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As filed with the Securities and Exchange Commission on January 6, 1999
Registration No. 333- 67107
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
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
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(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
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325 CENTRAL AVENUE
LAKE PLACID, FLORIDA 33852
(941) 465-0472
(Address and telephone number
of principal executive offices)
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JAMES C. CLINARD
325 CENTRAL AVENUE
LAKE PLACID, FLORIDA 33852
(941) 465-0472
(Name, address and telephone
number of agent for service)
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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
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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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<PAGE> 2
650,000 SHARES
COMMON STOCK
HEARTLAND BANCSHARES, INC.
A BANK HOLDING COMPANY FOR
HEARTLAND NATIONAL BANK, SEBRING, FLORIDA
A PROPOSED NATIONAL BANK
This is an initial public offering of shares of common stock of
Heartland Bancshares, Inc. ("Heartland Bancshares"). Heartland Bancshares is
offering a minimum of 620,000 shares and a maximum of 650,000 shares at a public
offering 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 are
being offered on a "best efforts" basis by certain directors and executive
officers of Heartland Bancshares so that Heartland Bancshares can raise the
minimum amount of capital necessary to form a national bank, Heartland National
Bank ("Heartland Bank"). A "best efforts" offering means that our directors and
executive officers will devote appropriate time and energy to marketing and
selling the shares but does not guarantee that all, or any, 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 SunTrust Bank, Central Florida, N.A. until subscriptions for
620,000 shares have been received. If Heartland Bancshares has not received
subscriptions for 620,000 shares by ___________, 199_, we will terminate the
offering and promptly return all subscription funds to subscribers, with any
interest earned on the funds. We may, however, at our option, extend the
offering for three consecutive 90-day periods until ___________, 199_, without
giving notice to subscribers. We may reject all or part of any subscription for
any reason.
There is currently no public market for our common stock. 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.
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Per Share Minimum Maximum
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Price to Public ...................... $10.00 $6,200,000 $6,500,000
Underwriting Discounts and Commissions $ 0 $ 0 $ 0
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 some information from this prospectus. It may
not contain all of the information that is important to you. To fully understand
this offering, you should read the entire prospectus carefully, including the
risk factors and the financial statements.
THE COMPANY
Heartland Bancshares was formed to operate as a bank holding company
and the sole shareholder of Heartland National Bank, a national bank to be
formed under the laws of the United States of America. The proceeds of this
offering will be used to purchase all of the common stock to be issued by
Heartland Bank. In addition, Heartland Bancshares will use the proceeds to
provide working capital to Heartland Bank to commence its operations, to pay
organizational expenses, and for other corporate purposes. Neither Heartland
Bancshares nor Heartland Bank has commenced business operations, and neither
will do so until this offering is completed and the necessary approvals of
certain regulatory agencies have been obtained. These regulatory agencies
include the Office of the Comptroller of the Currency ("OCC"), the Federal
Deposit Insurance Corporation ("FDIC"), and the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Heartland Bancshares' and
Heartland Bank's main office will be located in Sebring, Highlands County,
Florida and Heartland Bank's branch office will be located in Lake Placid,
Florida, which is also situated in Highlands County. We anticipate that
Heartland Bank will commence business operations out of its main office and
branch office in August of 1999, or as soon as practicable after that time.
Heartland Bank will operate as a full service community bank, with a primary
emphasis on providing high quality service to meet the financial needs of
individuals and small to medium-sized businesses residing and located in and
around Highlands County, Florida.
Our temporary mailing address is 325 Central Avenue, Lake Placid,
Florida 33852, and our temporary telephone number is (941) 465-0472.
THE OFFERING
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Common Stock Offered.............................. 650,000 shares. A minimum of 620,000 shares are required
to be sold in this offering. 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. The
minimum and maximum subscription amounts may be
waived by Heartland Bancshares in its sole discretion. See
"Terms of the Offering," beginning on page 10.
Common Stock to be Outstanding
after this Offering............................... Minimum - 620,000 shares
Maximum - 650,000 shares
Price to Public................................... $10.00 per share
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Offering Conditions............................... The following conditions must be met for this offering to be
completed:
- at least $6,200,000 must be deposited with the escrow
agent
- Heartland Bancshares must receive approval from the
Federal Reserve Board of its application to become a
bank holding company
- the organizers must receive preliminary approval from
the OCC to charter Heartland Bank
- the proposed Bank must receive approval of its
application for deposit insurance from the FDIC
- Heartland Bancshares must not have canceled this
offering prior to the time funds are withdrawn from the
subscription escrow account
Escrow Arrangements.................................... Until all of the Offering Conditions have been met, we will
place all subscription funds in a subscription escrow account
with the escrow agent. The escrow agent may invest
subscription funds in certain short-term investments upon
instruction by the President of Heartland Bancshares. If the
Offering Conditions are not satisfied by _______________,
all subscription funds that have been placed in the
subscription escrow account, and any interest earned on the
funds, will be returned promptly to the subscribers.
If all of the Offering Conditions are met, the escrow agent
will release all funds to Heartland Bancshares. The funds of
any person subscribing for shares after the Offering
Conditions are satisfied will not be placed in escrow, but
will be immediately available to 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 11).
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Plan of Distribution................................... Certain directors and executive officers of Heartland Bancshares
will market the common stock on a "best efforts," 620,000 share
minimum basis which means they will devote appropriate time and
energy to marketing and selling the shares, but does not guarantee
that all, or any, shares will be sold. The directors and executive
officers will not receive any commissions for these sales. If the
Offering Conditions are not satisfied by _____________, 1999,
Heartland Bancshares may engage an underwriter to sell the shares
on a "best efforts" basis and the underwriter would receive a
commission on such sales not to exceed 10%. See "Terms of The
Offering-- Plan of Distribution" (page 13).
Use of Proceeds....................................... The proceeds of the offering will be used:
- 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 15.
RISK FACTORS........................................... YOU SHOULD READ THE "RISK FACTORS" SECTION, BEGINNING ON
PAGE 4, AS WELL AS THE OTHER CAUTIONARY STATEMENTS
THROUGHOUT THE ENTIRE PROSPECTUS, TO ENSURE YOU
UNDERSTAND THE RISKS ASSOCIATED WITH AN INVESTMENT IN
OUR COMMON STOCK.
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RISK FACTORS
Before you invest in our common stock, you should be aware that there
are various risks, including but not limited to those described below. You
should consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to purchase shares of
our common stock.
This prospectus contains forward-looking statements. Such statements
can be identified by the use of forward-looking words such as "may," "will,"
"expect," "anticipate," "estimate," "continue," or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in this prospectus. The
risk factors noted in this section and other factors noted throughout this
prospectus, including certain risks and uncertainties, could cause our actual
results to differ materially from those described in any forward-looking
statement.
LACK OF OPERATING HISTORY TO EVALUATE PAST PERFORMANCE
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. Because of this, prospective investors do not have access to
all of the information that, in assessing their proposed investment, would be
available to purchasers of securities of a financial institution with a history
of operations.
NEED TO OBTAIN REGULATORY APPROVALS
Before Heartland Bank can begin operations, it must obtain several
regulatory approvals and must meet certain requirements. Once preliminary
charter approval is obtained from the OCC, Heartland Bank must obtain final
approval to commence banking operations within eighteen months. There can be no
assurance that these approvals will be obtained in a timely manner or at all.
In the event that we have satisfied the offering conditions, broken
escrow and issued the shares of common stock, but final approval to commence
banking operations has not been granted within eighteen months after receipt of
preliminary approval from the OCC, Heartland Bank would not be able to commence
banking operations and 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 incurred by
Heartland Bancshares. In short, if you invest in the common stock and Heartland
Bancshares breaks escrow and incurs start-up expenses, but final regulatory
approval is not granted, you may lose part of your initial investment. See
"Terms of the Offering -- Failure of Bank to Commence Operations" (page 12).
RELIANCE ON KEY MANAGEMENT
Regulatory approval to establish and operate a national bank partially
depends upon the OCC's approval of Heartland Bank's proposed chief executive
officer. Generally, the chief executive officer of a
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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 32.
SIGNIFICANT INITIAL LOSSES EXPECTED
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.
COMPETITION IN HIGHLANDS COUNTY
Heartland Bank will be a full service community bank in Highlands
County, Florida. Competition among financial institutions in Highlands County is
intense, and Heartland Bank will compete with other state and national banks,
savings and loan associations, consumer finance companies, credit unions, money
market mutual funds, and other financial institutions which have far greater
financial resources than those available to Heartland Bank. For example, as a
start-up financial institution, Heartland Bank's relatively small capital base
may affect its ability to compete for loans due to regulatory lending
limitations. Approximately seven financial institutions with a total of 27
branches are currently located in Highlands County. 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 and enabling financial institutions located outside the state of
Florida to more easily access the market served by Heartland Bank. Heartland
Bank's size may also impact its ability to compete effectively with larger
institutions in offering other financial services. If Heartland Bank is unable
to compete for deposit, loan and other banking customers effectively, it would
likely have an adverse effect on Heartland Bank's potential for growth and
profitability. See "Business of Heartland Bank -- Market Area and Competition"
(page 20).
POTENTIAL ADVERSE EFFECT OF UNPREDICTABLE ECONOMIC CONDITIONS
Commercial banks and other financial institutions are affected by
economic and political conditions, both domestic and international, and by
governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply, scarce natural resources,
international disorders and other factors beyond the control of Heartland
Bancshares may adversely affect its profitability. See "Business of Heartland
Bank -- Monetary Policies" (page 26).
The success of Heartland Bancshares 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, thereby 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
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of Highlands County depends.
INTEREST RATE SENSITIVITY
Heartland Bank's operations will depend substantially on its net
interest income, which is the difference between the interest income earned on
its interest-bearing assets and the interest expense paid on its
interest-bearing liabilities, such as deposits and borrowings. The difference
between these two interest rates is often referred to as the "interest rate
spread." In the early 1990s, many financial institutions experienced
historically high interest rate spreads. More recently, interest rate spreads
have generally narrowed due to changing market conditions and competitive
pricing pressure. These conditions may continue to exert pressure on pricing and
high interest rate spreads may not return. Like most depository institutions,
Heartland Bank's earnings and net interest spread will be affected by changes in
market interest rates and other economic factors beyond its control. As a
result, an increase or decrease in rates could have a material adverse effect on
Heartland Bank's net income, capital and liquidity. Heartland Bank's mix of
assets and liabilities 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 Heartland Bank's Board of Directors. The
objective of this policy is to control interest-sensitive assets and liabilities
to attempt to minimize the impact of substantial movements in interest rates on
Heartland Bank's earnings. Nevertheless, rapidly rising or falling interest
rates may adversely affect Heartland Bank's performance.
POTENTIAL LIMITATION ON GROWTH RESULTING FROM LOW LENDING LIMITS
At least during its first years of operation, Heartland Bank's legally
mandated lending limits will be lower than those of many of its competitors
because during this period it will have less capital than many of its
competitors. Initially, Heartland Bank will have a legal lending limit for
unsecured loans of up to $900,000 to any one person. Our lower lending limits
may discourage potential borrowers who have lending needs that exceed Heartland
Bank's limits 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.
