPORATE SEAL) SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION
Attest: /s/ Lawrence B. Wells By: /s/ Deborah Mareyra
------------------------ ------------------------------------
First Vice President
<PAGE> 6
ADDENDUM "A"
The "Required Offering Deadline" by which the Company must sell at least
600,000 shares of Capital Stock shall be the later of (i) December 1, 1999; or
(ii) the date which is one year from the date on which the Company's
Registration Statement on Form SB-2 is declared effective by the Securities and
Exchange Commission.
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Smith, Gambrell & Russell]
November 10, 1998
Board of Directors
Heartland Bancshares, Inc.
325 Central Avenue
Lake Placid, Florida 33852
RE: Heartland Bancshares, Inc.
Registration Statement on Form SB-2
650,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel for Heartland Bancshares, Inc. (the
"Company") in connection with the proposed public offering of the shares of its
$.10 par value Common Stock covered by the above-described Registration
Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, as amended,
certified by the Secretary of State of the State of Florida;
(2) The Bylaws of the Company, certified as complete and correct
by the Secretary of the Company;
(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company,
issued by the Secretary of State of the State of Florida; and
(5) The Registration Statement, including all exhibits thereto.
<PAGE> 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion
that:
(A) The Company has been duly incorporated and is validly
existing under the laws of the State of Florida.
(B) The 650,000 shares of $.10 par value Common Stock covered by
the Registration Statement have been legally authorized and
when issued in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid
and nonassessable.
We consent to the filing of this opinion as an exhibit to the
aforementioned Registration Statement on Form SB-2 and to the reference to this
firm under the caption "Legal Matters" in the Prospectus. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ Robert C. Schwartz
---------------------------------
Robert C. Schwartz
<PAGE> 1
EXHIBIT 10.1
Employment Contract
THIS AGREEMENT, dated as of the 2nd day of October, 1998, by and among
Heartland Bancshares, Inc., a Florida corporation (the "Company"), Heartland
National Bank, a proposed national bank to be organized under the laws of the
United States (the "Bank") (the Company and the Bank are collectively referred
to herein as the "Employer"), and James C. Clinard (the "Executive").
W I T N E S S E T H:
WHEREAS, the directors of the Company, as organizers of the Bank, are
seeking approval from the Comptroller of the Currency ("OCC") and the Federal
Deposit Insurance Corporation ("FDIC") to charter a national bank in Highlands
County, Florida; and
WHEREAS, Executive is willing to assist the directors of the Company
in the organization of the Bank and to become the President and Chief Executive
Officer of the Bank and the Company in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. CONSULTING SERVICES. From the time of preliminary approval
through such time as the Bank opens for business, Executive shall serve as
consultant to Employer for the purpose of assisting with the organization of
the Bank and the Company, and as a consultant Executive shall be deemed to be
an independent contractor. Executive shall be paid $8,333.33 per month, payable
semi-monthly, for such consulting services.
2. EMPLOYMENT. Employer employs Executive and Executive accepts
employment upon the terms and conditions set forth in this Agreement.
3. TERM. The term of employment of Executive under this
Agreement shall be the five year period commencing on the date the Bank opens
for business.
4. COMPENSATION. (a) Salary. For all services rendered by
Executive, Executive shall be paid a minimum annual base salary of $100,000.00,
payable in equal semi-monthly installments during the term of this Agreement.
Salary payments shall be subject to withholding and other applicable taxes.
Such base salary shall be increased from time to time in the sole discretion of
the Board of Directors of the Bank.
