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As filed with the Securities and Exchange Commission on February 2, 1999
Registration No. 333- 67107
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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HEARTLAND BANCSHARES, INC.
(Name of small business issuer in its charter)
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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. [ ]
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650,000 SHARES
COMMON STOCK
HEARTLAND BANCSHARES, INC.
A BANK HOLDING COMPANY FOR
HEARTLAND NATIONAL BANK, SEBRING, FLORIDA
A PROPOSED NATIONAL BANK
Heartland Bancshares is conducting this initial public offering of
shares of its common stock to raise capital to form Heartland National Bank, a
proposed national bank. Heartland Bancshares is offering a minimum of 620,000
shares and a maximum of 650,000 shares at a price of $10.00 per share.
Investors must purchase a minimum of 500 shares and are limited to purchasing a
maximum of 50,000 shares. The shares will be marketed by a few of our directors
and executive officers. Although these individuals will use their best efforts
to market and sell the shares, there is no guarantee that the required minimum
number of shares will be sold. 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 an escrow agent, SunTrust Bank, Central Florida, N.A. until we
have received subscriptions for 620,000 shares. If we do not receive
subscriptions for 620,000 shares by ___________, 1999, 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 until ___________, 2000, without giving notice to investors. We
reserve the right to reject all or part of any subscription for any reason.
There is currently no public market for our common stock. At this time,
we do not intend to list our common stock on a national securities exchange or
the Nasdaq Stock Market.
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.
<TABLE>
<CAPTION>
Per Share Minimum Maximum
--------- ------- -------
<S> <C> <C> <C>
Price to Public............................................. $10.00 $6,200,000 $6,500,000
Proceeds to Heartland Bancshares............................ $10.00 $6,200,000 $6,500,000
</TABLE>
- - 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 _____________, 1999.
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary does not contain all of the information you should
consider before investing in our common stock. To fully understand this
offering, you should read the entire prospectus carefully, including the risk
factors and the financial statements.
THE COMPANY
We formed Heartland Bancshares to operate as a bank holding company and
as the sole shareholder of Heartland National Bank, a proposed national bank.
Heartland Bancshares will primarily use the proceeds of this offering to
purchase all of the common stock of Heartland Bank. Heartland Bank will be a
community bank emphasizing prompt, personalized customer service to the
individuals and small to medium-sized businesses located in Highlands County,
Florida. We anticipate that we will receive all necessary regulatory approvals
and be able to commence operations of Heartland Bank in August of 1999.
Heartland Bancshares and Heartland Bank will operate out of their main office
in Sebring, Florida and will also establish a branch office in Lake Placid,
Florida. Our temporary mailing address is 325 Central Avenue, Lake Placid,
Florida 33852, and our temporary telephone number is (941) 465-0472.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered................ 650,000 shares. To complete the offering, we must sell a
minimum of 620,000 shares. Investors must purchase a
minimum of 500 shares to participate in the offering and may
purchase a maximum of 50,000 shares in the offering.
However, we reserve the right to waive these minimum and
maximum subscription amounts. See "Terms of the
Offering," beginning on page 9.
Common Stock to be Outstanding
after this Offering................. Minimum - 620,000 shares
Maximum - 650,000 shares
Price to Public..................... $10.00 per share
</TABLE>
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<TABLE>
<S> <C>
Offering Conditions................. We must satisfy the following conditions to complete this
offering:
- we must deposit at least $6,200,000 in an escrow
account with SunTrust Bank
- the Federal Reserve Board must approve Heartland
Bancshares' application to become a bank holding
company
- the Federal Deposit Insurance Corporation must approve
Heartland Bank's application for deposit insurance
- we must not have canceled this offering prior to the
time funds are withdrawn from the subscription escrow
account
Escrow Arrangements..................... Until we have satisfied all of the offering conditions, we will
place all subscription funds in a subscription escrow account
with SunTrust Bank. SunTrust Bank may invest subscription
funds in short-term investments upon instruction by the
President of Heartland Bancshares. If we have not satisfied
the offering conditions by _______________, we will return
to the subscribers all subscription funds placed in the
subscription escrow account, along with any interest earned
on the funds.
Once we have satisfied all of the offering conditions, SunTrust
Bank will release all funds to Heartland Bancshares. Any funds
Heartland Bancshares receives after this time will not be placed
in escrow, but rather will be immediately available for use by
Heartland Bancshares. At this point, all subscribers face the risk
of loss of a portion of their subscription funds regardless of
whether Heartland Bancshares and Heartland Bank receive final
regulatory approvals. See "Terms of The Offering -- Escrow of
Subscription Funds" (page 10).
Plan of Distribution.................... The shares of common stock will be marketed by a few of
our directors and executive officers. Although these
individuals will use their best efforts to market and sell the
common stock, there is no guarantee that the required
minimum number of shares will be sold. The directors and
executive officers will not receive any commissions for these
sales. If we have not satisfied the offering conditions by
_____________, 1999, we may engage an underwriter to sell
the shares and the underwriter would receive a commission
on such sales not to exceed 10%. See "Terms of The
Offering-- Plan of Distribution" (page 12).
</TABLE>
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<TABLE>
<S> <C>
Use of Proceeds......................... We will use the proceeds of the offering:
- to purchase all of the issued and outstanding capital stock
of Heartland Bank
- to provide working capital for Heartland Bank to commence
its business operations (including officers' and employees'
salaries and construction of Heartland Bancshares' permanent
office facilities)
- to pay expenses in connection with the formation of Heartland
Bancshares, the organization of Heartland Bank, and this
securities offering
- for other general corporate purposes
See "Use of Proceeds," beginning on page 14.
</TABLE>
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RISK FACTORS
An investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. 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.
IF WE FAIL TO RECEIVE NECESSARY REGULATORY APPROVALS, YOU COULD LOSE A PORTION
OF YOUR INVESTMENT.
If you invest in our common stock and we break escrow and incur
start-up expenses, but we fail to receive final regulatory approval, we would
seek to dissolve and liquidate Heartland Bancshares. Upon liquidation, we would
return to subscribers all subscription funds with any interest earned on the
funds, less all expenses we incurred by Heartland Bancshares. See "Terms of the
Offering -- Failure of Bank to Commence Operations" (page 11).
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
SUCCESS.
Heartland Bank, which initially will be the sole subsidiary of
Heartland Bancshares, is in organization and neither Heartland Bank nor
Heartland Bancshares has any operating history on which to base any estimate of
future performance. The financial statements presented in this prospectus may
not be as meaningful as those of a company which does have a history of
operations. In addition, the success of our operations must be considered in
light of the expenses, complications, and delays frequently encountered in
connection with the development of a new bank. Because of our lack of operating
history, you do not have access to the type and amount of information that
would be available to a purchaser of the securities of a financial institution
with an operating history.
WE WILL INCUR SUBSTANTIAL START-UP EXPENSES AND WE DO NOT EXPECT TO BE
PROFITABLE FOR SEVERAL YEARS.
Initially, Heartland Bancshares will merely act as the sole shareholder
of Heartland Bank. Thus, the profitability of Heartland Bancshares will be
dependent upon the successful operation of Heartland Bank. Typically, new banks
are not profitable in the first year of operation and sometimes are not
profitable for several years. Heartland Bank will incur substantial expenses in
establishing itself as a going concern, and we can offer no assurance that
Heartland Bank will be profitable or that future earnings, if any, will meet
the levels of earnings prevailing in the banking industry.
WE WILL BE COMPETING IN HIGHLANDS COUNTY WITH MANY OTHER, LARGER FINANCIAL
INSTITUTIONS.
Heartland Bank will be a full service community bank in Highlands
County, Florida. Competition among financial institutions in Highlands County
is intense, and we 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 us. Approximately seven financial
institutions with a total of 27 branches are currently located in Highlands
County. Our relatively small size may impact our ability to compete effectively
with these larger institutions in offering financial services. 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, making it easier for out-of-state financial
institutions to more easily access the market served by Heartland Bank. If we
are unable to successfully compete for deposit, loan and other banking
customers effectively, this inability would have an adverse effect on our
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potential for growth and profitability. See "Business of Heartland Bank --
Market Area and Competition" (page 19).
OUR SUCCESS WILL BE DEPENDENT UPON THE HIGHLANDS COUNTY ECONOMY.