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 vulnerable to future legislation and
government policy, including bank deregulation and interstate expansion, which
could adversely affect the banking industry as a whole. In particular, Heartland
Bank will be subject to regulatory capital requirements. Although we believe
that Heartland Bank's initial capitalization will be sufficient to support its
anticipated growth for its first five years of operation, these regulatory
capital requirements may restrict future growth without the infusion of
additional capital. These regulations are intended primarily for the protection
of depositors rather than for the benefit of investors, and restrict or limit
the manner in which Heartland Bancshares and Heartland Bank may conduct business
and obtain financing. Heartland Bancshares and Heartland Bank are also
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subject to changes in federal and state law, regulations, governmental policies,
income tax laws and accounting principles. The effects of any potential changes
cannot be predicted, but they could adversely affect our business and
operations. See "Supervision and Regulation," beginning on page 27.
ABILITY OF ORGANIZERS TO INFLUENCE CORPORATE ACTIONS
Upon completion of the offering, the organizers will own 145,000
shares, which will equal 23.4% of the 620,000 shares to be outstanding upon
completion of the minimum offering. As a result, the organizers will be able to
exercise significant control over Heartland Bancshares' management and affairs.
See "Management," beginning on page 32.
DETERRENT EFFECT OF ANTI-TAKEOVER PROVISIONS
Heartland Bancshares' Amended and Restated Articles of Incorporation
contain provisions which could deter and make it more difficult for a third
party to bring about a merger, sale of control or similar transaction, even if
the owners of a majority of the common stock vote in favor of such a
transaction. In addition, Heartland Bancshares' Articles of Incorporation
establish a classified Board of Directors, which means that only one-third of
the members of the Board of Directors is elected each year and each director
serves for a term of three years. Heartland Bancshares' Articles of
Incorporation also authorize the Board of Directors to issue a series of
preferred stock without shareholder action. The issuance of preferred stock by
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. These provisions also make it more
difficult for a third party to achieve a change in control of Heartland
Bancshares through the acquisition of a large block of Heartland Bancshares'
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 38).
NO ESTABLISHED MARKET AND POSSIBILITY THAT AN ACTIVE TRADING MARKET MAY NOT
DEVELOP
Since the size of the offering is relatively small, it is unlikely that
an active and liquid trading market will develop and be maintained. You should
only invest in the common stock if you have a long-term investment intent. If an
active market does not develop, you may not be able to sell your shares promptly
or perhaps at all. Even if you can sell your shares, you may not be able to sell
them at a price equal to or above the price you paid for them. At this time, we
do not intend to list the common stock on any national securities exchange or on
the Nasdaq Stock Market.
NO DIVIDENDS
Presently, we do not expect to pay dividends on our common stock.
Rather, we intend to retain 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 conditions
and other factors considered relevant by the Board of Directors. See "Dividend
Policy" (page 18).
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ARBITRARY DETERMINATION OF OFFERING PRICE
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. Should a market develop for the common stock after this
offering is complete, the market price may be less than the public offering
price.
ABSENCE OF PREEMPTIVE RIGHTS AND CUMULATIVE VOTING RIGHTS
As a shareholder of Heartland Bancshares, you will not have any
preemptive rights with respect to the issuance of additional shares of common
stock or any other class of stock, which means that if Heartland Bancshares
decides to issue additional shares of common stock, you will not automatically
be entitled to purchase additional shares to maintain your percentage ownership.
In addition, you will not have cumulative voting rights which means that, in the
election of directors, you will be entitled to cast one vote per share for each
director position to be filled. Under a cumulative voting scheme, each
shareholder would be entitled to cast a total number of votes equal to the
number of shares owned by the shareholder multiplied by the number of director
positions being filled, and to cast these votes for any one director or divide
the votes among several nominated directors. One effect of cumulative voting is
to prevent a majority shareholder from necessarily being able to determine the
make-up of the entire board of directors.
POTENTIAL DILUTION RESULTING FROM EXERCISE OF STOCK OPTIONS
Heartland Bancshares intends to establish an Incentive Stock Option
Plan which will allow Heartland Bancshares to grant stock options to employees
who are contributing significantly to the management or operation of the
business of Heartland Bancshares or its subsidiaries. Under this plan, 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, the Board of Directors intends to establish a directors
stock option plan, which will be designed to provide incentive compensation to
directors in the event that Heartland Bancshares' common stock increases in
value during the term of such plan. Upon completion of the offering, each
organizer will receive options to purchase 5,000 shares of common stock at an
exercise price of $10.00 per share. The exercise of options under the Incentive
Stock Option Plan and the directors stock option plan would dilute your
ownership interest in Heartland Bancshares. In addition, the exercise of the
options could adversely affect the terms on which Heartland Bancshares can
obtain additional capital. For instance, the holders of the options could
exercise the options when Heartland Bancshares could obtain capital by offering
additional securities on terms more favorable to Heartland Bancshares than those
provided by the options. See "Management--Stock Option Plans" (page 35).
FUTURE CAPITAL NEEDS
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.,
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$6,000,000) will be sufficient to support Heartland Bank's immediate capital
needs, the Board of Directors of Heartland Bancshares may, from time to time,
issue additional shares of the authorized common stock of Heartland Bancshares
to obtain additional capital. We can give no assurance that we will be able to
access the capital markets in the future in order to obtain additional capital
or that any newly issued shares will be sold at prices or terms better than or
equal to those you receive in this offering. In addition, the future issuance of
additional shares would dilute your ownership interest in Heartland Bancshares.
RISKS ASSOCIATED WITH THE YEAR 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 and represents 1998 and "00"
represents 1900. As a result, any computer programs or equipment that are 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.
Our business will be highly dependent on communications and information
systems, including systems which monitor deposit and lending accounts. We will
rely on software and hardware developed by independent third parties to provide
these critical systems. However, as we expect that any computer system or
software purchased for Heartland Bank's operations will be Year 2000 compliant,
we do not anticipate that either Heartland Bancshares or Heartland Bank will
incur significant operating expenses or be required to incur material costs to
be Year 2000 compliant. Heartland Bank will utilize a third-party vendor to
provide its primary banking applications, including core processing systems.
Heartland Bank intends to choose a third-party vendor that has modified or
upgraded its computer applications to ensure timely Year 2000 compliance. In
addition, we intend to implement a Year 2000 compliance program to review the
Year 2000 issue that may be faced by our other third-party vendors and loan and
deposit customers. Under the program, we will examine the need for modifications
or replacement of all non-Year 2000-compliant software. We do not currently
expect that the cost of our Year 2000 compliance program will be material to our
financial condition and expect that we will satisfy the compliance program
without material disruption of our operations. We intend to evaluate the
potential effect on our 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 before Heartland Bank
opens for business. If we, our 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.
NO UNDERWRITER OF THIS OFFERING
There is no underwriter involved in this offering. Sales will be
solicited only by certain executive officers and directors of Heartland
Bancshares. Accordingly, there can be no assurance that the shares will be sold.
See "Terms of The Offering," beginning on page 10.
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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, as amended. 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."
Upon receipt of preliminary approval from the OCC, Heartland Bancshares
will file an application to become a bank holding company with the Federal
Reserve Board. Upon obtaining regulatory approval, Heartland Bancshares will be
a registered 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
10
<PAGE> 13
stock, the capital requirements imposed by the OCC and general market conditions
for the sale of such securities were considered. There can be no assurance that,
if a market should develop for the common stock, the post-offering market price
will equal or exceed the offering price.
CONDITIONS OF THE OFFERING
This offering will expire at 5:00 p.m. Eastern Time, on _______, 199__
(90 days from the date of this prospectus) (the "Expiration Date"), unless such
date is extended by Heartland Bancshares. The Expiration Date 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 (the "Offering
Conditions") on or prior to the Expiration Date, as extended. The Offering
Conditions, which may not be waived, are as follows:
(a) at least $6,200,000 must be deposited with the escrow agent in
the subscription escrow account;
(b) Heartland Bancshares must receive approval from the Federal
Reserve Board of its application to become a bank holding
company;
(c) the organizers must receive preliminary approval from the OCC
to charter Heartland Bank;
(d) the proposed Bank must receive approval of its application for
deposit insurance from the FDIC; and
(e) 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
(the "Subscription Escrow Account") with SunTrust Bank, Central Florida, N.A.
(the "Escrow Agent"). Pursuant to the terms of the Escrow Agreement, as amended,
(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."
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
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<PAGE> 14
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 (i) the numerator of which is the dollar amount of such
subscriber's tendered subscription multiplied by the number of days between the
date of acceptance of the investor's subscription and the date of the
termination of the offering, inclusive (the subscriber's "Time Subscription
Factor"), and (ii) the denominator of which is the aggregate Time Subscription
Factors of all investors depositing subscription funds in the Subscription
Escrow Account. If the Offering Conditions are not satisfied, the expenses
incurred by 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 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 by
18 months after Heartland Bank's receipt of 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 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.
12
<PAGE> 15
PURCHASES BY ORGANIZERS OF HEARTLAND BANCSHARES
Upon completion of the offering, the organizers will own 145,000 shares
of Heartland Bancshares' common stock, or 23.4% of the 620,000 shares to be
outstanding upon completion of the minimum offering. All purchases by the
organizers will be made on the same terms as those made by other investors and
will count toward the achievement of the minimum offering. The organizers have
represented to Heartland Bancshares that any such purchases will be made for
investment purposes only and not with a view to resell such shares. See
"Management."
PLAN OF DISTRIBUTION
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, 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 certain
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.
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
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<PAGE> 16
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.
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<PAGE> 17
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.
15
<PAGE> 18
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
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<PAGE> 19
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> 20
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 the 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."
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<PAGE> 21
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.
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. Upon receipt
of preliminary approval from the OCC, Heartland Bancshares will file an
application with the Federal Reserve Board to become a bank holding company.
Heartland Bancshares has been organized as a mechanism to enhance Heartland
Bank's ability to serve its future customers' requirements for financial
services. The holding company structure 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."
19
<PAGE> 22
BUSINESS OF HEARTLAND BANK
GENERAL
The organizers expect to receive preliminary approval from the OCC to
charter Heartland Bank on or around February 6, 1999. The organizers expect
approval of Heartland Bank's application for deposit insurance from the FDIC 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 ("PSA") 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.
20
<PAGE> 23
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 Heartland Bank's PSA is intense. Total commercial bank
and thrift deposits in Highlands County as of June of 1997 were $1,028,757 with
an average annual growth rate for the preceding five years of 5.85%. The
Highlands County market consists of seven commercial banks with 27 branches. The
four regional holding company banks operating in Highlands County possess 88% of
the market share in the county. Barnett Bank has historically held the dominant
market share in the county with 34.9% market share as of June 1997. One locally
owned independent bank also operates in Highlands County, and two independent
banks each have one branch office in the county.
Financial institutions primarily compete with one another for deposits.