(b) Bonus. Beginning on the second year end, December
31, after the Bank's opening for business, or at any other time as determined
by the Board of Directors, and in addition to Executive's base salary,
Executive shall be eligible to receive such performance bonuses as
<PAGE> 2
determined in the discretion of the Board of Directors of the Bank. The payment
of any bonus pursuant to this Section 4(b) shall be contingent upon the
following:
(i) Prior to the granting of any bonus to Executive, the
Board of Directors of the Bank shall consider, and
document its findings in the minutes of the meeting
wherein the issue was considered, Executive's
performance in light of the status of the Bank's
internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth,
asset quality, earnings and such other performance
goals and objectives mutually agreed upon between
Executive and such Board of Directors,
(ii) The overall condition of the Bank must be
"satisfactory" in the opinion of the OCC as set
forth in the most current OCC Report of Supervisory
Activity provided in the Board of Directors of the
Bank and the Uniform Financial Institution Rating of
the Bank shall not be less than a "2"; and
(iii) The Bank shall be "well capitalized" as defined
under regulations promulgated by the OCC pursuant to
the Federal Deposit Insurance Corporation
Improvement Act of 1991.
5. TITLE AND DUTIES. Executive shall serve as Chief Executive
Officer of the Bank once the OCC has granted preliminary charter approval and a
member of the Interim Board of Directors and the initial Board of Directors of
the Bank. Executive shall run the day-to-day activities of the Bank and oversee
the Bank, within the framework of the approved annual budget, and with a sound
system of internal controls and in compliance with the policies of the Board of
Directors of the Bank, and all applicable laws and regulations. Executive shall
also serve as Chief Executive Officer of the Company and shall be nominated as
a director of the company for the term of this agreement.
6. EXPENSES. Executive may incur reasonable expenses for
promoting the business of the Bank, including expenses for entertainment,
travel, and similar items. Executive will be reimbursed for all such expenses
upon Executive's monthly presentation of an itemized account of such
expenditures.
7. VACATIONS. Executive shall be entitled each year to a
vacation in accordance with the personnel policy established by the Bank's
Board of Directors during which time Executive's compensation shall be paid in
full.
8. ADDITIONAL COMPENSATION. As additional consideration paid to
Executive, Executive shall be provided with health, hospitalization, disability
and term life insurance, and participation in the Bank's incentive compensation
plan (in the event one is adopted by the Board of Directors of the Bank). The
Company shall also grant Executive annually options to purchase 3,000 shares of
Common Stock of the Company at a purchase price of $10.00 per share pursuant to
the Company's Incentive Stock Option Plan, annually, beginning on the first
anniversary after the Bank commences business. Twenty (20%) of these options
shall vest annually on five (5) successive anniversaries after the date of the
grant. All options shall be exercisable for a period of ten (10) years.
2
<PAGE> 3
9. CHANGE IN CONTROL OF THE COMPANY. (a) In the event of a
"change in control" of the Company, as defined herein, Executive shall be
entitled, for a period of sixty (60) days from the date of closing of the
transaction effecting such change in control and at his election, to give
written notice to Employer of termination of this Agreement and to receive a
cash payment equal to two hundred percent (200%) times the compensation,
including bonus, if any, received by Executive in the one-year period
immediately preceding the change in control. The severance payments provided
for in this Section 9(a) shall be paid in cash, commencing not later than ten
(10) days after the date of closing of the transaction effecting the change in
control of the Company, whichever is later; provided that no severance payment
shall be made pursuant to this Section 9 if Executive shall receive a written
offer of employment from the party seeking to effect a change in control of the
Company, which offer would become effective upon the closing of the transaction
constituting a change in control providing an annual base salary of no less
than the base salary in effect at that time for the Executive.
(b) For purposes of this Section 9, "change in control"
of the Company shall mean:
(i) any transaction, whether by merger,
consolidation, asset sale, tender offer,
reverse stock split, or otherwise, which
result in the acquisition or beneficial
ownership (as such term is defined under
rules and regulations promulgated under the
Securities Exchange Act of 1934, as
amended) by any person or entity or any
group of persons or entities acting in
concert, of 50% or more of the outstanding
shares of Common Stock of the Company; or
(ii) the sale of all or substantially all of the
assets of the Company.
