As filed with the Securities and Exchange Commission on October 30, 1998
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
ARKANSAS 6021 71-0407808
(State or other jurisdiction (Primary Standard (I.R.S. employer
of incorporation or Industrial Classification) Identification No.)
organization) Code Number)
501 Main Street, Pine Bluff, Arkansas 71601 (870) 541-1000
(Address, including zip code and telephone number, including area code,
of registrant's principal executive offices)
---------------------------------------
J. THOMAS MAY,
Chairman of the Board, President and Chief Executive Officer
Simmons First National Corporation
501 Main Street
Pine Bluff, Arkansas 71601
(870) 541-1103
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------------------
With Copies to:
PATRICK A BURROW, Esq. GARLAND W. BINNS, JR., Esq.
WILLIAMS & ANDERSON LLP HORNE, HOLLINGSWORTH & PARKER, P.A.
111 CENTER STREET, 22 ND FLOOR 401 WEST CAPITOL AVENUE, SUITE 501
LITTLE ROCK, ARKANSAS 72201 LITTLE ROCK, ARKANSAS 72201
(501) 372-0800 (501) 376-4731
-------------------------------------
Approximate date of commencement of proposed sale of securities to the
public: As promptly as practicable after the effective date of this registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of Securities
to be Registered Registered Offering Price per Share(1) Aggregate Offering Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1 par 301,833 $15.535 $4,689,000 $1,304.00
</TABLE>
(1) Based upon the book value of Lincoln Bankshares, Inc., which amount is
estimated solely for the purpose of calculating the registration fee pursuant to
Rule 457.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement Shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- -------------------------------------------------------------------------------
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
CROSS-REFERENCE SHEET
Pursuant to Item 501 (b) of Regulation S-K Showing Location in the
Prospectus of Information by Items 1 through 19.
Part I, of Form S-4 Registration Statement
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
1. Forepart of the Registration Registration Statement Cover;
Statement and Outside Front Front Cover Page of Prospectus
Cover Page of Prospectus.
2. Inside Front and Outside Inside Front and Back Cover Page
Back Cover Page of of Prospectus; Available Information;
Prospectus. Documents Incorporated by Reference
Table of Contents
3. Risk Factors, Ratio of Prospectus Summary; Simmons First
Earnings to Fixed Charges National Corporation
and Other Information
4. Terms of Transaction. The Merger
5. Pro Forma Financial Information Financial Information
6. Material Contacts with the The Merger
Company Being Acquired.
7. Additional Information *
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters.
8. Interests of Named Experts Experts; Legal Matters
and Counsel.
9. Disclosure of Commission *
Position on Indemnification
for Securities Act Liabilities
10. Information with Respect to Simmons First National Corporation;
S-3 Registrants. Incorporation of Certain Documents by
Reference; Available Information
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference. Reference
12. Information with Respect to *
S-2 or S-3 Registrants.
13. Incorporation of Certain *
Information by Reference
14. Information with Respect to *
Registrants other than S-3 or
S-2 Registrants.
<PAGE>
15. Information with Respect to *
S-3 Companies.
16. Information with Respect to *
S-2 or S-3 Companies.
17. Information with Respect to Summary; Lincoln Bankshares, Inc.;
Companies Other than S-3 or Lincoln Bankshares, Inc Special
S-2 Companies. Meeting; Financial Information;
Lincoln Bankshares, Inc. Financial
Statements
18. Information if Proxies, Lincoln Bankshares, Inc. Special
Consents or Authorizations Meeting Lincoln Bankshares, Inc.
are to be Solicited
19. Information if Proxies Simmons First National Corporation
Consents or Authorizations
are not to be Solicited or
in an Exchange Offer.
<PAGE>
LINCOLN BANKSHARES, INC.
PROXY STATEMENT
SIMMONS FIRST NATIONAL CORPORATION
PROSPECTUS
301,833 Shares
Class A Common Stock, $1.00 Par Value
Special Shareholders Meeting
The Board of Directors of Lincoln Bankshares, Inc. ("LBI") is
furnishing this Proxy Statement and Prospectus to the stockholders of LBI to
solicit proxies for use at the special meeting of stockholders of LBI to be held
on December 15, 1998.
Purpose - Merger with Simmons First National Corporation
At the meeting, the stockholders of LBI will vote on a proposal to
authorize and approve the merger of LBI with and into Simmons First National
Corporation ("Simmons") as set forth in the Agreement and Plan of Merger, dated
August 25, 1998. If the merger is approved, LBI will merge into Simmons and will
no longer be a separate corporation. Simmons has agreed to register under the
Securities Act of 1933, as amended, up to 301,833 shares of Simmons Class A,
$1.00 par value, Common Stock to be issued in the merger to stockholders of LBI
in exchange for their LBI stock. No fractional shares of Simmons Common Stock
will be issued, instead LBI shareholders will receive cash for any fractional
shares due them. This Proxy Statement also serves as a Prospectus of Simmons
under the Securities Act for the issuance of shares of Simmons Common Stock to
stockholders of LBI.
Proxy Mailing
This Proxy Statement and the accompanying forms of proxy were
mailed to the stockholders of LBI on or about November__, 1998.