In turn, a bank's deposit base directly affects such bank's loan activities and
general growth. Primary methods of competition include interest rates on
deposits and loans, service charges on deposit accounts and the designing of
unique financial services products. 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 Heartland Bank's PSA, 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.
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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> 25
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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<PAGE> 26
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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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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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> 29
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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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 in the offering or 23.4% of the 620,000 shares outstanding. The
number of the shares of common stock intended to be purchased by each Organizer
is set forth in the table appearing in the section entitled "Security Ownership
of Certain Beneficial Owners and Management," which also specifies the
percentage of common stock owned by the organizers before and after completion
of the minimum offering. Upon completion of the offering, each organizer will
receive options to purchase 5,000 shares of common stock at an exercise price of
$10.00 per share. These options will become exercisable over a period of three
years and will be exercisable for a period of ten years.
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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<PAGE> 34
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> 35
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
33
<PAGE> 36
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,
34
<PAGE> 37
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
35
<PAGE> 38
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 100 10% 15,000 2.4%
William R. Grigsby 100 10% 25,000 4.0%
William R. Handley 100 10% 15,000 2.4%
Bert J. Harris, III 100 10% 10,000 1.6%
Issac G. Nagib 100 10% 15,000 2.4%
Perumalswamy Rajaram 100 10% 10,000 1.6%
S. Allen Skipper 100 10% 10,000 1.6%
Edward L. Smoak 100 10% 25,000 4.0%
Malcolm C. Watters, Jr. 100 10% 10,000 1.6%
Lawrence B. Wells 100 10% 10,000 1.6%
----- --- ------- ----
TOTAL 1,000 100% 145,000 23.4%
</TABLE>
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
36
<PAGE> 39
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 1,000 shares of
common stock issued and outstanding and held by ten shareholders of record. No
shares of the preferred stock are issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to elect the members of the
Board of Directors of 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.
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<PAGE> 40
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 (a) the consideration to be received
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<PAGE> 41
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), (b) there has been no reduction in the average dividend rate from
that which was obtained prior to the time the Interested Person became such, and
(c) the consideration to be received by shareholders who are not Interested
Persons shall be paid in cash or in the same form as the Interested Person
previously paid for shares of such class of stock. These Articles, 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 (a)
for any appropriation, in violation of his duties, of any business opportunity
of Heartland Bancshares, (b) for acts or omissions which involve intentional
misconduct or a knowing violation of law, (c) for unlawful corporate
distributions, or (d) for any transaction from which the director received an
improper personal benefit.
Article VI of 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) 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 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,
39
<PAGE> 42
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 (the "Act") 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 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 (herein, together
with all amendments thereto, called the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the shares of common stock
offered hereby. This prospectus does not contain all of the information included
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to Heartland Bancshares and the common stock,
reference is hereby made to the Registration Statement
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<PAGE> 43
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.
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<PAGE> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
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> 60
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> 61
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> 62
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> 63
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> 64
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> 65
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> 66
================================================================================
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.....................................................10
Terms of the Offering.........................................................10
Use of Proceeds...............................................................15
Pro Forma Capitalization......................................................17
Dividend Policy...............................................................18
Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................18
Business of Heartland Bancshares..............................................19
Business of Heartland Bank....................................................20
Supervision and Regulation....................................................27
Organizers and Principal Shareholders.........................................31
Management....................................................................32
Security Ownership of Certain Beneficial Owners and Management................36
Certain Transactions..........................................................36
Description of Capital Stock..................................................37
Legal Proceedings.............................................................40
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
---------------------------
January __, 1999
================================================================================
<PAGE> 67
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> 68
Article XI of the Company's Articles of Incorporation 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.
II-2
<PAGE> 69
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.
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.
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.
10.2 Contract for sale and purchase of land for the main
office in Sebring, Florida dated August 21, 1998.
10.3 Contract for sale and purchase of land for Heartland
Bank's branch office in Lake Placid, Florida dated
October 2, 1998.
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) 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> 70
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> 71
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.1 to be signed on its behalf by the undersigned, in the City of Sebring,
State of Florida on December 28, 1998.
<TABLE>
<S> <C>
HEARTLAND BANCSHARES, INC.
Date: December 28, 1998 By: /s/ James C. Clinard
-------------------------------------------------
James C. Clinard
President and Chief Executive Officer
(Principal Executive Officer)
Date: December 28, 1998 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 Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James C. Clinard President, Chief Executive December 28, 1998
- -------------------------------------------- Officer and Director
James C. Clinard
/s/ William R. Grigsby* Director December 28, 1998
- --------------------------------------------
William R. Grigsby
/s/ William R. Handley* Director December 28, 1998
- --------------------------------------------
William R. Handley
/s/ Bert J. Harris, III* Director December 28, 1998
- --------------------------------------------
Bert J. Harris, III
/s/ Issac G. Nagib* Director December 28, 1998
- --------------------------------------------
Issac G. Nagib
/s/ Perumalswamy Rajaram* Director December 28, 1998
- --------------------------------------------
Perumalswamy Rajaram
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <C>
/s/ S. Allen Skipper* Director December 28, 1998
- ------------------------------------
S. Allen Skipper
/s/ Edward L. Smoak* Director December 28, 1998
- ------------------------------------
Edward L. Smoak
/s/ Malcolm C. Watters, Jr.* Director December 28, 1998
- ------------------------------------
Malcolm C. Watters, Jr.
/s/ Lawrence B. Wells* Director December 28, 1998
- ------------------------------------
Lawrence B. Wells
</TABLE>
*By: /s/ James C. Clinard
James C. Clinard
Attorney-in-Fact
<PAGE> 73
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.
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.
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.
10.2 Contract for sale and purchase of land for the main
office in Sebring, Florida dated August 21, 1998.
10.3 Contract for sale and purchase of land for Heartland
Bank's branch office in Lake Placid, Florida dated
October 2, 1998.
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).
--------------------------
</TABLE>
(1) Previously filed.
<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF THE
STATE OF FLORIDA
NUMBER -0- 0 SHARES
HEARTLAND BANCSHARES, INC.
COMMON STOCK
This certifies that SPECIMEN is the owner of
-------------------------------------------
SPECIMEN Shares of the Capital Stock of
- -------------------------------------------
HEARTLAND BANCSHARES, INC. A FLORIDA CORPORATION, fully paid and non-assessable
[SEAL] transferable only on the Books of the Corporation by the holder
hereof in person or by duly authorized Attorney, on surrender of this
Certificate property endorsed.
In Witness Whereof the duly authorized officers of this Corporation have
hereunto subscribed their names and caused the corporate Seal to be hereto
affixed at Sebring, FL this day of A.D. 1999
------------- ---------------- --------------
- -------------------------------- ----------------------------------
PRESIDENT SECRETARY
Shares $0.10 Each.
Par Value
<PAGE> 2
CERTIFICATE
FOR
0
SHARES
OF THE
CAPITAL STOCK
HEARTLAND BANCSHARES, INC.
ISSUED TO
--------------
DATED
1999
--------------
For Value Received,______hereby sell, assign and transfer
unto_____________Shares of the Capital Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
_________________to transfer the said Stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated________________ ___
In presence of
_____________________________
_____________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.2.1
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.
<PAGE> 2
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
2
<PAGE> 1
EXHIBIT 10.1.1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Agreement (the "Agreement"), dated as of the 1st day of December,
1998, is made and entered into by and among Heartland Bancshares, Inc., a
corporation chartered under the laws of the State of Florida (the "Company"),
Heartland National Bank, a proposed national bank to be organized under the laws
of the United States (the "Bank") (the Company and the Bank are collectively
referred to herein as "Employer") and James C. Clinard (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company, the Bank, and the Executive entered into an
Employment Agreement dated October 2, 1998 (the "Employment Agreement"); and
WHEREAS, the Company, the Bank, and the Executive desire to amend the
Employment Agreement;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. Section 4(b) of the Employment Agreement shall be deleted in
its entirety and the following substituted in lieu thereof:
(b) Bonus. Beginning on the second year end, December 31,
after the Bank's opening for business, or at any other time as determined by the
Board of Directors, and in addition to Executive's base salary, Executive shall
be eligible to receive such performance bonuses as determined in the discretion
of the Board of Directors of the Bank; provided, however, that any bonus to be
received by Executive shall not exceed 30% of Executive's annual base salary.
The payment of any bonus pursuant to this Section 4(b) shall be contingent upon
the following:
(i) Prior to the granting of any bonus to Executive, the
Board of Directors of the Bank shall consider, and
document its findings in the minutes of the meeting
wherein the issue was considered, Executive's
performance in light of the status of the Bank's
internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth,
asset quality, earnings and such other performance
goals and objectives mutually agreed upon between
Executive and such Board of Directors,
(ii) The overall condition of the Bank must be
"satisfactory" in the opinion of the OCC as set forth
in the most current OCC Report of Supervisory
Activity provided in the Board of Directors of the
Bank and the Uniform Financial Institution Rating of
the Bank shall not be less than a "2";
<PAGE> 2
(iii) The Bank shall be "well capitalized" as defined under
regulations promulgated by the OCC pursuant to the
Federal Deposit Insurance Corporation Improvement Act
of 1991; and
(iv) The Bank must be profitable on a cumulative basis.
2. Section 8 of the Employment Agreement shall be deleted in its
entirety and the following substituted in lieu thereof:
8. Additional Compensation. As additional consideration
paid to Executive, Executive shall be provided with health, hospitalization,
disability and term life insurance, and participation in the Bank's incentive
compensation plan (in the event one is adopted by the Board of Directors of the
Bank). At the first Board of Directors meeting subsequent to the completion of
the Company's public offering of its Common Stock, the Company shall grant
Executive options to purchase 15,000 shares of Common Stock of the Company at a
purchase price equal to the fair market value of the Common Stock as of the date
of the grant pursuant to the Company's Incentive Stock Option Plan, which
options shall vest on the following schedule: (i) options to purchase 3,000
shares shall vest and become exercisable on the date the Bank commences
business; and (ii) options to purchase 3,000 shares shall vest and become
exercisable on each of the first, second, third and fourth anniversaries of the
date on which the Bank commences business. All options shall be exercisable for
a period of ten (10) years.
3. Except as otherwise specifically set forth herein, all of the
other terms and conditions of the Employment Agreement shall remain in full
force and effect as originally written without amendment or modification.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company, the Bank, and the Executive have
executed and delivered this Agreement as of the date first above written.
"Company"
HEARTLAND BANCSHARES, INC.
By: /s/ Lawrence B. Wells
--------------------------------
Lawrence B. Wells
"Bank"
HEARTLAND NATIONAL BANK
By: /s/ Lawrence B. Wells
--------------------------------
Lawrence B. Wells
"Executive"
/s/ James C. Clinard
--------------------------------------
James C. Clinard
3
<PAGE> 1
EXHIBIT 10.2
CONTRACT FOR SALE AND PURCHASE FLORIDA ASSOCIATION OF REALTORS AND THE FLORIDA
BAR
PARTIES: JOHNSON, JOHNSON, YERKE & HEIN PARTNERSHIP and JOHNSON INTERNATIONAL,
INC. ("Seller"), of____________________________________________
(Phone)__________________ , and HEARTLAND INVESTORS, INC., a Florida corporation
("Buyer"), of___________________________________________(Phone)_______________ ,
hereby agree that Seller shall sell and Buyer shall buy the following described
Real Property and Personal Property (collectively "Property") upon the following
terms and conditions, which include Standards for Real Estate Transactions
("Standard(s)") on the reverse side hereof or attached hereto and riders and
addenda to this Contract for Sale and Purchase ("Contract").