10. TERMINATION. (a) FOR CAUSE. This Agreement may be terminated
by the Board of Directors of the Bank without notice and without further
obligation than for monies already paid, for any of the following reasons:
(i) receipt by the Bank of written notice from
the OCC that the OCC has criticized
Executive's performance or his area of
responsibility, and has either (a) rated
the Bank a "4" or a "5" under the Uniform
Financial Rating System or (b) has
determined that the Bank is in a "troubled
condition" as defined under Section 914 of
the Financial Institutions Reform, Recovery
and Enforcement Act of 1989;
(ii) failure of Executive to follow reasonable
written instructions or policies of the
Board of Directors of the Bank;
(iii) gross negligence or willful misconduct of
Executive materially damaging to the
business of the Bank during the term of
this Agreement, or at any time while he was
employed by the Bank prior to the term of
this Agreement, if not disclosed to the
Bank prior to the commencement of the term
of this Agreement; or
3
<PAGE> 4
(iv) arrest for, charged in relation to, by
criminal information, indictment or
otherwise, or conviction of Executive
during the term of this Agreement of a
crime involving breach of trust or moral
turpitude.
In the event that the Bank discharges Executive
alleging "cause" under this Section 10(a) and it is subsequently determined
judicially that the termination was "without cause," then such discharge shall
be deemed a discharge without cause subject to the provisions of Section 10(b)
hereof. In the event that the Bank discharges Executive alleging "cause" under
this Section 10(a), such notice of discharge shall be accompanied by a written
and specific description of the circumstances alleging such "cause." The
termination of Executive for "cause" shall not entitle the Bank to enforcement
of the non-competition and non-solicitation covenants contained in Section 12
hereof.
(b) WITHOUT CAUSE.
(i) The Bank may, upon thirty (30) days'
written notice to Executive, terminate this
Agreement without cause at any time during
the term of this Agreement upon the
condition that Executive shall be entitled,
as liquidated damages in lieu of all other
claims, to the payment of his base salary
for a period of twelve (12) months. The
severance payments provided for in this
Section 10(b) shall commence not later than
thirty (30) days after the actual date of
termination of employment of Executive. The
termination of Executive "without cause"
shall not entitle the Bank to enforcement
of the non- competition and
non-solicitation covenants contained in
Section 12 hereof.
(ii) Executive may upon thirty (30) days'
written notice to Employer terminate this
Agreement without cause at any time during
the term of this Agreement. In the event of
termination of this Agreement by Executive,
the Bank shall have no further obligation
to Executive than for monies paid and the
Bank shall be entitled to enforcement of
the non-competition and non-solicitation
covenants contained in Section 12 hereof.
(iii) In the event this Agreement is terminated
without cause, whether by Executive or by
the Bank, any stock options or unexercised
portion thereof, granted pursuant to this
Agreement, whether or not vested on the
date of termination, may be exercised by
Executive within sixty (60) days from the
date of termination at which time all such
options shall expire.
11. DEATH OR DISABILITY. In the event of Executive's death,
Employer shall pay to Executive's designated beneficiary, or, if Executive has
failed to designate a beneficiary, to his estate, an amount equal to
Executive's base salary pursuant to Section 4 hereof through the end of the
month in which Executive's death occurred. Such compensation shall be in lieu
of any other benefits provided hereunder, except that (i) in the event of a
change in control of the Company as defined herein, Executive's designated
beneficiary or his estate, as the case may be, shall be entitled to the
benefits of Section 10(b) hereof, and (ii) any benefit payable pursuant to
Section 4 shall be prorated and made available to Executive in respect of any
period prior to his death. The Bank may maintain insurance in its behalf to
satisfy in whole or in part the obligations of this Section 11.
4
<PAGE> 5
In the event of Executive's disability, as hereinafter defined,
Employer shall pay to Executive the base salary then in effect through the end
of the month in which the Executive became disabled. Executive shall be deemed
disabled if, by reason of physical or mental impairment, he is incapable of
performing his duties hereunder for a period of sixty (60) consecutive days.