Our success will depend significantly upon general economic conditions
in Highlands County. A prolonged economic dislocation or recession affecting
Highlands County could cause Heartland Bank's non-performing assets to
increase, causing operating losses, impaired liquidity and the erosion of
capital. Such an economic dislocation or recession could result from a variety
of causes, including natural disasters such as hurricanes, floods or tornadoes,
or a prolonged downturn in various industries upon which the economy of
Highlands County depends.
IF OUR PROPOSED CEO, JAMES CLINARD, WERE TO BECOME UNAVAILABLE, IT COULD DELAY
OR PREVENT OUR OPENING FOR BUSINESS.
Regulatory approval to establish and operate a national bank partially
depends upon the approval by the bank's primary regulator, the Office of the
Comptroller of the Currency, or "OCC," 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 Heartland Bank's chief executive officer. If 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," beginning on page 31.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS.
Our results of operations, and the results of most other banks and bank
holding companies, will be significantly affected by changes in market interest
rates. Our profitability will depend substantially on our net interest income,
which is the difference between the interest income earned on our
interest-bearing assets, such as loans, and the interest paid on our
interest-bearing liabilities, such as deposits and borrowings. To the extent
that the maturities of these assets and liabilities differ, rapidly rising or
falling interest rates could have a material effect on our earnings. As we do
not expect to commence operations until August 1999, it is difficult to predict
whether rising or falling interest rates would have a greater adverse effect on
our operations. See "Business of Heartland Bank -- Asset/Liability Management"
(page 23).
OUR LOW LENDING LIMIT MAY LIMIT OUR GROWTH.
At least during our first years of operation, our legally mandated
lending limit will be lower than that of many of our competitors because during
this period we will have less capital than many of our competitors. Initially,
we will have a legal lending limit for unsecured loans of up to $900,000 to any
one borrower. This relatively low lending limit may discourage potential
borrowers who have greater lending needs, which may restrict our ability to
grow. We may try to serve the needs of these borrowers by selling loan
participations to other institutions, but this strategy may not succeed.
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POTENTIAL ADVERSE EFFECT OF GOVERNMENT REGULATION.
Both Heartland Bancshares and Heartland Bank will operate in a highly
regulated environment and will be subject to supervision and examination by
several regulatory agencies. As a bank holding company, Heartland Bancshares
will be subject to regulation and supervision by the Federal Reserve Board. As
a national bank, Heartland Bank will be subject to regulation and supervision
primarily by the OCC and, to a lesser extent, by the FDIC. Both Heartland
Bancshares and Heartland Bank will be subject to changes in federal and state
law, regulations, governmental policies, income tax laws and accounting
principles. In particular, legislation and regulations deregulating the banking
industry and allowing interstate expansion of financial services firms could
adversely affect our business along with that of the entire banking industry.
See "Supervision and Regulation," beginning on page 26.
THE OPERATION OF HEARTLAND BANK MAY IN THE FUTURE REQUIRE MORE CAPITAL THAN WE
WILL RAISE IN THIS OFFERING.
We intend to capitalize Heartland Bank at $6,000,000, regardless of
whether the minimum or maximum number of shares of common stock of Heartland
Bancshares are sold. Any funds in addition to the $6,000,000 capitalization
will be reserved for the growth of Heartland 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
Heartland Bank's immediate capital needs, we may in the future need to obtain
additional capital to comply with regulatory capital requirements. We can give
no assurance that we will be able to access the capital markets in the future
in order to obtain additional capital. See "Supervision and Regulation,"
beginning on page 26.
INVESTING IN THIS OFFERING WILL NOT GIVE YOU THE RIGHT TO PARTICIPATE IN ANY
FUTURE OFFERINGS OF OUR CAPITAL STOCK.
As a shareholder of Heartland Bancshares, you will not have preemptive
rights with respect to the issuance of additional shares of common stock or the
issuance of any other class of stock, which means that if we decide to issue
additional shares of stock, you will not automatically be entitled to purchase
additional shares to maintain your percentage ownership in the company. In
addition, if we decide to, and are able to, sell additional shares in the
future, it is possible that those shares would be issued on terms more
favorable than the terms of this offering.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, YOU MAY NOT BE ABLE TO SELL
YOUR SHARES.
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. At this time, we do not intend to list the common
stock on any national securities exchange or on the Nasdaq Stock Market.
WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK FOR AT LEAST SEVERAL
YEARS.
We intend to retain our future earnings, if any, to enhance Heartland
Bank's capital structure or to defray its operating costs. Dividend
distributions of national banks are restricted by statute and regulation. Our
future dividend policy will depend on the earnings, capital requirements,
financial
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conditions and other factors considered relevant by our board of directors. See
"Dividend Policy" (page 17).
THE OFFERING PRICE WAS ARBITRARILY SET BY THE ORGANIZERS AND MAY NOT ACCURATELY
REFLECT THE VALUE OF AN INVESTMENT IN OUR COMMON STOCK.
There is no established market for our 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 Heartland
Bancshares' 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.
THE ORGANIZERS AS A GROUP WILL BE ABLE TO EXERCISE GREATER CONTROL OVER
HEARTLAND BANCSHARES' MANAGEMENT AND AFFAIRS THAN WILL ANY INDIVIDUAL INVESTOR.
Upon completion of the offering, the organizers will own 145,000
shares, which will equal 22.9% of the 634,500 shares to be outstanding upon
completion of the minimum offering. The maximum number of shares that may be
purchased by a single investor is 50,000 shares, or 7.9%, although we reserve
the right to waive this maximum. See "Management," beginning on page 31.
OUR ARTICLES OF INCORPORATION CONTAIN PROVISIONS WHICH COULD SERVE TO DETER OR
PREVENT TAKE-OVER ATTEMPTS BY A POTENTIAL PURCHASER OF SHARES OF OUR COMMON
STOCK WHO WOULD BE WILLING TO PAY A PREMIUM OVER THE MARKET PRICE.
The Articles of Incorporation of Heartland Bancshares contain
provisions which give the board of directors the ability to deter or prevent a
merger with, or a sale of control to, a third party, even if the owners of a
majority of the common stock were to favor of such a transaction. Our Articles
of Incorporation authorize the board of directors to issue a series of
preferred stock without shareholder action. The issuance of preferred stock by
Heartland Bancshares could discourage a third party from attempting to acquire,
or make it more difficult for a third party to acquire, a controlling interest
in Heartland Bancshares, and could adversely affect the voting power or other
rights of holders of the common stock. In addition, the Articles of
Incorporation establish a classified board of directors, which means that only
one-third of the members of our board of directors is elected each year and
each director serves for a term of three years. These provisions make it
difficult for a third party to achieve a change in control of Heartland
Bancshares through the acquisition of a large block of our common stock without
approval of the board of directors. As a result, you may be deprived of
opportunities to sell some or all of your shares at prices that represent a
premium over market prices. See "Description of Capital Stock -- Anti-Takeover
Provisions" (page 37).
WE INTEND TO GRANT STOCK OPTIONS TO THE ORGANIZERS AND SOME OF OUR EMPLOYEES
WHICH, IF EXERCISED, WOULD REDUCE YOUR PERCENTAGE OWNERSHIP IN HEARTLAND
BANCSHARES.
We intend to establish an incentive stock option plan which will allow
us to grant stock options to employees who are making significant contributions
to our business. Upon completion of the offering, the President of Heartland
Bank, James C. Clinard, will receive options to purchase 15,000 shares of
common stock which will become exercisable over a period of four years. In
addition, each organizer will receive options to purchase 5,000 shares of
common stock at an exercise price of $10.00 per share. The exercise of options
under the incentive stock option plan or the directors' stock option plan would
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dilute your ownership interest in Heartland Bancshares. For example, prior to
the exercise of any options, the organizers will own approximately 22.9% of the
shares outstanding after the minimum offering. Assuming all of the options were
exercised, the organizers would own approximately 29.5% of the outstanding
shares. See "Management--Stock Option Plans" (page 34).
IT IS POSSIBLE THAT EITHER OUR COMPUTER SYSTEMS, OR THOSE OF OUR DATA
PROCESSING VENDOR OR LOAN CUSTOMERS, WILL FAIL TO OPERATE PROPERLY BEGINNING
JANUARY 1, 2000.