I. DESCRIPTION:
(a) Legal description of the Real Property located in Highlands
County, Florida: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART
HEREOF
(b) Street address, city, zip, of the Property is:____________________
__________________________________________________________________
(c) Personal Property:________________________________________________
<TABLE>
<S> <C> <C>
II. PURCHASE PRICE...............................................................................................$ 625,000.00
---------------
PAYMENT:
(a) Deposit held in escrow by Swaine, Harris, Sheehan & McClure, P.A. in the amount of $ 5,000.00
---------------
(b) Additional escrow deposit to be made within 5 days after Effective Date (as defined in
Paragraph III) in the amount of..............................................................................$ 40,000.00
---------------
(c) Subject to AND assumption of existing mortgage in good standing in favor of n/a
having an approximate present principal balance of...........................................................$
---------------
(d) Purchase money mortgage and note to Seller (see addendum) in the amount of.............................$
---------------
(e) Other:________________________________________________________________________________________________________________
(f) Balance to close by U.S. cash, LOCALLY DRAWN certified or cashier's check or third-party loan, subject
to adjustments or prorations.................................................................................$ 580,000.00
---------------
</TABLE>
III. TIME FOR ACCEPTANCE OF OFFER; EFFECTIVE DATE; FACSIMILE: If this offer
is not executed by and delivered to all parties OR FACT OF EXECUTION
communicated in writing between the parties on or before September 25th, 1998,
the deposit(s) will at Buyer's option, be returned and this offer withdrawn. The
date of Contract ("Effective Date") will be the date when the last one of the
Buyer and Seller has signed this offer. A facsimile copy of this Contract and
any signatures hereon shall be considered for all purposes as originals.
IV. FINANCING: [SECTION STRICKEN BY PARTIES]
V. TITLE EVIDENCE: At least 30 days before closing date, (CHECK ONLY ONE):
[X] Seller shall, at Seller's expense, deliver to Buyer or Buyer's attorney; or
[ ] Buyer shall at Buyer's expense obtain (CHECK ONLY ONE): [ ] abstract of
title; or [X] title insurance commitment (with legible copies of instruments
listed as exceptions attached thereto) and, after closing, an owner's policy of
title insurance.
VI. CLOSING DATE: This transaction shall be closed and the deed and other
closing papers delivered on SEE ADDENDUM, unless modified by other provisions of
this Contract.
VII. RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject
to: comprehensive land use plans, zoning, restrictions, prohibitions and other
requirements imposed by governmental authority; restrictions and matters
appearing on the plat or otherwise common to the subdivision; public utility
easements of record (easements are to be located contiguous to Real Property
lines and not more than 10 feet in width as to the rear or front lines and 7-1/2
feet in width as to the side lines, (UNLESS OTHERWISE STATED HEREIN); taxes for
year of closing and subsequent years; assumed mortgages and purchase money
mortgages, if any (if additional items see addendum); provided, that there
exists at closing no violation of the foregoing and none prevent use of the
Property for TWO (2) OFFICE BUILDINGS purpose(s).
VIII. OCCUPANCY: Seller shall deliver occupancy of Property to Buyer at time
of closing unless otherwise stated herein. If occupancy is to be delivered
before closing, Buyer assumes all risks of loss to Property from date of
occupancy, shall be responsible and liable for maintenance from that date, and
shall be deemed to have accepted Property in its existing condition as of time
of taking occupancy unless otherwise stated herein.
IX. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or handwritten
provisions, riders and addenda shall control all printed provisions of this
Contract in conflict with them.
X. RIDERS: (CHECK those riders which are applicable AND are attached to
this Contract):
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) [ ] COASTAL CONSTRUCTION CONTROL LINE (d) [ ] VA/FHA (g) [ ] HOMEOWNERS' ASSOCIATION DISCLOSURE
(b) [ ] CONDOMINIUM (e) [ ] INSULATION (h) [ ] RESIDENTIAL LEAD-BASE HAZARD DISCLOSURE
(c) [ ] FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (f) [ ] "AS IS" (i) [ ] ________________________________________
</TABLE>
XI. ASSIGNABILITY: (CHECK ONLY ONE): Buyer [ ] may assign and thereby be
released from any further liability under this Contract [X] may assign but not
be released from liability under this Contract; or [ ] may not assign this
Contract.
XII. DISCLOSURES:
(a) Radon is a naturally occurring radioactive gas that when
accumulated in a building in sufficient quantities may present
health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding Radon or
Radon testing may be obtained from your County Public Health unit.
(b) Buyer may have determined the energy efficiency rating of the
residential building, if any is located on the Real Property.
(c) If the Real Property includes pre-1978 residential housing then
Paragraph X(h) is mandatory.
XIII. MAXIMUM REPAIR COSTS: Seller shall not be responsible for payments in
excess of:
(a) $ n/a for treatment and repair under Standard D (if blank, then
2% of the Purchase Price).
(b) $ n/a for repair and replacement under Standard N (if blank, then
3% of the Purchase Price).
<PAGE> 2
XIV. SPECIAL CLAUSES; ADDENDA: If additional terms are to be provided,
attach addendum and CHECK HERE [X].
THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT. IF NOT FULLY UNDERSTOOD,
SEEK THE ADVICE OF AN ATTORNEY PRIOR TO SIGNING.
THIS FORM HAS BEEN APPROVED BY THE FLORIDA ASSOCIATION OF REALTORS
AND THE FLORIDA BAR.
Approval does not constitute an opinion that any of the terms and conditions
in this Contract should be accepted by the parties in a particular
transaction. Terms and conditions should be negotiated based upon the
respective interests, objectives and bargaining
positions of all interested persons.
COPYRIGHT 1995 BY THE FLORIDA BAR AND THE FLORIDA ASSOCIATION OF REALTORS
<TABLE>
<CAPTION>
HEARTLAND INVESTORS, INC. JOHNSON, JOHNSON, YERKE, HEIN PARTNERSHIP
<S> <C> <C> <C>
/s/ Bert J. Harris, III 09/25/98 By:/s/ Lawrence W. Johnson, Jr. 09/25/98
- ------------------------------------ -------- ------------------------------------- --------
(Buyer) By: Bert J. Harris, III, (Date) (Seller) Lawrence W. Johnson, Jr., (Date)
as Secretary as General Partner
Social Security or Tax I.D.# Social Security or Tax I.D.# ###-##-####
-------- -----------
JOHNSON INTERNATIONAL, INC.
By:/s/ L.W. Johnson, Jr. 09/25/98
- ------------------------------------ -------- ------------------------------------- --------
(Buyer) (Date) (Seller) L.W. Johnson, Jr., as President (Date)
Social Security or Tax I.D.# Social Security or Tax I.D.# ###-##-####
-------- -----------
</TABLE>
Deposit under Paragraph II(a) received; IF OTHER THAN CASH, THEN SUBJECT TO
CLEARANCE. /s/Bert J. Harris,III
------------------------
(Escrow Agent)
Swaine, Harris, Sheehan & McClure, P.A.
BROKER'S FEE: The brokers named below, including listing and cooperating
brokers, are the only brokers entitled to compensation in connection with this
Contract.
NAME:
Listing Broker ALL-STAR PROPERTIES, INC. Cooperating Brokers, if any
NONE
<PAGE> 3
STANDARDS FOR REAL ESTATE TRANSACTIONS BUYER'S / SELLER'S INITIALS________
A. EVIDENCE OF TITLE: (1) An abstract of title prepared or brought
current by a reputable and existing abstract firm (if not existing then
certified as correct by an existing firm) purporting to be an accurate synopsis
of the instruments affecting title to the Real Property recorded in the public
records of the county wherein the Real Property is located through Effective
Date. It shall commence with the earliest public records, or such later date as
may be customary in the county. Upon closing of this Contract, the abstract
shall become the property of Buyer, subject to the right of retention thereof by
first mortgagee until fully paid. (2) A title insurance commitment issued by a
Florida licensed title insurer agreeing to issue Buyer, upon recording of the
deed to Buyer, an owner's policy of title insurance in the amount of the
purchase price, insuring Buyer's title to the Real Property, subject only to
liens, encumbrances, exceptions or qualifications provided in this Contract and
those to be discharged by Seller at or before closing. Seller shall convey
marketable title subject only to liens, encumbrances, exceptions or
qualifications provided in this Contract. Marketable title shall be determined
according to applicable Title Standards adopted by authority of The Florida Bar
and in accordance with law. Buyer shall have 30 days, if abstract, or 5 days, if
title commitment, from date of receiving evidence of title to examine it. If
title is found defective, Buyer shall within 3 days thereafter, notify Seller in
writing specifying the defect(s). If defect(s) render title unmarketable, Seller
will have 30 days from receipt of notice to remove the defects, failing which
Buyer shall within five (5) days after expiration of the thirty (30) day period,
deliver written notice to Seller either: (1) extending the time for a reasonable
period not to exceed 120 days within which Seller shall use diligent effort to
remove the defects; or (2) requesting a refund of deposit(s) paid which shall be
immediately returned to Buyer. If Buyer fails to so notify Seller, Buyer shall
be deemed to have accepted the title as it then is. Seller shall, if title is
found unmarketable, use diligent effort to correct defect(s) within the time
provided therefor. If Seller is unable to timely correct the defects, Buyer
shall either waive the defects, or receive a refund of deposit(s), thereby
releasing Buyer and Seller from all further obligation under this Contract.
B. PURCHASE MONEY MORTGAGE; SECURITY AGREEMENT TO SELLER: [SECTION
STRICKEN BY PARTIES]
C. SURVEY: Buyer, at Buyer's expense, within time allowed to deliver
evidence of title and to examine same, may have the Real Property surveyed and
certified by a registered Florida surveyor. If the survey discloses
encroachments on the Real Property or that improvements located thereon encroach
on setback lines, easements, lands of others or violate any restrictions,
Contract covenants or applicable governmental regulation, the same shall
constitute a title defect.
D. TERMITES: [SECTION STRICKEN BY PARTIES]
E. INGRESS AND EGRESS: [SECTION STRICKEN BY PARTIES]
F. LEASES: [SECTION STRICKEN BY PARTIES]
G. LIENS: Seller shall furnish to Buyer at time of closing an affidavit
attesting to the absence, unless otherwise provided for herein, of any financing
statement, claims of lien or potential lienors known to Seller and further
attesting that there have been no improvements or repairs to the Real Property
for 90 days immediately preceding date of closing. If the Real Property has been
improved or repaired within that time, Seller shall deliver releases or waivers
of construction liens executed by all general contractors, subcontractors,
suppliers and materialmen in addition to Seller's lien affidavit setting forth
the names of all such general contractors, subcontractors, suppliers and
materialmen, further affirming that all charges for improvements or repairs
which could serve as a basis for a construction lien or a claim for damages have
been paid or will be paid at the closing of this Contract.