Recent Stock Price
On November ___, 1998, the closing price per share of Simmons
First National Corporation Class A Common Stock (symbol: SFNCA) on the NASDAQ,
National Market System was $_____.
For a more complete discussion of the merger, you are strongly urged to read and
consider carefully this proxy statement in its entirety.
Neither the SEC nor any state securities agency has approved these securities or
determined that this proxy statement and prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The date of this Proxy Statement is November ___, 1998. The information
contained in the Proxy may change after the date of this Proxy Statement. You
should not assume that none of the information in the Proxy Statement has
changed just because the merger is completed or you receive shares of Simmons
Common Stock pursuant to the merger.
Neither Simmons nor LBI have authorized anyone to give any information or to
make any promises, not contained in proxy statement, related to the proxy
solicitation and the stock offering made by this proxy statement. If you receive
any unauthorized information or promises, you should not rely on them.
The proxy solicitation and stock offering are effective only if these activities
are legal in the states and countries in which made.
AVAILABLE INFORMATION
Simmons is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended. In accordance with this Act,
Simmons files annual reports on Form 10-K, quarterly reports on Form 10-Q,
Current Reports of Form 8-K, proxy statements and other information with the
Securities and Exchange Commission. Reports, proxy statements and other
information concerning Simmons may be inspected and copied at the public
reference facilities maintained by the SEC. These facilities are located at:
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
7 World Trade Center, Suite 1300, New York, New York 10048.
You may obtain copies of such material from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The public may obtain information regarding the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy statements, registration statements
and other information regarding companies which file electronically with the
SEC. The address of that site is http://www.sec.gov. In addition, reports, proxy
statements and other information concerning Simmons may be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
Simmons has filed with the SEC a Registration Statement on Form S-4 under
the Securities Act for a maximum of 301,833 shares of Simmons Class A Common
Stock to be issued upon consummation of the merger. This Proxy Statement does
not contain all the information set forth in the Registration Statement and its
exhibits. Certain portions of the information have been omitted as allowed by
the rules and regulations of the SEC. You may obtain a photocopy of the
Registration Statement from the SEC, upon payment of prescribed copying charges
or you may obtain a copy from the Internet site referred to above. For further
information, you should refer to the Registration Statement and its exhibits.
Statements in this Proxy Statement (or any document incorporated by reference in
this Proxy Statement) relating to the contents of any contract or other document
are not necessarily complete. For additional information about the contract or
other document, you should refer to the Registration Statement and its Exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
INCLUDED OR FURNISHED WITH THE PROXY STATEMENT. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM MR. BARRY L. CROW, EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, SIMMONS FIRST NATIONAL CORPORATION, 501 MAIN STREET, PINE
BLUFF, ARKANSAS 71601, (870) 541-1350. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE ON OR BEFORE DECEMBER 10, 1998.
The following documents have been filed with the SEC under the Exchange Act
and are incorporated by reference into this Proxy Statement:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 25, 1998.
2. The Company's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31, 1998, and June 30, 1998, filed with the Commission on
May 4, 1998 and August 10, 1998, respectively.
3. The Company's most recent Current Reports on Form 8-K filed with the
Commission on July 1, 1998, July 29, 1998 and August 26, 1998.
4. The description of the Company's Common Stock contained in the
registration Statement on Form S-2, filed April 16, 1993 (File No.
0-06253) and any amendment or report field for the purpose of updating
such description.
Each document filed after the date of this Proxy Statement pursuant to
Section 13 (a), 13(c), 14 or 15(d) of the Exchange Act but prior to the special
meeting of the LBI stockholders will be treated as incorporated by reference in
this Proxy Statement. These later filed documents shall be treated as a part of
this Proxy Statement from the date of filing of the document. Any statement
contained in a document incorporated in this Proxy Statement shall be treated as
modified or replaced if a statement contained in this Proxy Statement or in any
later filed document which is treated as incorporated by reference modifies or
replaces the original document.
Simmons has supplied all information in this Proxy Statement relating to
Simmons and LBI has supplied all information relating to LBI.
TABLE OF CONTENTS
SUMMARY
Simmons.......................................................................5
Lincoln Bankshares, Inc. ................................................5
The Merger...............................................................6
Election of Lincoln Bankshares, Inc. under the 1987 Act..................6
The Lincoln Bankshares, Inc. Special Meeting.............................7
Certain Federal Income Tax Consequences .................................7
Dissenters' Rights.......................................................7
Regulatory Approvals.....................................................7
Accounting Treatment ....................................................7
Market Prices ...........................................................8
Pro Forma and Selected Financial Data..................................8-9
THE LINCOLN BANKSHARES, INC. SPECIAL MEETING
Date, Time and Place....................................................10
Purpose of Meeting .....................................................10
Shares Outstanding and Entitled to Vote; Record Date ...................10
Vote Required ..........................................................10
Voting; Solicitation of Proxies.........................................10
THE MERGER
Background of the Merger................................................11
Reason for the Merger ..............................................11-12
The Agreement .......................................................12-13
Bank Merger.............................................................13
Regulatory Approvals ...................................................13
Antitrust Matters ......................................................13
Certain Federal Income Tax Consequences ................................14
Accounting Treatment ................................................14-15
Right to Dissent under 1965 Act.........................................15
Right to Dissent under 1987 Act......................................16-17
Exchange Ratio for the Merger ..........................................16
Expenses of the Merger .................................................17
FINANCIAL INFORMATION
Pro Form Unaudited Conmbined Financial Statements ......................17
Pro Forma Combined Balance Sheet........................................18
Pro Forma Combined Statements of Income..............................19-22
ELECTION BY LINCOLN BANKSHARES, INC. STOCKHOLDERS UNDER THE 1987 ACT
Election Incidental to the Merger ......................................23
Reason for the Election ................................................23
Result of the Election...............................................23-25
SIMMONS FIRST NATIONAL CORPORATION
General............................................................. 25-26
Regulation.......................................................... 26-28
Offices ................................................................28
Employees ..............................................................28
Description of Simmons Common Stock.....................................28
Resale of Simmons Common Stock ......................................28-29
No Shareholder Approval Required .......................................29
Other Pending Transactions .............................................29
LINCOLN BANKSHARES, INC.