As the year 2000 approaches, an important business issue has emerged
regarding existing application software programs and operating systems. Many
existing application software products were designed to accommodate a two-digit
year. For example, "98" is stored on the system to represent 1998. As a result,
any computer programs or equipment that are date dependent may, for example,
recognize a date stored as "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing a significant
disruption of operations. We will utilize a third party vendor to provide
primary banking applications for Heartland Bank, including its core processing
systems. If we, our data processing vendor, or our loan customers do not
successfully and timely achieve Year 2000 compliance, our business, future
prospects, financial condition or results of operations could be materially
adversely affected. See "Business of Heartland Bank--Year 2000" beginning at
page 25.
WE MAY FAIL TO ACHIEVE THE MINIMUM OFFERING, IN WHICH CASE YOUR SUBSCRIPTION
WOULD BE RETURNED TO YOU UPON THE EXPIRATION OF THE OFFERING.
There is no underwriter involved in this offering. Sales will be
solicited by a number of our officers and directors. Accordingly, there can be
no assurance that the required minimum of 620,000 shares will be sold. See
"Terms of The Offering," beginning on page 9.
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.
HEARTLAND BANCSHARES, INC.
Heartland Bancshares 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. Heartland Bancshares will use the
proceeds of this offering to purchase all of the authorized capital stock of
Heartland 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 both Heartland Bancshares and
Heartland Bank. See "Organizers and Principal Shareholders." See "Management."
In order to become a bank holding company, Heartland Bancshares will
file an application with the Federal Reserve Board. Upon obtaining regulatory
approval, Heartland Bancshares will be a registered
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bank holding company subject to regulation by the Federal Reserve Board. See
"Supervision and Regulation."
The principal offices of Heartland Bancshares and Heartland Bank will
be located at 320 U.S. Highway 27 North, Sebring, Florida 33870. Heartland Bank
will also operate a branch office which will be located at 600 U.S. Highway 27
North, Lake Placid, Florida 33852. Heartland Bancshares has purchased the land
located in Sebring and has entered into a contract to purchase the land located
in Lake Placid. Construction on the two offices is expected to begin in
February of 1999, and it is anticipated that Heartland Bank will commence
operations in August of 1999, or as soon thereafter as practicable. See
"Business of Heartland Bancshares -- Premises." The mailing address of
Heartland Bancshares' 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
Heartland Bancshares is offering 650,000 shares of its common stock for
cash at a price of $10.00 per share. Investors must purchase a minimum of 500
shares and may purchase a maximum of 50,000 shares, or 7.7% of the total number
of shares being offered. The minimum and maximum subscription amounts may be
waived by Heartland Bancshares in its sole discretion. The purchase price shall
be paid in full upon execution and delivery of a subscription agreement. All
subscriptions tendered by investors are subject to acceptance by the Board of
Directors of Heartland Bancshares, and Heartland Bancshares reserves the
absolute and unqualified right to reject or reduce any subscription for any
reason prior to acceptance. Subscriptions which are rejected by Heartland
Bancshares will be returned to the subscriber without interest. Investors whose
subscription is reduced by Heartland Bancshares may withdraw their subscription
within ten days after being notified of such reduction by Heartland Bancshares.
Heartland Bancshares 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 Heartland Bancshares' 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.
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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), unless such date is extended by
Heartland Bancshares. The expiration date of the offering may be extended by
Heartland Bancshares 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 on or prior to the
expiration date, as extended. The offering conditions, which may not be waived,
are as follows:
- at least $6,200,000 must be deposited with the escrow agent in
the subscription escrow account;
- Heartland Bancshares must receive approval from the Federal
Reserve Board of its application to become a bank holding
company;
- the proposed Bank must receive approval of its application for
deposit insurance from the FDIC; and
- Heartland Bancshares must not have canceled this offering prior
to the time funds are withdrawn from the subscription escrow
account.
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
with SunTrust Bank, Central Florida, N.A. Pursuant to the terms of the escrow
agreement (a copy of which is attached to this prospectus as Appendix A), if
all of the offering conditions are met, Heartland Bancshares may certify such
fact to the escrow agent and the escrow agent will release all subscription
funds, and any profits thereon, to Heartland Bancshares. Subscription funds are
not insured by the FDIC 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 Heartland Bank, to invest subscription funds in investments of the
United States Government and United States Government- backed securities.
Heartland Bancshares will invest the subscription funds and any additional
funds obtained after breaking escrow and prior to the time that Heartland
Bancshares infuses capital into Heartland Bank in a similar manner. The
offering proceeds will be used to purchase capital stock of Heartland Bank and
to repay expenses incurred in the organization of Heartland Bancshares and
Heartland Bank. See "Use of Proceeds."
10
<PAGE> 13
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 will
be that fraction
- 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 termination of the offering,
inclusive (the subscriber's "Time Subscription Factor"), and
- 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
Heartland Bancshares 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 Heartland Bancshares
withdraws the subscription funds from the subscription escrow account, all
profits and earnings on such account shall belong to Heartland Bancshares.
SunTrust Bank, Central Florida, N.A., by accepting appointment as
escrow agent under the escrow agreement, in no way endorses the purchase of
securities of Heartland Bancshares 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 received preliminary approval to charter Heartland Bank
on January 27, 1999. The organizers anticipate that Heartland Bank will open
for business in August of 1999. Because final approval of Heartland Bank's
charter is conditioned on Heartland Bancshares' raising $6,200,000 of funds to
capitalize Heartland Bank, Heartland Bancshares expects to issue the shares of
common stock before it has obtained all final regulatory approvals for
Heartland Bank. If Heartland Bancshares issues the shares of common stock and
the OCC does not grant Heartland Bank final regulatory approval to commence
banking operations within 18 months after Heartland Bank received preliminary
approval from the OCC, Heartland Bancshares will solicit shareholder approval
for its dissolution and liquidation, in which event Heartland Bancshares will
promptly return to subscribers all subscription funds and interest earned
thereon, less all expenses incurred by Heartland Bancshares, including the
expenses of the offering and the organizational and pre-opening expenses of
Heartland Bancshares and Heartland Bank. Therefore, if Heartland Bancshares and
Heartland Bank do not receive final regulatory approvals, subscribers whose
funds were originally placed in escrow and subscribers whose funds were
immediately available to Heartland Bancshares 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 Heartland Bancshares 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
11
<PAGE> 14
creditors of Heartland Bancshares, including claims against Heartland
Bancshares that may arise out of actions of Heartland Bancshares' officers,
directors, or employees. It is possible, therefore, that one or more creditors
may seek to attach the proceeds of the offering prior to Heartland 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 HEARTLAND BANCSHARES
Upon completion of the offering, the organizers will own 145,000 shares
of Heartland Bancshares' common stock, or 22.9% of the 634,500 shares to be
outstanding upon completion of the minimum offering. The organizers have
represented to Heartland Bancshares that any purchases will be made for
investment purposes only and not with a view to resell such shares. See
"Management."
PLAN OF DISTRIBUTION
Heartland Bancshares 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 Heartland Bancshares elects to cancel the offering in its entirety. If the
offering conditions have not been satisfied by the expiration date of the
offering, 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 Heartland Bancshares will be marketed on
a best-efforts, 620,000 share minimum basis exclusively through a few of the
directors and executive officers of Heartland Bancshares, none of whom will
receive any commissions or other form of remuneration based on the sale of the
shares. However, if the offering conditions have not been satisfied by
_______________, Heartland Bancshares 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. If 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 Heartland Bancshares 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 Heartland Bancshares,
all subscription amounts must be paid 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." Failure to pay the full subscription
price shall entitle Heartland Bancshares to disregard the subscription.
12
<PAGE> 15
No subscription agreement is binding until accepted by Heartland
Bancshares. Heartland Bancshares 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, Heartland
Bancshares will accept or reject such subscription. Subscriptions not rejected
by Heartland Bancshares within this ten day period shall be deemed accepted. If
Heartland Bancshares 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, Heartland
Bancshares will not cancel such subscription unless all accepted subscriptions
are canceled. Once a subscription is accepted by Heartland Bancshares, it
cannot be withdrawn by the subscriber. A subscription will be accepted in
writing by Heartland Bancshares in the Form of Acceptance attached to this
prospectus.
Certificates representing shares of common stock of Heartland
Bancshares, duly authorized and fully paid, will be issued as soon as
practicable after subscription funds are released to Heartland Bancshares from
the subscription escrow account.