H. PLACE OF CLOSING: Closing shall be held in the county wherein the Real
Property is located at the office of the attorney or other closing agent
designated by Seller.
I. TIME: In computing time periods of less than six (6) days, Saturdays,
Sundays and state or national legal holidays shall be excluded. Any time periods
provided for herein which shall end on a Saturday, Sunday or a legal holiday
shall extend to 5:00 p.m. of the next business day. TIME IS OF THE ESSENCE IN
THIS CONTRACT.
J. DOCUMENTS FOR CLOSING: Seller shall furnish the deed, bill of sale,
construction lien affidavit, owner's possession affidavit, assignments of
leases, tenant and mortgagee estoppel letters and corrective instruments. Buyer
shall furnish closing statement, mortgage, mortgage note, security agreement and
financing statements.
K. EXPENSES: Documentary stamps on the deed and recording of corrective
instruments shall be paid by Seller. Documentary stamps and intangible tax on
the purchase money mortgage and any mortgage assumed, and recording of purchase
money mortgage to Seller, deed and financing statements shall be paid by the
Buyer. Unless otherwise provided by law or rider to this Contract, charges for
the following related title services, namely title or abstract charge, title
examination, and settlement and closing fee shall be paid by the party
responsible for furnishing the title evidence in accordance with Paragraph V.
L. PRORATIONS; CREDITS: Taxes, assessments, rent, interest, insurance and
other expenses of the Property shall be prorated through the day before closing.
Buyer shall have the option of taking over existing policies of insurance, if
assumable, in which event premiums shall be prorated. Cash at closing shall be
increased or decreased as may be required by prorations to be made through day
prior to closing or occupancy if occupancy occurs before closing. Advance rent
and security deposits will be credited bo Buyer. Escrow deposits held by
mortgagee will be credited to Seller. Taxes shall be prorated based on the
current year's tax with due allowance made for maximum allowable discount,
homestead and other exemptions. If closing occurs at a date when the current
year's millage is not fixed and current year's assessment is available, taxes
will be prorated based upon such assessment and prior year's millage. If current
year's assessment is not available, then taxes will be prorated on prior year's
tax. If there are completed improvements on the Real Property by January 1st of
year of closing, which improvements were not in existence on January 1st of
prior year, then taxes shall be prorated based upon prior year's millage and at
an equitable assessment to be agreed upon between the parties; failing which,
request shall be made to the County Property Appraiser for an informal
assessment taking into account available exemptions. A tax proration based on an
estimate shall, at request of either party, be readjusted upon receipt of tax
bill on condition that a statement to that effect is signed at closing.
M. SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of date of closing (not as of Effective Date) are to be paid
by Seller. Pending liens as of date of closing shall be assumed by Buyer. If the
improvement has been substantially completed as of Effective Date, any pending
lien shall be considered certified, confirmed or ratified and Seller shall, at
closing, be charged an amount equal to the last estimate or assessment for the
improvement by the public body.
N. INSPECTION, REPAIR AND MAINTENANCE: [SECTION STRICKEN BY PARTIES]
O. RISK OF LOSS: [SECTION STRICKEN BY PARTIES]
P. PROCEEDS OF SALE; CLOSING PROCEDURE: The deed shall be recorded upon
clearance of funds. If an abstract of title has been furnished, evidence of
title shall be continued at Buyer's expense to show title in Buyer, without any
encumbrances or change which would render Seller's title unmarketable from the
date of the last evidence. All closing proceeds shall be held in escrow by
Seller's attorney or other mutually acceptable escrow agent for a period of not
more than 5 days after closing date. If Seller's title is rendered unmarketable,
through no fault of Buyer, Buyer shall within the 5-day period, notify Seller in
writing of the defect and Seller shall have 30 days from date of receipt of such
notification to cure the defect. If Seller fails to timely cure the defect, all
deposit(s) and closing funds shall, upon written demand by Buyer and within 5
days after demand, be returned to Buyer and, simultaneously with such repayment,
Buyer shall return the Personal Property, vacate the Real Property and reconvey
the Property to Seller by special warranty deed and bill of sale. If Buyer fails
to make timely demand for refund, Buyer shall take title as is, waiving all
rights against Seller as to any intervening defect except as may be available to
Buyer by virtue of warranties contained in the deed or bill of sale. If a
portion of the purchase price is to be derived from institutional financing or
refinancing, requirements of the lending institution as to place, time of day
and procedures for closing, and for disbursement of mortgage proceeds shall
control over contrary provision in this Contract, Seller shall have the right to
require from the lending institution a written commitment that it will not
withhold disbursement of mortgage proceeds as a result of any title defect
attributable to Buyer-mortgagor. The escrow and closing procedure required by
this Standard shall be waived if the title agent insures adverse matters
pursuant to Section 627.7841, F.S., as amended.
Q. ESCROW: Any escrow agent ("Agent") receiving funds or equivalent is
authorized and agrees by acceptance of them to deposit them promptly, hold same
in escrow and, subject to clearance, disburse them in accordance with terms and
conditions of this Contract. Failure of funds to clear shall not excuse Buyer's
performance. If in doubt as to Agent's duties or liabilities under the
provisions of this Contract, Agent may, at Agent's option, continue to hold the
subject matter of the escrow until the parties hereto agree to its disbursement
or until a judgment of a court of competent jurisdiction shall determine the
rights of the parties or Agent may deposit same with the clerk of the circuit
court having jurisdiction of the dispute. Upon notifying all parties concerned
of such action, all liability on the part of Agent shall fully terminate, except
to the extent of accounting for any items previously delivered out of escrow. If
a licensed real estate broker, Agent will comply with provisions of Chapter 475,
F.S., as amended. Any suit between Buyer and Seller wherein Agent is made a
party because of acting as Agent hereunder, or in any suit wherein Agent
interpleads the subject matter of the escrow, Agent shall recover reasonable
attorneys' fees and costs incurred with these amounts to be paid from and out of
the escrowed funds or equivalent and charged and awarded as court costs in favor
of the prevailing party. The Agent shall not be liable to any party or person
for misdelivery to Buyer or Seller of items subject to the escrow, unless such
misdelivery is due to willful breach of the provisions of this Contract or gross
negligence of Agent.
R. ATTORNEYS' FEES; COSTS: In any litigation, including breach,
enforcement or interpretation, arising out of this Contract, the prevailing
party in such litigation, which, for purposes of this Standard, shall include
Seller, Buyer and
<PAGE> 4
any brokers acting in agency or nonagency relationships authorized by Chapter
475, F.S., as amended, shall be entitled to recover form the non-prevailing
party reasonable attorneys' fees, costs and expenses.
S. FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within
the time specified, including payment of all deposits, the deposit(s) paid by
Buyer and deposit(s) agreed to be paid, may be recovered and retailed by and for
the account of Seller as agreed upon liquidated damages, consideration for the
execution of this Contract and in full settlement of any claims; whereupon,
Buyer and Seller shall be relieved of all obligations under this Contract; or
Seller, at Seller's option, may proceed in equity to enforce Seller's rights
under this Contract. If for any reason other than failure of Seller to make
Seller's title marketable after diligent effort, Seller fails, neglects or
refused to perform this Contract, the Buyer may seek specific performance or
elect to receive the return of Buyer's deposit(s) without thereby waiving any
action for damages resulting from Seller's breach.
T. CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE: Neither this Contract
nor any notice of its shall be recorded in any public records. This Contract
shall bind and inure to the benefit of the parties and their successors in
interest. Whenever the context permits, singular shall include plural and one
gender shall include all. Notice given by or to the attorney for any party shall
be as effective as if given by or to that party.
U. CONVEYANCE: Seller shall convey title to the Real Property by statutory
warranty, trustee's, personal representative's or guardian's deed, as
appropriate to the status of Seller, subject only to matters contained in
Paragraph VII and those otherwise accepted by Buyer. Personal Property shall, at
the request of the Buyer, be transferred by an absolute bill of sale with
warranty of title, subject only to such matters as may be otherwise provided for
herein.
V. OTHER AGREEMENTS: No prior or present agreements or representations
shall be binding upon Buyer or Seller unless included in this Contract. No
modification to or change in this Contract shall be valid or binding upon the
parties unless in writing and executed by the party or parties intended to be
bound by it.
W. WARRANTY: Seller warrants that there are not facts known to Seller
materially affecting the value of the Property which are not readily observable
by Buyer or which have not been disclosed to Buyer.
<PAGE> 5
ADDENDUM TO CONTRACT
Addendum No. 1 to the Contract dated September 25th, 1998 between
JOHNSON, JOHNSON, YERKE & HEIN PARTNERSHIP and JOHNSON INTERNATIONAL, INC.
(Seller) and HEARTLAND INVESTORS, INC., a Florida corporation (Buyer)
concerning the property described as:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF
(the "Contract"). Buyer and Seller make the following terms and conditions part
of the Contract:
1. Closing shall take place in the law offices of Swaine, Harris,
Sheehan & McClure, P.A., 325 Central Avenue, Lake Placid, Florida twenty
(20) days after the contingencies are satisfied or waived (see
Paragraphs 2 and 4 below).
2. The Buyer shall have until October 26, 1998 (thirty (30) days from
Effective Date of the Contract) to conduct any and all tests,
investigations, or inquiries to determine the fitness of the property
for the Buyer's intended purpose. The Buyer may cancel this Contract at
any time during the said thirty (30) day period, and receive a full
refund of its deposit. Notice of cancellation, if any, shall be in
writing and shall be hand delivered or sent by Registered or Certified
Mail, Return Receipt Requested, postage pre-paid or by recognized
overnight courier, addressed to:
Via Overnight Courier: Via U.S. Mail:
John Borgemeister John Borgemeister
All-Star Properties, Inc. All-Star Properties, Inc.
433 South Pine Street Post Office Box 3747
Sebring, FL 33870 Sebring, FL 33871-3747
Failure to notify Seller as provided herein, shall be deemed a waiver or
acceptance of the contingencies outlined in this paragraph.
3. Paragraphs B (Purchase Money Mortgage; Security Agreement to
Seller); D (Termites); E (Ingress and Egress); F (Leases); N
(Inspection, Repair and Maintenance); and O (Risk of Loss) of this
Contract are hereby deleted.
4. This Contract is contingent upon the Buyer obtaining ingress and
egress to the property (lawfully permitted driveways) along Howey Road
and along Lakeview Drive (two separate driveways) from the government
agency with jurisdiction (without developmental costs, impact fees or
road improvements) within sixty (60) days of the Effective Date. The
sixty (60) day period may be extended by thirty (30) days without cost
upon written request from Buyer.
5. Seller makes no warranties to Buyer as to the condition of the
property or suitability of the property for the Buyer's intended use.