Description of Business .............................................29-30
Management's Discussion and Analysis ................................30-42
Directors and Executive Officers ....................................42-43
Transactions with Management ...........................................43
Principal Stockholders of Lincoln Bankshares, Inc. .....................44
Competition.............................................................44
Litigation .............................................................44
Offices ................................................................44
Employees ..............................................................44
Description of Lincoln Bankshares, Inc. Stock ..........................45
Comparison of Rights of Holders of Lincoln Bankshares, Inc. Common Stock
and Simmons Common Stock ............................................45-46
LEGAL MATTERS AND EXPERTS
Legal Opinions .........................................................46
Experts ................................................................46
General ................................................................46
ANNEXES
I - Agreement and Plan of Merger .................................62-83
II - Arkansas Business Corporation Act of 1965 Section 4-26-1007 .. 84-85
III - Arkansas Business Corporation Act of 1987 Section 4-27-1301
et. seq........................................................86-95
<PAGE>
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SUMMARY
The following is a summary of certain information in this Proxy Statement.
This is only a summary, you should refer to the more detailed discussion in the
Proxy Statement and Annexes and other documents for additional information. You
are urged to read carefully this Proxy Statement and the attached Annexes in
their entirety.
Simmons
Simmons First National Corporation ("Simmons") is registered as a bank
holding company under the Bank Holding Company Act of 1956. Simmons owns the
following seven subsidiary banks in Arkansas which conduct banking operations
through 40 offices located in 21 communities in Arkansas:
<TABLE>
<CAPTION>
<S> <C>
Simmons First National Bank Pine Bluff, Arkansas
Simmons First Bank of Jonesboro Jonesboro, Arkansas
Simmons First Bank of South Arkansas Lake Village, Arkansas
Simmons First Bank of Dumas Dumas, Arkansas
Simmons First Bank of Northwest Arkansas Rogers, Arkansas
Simmons First Bank of Russellville Russellville, Arkansas
Simmons First Bank of Searcy Searcy, Arkansas.
</TABLE>
Its lead bank, Simmons First National Bank (the "Bank"), is a national bank
which has been in operation since 1903. The Bank has received favorable national
publicity for offering one of the lowest credit card interest rates in the
United States. The Bank's primary market area is the State of Arkansas, except
for its credit cards which are marketed nationally.
<TABLE>
Recent Financial Information on Simmons
<CAPTION>
June 30, 1998 December 31, 1997
---------------------------------------------
<S> <C> <C>
Total Consolidated Assets $1,338.9 million $1,326.1 million
Total Equity Capital $ 116.9 million $ 112.1 million
</TABLE>
Simmons' Common Stock is traded on the National Association of Securities
Dealers Automated Quotation National Market System over-the-counter market
(NASDAQ-NMS) under the symbol "SFNCA". The Corporation's principal executive
offices are located at 501 Main Street, Pine Bluff, Arkansas 71601, and its
telephone number is (870) 541-1000.
Lincoln Bankshares, Inc.
LBI is registered as a bank holding company under the Bank Holding Company
Act of 1956. LBI owns 6,538 shares or 82.10% of the outstanding stock of Bank of
Lincoln ("BOL"). LBI has entered into agreements with the other stockholders
of BOL to exchange LBI common stock for the remaining BOL stock. This exchange
is expected to be completed immediately prior to the completion of the Mefger.
Pursuant to the agreements, LBI will issue 1,874 shares of LBI common stock
in exchange for 1,432 shares of BOL stock. After the comppletion of these
exchanges, LBI will own 82.10% of the outstanding stock of Bank of Lincoln,
Lincoln, Arkansas. There is no public market for shares of LBI's outstanding
capital stock. LBI's principal executive offices are located at 101 Boyer
Street, West side of Square, Lincoln, Arkansas 72744; its telephone number is
(501) 824-3232.