13
<PAGE> 16
USE OF PROCEEDS
The gross proceeds from the sale of shares of common stock offered by
Heartland Bancshares are estimated to be $6,200,000 assuming the sale of a
minimum of 620,000 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>
<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
Miscellaneous ............................... 6,000
----------
Total expenses ......................... $ 41,307
==========
Net proceeds (minimum offering) ....... $6,158,693
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 Heartland Bancshares, after breaking escrow,
primarily for the purchase all of the issued and outstanding capital stock of
Heartland Bank. Heartland Bank will, in turn, use the funds as capital to
commence its business operations (including officers' and employees' salaries
and construction of Heartland Bank's permanent facilities) and to repay expenses
incurred in the organization of Heartland Bancshares and Heartland Bank.
As indicated in the charter application of Heartland Bank filed by
Heartland Bancshares with the OCC, Heartland Bancshares intends to capitalize
Heartland Bank at $6,000,000. Accordingly, any net proceeds of this offering in
excess of $6,000,000 will be retained by Heartland Bancshares for growth of
Heartland Bank in compliance with OCC regulations regarding the ratio that
Heartland Bank's total assets may bear to its total capital. Although management
of Heartland Bancshares anticipates that the proceeds of this offering will be
sufficient to support Heartland Bank's immediate capital needs, if Heartland
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 Heartland Bancshares 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.
14
<PAGE> 17
The following is a schedule of the estimated use by Heartland Bank of
the proceeds from the sale of the common stock of Heartland Bancshares,
including Heartland Bank's estimated operating expenses for its first 12 months
of operation.
<TABLE>
<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(4)................................ 174,030 +
Furniture, fixtures and equipment(5)..................................... 461,865 *
Investment portfolio(6).................................................. 2,286,104
----------
$6,000,000
==========
</TABLE>
- -----------------
* Represents expenses which will be incurred prior to commencement of
operations of Heartland Bank.
+ Represents operating expenses which will be incurred during Heartland
Bank's first 12 months of operations.
(1) These expenses will be incurred prior to the commencement of operations
of Heartland Bank and are being funded from the proceeds of a line of
credit Heartland Bancshares has obtained from SunTrust Bank, Central
Florida, N.A.
(2) Costs for construction of Heartland Bank's offices are based on an
architect's estimate. The land upon which the facility will be located
will be purchased. The proceeds for the purchase of the land are being
funded from a $2,000,000 line of credit obtained from SunTrust Bank,
Central Florida. Construction on the offices is expected to begin in
February of 1999, and to be completed in August of 1999. See "Business
of Heartland 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 Heartland Bank. It is presently anticipated
that Heartland 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 Heartland Bancshares for the expected level of
operations.
(6) Although the exact investments comprising Heartland Bank's investment
portfolio has not been determined, it is currently anticipated that any
remaining proceeds will be used to fund investments in loans, U.S.
government and agency securities, and Federal Funds sold.
The expenses described above are estimates only and assume Heartland
Bancshares will commence operations in August of 1999, or as soon thereafter as
practicable. Actual expenses may exceed these
15
<PAGE> 18
amounts. A portion of these expenses will be offset by revenues generated by
Heartland Bancshares during its first year of operation.
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of Heartland Bancshares as of
September 30, 1998, and as adjusted to give effect to the sale of a minimum of
620,000 shares and a maximum of 650,000 shares of common stock offered hereby,
at an assumed public offering price of $10.00 per share.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
for Minimum for Maximum
Actual Offering (A) Offering (A)
-----------------------------------------
<S> <C> <C> <C>
BORROWINGS:
Note Payable $ 72,875 $ - $ -
========== ========== ==========
SHAREHOLDERS' EQUITY:
Common Stock, $.10 par value, 10,000,000 shares
authorized, 1,000 shares issued and outstanding -
(621,000 shares at the minimum offering and 651,000
shares at the maximum offering) $ 100 $ 62,100 $ 65,100
Additional paid-in capital 9,900 6,147,900 6,444,900
Accumulated deficit during development stage (40,215) (40,215) (40,215)
---------- ---------- ----------
Total Shareholders' Equity $ (30,215) $6,169,785 $6,469,785
========== ========== ==========
Total Capitalization $ 42,660 $6,169,785 $6,469,785
========== ========== ==========
</TABLE>
(A) The pro forma cash received and allocation to the equity accounts are as
follows:
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Cash received (excluding offering costs) at $10.00 per share $6,200,000 $6,500,000
========== ==========
Allocated as follows:
Common stock at $.10 per share $ 62,000 $ 65,000
Additional paid-in capital at $9.90 per share 6,138,000 6,435,000
---------- ----------
Total $6,200,000 $6,500,000
========== ==========
</TABLE>
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<PAGE> 19
DIVIDEND POLICY
As Heartland Bancshares and Heartland Bank are both start-up
operations, the Board of Directors of Heartland Bancshares intends to reinvest
earnings for such period of time as is necessary to ensure the success of the
operations of Heartland Bancshares and Heartland Bank. There are no current
plans to initiate payment of cash dividends, and future dividend policy will
depend on Heartland Bank's earnings, capital requirements, financial condition
and other factors considered relevant by the Board of Directors of Heartland
Bancshares.
Heartland 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 Heartland 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 Heartland 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
Heartland Bancshares is still in the development stage, and will remain
in that stage until the offering of the common stock is complete. Heartland
Bancshares 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. Heartland Bancshares 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, Heartland Bancshares 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 a subscription escrow account and invested in investments of the
United States Government and United States Government-backed securities.
In the opinion of Heartland Bancshares, the minimum net proceeds of
$6,158,693 from the minimum offering will be adequate capital to support the
growth of Heartland Bancshares for its first five years of operation and
Heartland Bank for its first five years of operation. It is not anticipated that
Heartland Bancshares will find it necessary to raise additional funds to meet
expenditures required to operate the business of Heartland Bancshares and
Heartland 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."
17
<PAGE> 20
The plan of operations for Heartland Bancshares and Heartland Bank is
described in detail elsewhere in this prospectus. See "Business of Heartland
Bancshares" and "Business of Heartland Bank."
RECENT DEVELOPMENTS
Heartland Bancshares has continued with its organizational activities
since September 30, 1998. Since that date, it has expended approximately
$650,000, all of which was funded under its two lines of credit. The $2,000,000
line of credit will be used for land acquisition in Sebring and Lake Placid, and
for the construction of banking and branching facilities. The $300,000 line of
credit will be used principally for the purpose of funding operational costs
incurred during the organizational phase. Amounts outstanding under the lines of
credit at December 31, 1998 were $626,025 and $111,850, respectively, while
amounts remaining for future use are $1,373,975 and $188,150, respectively.
Of the amount expended since September 30, 1998, approximately $596,000
was used to close the contract on the land for the Sebring site and for deposits
towards other capital acquisitions; $16,000 was used to settle accounts payable
at September 30; $3,100 was spent for offering costs, and $35,000 was spent on
continuing organizational expenses incident to the formation of Heartland Bank.
Expenditures of $35,000 for the period from September 30, 1998 through
December 31, 1998 that were charged to expense consisted principally of the OCC
application fee of $17,400, additional legal and professional costs of $10,650,
and interest of $5,100 paid on the lines of credit.
In addition, on January 15, 1999, in an effort to raise additional
equity capital prior to the commencement of the offering, the organizers
purchased 13,500 shares of common stock at a purchase price of $10.00 per
share. These shares were issued without registration under the Securities Act
of 1933 in reliance on the exemption provided by Section 4(2) of the Securities
Act.
BUSINESS OF HEARTLAND BANCSHARES
Heartland Bancshares was incorporated under the laws of the State of
Florida on August 3, 1998, for the purpose of organizing Heartland Bank and
purchasing all of the outstanding capital stock of Heartland Bank. The
organizers received approval from the OCC to charter Heartland Bank on January
27, 1999. Heartland Bancshares has been organized as a mechanism to enhance
Heartland Bank's ability to serve its future customers' requirements for
financial services. Heartland Bancshares will file an application with the
Federal Reserve Board to become a bank holding company, which will provide
flexibility for expansion of Heartland Bancshares' 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 Heartland Bank
maintain a minimum ratio of capital to assets. In the event that Heartland
Bank's growth is such that this minimum ratio is not maintained, Heartland
Bancshares may borrow funds, subject to the capital adequacy guidelines of the
Federal Reserve Board, and contribute them to the capital of Heartland Bank and
otherwise raise capital in a manner which is unavailable to Heartland Bank under
existing banking regulations.