6. Like-Kind Exchange. Notwithstanding anything herein to the contrary,
Seller may, pursuant to this paragraph, elect to effect an exchange of
the Property for other real property of like-kind to be designated by
Seller such that the exchange shall qualify for nonrecognition of gain
or loss under Section 1031 of the Internal Revenue Code of 1986, as
amended. If Seller elects to effect a like-kind exchange of the
Property, Buyer shall cooperate with Seller in effecting the exchange.
Seller and Buyer shall execute, on or before settlement, an Assignment
of Sales Contract which shall assign all of Seller's right, title and
interest in and to the Contract to CLIFFORD R. RHOADES, P.A.
("Intermediary") and Intermediary shall complete the sale of the
Property to Buyer. Seller shall, at settlement, pay for any and all
additional costs, fees and expenses incurred solely as a result of
transferring the Property as part of a like-kind exchange (rather than a
sale of the Property), including without limitation, the cost of
preparing the Assignment of Sales Contract and any other documents
required to effect the exchange. Seller shall indemnify and hold Buyer
harmless from and against any and all liability, costs, damages, claims
or demands arising from Buyer's cooperation in effecting the exchange
contemplated hereby. This paragraph shall survive the closing.
<TABLE>
<S> <C> <C> <C>
HEARTLAND INVESTORS, INC. JOHNSON, JOHNSON, YERKE & HEIN PARTNERSHIP
/s/ Bert J. Harris, III 09/25/98 /s/ Lawrence W. Johnson, Jr. 09/25/98
- --------------------------------- -------- --------------------------------- --------
BUYER By: Bert J. Harris, III, (Date) SELLER By: Lawrence W. Johnson, Jr., (Date)
as Secretary as General Partner
JOHNSON INTERNATIONAL, INC.
/s/ L.W. Johnson, Jr. 09/25/98
- --------------------------------- -------- -------------------------------------------- --------
BUYER (Date) SELLER By: L.W. Johnson, Jr., as President (Date)
</TABLE>
<PAGE> 6
LEGAL DESCRIPTION - EXHIBIT "A"
PARTIES:
JOHNSON, JOHNSON, YERKE & HEIN PARTNERSHIP and JOHNSON INTERNATIONAL, INC.,
("Seller") and HEARTLAND INVESTORS, INC., a Florida corporation ("Buyer")
Lots 1, 2, and the South 1/2 of Lot 3, Block "E", of LAKE JACKSON
BOULEVARD SUBDIVISION, as per plat recorded in Transcript Book Page 10,
of the Public Records of Highlands County, Florida.
LESS AND EXCEPT road right-of-way of U.S. Highway 27.
LESS AND EXCEPT the portion of said lots lying East of Lakeview Drive.
SUBJECT TO Right-of-Way Easement recorded in O.R. Book 936, Pages 420,
421 and 422, Public Records of Highlands County, Florida.
Buyer's Initials: Seller's Initials:
BJH LWJ Jr.
- ---------------------------- ----------------------------
LWJ II
----------------------------
<PAGE> 1
EXHIBIT 10.3
THIS FORM HAS BEEN APPROVED BY THE FLORIDA ASSOCIATION OF REALTORS(R) AND THE
FLORIDA BAR
Contract for Sale and Purchase
Florida Association of Realtors(R) and The Florida Bar
PARTIES: Smoak Groves, Inc. ("Seller"),
of 1025 CR 17 North, Lake Placid, FL 33852 (Phone) 465-2561,
and Heartland Investors, Inc., or assigns ("Buyer"),
of 325 Central Avenue, Lake Placid, FL 33852 (Phone) 465-2811 ,
hereby agree that Seller shall sell and Buyer shall buy the following described
Real Property and Personal Property (collectively "Property") upon the following
terms and conditions, which include Standards for Real Estate Transactions
("Standard(s)") on the reverse side hereof or attached hereto and riders and
addenda to this Contract for Sale and Purchase ("Contract").
I. DESCRIPTION:
(a) Legal description of the Real Property located in Highlands
County, Florida: PARCEL 3 containing 1.167 acres more or less as
shown on Boundary Survey by Lawrence E. Douglas FL REG NO. 4410,
dated 3/17/98 Drawing B-1980168, Revised 9/21/98.
(b) Street address, city, zip, of the Property is:___________________
_________________________________________________________________
(c) Personal Property:_______________________________________________
_________________________________________________________________
<TABLE>
<S> <C> <C>
II. PURCHASE PRICE...............................................................................................$ 246,000.00
-------------
PAYMENT:
(a) Deposit held in escrow by Michael A. Rider, Trust Account in the amount of ............................$ 1,000.00
-------------
(b) Additional escrow deposit to be made within __ days after Effective Date (as defined in Paragraph III)
in the amount of ............................................................................................$ -0-
-------------
(c) Subject to AND assumption of existing mortgage in good standing in favor of __________________
________________________________ having an approximate present principal balance of..........................$ -0-
-------------
(d) Purchase money mortgage and note to Seller (see addendum) in the amount of ............................$ -0-
-------------
(e) Other:_________________________________________________________________................................$ -0-
-------------
(f) Balance to close by U.S. cash, LOCALLY DRAWN certified or cashier's check or third-party loan,
subject to adjustments and prorations........................................................................$ 245,000.00
-------------
</TABLE>
III. TIME FOR ACCEPTANCE OF OFFER; EFFECTIVE DATE; FACSIMILE: If this offer
is not executed by and delivered to all parties OR FACT OF EXECUTION
communicated in writing between the parties on or before ___________________,
the deposit(s) will, at Buyer's option, be returned and this offer withdrawn.
The date of Contract ("Effective Date") will be the date when the last one of
the Buyer and Seller has signed this offer. A facsimile copy of this Contract
and any signatures thereon shall be considered for all purposes as originals.
IV. FINANCING:
(a) If the Purchase Price or any part of it is to be financed by a
third-party loan, this Contract is conditioned on Buyer obtaining
a written commitment within N/A days after Effective Date for
(CHECK ONLY ONE): [ ] a fixed; [ ] an adjustable; or [ ] a fixed
or adjustable rate loan in the principal amount of $____________,
at an initial interest rate not to exceed N/A%, discount and
origination fees not be exceed N/A% of principal amount, and for
a term of ___ years. Buyer will make application within ___ days
after Effective Date and use reasonable diligence to obtain a
loan commitment and, thereafter, to satisfy terms and
conditions of the commitment and close the loan. Buyer shall pay
all loan expenses. If Buyer fails to obtain a commitment or fails
to waive Buyer's rights under this subparagraph within the time
for obtaining a commitment or, after diligent effort, fails to
meet the terms and conditions of the commitment, then either
party thereafter, by written notice to the other, may cancel this
Contract and Buyer shall be refunded the deposit(s); or
(b) The existing mortgage described in Paragraph II(c), above, has
(CHECK ONLY ONE): [ ] a variable interest rate; or [ ] a fixed
interest rate of ___% per annum. At time of title transfer, some
fixed interest rates are subject to increase; if increased, the
rate shall not exceed ___% per annum. Seller shall, within ___
days after Effective Date, furnish a statement from each
mortgagee stating the principal balance, method of payment,
interest rate and status of mortgage. If Buyer has agreed to
assume a mortgage which requires approval of Buyer by the
mortgagee for assumption, then Buyer shall promptly obtain the
necessary application and diligently complete and return it to
the mortgagee. Any mortgagee charge(s) not to exceed
$_______________ shall be paid by Buyer. If Buyer is not
accepted by mortgagee or the requirements for assumption are not
in accordance with the terms of this Contract or mortgagee makes
a charge in excess of the stated amount, Seller or Buyer may
rescind this Contract by written notice to the other party
unless either elects to pay the increase in interest rate or
excess mortgage charges.
V. TITLE EVIDENCE: At least 20 days before closing date, but no earlier
than ___ days after Seller receives written notification that Buyer has obtained
the loan commitment or has been approved for the loan assumption as provided in
Paragraphs IV(a) or (b), above, or, if applicable, waived the financing
requirements, (CHECK ONLY ONE): [X] Seller shall, at Seller's expense, deliver
to Buyer or Buyer's attorney; or [ ] Buyer shall at Buyer's expense obtain
(CHECK ONLY ONE): [ ] abstract of title; or [ ] title insurance commitment (with
legible copies of instruments listed as exceptions attached thereto) and, after
closing, an owner's policy of title insurance.
VI. CLOSING DATE: This transaction shall be closed and the deed and other
closing papers delivered on ________________, unless modified by other
provisions of this Contract.
VII. RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject
to: comprehensive land use plans, zoning, restrictions, prohibitions and other
requirements imposed by governmental authority; restrictions and matters
appearing on the plat or otherwise common to the subdivision; public utility
easements of record (easements are to be located contiguous to Real Property
lines and not more than 10 feet in width as to the rear or front lines and 7-1/2
feet in width as to the side lines, UNLESS OTHERWISE STATED HEREIN); taxes for
year of closing and subsequent years; assumed mortgages and purchase money
mortgages, if any (if additional items, see addendum); provided, that there
exists at closing no violation of the foregoing and none prevent use of the
Property for commercial purpose(s).
VIII. OCCUPANCY: Seller warrants that there are no parties in occupancy other
than Seller; but if Property is intended to be rented or occupied beyond
closing, the fact and terms thereof and the tenant(s) or occupants shall be
disclosed pursuant to Standard F. Seller shall deliver occupancy of Property to
Buyer at time of closing unless otherwise stated herein. If occupancy is to be
delivered before closing, Buyer assumes
<PAGE> 2
all risks of loss to Property from date of occupancy, shall be responsible and
liable for maintenance from that date, and shall be deemed to have accepted
Property in its existing condition as of time of taking occupancy unless stated
herein.
RIDERS CAN BE OBTAINED FROM THE FLORIDA ASSOCIATION OF REALTORS(R) OR THE
FLORIDA BAR
IX. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or handwritten
provisions, riders and addenda shall control all printed provisions of this
Contract in conflict with them.
X. RIDERS: (CHECK those riders which are applicable AND are attached to
this Contract):
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) [ ] COASTAL CONSTRUCTION CONTROL LINE (d) [ ] VA/FHA (g) [ ] HOMEOWNERS' ASSOCIATION DISCLOSURE
(b) [ ] CONDOMINIUM (e) [ ] INSULATION (h) [ ] RESIDENTIAL LEAD-BASE HAZARD DISCLOSURE
(c) [ ] FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (f) [ ] "AS IS" (i) [ ]________________________________________
</TABLE>
XI. ASSIGNABILITY: (CHECK ONLY ONE): Buyer [ ] may assign and thereby be
released from any further liability under this Contract; [ ] may assign but not
be released from liability under this Contract; or [ ] may not assign this
Contract.
XII. DISCLOSURES:
(a) Radon is a naturally occurring radioactive gas that when
accumulated in a building in sufficient quantities may present
health risks to persons who are exposed to it over time. Levels
of radon that exceed federal and state guidelines have been found
in buildings in Florida. Additional information regarding Radon
or Radon testing may be obtained from your County Public Health
unit.
(b) Buyer may have determined the energy efficiency rating of the
residential building, if any is located on the Real Property.
(c) If the Real Property includes pre-1978 residential housing, then
Paragraph X
(h) is mandatory.