<TABLE>
Recent Financial Information on LBI
<CAPTION>
June 30, 1998 December 31, 1997
--------------------------------------------
<C> <C> <C>
Total Consolidated Assets $ 75.3 million $ 72.8 million
Total Equity Capital $ 4.7 million $ 4.4 million
</TABLE>
<PAGE>
The Merger
On August 25, 1998, Simmons and LBI entered into a merger agreement. Upon
completion of the merger, LBI will become a part of Simmons and will no longer
exist as a separate corporation. Simmons will issue up to 301,833 shares of
Simmons Common Stock to the LBI shareholders in exchange for their LBI shares.
No fractional shares of Simmons Common Stock will be issued. LBI shareholders
will receive cash instead of fractional shares of Simmons Common Stock. Simmons
and LBI believe that the Merger will ---
* provide liquidity to the holders of LBI common stock,
* expand the present banking services of LBI,
* expand the geographical presence of Simmons into the banking markets
in which LBI operates, and
* increase the earning potential of the consolidated enterprises.
See "The Merger-The Agreement."
Upon completion of the Merger, LBI will no longer exist as a corporation.
Simmons will be the surviving corporation in the Merger. Each share of LBI
common stock outstanding immediately prior to the effective time of the Merger
(other than shares as to which dissenter's rights have been perfected under
applicable law) will be converted into the right to receive 30.41445 shares of
Simmons Common Stock. The Merger will only be completed if it qualifies as
a tax-free reorganization. Simmons will not issue fractional shares of its
common stock in the Merger. Any holder of LBI common stock entitled to a
fractional share will be paid cash instead of the fractional shares.
LBI STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF SIMMONS COMMON STOCK
FOR EACH SHARE OF LBI COMMON STOCK BASED UPON THE EXCHANGE RATIO. THE VALUE OF
THE SIMMONS COMMON STOCK TO BE DELIVERED TO LBI STOCKHOLDERS UPON COMPLETION OF
THE MERGER IS SUBJECT TO CHANGE, DUE TO FLUCTUATION OF THE PRICE OF SIMMONS
COMMON STOCK. SIMILARLY, THE MARKET VALUE OF THE SHARES OF SIMMONS COMMON STOCK
THAT LBI STOCKHOLDERS RECEIVE IN THE MERGER MAY INCREASE OR DECREASE FOLLOWING
THE MERGER, DUE TO THE MARKET FLUCTUATION OF SIMMONS COMMON STOCK
On August 25, 1998, immediately prior to the announcement of the definitive
agreement, shares of Simmons Common Stock closed on the NASDAQ-NMS at a price of
$42.000. There is no established market value for the stock of LBI.
THE BOARD OF DIRECTORS OF LBI UNANIMOUSLY RECOMMENDS THAT THE LBI STOCKHOLDERS
VOTE IN FAVOR OF THE APPROVAL OF THE MERGER.
Election by Lincoln Bankshares, Inc. Stockholders under the 1987 Act
Simmons has requested LBI to elect to be governed by the Arkansas
Business Corporation Act of 1987 (the "1987 Act") in order to more efficiently
implement the Merger. However, the election is effective only if the Merger is
approved.
LBI is an Arkansas corporation organized under the Arkansas Business
Corporation Act of 1965, (the "1965 Act"). The 1987 Act is applicable to
corporations that were incorporated on or after January 1, 1988 and those other
corporations that elect to be governed by the 1987 Act by amending their
Articles of Incorporation to adopt the 1987 Act. The stockholders of Simmons
elected to be governed by the 1987 Act by amending its Articles of Incorporation
during 1994.
Both the 1965 Act and the 1987 Act contain merger procedures. Although both
Acts contain similar provisions, Simmons has requested LBI to elect to be
governed by the 1987 Act in order to more efficiently complete the merger. The
election to be governed by the 1987 Act is not a requirement for the Merger to
be completed.
The Lincoln Bankshares, Inc. Special Meeting
The Board of Directors of LBI has called a Special Stockholders Meeting to
consider and vote on the proposed merger. This meeting will be held at the
offices of LBI, 101 Boyer Street, West side of Square, Lincoln, Arkansas on
December 15, 1998, at 11:30 a.m. Central Standard Time.
The holders of a majority of the outstanding shares of LBI common stock
must vote "yes" to approve the Merger. Directors, executive officers and certain
related persons and trusts hold a total of 57.14% of the outstanding stock of
LBI. Management of LBI expects that the directors, executive officers, and those
related persons and trusts will vote in favor of the Merger. Stockholders of LBI
are entitled to assert dissenters' rights. See "The Merger - Right to Dissent
under 1965 Act" and "The Merger - Right to Dissent under 1987 Act"
Certain Federal Income Tax Consequences
Simmons and LBI intend for the Merger to be treated as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, neither Simmons nor LBI will recognize any
gain or loss as a result of the Merger. LBI's stockholders will not recognize
gain or loss upon the receipt of solely Simmons Common Stock in exchange for LBI
common stock. LBI will receive an opinion from Simmons' counsel, that
shareholders who exchange their LBI common stock for shares of Simmons Common
Stock will not recognize a gain or loss in the Merger. The parties to this
transaction will not request a ruling from the Internal Revenue Service
concerning this transaction. See "The Merger - Certain Federal Income Tax
Consequences."