Heartland Bancshares has no present plans to acquire any operating
subsidiaries other than Heartland Bank; however, it is expected that Heartland
Bancshares may make additional acquisitions in the event that Heartland Bank
becomes profitable and such acquisitions are deemed to be in the best interests
of Heartland Bancshares and its shareholders. Such acquisitions, if any, will be
subject to certain regulatory approvals and requirements. See "Supervision and
Regulation."
18
<PAGE> 21
BUSINESS OF HEARTLAND BANK
GENERAL
The organizers received preliminary approval from the OCC to charter
Heartland Bank on January 27, 1999. The organizers expect the FDIC to approve
Heartland Bank's application for deposit insurance on or around February 6,
1999.
Heartland Bank anticipates that it will commence business operations in
August of 1999. Heartland Bank plans to be a full service commercial bank,
except that it will not have any trust powers. Heartland 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, Heartland 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 Heartland 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 Heartland Bank's market area. Heartland 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 Heartland Bank's efforts to capture such
market share. In addition, Heartland 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 Heartland Bank's customer base. All of
the organizers are active members of the business community in and around the
Highlands County area, and continued active community involvement will provide
an opportunity to promote Heartland 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 Heartland Bank and to capture
a customer base.
MARKET AREA AND COMPETITION
The primary service area for Heartland 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.
19
<PAGE> 22
Heartland 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 Heartland
Bank expects to generate over 95% of its business from these two cities.
Heartland 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 Highlands County 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. Heartland Bank will be competing with
financial institutions which have much greater financial resources than
Heartland Bank, and which may be able to offer more and unique services and
possibly better terms to their customers. However, the organizers believe that
Heartland Bank will be able to attract sufficient deposits to enable it to
compete effectively with other area financial institutions. The organizers
believe that Heartland 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.
Heartland 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 Highlands County, it is
anticipated that additional competition will continue from new entrants to the
market.
DEPOSITS
Heartland 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
Heartland Bank's market area, obtained through the personal solicitation of
Heartland Bank's officers and directors, direct mail solicitation and
advertisements published in the local media. Heartland Bank will pay competitive
interest rates on time and savings deposits up to the maximum permitted by law
or regulation. In addition, Heartland Bank will implement a service charge fee
schedule competitive with other financial institutions in Heartland 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.
20
<PAGE> 23
LOAN PORTFOLIO
Heartland Bank will engage in a full complement of lending activities,
including commercial, consumer/installment (including credit cards) and real
estate loans. Although management believes that commercial loans will be
Heartland Bank's primary product (approximately 44.3% of Heartland Bank's loan
portfolio), real estate and consumer/installment loans are expected to comprise
significant portions of Heartland Bank's loan portfolio as well (32.2% and 23.5%
respectively). While adjustable rates for Heartland Bank's real estate loans
will be emphasized, fixed rates will also be employed. Initially, Heartland Bank
will have a legal lending limit for unsecured loans of up to $900,000 to any one
person. Management intends to originate loans and to participate with other
banks with respect to loans which exceed Heartland Bank's lending limits.
Management does not believe that loan participations will necessarily pose any
greater risk of loss than loans which Heartland Bank originates. See
"Supervision and Regulation."
Lending will be directed principally towards individuals and businesses
whose demands for funds fall within Heartland Bank's legal lending limits and
which are potential deposit customers of Heartland Bank. Heartland Bank does not
anticipate any foreign loans in Heartland Bank's loan portfolio. The following
is a description of each of the major categories of loans anticipated in
Heartland Bank's loan portfolio and the anticipated risks associated with each
type of loan:
Commercial and Industrial Loans
Commercial lending will be directed principally towards businesses
whose demands for funds fall within Heartland Bank's legal lending limits and
which are potential deposit customers of Heartland 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. Risks of these types of
loans depend on the general business conditions of the local economy and the
local business borrower's ability to sell its products and services in order to
generate sufficient business profits to repay Heartland Bank under the agreed
upon terms and conditions. The value of the collateral held by Heartland Bank as
a measure of safety against loss is most volatile in this loan category.
Consumer Loans
Heartland 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. Loss or decline of income by the borrower due to layoffs,
divorce or unexpected medical expenses represent unplanned occurrences that may
represent risk of default to Heartland Bank. In the event of default, a
shortfall in the value of the collateral may pose a loss to Heartland Bank in
this loan category.
Real Estate Loans
Heartland 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
Heartland Bank's appraisal policy and real estate lending policy which will
detail
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<PAGE> 24
maximum loan to value ratios and maturities. Heartland Bank expects that these
loan to value ratios will be sufficient to compensate for fluctuations in the
real estate market to minimize the risk of loss to Heartland Bank.
Residential Mortgage. These loans will be granted to qualified
individuals for the purchase of existing single family residences in Heartland
Bank's market area. Both fixed and variable rate loans will be offered with
competitive terms and fees consistent with national mortgage investor
guidelines. These loans will be made consistent with Heartland Bank's appraisal
policy and real estate lending policy which will detail maximum loan-to-value
ratios and maturities. Management of Heartland Bank expects that these
loan-to-value ratios, which generally will not exceed 80%, will be sufficient to
compensate for fluctuations in the real estate market to minimize the risk of
loss. Mortgage loans that do not conform to Heartland Bank's asset/liability mix
policies will be sold in the secondary markets. The risk of this type of
activity depends on the salability of the loan to national investors and
interest rate changes. Delivering these loans to the end investor on a mandatory
basis and meeting the investor's quality control procedures limits Heartland
Bank's risk of making fixed rate mortgage loans. The risk assumed by Heartland
Bank will be conditioned upon Heartland Bank's internal controls, loan
underwriting and market conditions in the national mortgage market. Heartland
Bank will retain loans for its portfolio when it has sufficient liquidity to
fund the needs of the established customers and when rates are favorable to
retain the loans. Although Heartland Bank has not formally adopted any
underwriting or loan policies, the loan underwriting standards and policies will
generally be the same for both loans sold in the secondary market and those
retained in Heartland Bank's portfolio.
Residential Construction. These loans will be made for the construction
of single family residences in Heartland Bank's market area. The loans will be
granted to qualified individuals with down payments of at least 20% of the
appraised value or contract price, whichever is less. The interest rates are
expected to fluctuate at 1% to 2% above Heartland Bank's prime interest rate
during the six month construction period. Heartland Bank will also charge a fee
of 1% to 2% in addition to the normal closing costs. These loans generally
command higher rates and fees commensurate with the risk warranted in the
construction lending field. The risk in construction lending is dependent upon
the performance of the builder in building the project to the plans and
specifications of the borrower and Heartland Bank's ability to administer and
control all phases of the construction disbursements. Upon completion of the
construction period, management anticipates that the mortgage will be converted
to a permanent loan and normally sold to an investor in the secondary mortgage
market.
Commercial Real Estate. To a limited extent, Heartland Bank anticipates
that it will also offer commercial real estate loans to developers of both
commercial and residential properties. In making these loans, Heartland Bank
intends to manage its credit risk by actively monitoring such measures as
advance rate, cash flow, collateral value and other appropriate credit factors.
Management will attempt to reduce credit risk in the commercial real estate
portfolio be emphasizing loans on owner-occupied office and retail buildings
where the loan-to-value ratio, established by independent appraisals, does not
exceed 80%. In addition, Heartland Bank may require personal guarantees of the
principal owners.
While risk of loss in Heartland 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 Heartland Bank's control, such as local, regional and/or
national economic downturns. General conditions in the real estate market may
also impact the relative risk in Heartland Bank's real estate portfolio. Of
Heartland Bank's target areas of lending activities, commercial loans are
generally considered to have greater risk than real estate loans or consumer
installment loans.
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The above description of Heartland Bank's loan portfolio represents
management's best estimate as to the types of loans which will comprise its
portfolio and the risks associated with such loans. The Board of Directors of
Heartland Bank has not adopted any specific loan policies and procedures as of
the date of this prospectus.
INVESTMENTS
In its first year of operation, management of Heartland Bank
anticipates that investment securities will comprise approximately 48% of
Heartland Bank's assets, loans will comprise approximately 42% of Heartland
Bank's assets, and other investments will comprise approximately 10% of
Heartland Bank's assets. Heartland 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, Heartland 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 Heartland Bank to
another bank.
ASSET/LIABILITY MANAGEMENT
It is the objective of Heartland 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 Heartland 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 Heartland Bank will seek to invest the largest
portion of Heartland Bank's assets in commercial, consumer and real estate
loans.