XIII. MAXIMUM REPAIR COSTS: Seller shall not be responsible for payments in
excess of:
(a) $ N/A for treatment and repair under Standard D (if blank, then
2% of the Purchase Price).
(b) $ N/A for repair and replacement under Standard N (if blank,
then 3% of the Purchase Price).
XIV. SPECIAL CLAUSES; ADDENDA: If additional terms are to be provided,
attach addendum and CHECK HERE [ ].
THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT. IF NOT FULLY UNDERSTOOD,
SEEK THE ADVICE OF AN ATTORNEY PRIOR TO SIGNING.
THIS FORM HAS BEEN APPROVED BY THE FLORIDA ASSOCIATION OF REALTORS
AND THE FLORIDA BAR.
Approval does not constitute an opinion that any of the terms and conditions
in this Contract should be accepted by the parties in a particular
transaction. Terms and conditions should be negotiated based upon the
respective interests, objectives and bargaining
positions of all interested persons.
COPYRIGHT 1995 BY THE FLORIDA BAR AND THE FLORIDA ASSOCIATION OF REALTORS
<TABLE>
<S> <C> <C> <C>
HEARTLAND INVESTORS, INC. SMOAK GROVES, INC.
By:/s/ James C. Clinard 10/2/98 By: /s/ John F. Smoak, Jr. 10/2/98
------------------------------------- ------- -------------------------------------- -------
(Buyer) James C. Clinard (Date) (Seller) John F. Smoak, Jr., President (Date)
Social Security or Tax I.D.# 65-085-4929 Social Security or Tax I.D.#
----------- -------------
JOHNSON INTERNATIONAL, INC.
By: /s/ Edward L. Smoak 10/2/98
- ---------------------------------------- ------- -------------------------------------- -------
(Buyer) (Date) (Seller) Edward L. Smoak, Secretary (Date)
Social Security or Tax I.D.# Social Security or Tax I.D.#
------------ -------------
</TABLE>
Deposit under Paragraph II(a) received; IF OTHER THAN CASH, THEN SUBJECT TO
CLEARANCE. (Escrow Agent)
BROKER'S FEE: The brokers named below, including listing and cooperating
brokers, are the only brokers entitled to compensation in connection with this
Contract.
NAME: N/A
LISTING BROKER COOPERATING BROKERS, IF ANY
<PAGE> 3
STANDARDS FOR REAL ESTATE TRANSACTIONS
A. EVIDENCE OF TITLE: (1) An abstract of title prepared or brought current
by a reputable and existing abstract firm (if not existing then certified as
correct by an existing firm) purporting to be an accurate synopsis of the
instruments affecting title to the Real Property recorded in the public records
of the county wherein the Real Property is located through Effective Date. It
shall commence with the earliest public records, or such later date as may be
customary in the county. Upon closing of this Contract, the abstract shall
become the property of Buyer, subject to the right of retention thereof by first
mortgagee until fully paid. (2) A title insurance commitment issued by a Florida
licensed title insurer agreeing to issue Buyer, upon recording of the deed to
Buyer, an owner's policy of title insurance in the amount of the purchase price,
insuring Buyer's title to the Real Property, subject only to liens,
encumbrances, exceptions or qualifications provided in this Contract and those
to be discharged by Seller at or before closing. Seller shall convey marketable
title subject only to liens, encumbrances, exceptions or qualifications provided
in this Contract. Marketable title shall be determined according to applicable
Title Standards adopted by authority of The Florida Bar and in accordance with
law. Buyer shall have 30 days, if abstract, or 5 days, if title commitment, from
date of receiving evidence of title to examine it. If title is found defective,
Buyer shall within 3 days thereafter, notify Seller in writing specifying the
defect(s). If defect(s) render title unmarketable, Seller will have 30 days from
receipt of notice to remove the defects, failing which Buyer shall within five
(5) days after expiration of the thirty (30) day period, deliver written notice
to Seller either: (1) extending the time for a reasonable period not to exceed
120 days within which Seller shall use diligent effort to remove the defects; or
(2) requesting a refund of deposit(s) paid which shall be immediately returned
to Buyer. If Buyer fails to so notify Seller, Buyer shall be deemed to have
accepted the title as it then is. Seller shall, if title is found unmarketable,
use diligent effort to correct defect(s) within the time provided therefor. If
Seller is unable to timely correct the defects, Buyer shall either waive the
defects or receive a refund of deposit(s), thereby releasing Buyer and Seller
from all further obligation under this Contract.
B. PURCHASE MONEY MORTGAGE;SECURITY AGREEMENT TO SELLER: A purchase money
mortgage and mortgage note to Seller shall provide for a 30-day grace period in
the event of default if a first mortgage and a 15-day period if a second or
lesser mortgage; shall provide for right of prepayment in whole or in part
without penalty; shall permit acceleration in event of transfer of the Real
Property; shall require all prior liens and encumbrances to be kept in good
standing and forbid modifications of or future advances under prior mortgage(s);
shall require Buyer to maintain policies of insurance containing a standard
mortgagee clause covering all improvements located on the Real Property against
fire and all perils included within the term "extended coverage endorsements"
and such other risks and perils as Seller may reasonably require, in an amount
equal to their highest insurable value; and the mortgage, note and security
agreement shall be otherwise in form and content required by Seller; but Seller
may only require clauses and coverage customarily found in mortgages, mortgage
notes and security agreements generally utilized by savings and loan
institutions or state or national banks located in the county wherein the Real
Property is located. All Personal Property and leases being conveyed or assigned
will, at Seller's option, be subject to the lien of a security agreement
evidenced by recorded financing statements. If a balloon mortgage, the final
payment will exceed the periodic payments thereon.
C. SURVEY: Buyer, at Buyer's expense, within time allowed to deliver
evidence of title and to examine same, may have the Real Property surveyed and
certified by a registered Florida surveyor. If the survey discloses
encroachments on the Real Property or that improvements located thereon encroach
on setback lines, easements, lands of others or violate any restrictions,
Contract covenants or applicable governmental regulation, the same shall
constitute a title defect.
D. TERMITES: Buyer, at Buyer's expense, within the time allowed to deliver
evidence of title, may have the Property inspected by a Florida Certified Pest
Control Operator ("Operator") to determine if there is any visible active
termite infestation or visible damage from termite infestation in the Property.
If either or both are found, Buyer shall have 4 days from date of written notice
thereof within which to have cost of treatment, if required, estimated by the
Operator and all damage inspected and estimated by a licensed builder or general
contractor. Seller shall pay valid costs of treatment and repair of all damage
up to the amount provided in Paragraph XIII(a). If estimated costs exceed that
amount, Buyer shall have the option of canceling this Contract within 5 days
after receipt of contractor's repair estimate by giving written notice to Seller
or Buyer may elect to proceed with the transaction, and receive a credit at
closing on the amount provided in Paragraph XIII(a). "Termites" shall be deemed
to include all wood destroying organisms required to be reported under the
Florida Pest Control Act, as amended.
E. INGRESS AND EGRESS: Seller warrants and represents that there is
ingress and egress to the Real Property sufficient for its intended use as
described in Paragraph VII hereof, title to which is in accordance with Standard
A.
F. LEASES: Seller shall, not less than 15 days before closing, furnish to
Buyer copies of all written leases and estoppel letters from each tenant
specifying the nature and duration of the tenant's occupancy, rental rates,
advanced rent and security deposits paid by tenant. If Seller is unable to
obtain such letter from each tenant, the same information shall be furnished by
Seller to Buyer within that time period in the form of a Seller's affidavit, and
Buyer may thereafter contact tenants to confirm such information, Seller shall,
at closing, deliver and assign all original leases to Buyer.
G. LIENS: Seller shall furnish to Buyer at time of closing an affidavit
attesting to the absence, unless otherwise provided for herein, of any financing
statement, claims of lien or potential lienors known to Seller and further
attesting that there have been no improvements or repairs to the Real Property
for 90 days immediately preceding date of closing. If the Real Property has been
improved or repaired within that time, Seller shall deliver releases or waivers
of construction liens executed by all general contractors, subcontractors,
suppliers and materialmen in addition to Seller's lien affidavit setting forth
the names of all such general contractors, subcontractors, suppliers and
materialmen, further affirming that all charges for improvements or repairs
which could serve as a basis for a construction lien or a claim for damages have
been paid or will be paid at the closing of this Contract.
H. PLACE OF CLOSING: Closing shall be held in the county wherein the Real
Property is located at the office of the attorney or other closing agent
designated by Seller.
I. TIME: In computing time periods of less than six (6) days, Saturdays,
Sundays and state or national legal holidays shall be excluded. Any time periods
provided for herein which shall end on a Saturday, Sunday or a legal holiday
shall extend to 5:00 p.m. of the next business day. TIME IS OF THE ESSENCE IN
THIS CONTRACT.
J. DOCUMENTS FOR CLOSING: Seller shall furnish the deed, bill of sale,
construction lien affidavit, owner's possession affidavit, assignments of
leases, tenant and mortgagee estoppel letters and corrective instruments. Buyer
shall furnish closing statement, mortgage, mortgage note, security agreement and
financing statements.
K. EXPENSES: Documentary stamps on the deed and recording of corrective
instruments shall be paid by Seller. Documentary stamps and intangible tax on
the purchase money mortgage and any mortgage assumed, and recording of purchase
money mortgage to Seller, deed and financing statements shall be paid by the
Buyer. Unless otherwise provided by law or rider to this Contract, charges for
the following related title services, namely title or abstract charge, title
examination, and settlement and closing fee shall be paid by the party
responsible for furnishing the title evidence in accordance with Paragraph V.
L. PRORATIONS; CREDITS: Taxes, assessments, rent, interest, insurance and
other expenses of the Property shall be prorated through the day before closing.
Buyer shall have the option of taking over existing policies of insurance, if
assumable, in which event premiums shall be prorated. Cash at closing shall be
increased or decreased as may be required by prorations to be made through day
prior to closing or occupancy if occupancy occurs before closing. Advance rent
and security deposits will be credited bo Buyer. Escrow deposits held by
mortgagee will be credited to Seller. Taxes shall be prorated based on the
current year's tax with due allowance made for maximum allowable discount,
homestead and other exemptions. If closing occurs at a date when the current
year's millage is not fixed and current year's assessment is available, taxes
will be prorated based upon such assessment and prior year's millage. If current
year's assessment is not available, then taxes will be prorated on prior year's
tax. If there are completed improvements on the Real Property by January 1st of
year of closing, which improvements were not in existence on January 1st of
prior year, then taxes shall be prorated based upon prior year's millage and at
an equitable assessment to be agreed upon between the parties; failing which,
request shall be made to the County Property Appraiser for an informal
assessment taking into account
<PAGE> 4
available exemptions. A tax proration based on an estimate shall, at request of
either party, be readjusted upon receipt of tax bill on condition that a
statement to that effect is signed at closing.
M. SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of date of closing (not as of Effective Date) are to be paid
by Seller. Pending liens as of date of closing shall be assumed by Buyer. If the
improvement has been substantially completed as of Effective Date, any pending
lien shall be considered certified, confirmed or ratified and Seller shall, at
closing, be charged an amount equal to the last estimate or assessment for the
improvement by the public body.