Dissenters' Rights
LBI shareholders are entitled to assert dissenter's rights due to the
Merger. LBI Shareholders may exercise their right of dissent under either the
1965 Act or the 1987 Act. Each act has a separate procedure as described in the
"The Merger - Right to Dissent under the 1965 Act " and "The Merger - Right to
Dissent under the 1987 Act". The applicable part of each statute is set forth as
an Annex, The provisions of the 1965 Act relating to dissenter's rights appear
in Annex II and the provisions of the 1987 Act relating to dissenter's rights
appear in Annex III.
Regulatory Approvals
At this time, Simmons is preparing applications for approval by the Board
of Governors of the Federal Reserve and the Arkansas State Bank Department to
merge LBI into Simmons. These applications are expected to be filed with the
regulatory agencies within ten days. The consummation of the Merger is dependent
upon the receipt of approvals from the foregoing regulatory agencies. See "The
Merger - Regulatory Approvals."
Accounting Treatment
Simmons intends to treat the Merger as a pooling of interests for
accounting purposes, except for the acquisition of the minority shares (17.9%)of
the Bank of Lincoln, which will be accounted for on a purchase accounting basis.
See "The Merger - Accounting Treatment."
<PAGE>
Market Prices
Simmons Common Stock is traded over-the-counter in the NASDAQ National
Market System. LBI common stock is not traded publicly and there is no quoted
market for the stock. The table below shows the high and low closing sales
prices for Simmons Common Stock.
Simmons Common Stock(1)
Price Per Share
---------------------------------
High Low
----------- -----------
1995 $ 20.667 $ 15.000
1996 $ 27.250 $ 20.500
1997 $ 42.000 $ 25.500
01/01/98 - 06/30/98 $ 53.250 $ 42.000
(1) All share prices have been adjusted for a 50% stock dividend which was paid
December 6, 1996.
On August 25, 1998, immediately prior to the public announcement of the
definitive agreement between Simmons and LBI as to the proposed merger
transaction, the closing sales price for Simmons Common Stock was $42.000. On
_________________, 1998, the closing sales price for Simmons Common Stock was
$-------.
Pro Forma and Selected Financial Data
The table on the following page shows selected historical financial
information of Simmons and LBI and certain unaudited pro forma financial
information after giving effect to the Merger. The Merger is treated as a
pooling of interest for accounting purposes, except for the acquisition of the
minority shares (17.9%) of the Bank of Lincoln, which will be accounted for on a
purchase accounting basis. The table also shows certain historical per share
information about Simmons and LBI and pro forma equivalent per share amounts
giving effect to the proposed Merger. The Simmons historical information for
each of the years in the five-year period ended December 31, 1997 are based on
the historical financial statements of Simmons as audited by Baird, Kurtz and
Dobson, independent public accountants. The Simmons and LBI historical
information for the six months ended June 30, 1998 and 1997 are based on
unaudited historical records. The LBI historical information for 1997 and the
operating and per share data for 1997 are based on the historical financial
statements of LBI, as audited by Baird, Kurtz & Dobson, independent accountants.
The selected LBI balance sheet items for December 31,1996, 1995, 1994 and 1993,
and the historical information for the years then ended are based on unaudited
company records. The pro forma information shown is a combination of prior
fiscal periods of Simmons and LBI. This information should be read together with
the historical and pro forma financial statements and related notes. The
assumptions used in the preparation of this table are stated elsewhere in the
"Financial Information" section of this Proxy Statement. This information does
not show or project future operations of Simmons after the Merger or actual
results of operations if the Merger had been completed prior to the periods
indicated. Pro forma consolidated per share data of Simmons and LBI is prepared
using the exchange ratio of 30.41445 shares of Simmons Common Stock for each
share of LBI common stock.
This information should be read together with the consolidated financial
statements of each of Simmons and LBI, and the related notes, which are
incorporated into this Proxy Statement by reference and together with the
unaudited pro forma financial information, including the notes, appearing in
this Proxy Statement. See "Incorporation of Certain Documents by Reference" and
"Financial Information."
<PAGE>
<TABLE>
Pro Forma and Selected Financial Data
(Amounts in thousands, except per share)
(unaudited)
The following table presents for Simmons First National Corporation and
Lincoln Bankshares, Inc. on a historical basis, selected consolidated financial
data and unaudited pro forma combined amounts reflecting the merger. The pro
forma amounts assume the merger had been effective during the periods presented.
In addition to the proposed Merger with Lincoln Bankshares, Inc., Simmons has a
pending merger with American Bancshares of Arkansas, Inc. This pending merger is
not included in the pro forma data presented below.