Heartland 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 Heartland 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. Heartland 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.
Heartland Bank anticipates that it will sell loan participations to
correspondent banks with respect to loans which exceed Heartland Bank's lending
limit. As compensation for services provided by a correspondent, Heartland Bank
may maintain certain balances with such correspondents in non-interest bearing
accounts.
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<PAGE> 26
DATA PROCESSING
Heartland Bank expects to enter into a data processing servicing
agreement with a third party vendor which has not been identified at this time.
This servicing agreement is expected to provide for Heartland Bank to receive a
full range of data processing services, including an automated general ledger,
deposit accounting, commercial, real estate and installment lending data
processing and central information file. Heartland Bank also anticipates
entering into an agreement with third party vendors to provide payroll services,
ATM processing services and investment portfolio accounting.
YEAR 2000
As the year 2000 ("Year 2000") approaches, an important business issue
has emerged regarding existing application software programs and operating
systems. To minimize the use of computer memory, many existing application
software products were designed to accommodate only a two-digit year rather than
a four-digit year. For example, "98" is stored on the system and represents 1998
and "00" represents 1900. As a result, software or equipment that is date
dependent may, for example, recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruption of operations, a temporary inability to process transactions,
send invoices, or engage in similar normal business activity.
Communications and information systems, including systems which monitor
deposit and lending accounts, are critical to Heartland Bancshares' and
Heartland Bank's business. Software and hardware developed by independent third
parties will be installed to provide primary banking applications, including
core processing systems. Heartland Bank intends to choose a source for these
systems that has modified or upgraded its computer applications to become Year
2000 compliant. In addition, Heartland Bancshares and Heartland Bank intend to
implement a Year 2000 compliance program whereby Heartland Bank will review the
Year 2000 issue that may be faced by its other third-party vendors and loan and
deposit customers. Under such program, Heartland Bank will examine the need for
modifications or replacement of all non-Year 2000 compliant pieces of software.
Heartland Bank does not currently expect that the cost of its Year 2000
compliance program will be material to its financial conditions and expects that
it will satisfy such compliance program without material disruption of its
operations. Management intends to evaluate the potential effect on its
third-party vendor's data processing systems resulting from Year 2000 issues and
to obtain a representation from such vendor that its core processing systems
will be fully Year 2000 compliant prior to the opening of Heartland Bank for
business. In the event that Heartland Bancshares, Heartland Bank, such vendor or
its other significant vendors or loan customers do not successfully and timely
achieve Year 2000 compliance, Heartland Bank's business, future prospects,
financial condition or results of operations could be materially adversely
affected.
An area of concern to Heartland Bancshares, Heartland Bank, and their
primary regulator, the OCC, is the effect of Year 2000 issues on Heartland
Bank's loan customers. Failure to address Year 2000 related issues could have
significant impact on the ability of certain customers of Heartland Bank to
continue operations. Heartland 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, Heartland Bank will review Year 2000 related issues
as part of its normal underwriting criteria and loan approval process. Heartland
Bank also will include Year 2000 compliance requirements and covenants requiring
compliance within its standard loan
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<PAGE> 27
agreements. Although Heartland Bancshares and Heartland Bank will take extensive
steps to address Year 2000 customer related issues, there can be no assurance
that all customers will be Year 2000 compliant. Failure of certain customers to
adequately address these issues could result in loan defaults which would
negatively impact Heartland Bancshares' earnings.
Although Heartland Bancshares and Heartland 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 Heartland Bank's internal systems or the systems provided by
its data processing vendor or other companies on which Heartland Bank's systems
rely will not negatively impact Heartland Bank's systems or operations.
EMPLOYEES
In its first year of operation, Heartland Bancshares and Heartland Bank
expect to employ 19 individuals on a full-time basis, including five officers.
Heartland Bank will hire additional persons as needed, including additional
tellers and financial service representatives.
MONETARY POLICIES
The results of operations of Heartland Bank will be affected by credit
policies of monetary authorities, particularly 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 Heartland Bank.
PREMISES
Heartland Bancshares has purchased the land which will be used for
Heartland Bank's main office and has entered into a contract to purchase the
land for Heartland Bank's branch office. The headquarters building for both
Heartland Bancshares and Heartland Bank, a 1.9-acre of land parcel of land at
320 U.S. Highway 27 North, Sebring, Florida 33870, was purchased for a price of
$625,000. Heartland Bank's branch office in Lake Placid will be located on a
1.167-acre parcel of land at the corner of Roy Pendarvis Road and U.S. Highway
27 in Lake Placid, Florida and will be purchased for a price of $246,000. The
proposed property to be purchased for Heartland Bank's branch office in Lake
Placid is currently owned by Edward L. Smoak, an organizer of Heartland
Bancshares and Heartland Bank. See "Certain Transactions."
Construction of Heartland 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.
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<PAGE> 28
SUPERVISION AND REGULATION
GENERAL
Heartland Bancshares and Heartland Bank will operate in a highly
regulated environment, and the business activities of Heartland Bancshares and
Heartland 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.
Heartland Bancshares 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, Heartland Bancshares may be required to
provide financial support to its subsidiary bank at a time when, absent such
Federal Reserve Board policy, Heartland Bancshares 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 Heartland Bancshares 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 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
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<PAGE> 29
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.
Heartland Bancshares 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 Heartland Bank to be
acquired or all bank subsidiaries of the Florida bank holding company to be
acquired are national banks.
Heartland Bank, as a subsidiary of Heartland Bancshares, is subject to
restrictions under federal law in dealing with Heartland Bancshares 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.
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 Heartland Bancshares and Heartland 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
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consolidated basis with Heartland 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 CAMELS 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
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 have adopted
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 agencies' 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
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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. Based on a capitalization of
$6,000,000, management of Heartland Bank believes that Heartland Bank will be a
"well capitalized" institution.
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.
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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 Heartland
Bancshares and Heartland 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. Heartland Bancshares and Heartland 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 Heartland
Bancshares and Heartland 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
145,000 shares, or 23.4% of the 634,500 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.
Upon completion of the offering, James C. Clinard will receive options
to purchase 15,000 shares of Heartland Bancshares common stock at an exercise
price of $10.00 per share. These options will become exercisable in equal
amounts commencing on the date Heartland Bank commences business and on each of
the four succeeding anniversaries of the date on which it commenced business.
The options will be exercisable for a period of ten years. See "Management --
Executive Compensation."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF HEARTLAND BANCSHARES AND HEARTLAND BANK
Heartland Bancshares' directors and executive officers and Heartland
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 Heartland Bancshares
since August 4, 1998. Heartland Bancshares has a classified Board of Directors
whereby one-third of the members will be elected each year at Heartland
Bancshares' Annual Meeting of Shareholders. Upon such election, each director of
Heartland Bancshares will serve for a term of three years. See "Description of
Capital Stock -- Board of Directors." Heartland Bancshares' officers are
appointed by the Board of Directors and hold office at the will of the Board.
Each of Heartland Bank's proposed directors will, upon approval of the
OCC, serve until Heartland Bank's first shareholders' meeting, which meeting
will be held shortly after Heartland Bank receives its charter. Each of the
proposed directors is also an organizer. As Heartland Bancshares will be the
sole shareholder of Heartland Bank, it is expected that each interim director
will be elected to serve as a director of Heartland Bank at that meeting. After
the first shareholders' meeting, directors of Heartland Bank will serve for a
term of one year and will be elected each year at Heartland Bank's Annual
Meeting of Shareholders. Heartland 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
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<PAGE> 34
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.
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 Heartland Bancshares 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
32
<PAGE> 35
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.
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 Heartland Bancshares.
EXECUTIVE COMPENSATION
On October 2, 1998, Heartland Bancshares and the 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 Heartland Bank
while Heartland Bank is being organized and for a period of five years
commencing on the date Heartland 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 Heartland Bank. Mr. Clinard will also be eligible to receive a
bonus which will not exceed 30% of his annual base salary.
The employment agreement provides that Mr. Clinard will receive
options to purchase 15,000 shares of common stock of Heartland Bancshares at a
price of $10.00 per share pursuant to an incentive stock option plan to be
adopted by Heartland Bancshares. These options will become exercisable in equal
amounts commencing on the date Heartland Bank opens for business and on each of
the four successive anniversaries after the date Heartland Bank opens for
business. All options will 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 Heartland Bank's incentive compensation plan,
33
<PAGE> 36
in the event one is adopted by the Board of Directors of Heartland Bank. In
accordance with the personnel policy to be adopted by the Board of Directors of
Heartland Bank, Mr. Clinard will also be entitled to a vacation each year during
which time his salary will be paid in full.