N. INSPECTION, REPAIR AND MAINTENANCE: Seller warrants that, as of 10 days
prior to closing, the ceiling, roof (including the fascia and soffits) and
exterior and interior walls, foundation, seawalls (or equivalent) and dockage do
not have any VISIBLE EVIDENCE of leaks, water damage or structural damage and
that the septic tank, pool, all appliances, mechanical items, heating, cooling,
electrical, plumbing systems and machinery are in WORKING CONDITION. The
foregoing warranty shall be limited to the items specified unless otherwise
provided in an addendum. Buyer may, at Buyer's expense, have inspections made of
those items by a firm or shall be limited to the items specified unless
otherwise provided in an addendum. Buyer may, at Buyer's expenses, have
inspections made of those items by a firm or individual specializing in home
inspections and holding an occupational license for such purpose (if required)
or by an appropriately licensed Florida contractor. Buyer shall, prior to
Buyer's occupancy or not less than 10 days prior to closing, whichever occurs
first, report in writing to Seller such items that do not meet the above
standards as to defects. Unless Buyer timely reports such defects, Buyer shall
be deemed to have waived Seller's warranties as to defects not reported. If
repairs or replacements are required to comply with this Standard, Seller shall
cause them to be made and shall pay up to the amount provided in Paragraph
XIII(b)> Seller is not required to make repairs or replacements of a cosmetic
nature unless caused by a defect Seller is responsible to repair or replace. If
the cost for such repair or replacement exceeds the amount provided in Paragraph
XIII(b), Buyer or Seller may elect to pay such excess, failing which either
party may cancel this Contract. If Seller is unable to correct the defects prior
to closing, the cost thereof shall be paid into escrow at closing. Seller shall,
upon reasonable notice, provide utilities service and access to the Property for
inspections, including a walk-through prior to closing, to confirm that all
items of Personal Property are on the Real Property and, subject to the
foregoing, that all required repairs and replacements have been made and that
the Property, including, but not limited to, lawn, shrubbery and pool, if any,
has been maintained in the condition existing as of Effective Date, ordinary
wear and tear excepted.
O. RISK OF LOSS: If the Property is damaged by fire or other casualty
before closing and cost of restoration does not exceed 3% of the assessed
valuation of the Property so damaged, cost of restoration shall be an obligation
of the Seller and closing shall proceed pursuant to the terms of this Contract
with restoration costs escrowed at closing. If the cost of restoration exceeds
3% of the assessed valuation of the Property so damaged, Buyer shall have the
option of either taking the Property as is, together with either the 3% or any
insurance proceeds payable by virtue of such loss or damage, or of canceling
this Contract and receiving return of the deposit(s).
P. PROCEEDS OF SALE; CLOSING PROCEDURE: The deed shall be recorded upon
clearance of funds. If an abstract of title has been furnished, evidence of
title shall be continued at Buyer's expense to show title in Buyer, without any
encumbrances or change which would render Seller's title unmarketable from the
date of the last evidence. All closing proceeds shall be held in escrow by
Seller's attorney or other mutually acceptable escrow agent for a period of not
more than 5 days after closing date. If Seller's title is rendered unmarketable,
through no fault of Buyer, Buyer shall within the 5-day period, notify Seller in
writing of the defect and Seller shall have 30 days from date of receipt of such
notification to cure the defect. If Seller fails to timely cure the defect, all
deposit(s) and closing funds shall, upon written demand by Buyer and within 5
days after demand, be returned to Buyer and, simultaneously with such repayment,
Buyer shall return the Personal Property, vacate the Real Property and reconvey
the Property to Seller by special warranty deed and bill of sale. If Buyer fails
to make timely demand for refund, Buyer shall take title as is, waiving all
rights against Seller as to any intervening defect except as may be available to
Buyer by virtue of warranties contained in the deed or bill of sale. If a
portion of the purchase price is to be derived from institutional financing or
refinancing, requirements of the lending institution as to place, time of day
and procedures for closing, and for disbursement of mortgage proceeds shall
control over contrary provision in this Contract, Seller shall have the right to
require from the lending institution a written commitment that it will not
withhold disbursement of mortgage proceeds as a result of any title defect
attributable to Buyer-mortgagor. The escrow and closing procedure required by
this Standard shall be waived if the title agent insures adverse matters
pursuant to Section 627.7841, F.S., as amended.
Q. ESCROW: Any escrow agent("Agent") receiving funds or equivalent is
authorized and agrees by acceptance of them to deposit them promptly, hold same
in escrow and, subject to clearance, disburse them in accordance with terms and
conditions of this Contract. Failure of funds to clear shall not excuse Buyer's
performance. If in doubt as to Agent's duties or liabilities under the
provisions of this Contract, Agent may, at Agent's option, continue to hold the
subject matter of the escrow until the parties hereto agree to its disbursement
or until a judgment of a court of competent jurisdiction shall determine the
rights of the parties or Agent may deposit same with the clerk of the circuit
court having jurisdiction of the dispute. Upon notifying all parties concerned
of such action, all liability on the part of Agent shall fully terminate, except
to the extent of accounting for any items previously delivered out of escrow. If
a licensed real estate broker, Agent will comply with provisions of Chapter 475,
F.S., as amended. Any suit between Buyer and Seller wherein Agent is made a
party because of acting as Agent hereunder, or in any suit wherein Agent
interpleads the subject matter of the escrow, Agent shall recover reasonable
attorneys' fees and costs incurred with these amounts to be paid from and out of
the escrowed funds or equivalent and charged and awarded as court costs in favor
of the prevailing party. The Agent shall not be liable to any party or person
for misdelivery to Buyer or Seller of items subject to the escrow, unless such
misdelivery is due to willful breach of the provisions of this Contract or gross
negligence of Agent.
R. ATTORNEYS' FEES; COSTS: In any litigation, including breach,
enforcement or interpretation, arising out of this Contract, the prevailing
party in such litigation, which, for purposes of this Standard, shall include
Seller, Buyer and any brokers acting in agency or nonagency relationships
authorized by Chapter 475, F.S., as amended, shall be entitled to recover form
the non-prevailing party reasonable attorneys' fees, costs and expenses.
S. FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within
the time specified, including payment of all deposits, the deposit(s) paid by
Buyer and deposit(s) agreed to be paid, may be recovered and retailed by and for
the account of Seller as agreed upon liquidated damages, consideration for the
execution of this Contract and in full settlement of any claims; whereupon,
Buyer and Seller shall be relieved of all obligations under this Contract; or
Seller, at Seller's option, may proceed in equity to enforce Seller's rights
under this Contract. If for any reason other than failure of Seller to make
Seller's title marketable after diligent effort, Seller fails, neglects or
refused to perform this Contract, the Buyer may seek specific performance or
elect to receive the return of Buyer's deposit(s) without thereby waiving any
action for damages resulting from Seller's breach.
T. CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE: Neither this Contract
nor any notice of its shall be recorded in any public records. This Contract
shall bind and inure to the benefit of the parties and their successors in
interest. Whenever the context permits, singular shall include plural and one
gender shall include all. Notice given by or to the attorney for any party shall
be as effective as if given by or to that party.
U. CONVEYANCE: Seller shall convey title to the Real Property by statutory
warranty, trustee's, personal representative's or guardian's deed, as
appropriate to the status of Seller, subject only to matters contained in
Paragraph VII and those otherwise accepted by Buyer. Personal Property shall, at
the request of the Buyer, be transferred by an absolute bill of sale with
warranty of title, subject only to such matters as may be otherwise provided for
herein.
V. OTHER AGREEMENTS: No prior or present agreements or representations
shall be binding upon Buyer or Seller unless included in this Contract. No
modification to or change in this Contract shall be valid or binding upon the
parties unless in writing and executed by the party or parties intended to be
bound by it.
W. WARRANTY: Seller warrants that there are not facts known to Seller
materially affecting the value of the Property which are not readily observable
by Buyer or which have not been disclosed to Buyer.
<PAGE> 5
ADDENDUM TO CONTRACT
Addendum No.____to the Contract dated_____________________between Smoak Groves,
Inc. (SELLER) and Heartland Investors, Inc., or assigns (BUYER) concerning the
property described as:
(the "Contract"). BUYER and SELLER make the following terms and conditions part
of the Contract:
A. This Contract is expressly contingent upon: (1) The Buyer
obtaining approval of its new bank application from the Controller of the
Currency and other regulatory agencies; and (2) The Buyer obtaining approval
from the Florida Department of Transportation for an access road off U.S. 27.
The costs of that access road and a possible shared driveway between Parcel 2
and Parcel 3 shall not be borne by the Seller. If, for any reasons, those two
approvals cannot be obtained within 120 days from the effective date, this
Contract shall be rescinded and the earnest money deposit returned to the Buyer.
B. The Buyer and the Seller each agree to pay 1/3 of the cost (not to
exceed $20,000.00 each) to construct a paved connector road from Pendarvis Road
to the Publix Shopping Center as shown on the Boundary Survey dated 3/17/98 by
Douglas Surveying, Inc. It is anticipated that Publix will pay the other 1/3 of
the cost. The road construction will be designed, scheduled and coordinated by
the Buyer, with the goal of dedicating the road as a public street to either the
Town of Lake Placid or to Highlands County.
HEARTLAND INVESTORS, INC.
Date: BUYER: By: /s/ James C. Clinard
-------------------- -------------------------------
Date: BUYER:
-------------------- -------------------------------
SMOAK GROVES, INC.
Date: SELLER: By: /s/ John F. Smoak, Jr.
-------------------- ------------------------------
John F. Smoak, Jr., President
Date: SELLER: By: /s/ Edward L. Smoak
-------------------- ------------------------------
Edward L. Smoak, Secretary
THIS FORM IS AVAILABLE FOR USE BY THE ENTIRE REAL ESTATE INDUSTRY AND IS NOT
INTENDED TO IDENTIFY THE USER AS A REALTOR. REALTOR IS A REGISTERED COLLECTIVE
MEMBERSHIP MARK THAT MAY BE USED ONLY BY REAL ESTATE LICENSEES WHO ARE MEMBERS
OF THE NATIONAL ASSOCIATION OF REALTORS AND WHO SUBSCRIBE TO ITS CODE OF ETHICS.
The copyright laws of the United States (17 U.S. Code) forbid the unauthorized
reproduction of blank forms by any means including facsimile or computerized
forms.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 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
January 5, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> AUG-03-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,905
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<LOANS> 0
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<TOTAL-ASSETS> 58,905
<DEPOSITS> 0
<SHORT-TERM> 72,875
<LIABILITIES-OTHER> 16,245
<LONG-TERM> 0
0
0
<COMMON> 100
<OTHER-SE> (30,315)
<TOTAL-LIABILITIES-AND-EQUITY> (58,905)
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<EXPENSE-OTHER> (40,215)
<INCOME-PRETAX> (40,215)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,215)
<EPS-PRIMARY> (40.22)
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<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