<CAPTION>
Six Months Ended
-------------------- For the Year Ended December 31,
June 30, June 30, -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income and other income
Simmons First National Corp. $ 41,544 $ 30,628 $ 67,960 $ 58,921 $ 56,129 $ 54,106 $ 54,579
Lincoln Bankshares, Inc. 1,800 1,701 3,537 3,161 2,738 2,621 2,587
Pro Forma 43,344 (a) 71,497 62,082 58,867 (a) (a)
Net income
Simmons First National Corp. 6,270 5,402 11,989 10,301 10,019 9,860 9,396
Lincoln Bankshares, Inc. 310 263 472 636 399 530 531
Pro Forma 6,608 (a) 12,499 10,998 10,429 (a) (a)
Basic net income per common share
Simmons First National Corp. 1.09 0.94 2.10 1.81 1.77 1.79 1.85
Lincoln Bankshares, Inc. . 38.51 32.67 58.63 79.01 49.57 65.84 65.96
Pro Forma 1.10 (a) 2.08 1.83 1.74 (a) (a)
Historical dividends per common share
Simmons First National Corp. 0.31 0.27 0.56 0.48 0.40 0.31 0.27
Lincoln Bankshares, Inc. -- -- 4.00 3.00 -- -- --
Pro Forma 0.29 (a) 0.54 0.46 0.37 (a) (a)
Total Assets (end of period)
Simmons First National Corp. 1,338,934 930,752 1,326,145 881,332 839,884 713,262 738,760
Lincoln Bankshares, Inc. 75,300 69,779 72,833 66,326 60,574 52,904 50,833
Pro Forma 1,415,275 (a) (a) (a) (a) (a) (a)
Long-term borrowings (end of period)
Simmons First National Corp. 49,582 18,294 50,281 1,067 4,757 12,144 12,178
Lincoln Bankshares, Inc. -- -- -- -- -- -- --
Pro Forma 49,582 (a) (a) (a) (a) (a) (a)
Total stockholders' equity (end of period)
Simmons First National Corp. 116,850 106,696 112,082 102,825 96,797 83,700 75,335
Lincoln Bankshares, Inc. 4,689 4,201 4,379 3,938 3,326 2,816 2,798
Pro Forma 123,701 (a) (a) (a) (a) (a) (a)
Book value per common share (end of period)
Simmons First National Corp. 20.35 18.64 19.57 18.02 16.91 15.17 13.66
Lincoln Bankshares, Inc. 586.13 525.13 547.38 492.25 415.75 352.00 349.75
Pro Forma 20.47 (a) (a) (a) (a) (a) (a)
</TABLE>
(a) Proforma information not presented.
<PAGE>
THE LINCOLN BANKSHARES, INC. SPECIAL MEETING
DATE, TIME AND PLACE
The LBI Special Shareholders Meeting will be held on December 15, 1998,
commencing at 11:30 a.m. Central Standard Time, at the offices of LBI, 101
Boyer Street, West side of Square, Lincoln, Arkansas.
PURPOSE OF MEETING
The purpose of the LBI Special Shareholders Meeting is to consider and vote
upon the adoption of the Agreement and Plan of Merger ("Agreement"), by and
between LBI and Simmons, dated August 25, 1998 and to consider and vote upon the
election of LBI to be governed by the Arkansas Business Corporation Act of 1987
(the "Election").
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on October 29, 1998, has been fixed by the Board of
Directors of LBI as the record date for the determination of holders of LBI
common stock entitled to notice of and to vote at the LBI Special Shareholders
Meeting. At the close of business on October 29, 1998, there were 8,050 shares
of LBI common stock issued and outstanding held by 15 shareholders of record.
Additionally, 1,874 shares of LBI common stock has been set aside in an escrow
for exchange with the holders of 1,432 shares of BOL common stock. This
exchange by the minority shareholders of the BOL for LBI common stock is
expected to occur immediately prior to the completion of the Merger. Holders
of record of LBI common stock on the record date are entitled to one vote
per share and are entitled to dissenters' rights. See "The Merger - Right to
Dissent under the 1965 Act " and "The Merger - Right to Dissent under the
1987 Act."
VOTE REQUIRED
The affirmative vote of the holders of 66 2/3% of all the shares of LBI
common stock outstanding on the record date is required to adopt the Agreement
and the Election.
As of June 30, 1998, directors, executive officers and their affiliates own
57.14% of the outstanding stock of LBI. Management anticipates that the
directors, executive officers, and their affiliates will vote in favor of the
Merger. The directors, executive officers and their affiliates do not hold
sufficient shares of LBI common stock to approve the Merger without affirmative
votes of other shareholders of LBI.
VOTING; SOLICITATION OF PROXIES
Proxies for use at the LBI Special Meeting accompany copies of this Proxy
Statement delivered to record holders of LBI common stock and such proxies are
solicited on behalf of the Board of Directors of LBI. A holder of LBI common
stock may use his proxy if he is unable to attend the LBI Special Meeting in
person or wishes to have his shares voted by proxy even if he does attend the
meeting. The proxy may be revoked in writing by the person giving it at any time
before it is exercised, by notice of such revocation to the secretary of LBI, or
by submitting a proxy having a later date, or by such person appearing at the
LBI meeting and electing to vote in person. All proxies validly submitted and
not revoked will be voted in the manner specified therein. If no specification
is made, the proxies will be voted in favor of the Merger and the Election.
LBI will bear the cost of solicitation of proxies from its stockholders. In
addition to using the mail, proxies may be solicited by personal interview.
Officers and other employees of LBI acting on LBI's behalf, may solicit proxies
personally.