Any dispute regarding the existence, the extent, or the continuance of
Executive's disability shall be resolved by the determination of a duly
licensed and practicing physician selected by and mutually agreeable to both
the Board of Directors of the Bank and Executive; provided, however, if
Executive officially establishes his eligibility to receive social security
disability benefits or is deemed disabled under the terms and conditions of any
disability insurance policy carried on Executive by the Company or the Bank, he
shall be deemed to be disabled as provided herein without further proof.
Executive shall make himself available for and submit to such examinations by
said physician as may be directed from time to time by the physician. Failure
to submit to any such examination shall constitute a material breach of this
Agreement.
12. NON-COMPETITION AND NON-SOLICITATION. (a) Executive
acknowledges that he has performed services or will perform services hereunder
which directly affect Employer's business. Accordingly, the parties deem it
necessary to enter into the protective agreement set forth below, the terms and
condition of which have been negotiated by and between the parties hereto.
(b) In the event of termination of employment under this
Agreement by action of Executive pursuant to 10(b)(ii) prior to the expiration
of the term of this Agreement, Executive agrees with Employer that through the
actual date of termination of the Agreement, and for a period of twenty-four
(24) months after such termination date, Executive shall not, without the prior
written consent of Employer, within Highlands County, Florida, or any other
county wherein a branch office of Employer is located, either directly or
indirectly, serve as an executive officer of any bank, bank holding company or
other financial institution.
(c) The covenants of Executive set forth in this Section
12 are separate and independent covenants for which valuable consideration has
been paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce Employer to enter
into this Agreement. In the event that a court of competent jurisdiction finds
that Executive has violated the provisions of this Section 12, then, as partial
relief to Employer, all unexercised options granted to Executive pursuant to
Section 8 hereof shall immediately become null and void. Further, each of the
aforesaid covenants may be availed of or relied upon by Employer in any court
of competent jurisdiction, and shall form the basis of injunctive relief and
damages including expenses of litigation (including but not limited to
reasonable attorney's fees) suffered by Employer arising out of any breach of
the aforesaid covenants by Executive. The covenants of Executive set forth in
this Section 12 are cumulative to each other and to all other covenants of
Executive in favor of Employer contained in this Agreement and shall survive
the termination of this Agreement for the purposes intended. Should any
covenant, term, or condition contained in this Section 12 become or be declared
invalid or unenforceable by a court of competent jurisdiction, then the parties
may request that such court judicially modify such unenforceable provision
consistent with the intent of this Section 12 so that it shall be enforceable
as modified, and in any event the invalidity of any provision of this Section
12 shall not affect the validity of any other provision in this Section 12 or
elsewhere in this Agreement.
5
<PAGE> 6
13. NOTICES. Any notice required or desired to be given under
this Agreement shall be deemed given if in writing sent by certified mail to
his residence in the case of Executive, or to its principal office in the case
of Employer.
14. WAIVER OF BREACH. The waiver by Employer of a breach of any
provision of this Agreement by Executive shall not operate or be construed as a
waiver of any subsequent breach by Executive. No waiver shall be valid unless
in writing and signed by an authorized officer of Employer.
15. ASSIGNMENT. Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement. The rights and obligations of Executive under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
Employer.
16. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.
17. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto regarding employment of Executive, and
supersedes and replaces any prior agreement relating thereto. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension, or discharge
is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BANK
HEARTLAND NATIONAL BANK
By: /s/ Lawrence B. Wells
---------------------------------------
Lawrence B. Wells
COMPANY
HEARTLAND INVESTORS, INC.
By: /s/ Lawrence B. Wells
---------------------------------------
Lawrence B. Wells
EXECUTIVE
/s/ James C. Clinard (L.S.)
----------------------------------
James C. Clinard
6
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Heartland Bancshares,
Inc. on Form SB-2 of our report dated November 5, 1998 of our audit of the
financial statements of Heartland Bancshares, Inc. as of September 30, 1998,
and for the period from its inception (August 3, 1998) through September 30,
1998, appearing in the Prospectus which is a part of this Registration
Statement, and to the reference to our firm under the heading "Experts" in such
Prospectus.
OSBURN, HENNING AND COMPANY
Orlando, Florida
November 9, 1998
7