In the event of a "change of control" of Heartland Bancshares, Mr.
Clinard will be entitled to give written notice to Heartland Bancshares of
termination of his employment agreement and to receive a cash payment equal to
200% times the compensation received by Mr. Clinard in the year prior to
termination. The employment agreement contains a non-compete provision pursuant
to which Mr. Clinard may not, without the prior written consent of Heartland
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 Heartland 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 employment agreement provides that Heartland 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.
No other officers or directors of the Board of Directors have
received compensation in excess of $100,000 for services to Heartland
Bancshares.
STOCK OPTION PLANS
Heartland Bancshares' 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 Heartland Bancshares or its
subsidiaries as determined by the committee administering the Plan. The Plan
will be contingent upon approval by the shareholders of Heartland Bancshares.
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 Heartland Bancshares or any
subsidiary of Heartland Bancshares.
The Board of Directors may, at Heartland Bancshares' first Annual
Meeting of Shareholders after Heartland 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 Heartland
Bancshares' 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
34
<PAGE> 37
shareholders in Heartland Bancshares' Proxy Statement issued in connection with
solicitation of shareholder approval of such plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of the common stock of
Heartland Bancshares by the organizers, both before and after completion of the
minimum offering of 620,000 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 1,600 11.0% 15,000 2.4%
William R. Grigsby 1,600 11.0% 25,000 3.9%
William R. Handley 1,600 11.0% 15,000 2.4%
Bert J. Harris, III 1,600 11.0% 10,000 1.6%
Issac G. Nagib 1,600 11.0% 15,000 2.4%
Perumalswamy Rajaram 100 * 10,000 1.6%
S. Allen Skipper 1,600 11.0% 10,000 1.6%
Edward L. Smoak 1,600 11.0% 25,000 3.9%
Malcolm C. Watters, Jr. 1,600 11.0% 10,000 1.6%
Lawrence B. Wells 1,600 11.0% 10,000 1.6%
------ ---- ------- ----
TOTAL 14,500 100% 145,000 22.9%
</TABLE>
- ------------------------
*Less than 1%.
CERTAIN TRANSACTIONS
The proposed property to be purchased for Heartland 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 Heartland
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.
Once Heartland Bank opens for business, it may from time to time
extend loans to certain of Heartland Bancshares' directors, their associates,
and members of the immediate families of the directors and executive officers of
Heartland Bancshares. 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
35
<PAGE> 38
with Heartland Bancshares or Heartland 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 Heartland Bancshares 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 14,500 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 Heartland Bancshares and are entitled to vote as a class
on all matters required or permitted to be submitted to the shareholders of
Heartland Bancshares.
No holder of any class of stock of Heartland Bancshares 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
Heartland Bancshares, the holder of each share of common stock will be entitled
to share equally in the distribution of Heartland Bancshares' assets. The
holders of common stock are not entitled to the benefit of any sinking fund
provision. The shares of common stock of Heartland Bancshares are not subject to
any redemption provisions, nor are they convertible into any other security or
property of Heartland Bancshares. 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 Heartland
Bancshares' 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.
36
<PAGE> 39
BOARD OF DIRECTORS
The initial Board of Directors of Heartland Bancshares 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 Heartland Bancshares' initial Class I directors expires
at Heartland Bancshares' first Annual Meeting of Shareholders; the term of
Heartland Bancshares' initial Class II directors expires at Heartland
Bancshares' second Annual Meeting of Shareholders; and the term of Heartland
Bancshares' initial Class III directors expires at Heartland Bancshares' 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 Heartland Bancshares'
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
Heartland Bancshares through the acquisition of a large block of Heartland
Bancshares' voting stock.
ANTI-TAKEOVER PROVISIONS
Heartland Bancshares' 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
Heartland Bancshares entitled to vote in elections of directors to approve any
merger, consolidation, disposition of all or a substantial part of the assets of
Heartland Bancshares or a subsidiary of Heartland Bancshares, exchange of
securities requiring shareholder approval or liquidation of Heartland Bancshares
("Covered Transaction"), if any person who together with his affiliates and
associates owns beneficially 5% or more of any voting stock of Heartland
Bancshares ("Interested Person") is a party to the transaction; provided that
three-fourths (75%) of the entire Board of Directors of Heartland Bancshares 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 Heartland Bancshares 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 Heartland Bancshares or a subsidiary of Heartland Bancshares,
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
- the consideration to be received
37
<PAGE> 40
by the holders of the stock of Heartland Bancshares 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),
- 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
- 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, 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 Heartland Bancshares 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 Heartland Bancshares
through the acquisition of a large block of Heartland Bancshares' voting stock.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
As provided under Florida law, Heartland Bancshares' Articles of
Incorporation provide that a director shall not be personally liable to
Heartland Bancshares or its shareholders for monetary damages for breach of duty
of care or any other duty owed to Heartland Bancshares as a director, except
that such provision shall not eliminate or limit the liability of a director
- for any appropriation, in violation of his duties, of any business
opportunity of Heartland Bancshares,
- for acts or omissions which involve intentional misconduct or a
knowing violation of law,
- for unlawful corporate distributions, or
- for any transaction from which the director received an improper
personal benefit.
Article VI of Heartland Bancshares' Bylaws provides that Heartland
Bancshares 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 Heartland Bancshares, against
reasonable expenses incurred by him in connection with such defense.
Heartland Bancshares' Bylaws also provide that Heartland Bancshares
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 Heartland Bancshares
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 disinterested majority of the Board of Directors,
- a majority of a committee of disinterested directors,
- independent legal counsel, or
- 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 Heartland Bancshares in which such person was adjudged liable to
Heartland Bancshares 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.
Heartland Bancshares may, if authorized by its shareholders by a
majority of votes which would be entitled to be cast in a vote to amend
Heartland Bancshares' Articles of Incorporation,
38
<PAGE> 41
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 Heartland Bancshares.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
Heartland Bancshares has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities 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. In its Articles
of Incorporation, Heartland Bancshares has elected not to be governed by these
provisions and, therefore, these statutory anti-takeover provisions do not apply
to Heartland Bancshares.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Heartland
Bancshares or Heartland Bank is a party or of which any of their properties are
subject; nor are there material proceedings known to Heartland Bancshares or
Heartland Bank to be contemplated by any governmental authority; nor are there
material proceedings known to Heartland Bancshares or Heartland Bank, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of Heartland Bancshares or Heartland Bank, or any associate of
any of the foregoing is a party or has an interest adverse Heartland Bancshares
or Heartland Bank.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
offered hereby have been passed upon for Heartland Bancshares by Smith, Gambrell
& Russell, LLP, Atlanta, Georgia, counsel to Heartland Bancshares.
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
Heartland Bancshares has filed with the Securities and Exchange
Commission, Washington, D.C. 20549, a registration statement under the
Securities Act of 1933 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 Heartland Bancshares and the common stock, please
refer to the registration statement
39
<PAGE> 42
and the exhibits and schedules thereto. Such request shall be directed to
Heartland Bancshares either at its temporary mailing address at 325 Central
Avenue, Lake Placid, Florida 33852, or at its temporary telephone number at
(941) 465-0472.
Heartland Bancshares intends to furnish its shareholders annual
reports containing audited financial statements.
40
<PAGE> 43
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> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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 therefor, 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> 51
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 expire 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> 52
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> 53
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 Heartland
National 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.
A-1
<PAGE> 54
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 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.
A-2
<PAGE> 55
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.
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
A-3
<PAGE> 56
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 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.
A-4
<PAGE> 57
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.
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> 58
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.
149332
A-6
<PAGE> 59
AMENDMENT NO. 1 TO ESCROW AGREEMENT
This Agreement (the "Agreement"), dated as of the 28th day of
December, 1998, is made and entered into by and between Heartland Bancshares,
Inc., a Florida corporation (the "Company") and SunTrust Bank, Central Florida,
National Association, located at 225 East Robinson Street, Suite 250, Orlando,
Florida 32801 (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Escrow Agent entered into that certain
Escrow Agreement dated November 6, 1998 (the "Escrow Agreement");
WHEREAS, the Company has determined to increase the minimum number of
shares of its capital stock to be sold in its initial public offering from
600,000 to 620,000 shares (the "Required Offering"); and
WHEREAS, the Company and the Escrow Agent desire to amend the Escrow
Agreement;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. Section 4 of the Escrow Agreement shall be amended such that all
references to "$6,000,000" shall mean $6,200,000.