THE MERGER
BACKGROUND OF THE MERGER
In October, 1997, the President and Chief Executive Officer of
Directors of LBI, Loyd R. Swope contacted Stephens Inc., to discuss possible
strategic alliances in light of three factors: (1) the desire on the part of the
Board of Directors and Management to affiliate with a larger banking
organization which could provide additional financial services to its customers
(2) the desire of certain shareholders to examine the conversion of their
holdings in LBI on a tax-free basis into publicly traded securities, and (2) the
large number of bank merger and acquisition transactions that had been occurring
over the past 24 to 36 months in the Arkansas and Southwest area at attractive
purchase premiums.
Following that contact, Mr. Swope met with Mr. Robert Ulrey, of Stephens Inc.
and discussed these matters on several occasions. In December, 1997, Mr.
Ulrey met with the Board of Directors of LBI and presented several alternative
courses of action available to LBI. The Board of Directors determined that it
would be in the best interest of the stockholders of LBI for LBI to actively
solicit offers for acquisition by outside parties. The Board retained Stephens
Inc. and counsel to assist it with soliciting outside acquisition offers.
Over the next several weeks, informal discussions occurred with a number of
institutions that determined level of interest in possibly acquiring LBI. At a
meeting of the Board of Directors in July, 1998, the Board of Directors
was presented a written offer from Simmons First National Corporation to acquire
LBI. After discussion, the Board of Directors authorized senior management and
counsel to pursue additional negotiations with Simmons. Those negotiations
ensued, and on July 24, 1998, a letter of intent was reached between LBI and
Simmons regarding an acquisition. At the time the letter of intent was reached,
LBI and Simmons exchanged certain information for review by each party's
respective management, counsel and advisors. Further negotiations commenced
regarding the negotiation of the Merger Agreement. On August 25, 1998, LBI's
Board of Directors met for purposes of considering and acting upon the proposed
Agreement between LBI and Simmons.Based upon the terms of the Agreement, the LBI
Board of Directors unanimously approved the Agreement.
At a meeting of the Board of Directors of Simmons held on August 19, 1998,
the Simmons Board unanimously approved the Agreement. The agreement was signed
on August 25, 1998.
REASONS FOR THE MERGER
In reaching its determination that the Merger and the Agreement are fair
to, and in the best interest of, LBI and its shareholders, LBI's Board of
Directors consulted with its consultants and counsel, as well as with LBI's
management, and considered a number of factors, including, without limitation,
the following:
a. The familiarity of the LBI Board of Directors with and review of
Simmons' business, operations, earnings and financial condition;
b. The terms and general level of interest of Simmons and other
interested potential acquirer for LBI, including the amount and type of
consideration proposed;
c. The belief of the LBI Board of Directors that the terms of the Agreement
are attractive in that LBI's shareholders will become shareholders in Simmons, a
company whose stock is traded over NASDAQ's National Market System;
d. The market performance of Simmons Common Stock and , as well as
the recent earnings performance and dividend payment history of Simmons;
e. The wide range of banking products and services Simmons offers to
its customers;
f. The current business climate and competitive factors facing the
banking industry and financial institutions in LBI's market area;
g. The belief of the LBI Board of Directors, based upon analysis of the
anticipated financial effects of the Merger, that upon consummation of the
Merger, Simmons and its banking subsidiaries would be well-capitalized
institutions, the financial positions of which would be in excess of all
applicable regulatory capital requirements;
h. The recent business combinations involving financial institutions,
either announced or completed, during the past 24 to 36 months in the United
States, the State of Arkansas and contiguous states and the effect of such
combinations on the banking environment in LBI's market area;
h. The belief of the LBI Board of Directors that, in light of the
reasons discussed above, Simmons was an attractive choice as a long-term
affiliation partner of LBI; and
i. The expectation that the Merger will generally be a tax-free transaction
to LBI shareholders who receive Simmons Common Stock by virtue of the Merger
(see "Certain Federal Income Tax Consequences").
LBI's Board did not assign any specific or relative weight to the foregoing
factors in their considerations.
THE BOARD OF DIRECTORS OF LBI BELIEVES THAT THE PROPOSED ACQUISITION IS IN THE
BEST INTEREST OF THE STOCKHOLDERS OF LBI AND RECOMMENDS A VOTE IN FAVOR OF THE
ADOPTION OF THE AGREEMENT.
THE AGREEMENT
The following description of certain features of the Agreement is qualified
in its entirety by the full text of the Agreement, which is incorporated herein
by reference and attached to this document as Annex I.
Under the terms of the Agreement, LBI will be merged with and into Simmons
in exchange for the issuance by the Company of a maximum of 301,833 newly issued
shares of Simmons Common Stock to the holders of the common stock of LBI. The
consummation of the Merger is conditioned on it being a tax-free reorganization.
Fractional shares of Simmons Common Stock will not be issued in connection with
the Merger. A holder of LBI common stock otherwise entitled to a fractional
share will be paid cash in lieu of such fractional shares.
Upon consummation of the Merger, LBI will merge with and into Simmons, and
Simmons will be the surviving corporation in the Merger. As a result of the
Merger, each share of LBI common stock outstanding immediately prior to the
effective time (the "Effective Time") of the Merger (other than shares as to
which dissenter's rights have been perfected ("Dissenters' Shares") under either
the Arkansas Business Corporation Act of 1965 or the Arkansas Business
Corporation Act of 1987) will be converted into the right to receive 30.41445
shares of Simmons Common Stock (the "Exchange Ratio"). The payment of cash for
fractional shares will be computed by valuing Simmons Common Stock at the
average closing price per share of Simmons Common Stock during the period of ten
(10) trading days on which one or more trades actually takes place ending
immediately prior to the fifth trading day preceding the Effective Time.