2. The first sentence of Section 8 of the Escrow Agreement shall be
deleted in its entirety and the following substituted in lieu thereof:
"The Escrow Agent shall, at the direction of the President of the
Company, invest the Proceeds in one or more funds comprised solely of
investments in United States government and United States government-backed
securities."
3. Addendum "A" to the Escrow Agreement shall be amended such that the
reference to "600,000 shares" shall mean 620,000 shares.
4. Except as otherwise specifically set forth herein, all of the other
terms and conditions of the Escrow Agreement shall remain in full force and
effect as originally written without amendment or modification.
153383
A-7
<PAGE> 60
IN WITNESS WHEREOF, the Company and the Escrow Agent have executed and
delivered this Agreement as of the date first above written.
"Company"
HEARTLAND BANCSHARES, INC.
By: /s/ James C. Clinard
----------------------
James C. Clinard
President
(CORPORATE SEAL)
Attest: /s/ Lawrence B. Wells
---------------------
Lawrence B. Wells
SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION
/s/ Paul L. Wingo
-----------------------------
Paul L. Wingo
Assistant Vice President
153383
A-8
<PAGE> 61
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> 62
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.
<TABLE>
<S> <C>
- ------------------------------- --------------------------------------
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
</TABLE>
B-2
<PAGE> 63
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>
<CAPTION>
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> 64
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 (620,000 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) Heartland
National 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
B-4
<PAGE> 65
================================================================================
THE ONLY INFORMATION AUTHORIZED BY HEARTLAND BANCSHARES REGARDING THIS OFFERING
IS CONTAINED IN THIS PROSPECTUS. ANY OTHER STATEMENTS OR REPRESENTATIONS MADE
TO YOU BY A DEALER, SALESMAN, ORGANIZER OF HEARTLAND BANCSHARES, OR ANY OTHER
INDIVIDUAL MUST NOT BE RELIED UPON AS BEING AUTHORIZED BY HEARTLAND BANCSHARES.
THE INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF ___________, 1998.
THIS PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY
SECURITIES OF HEARTLAND BANCSHARES IN ANY JURISDICTION WHERE THE OFFER OR SALES
IS NOT PERMITTED.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................................................1
Risk Factors...................................................................4
Heartland Bancshares, Inc......................................................9
Terms of the Offering.........................................................10
Use of Proceeds...............................................................14
Pro Forma Capitalization......................................................16
Dividend Policy...............................................................17
Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................17
Business of Heartland Bancshares..............................................18
Business of Heartland Bank....................................................19
Supervision and Regulation....................................................26
Organizers and Principal Shareholders.........................................30
Management....................................................................31
Security Ownership of Certain Beneficial Owners and Management................35
Certain Transactions..........................................................36
Description of Capital Stock..................................................36
Legal Proceedings.............................................................39
Legal Matters.................................................................40
Experts.......................................................................40
Additional Information........................................................40
Index to Financial Statements................................................F-1
Appendix A - Escrow Agreement
Appendix B - Subscription Materials
---------------------------
</TABLE>
UNTIL ____________(90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
650,000 SHARES
HEARTLAND
BANCSHARES, INC.
A Bank Holding Company for
HEARTLAND NATIONAL BANK
A Proposed National Bank
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
February __, 1999
================================================================================
<PAGE> 66
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 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.
II-1
<PAGE> 67
Article XI of the Articles of Incorporation of Heartland Bancshares,
Inc. (the "Company") provides 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
Miscellaneous.................................................. $ 6,000
--------
Total................................................ $ 41,307
========
</TABLE>
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.
On January 15, 1999, the Company issued 13,500 shares to nine of its
directors at a purchase price of $10.00 per share. These shares were issued
without registration under the Securities Act in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
II-2
<PAGE> 68
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
Heartland Bancshares. (1)
3.2 Amended and Restated Bylaws of Heartland Bancshares.
(1)
4.1 Specimen Common Stock Certificate.(1)
4.2 Escrow Agreement dated November 6, 1998 between
Heartland Bancshares and SunTrust Bank, Central
Florida, N.A. (1)
4.2.1 Amendment No. 1 to Escrow Agreement dated December
28, 1998.(1)
5.1 Opinion of Smith, Gambrell & Russell, LLP. (1)
10.1 Employment Agreement dated October 2, 1998 between
the Organizers of Heartland Bancshares and James C.
Clinard. (1)
10.1.1 Amendment No. 1 to Employment Agreement dated
December 1, 1998.(1)
10.2 Contract for sale and purchase of land for the main
office in Sebring, Florida dated August 21, 1998.(1)
10.3 Contract for sale and purchase of land for Heartland
Bank's branch office in Lake Placid, Florida dated
October 2, 1998.(1)
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)
24.1 Power of Attorney (included in signature page to
this Registration Statement).
27.1 Financial Data Schedule (for SEC use only).(1)
--------------------------
(1) Previously filed.
</TABLE>
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
II-3
<PAGE> 69
Commission pursuant to Rule 424(b) if, in
the aggregate, changes in the volume and
price represent no 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> 70
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 Amendment
No.2 to be signed on its behalf by the undersigned, in the City of Sebring,
State of Florida on February 1, 1999.
<TABLE>
<S> <C>
HEARTLAND BANCSHARES, INC.
Date: February 1, 1999 By: /s/ James C. Clinard
-------------------------------------------------
James C. Clinard
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 1, 1999 By: /s/ Lawrence B. Wells
-------------------------------------------------
Lawrence B. Wells
(Principal Financial and Accounting Officer)
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 2 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 February 1, 1999
- -------------------------------------------- Officer and Director
James C. Clinard
/s/ William R. Grigsby* Director February 1, 1999
- --------------------------------------------
William R. Grigsby
/s/ William R. Handley* Director February 1, 1999
- --------------------------------------------
William R. Handley
/s/ Bert J. Harris, III* Director February 1, 1999
- --------------------------------------------
Bert J. Harris, III
/s/ Issac G. Nagib* Director February 1, 1999
- --------------------------------------------
Issac G. Nagib
/s/ Perumalswamy Rajaram* Director February 1, 1999
- --------------------------------------------
Perumalswamy Rajaram
</TABLE>
<PAGE> 71
<TABLE>
<S> <C> <C>
/s/ S. Allen Skipper* Director February 1, 1999
- ------------------------------------
S. Allen Skipper
/s/ Edward L. Smoak* Director February 1, 1999
- ------------------------------------
Edward L. Smoak
/s/ Malcolm C. Watters, Jr.* Director February 1, 1999
- ------------------------------------
Malcolm C. Watters, Jr.
/s/ Lawrence B. Wells* Director February 1, 1999
- ------------------------------------
Lawrence B. Wells
</TABLE>
*By: /s/ James C. Clinard
James C. Clinard
Attorney-in-Fact
<PAGE> 72
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of
Heartland Bancshares. (1)
3.2 Amended and Restated Bylaws of Heartland Bancshares.
(1)
4.1 Specimen Common Stock Certificate. (1)
4.2 Escrow Agreement dated November 6, 1998 between
Heartland Bancshares and SunTrust Bank, Central
Florida, N.A. (1)
4.2.1 Amendment No. 1 to Escrow Agreement dated December
28, 1998. (1)
5.1 Opinion of Smith, Gambrell & Russell, LLP. (1)
10.1 Employment Agreement dated October 2, 1998 between
the Organizers of Heartland Bancshares and James C.
Clinard. (1)
10.1.1 Amendment No. 1 to Employment Agreement dated
December 1, 1998. (1)
10.2 Contract for sale and purchase of land for the main
office in Sebring, Florida dated August 21, 1998. (1)
10.3 Contract for sale and purchase of land for Heartland
Bank's branch office in Lake Placid, Florida dated
October 2, 1998. (1)
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)
24.1 Power of Attorney (included in signature page to
this Registration Statement).
27.1 Financial Data Schedule (for SEC use only). (1)
--------------------------
</TABLE>
(1) Previously filed.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to the 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 such
Registration Statement, and to the reference to our firm under the heading
"Experts" in such Prospectus.
/s/ Osburn, Henning and Company
OSBURN, HENNING AND COMPANY
Orlando, Florida
February 1, 1999