Simmons and LBI have agreed, for the period prior to the consummation of
the merger, to operate their respective businesses only in the usual, regular
and ordinary course. In addition, Simmons and LBI will use reasonable efforts to
maintain and keep their respective properties in as good repair and condition as
at present, except for ordinary wear and tear and to perform all obligations
required under all material contracts, leases, and documents relating to or
affecting their respective assets prior to the consummation of the Merger.
Simmons and LBI have further agreed that, prior to consummation of the Merger,
they will not incur any material liabilities or obligations, except in the
ordinary course of business, or take any action which would or is reasonably
likely to adversely affect the ability of either Simmons or LBI to obtain any
necessary approvals, adversely affect the ability of Simmons or LBI to perform
their covenants and agreements under the Agreement, or result in any of the
conditions to the Merger not being satisfied. LBI has further agreed that,
unless otherwise required by applicable law, it shall not initiate, solicit or
encourage any inquiry or proposal which constitutes a competing transaction.
The Agreement requires that certain conditions occur or be waived prior to
the closing date ("Conditions Precedent"), including (a) approval by LBI
stockholders by a 66 2/3% majority of all outstanding shares; (b) eligibility of
the transaction to be accounted for under the pooling of interest method of
accounting, (c) approval by the appropriate bank regulatory authorities; and (d)
satisfaction of other customary conditions normally associated with closing a
merger transaction. It is also a condition to the Merger that Simmons have an
effective registration statement on file with the Securities and Exchange
Commission covering the issuance of shares to be exchanged pursuant to the
Merger. Prior to the effective date of the Merger, any condition of the
Agreement, except those required by law, may be waived by the party benefited by
the condition.
The effective date of the Merger will be the date the Articles of Merger
are filed with the Arkansas Secretary of State, or the date so stated in the
Articles of Merger. The Agreement provides that a closing date will be set by
mutual agreement to occur within a reasonable time following the date on which
the last of all regulatory and other approvals necessary to consummate the
Merger have been received and all necessary time periods imposed by regulatory
authorities have elapsed. The parties may, however, amend the Agreement to
provide a later closing date.
All shares of LBI common stock converted into the right to receive the
merger consideration in the Merger shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent the right to
receive a certificate representing shares of Simmons Common Stock into which
such shares of LBI common stock are convertible. Certificates previously
representing shares of LBI common stock shall be exchanged for certificates
representing whole shares of Simmons Common Stock issued in consideration
therefor upon the surrender of such certificates as provided below.
The Agreement provides that Simmons and LBI will cause the Effective Time
to occur as promptly as practicable after the approval by the stockholders of
LBI of the Agreement and the satisfaction (or waiver, if permissible) of the
other conditions set forth in the Agreement. As soon as the date on which the
Effective Time is anticipated to occur is determined, Simmons and LBI will
publicly announce such date, although no assurance can be given that the
Effective Time will occur on such date.
BANK MERGER
Incidental to the consummation of the Merger, it is anticipated that BOL,
the only banking subsidiary of LBI will merge with and into Simmons First Bank
of Northwest Arkansas during early 1999 ("Bank Merger"). Simmons First Bank of
Northwest Arkansas will be the surviving entity and expects to continue to
operate all of the banking offices of BOL as branches. The Bank Merger is
conditioned upon the prior completion of the Merger.
REGULATORY APPROVALS
The Merger is subject to prior approval by the appropriate banking
regulatory authorities. Simmons is preparing applications for approval of the
Merger with the Board of Governors of the Federal Reserve System
("Federal Reserve") and the Arkansas State Bank Department ("Department")for
Simmons to acquire LBI. These applications are expected to be filed with the
regulatory agencies within ten days. Upon approval of the Federal Reserve
application, the Merger is also subject to review by the Department of
Justice as to its competitive effects. Additionally, it is expected that an
application will be filed shortly with the Arkansas State Bank Department and
the Federal Deposit Insurance Corporation for approval of the Bank Merger. Even
though no applications have been filed nor any approvals received, Simmons and
LBI expect all applications to be approved in due course after filing.
ANTITRUST MATTERS
After approval by the Federal Reserve, the Department of Justice has
fifteen (15) calendar days in which to challenge the proposed Merger on
anti-trust considerations. It is expected that any approval letter from the
Federal Reserve will provide that the Merger may not be consummated until
fifteen (15) calendar days after the effective date of such letter.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the principal federal income tax
consequences of the Merger. The summary is based upon the Code, applicable
Treasury Regulations thereunder and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to change, and
any such change could affect the continuing validity of the discussion. The
discussion assumes that holders of shares of LBI common stock hold such shares
as a capital asset, and does not address the tax consequences that may be
relevant to a particular stockholder subject to special treatment under certain
federal income tax laws, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, non-United States persons, nor any
consequences arising under the laws of any state, locality or foreign
jurisdiction.
Williams & Anderson LLP, counsel to Simmons is of the opinion, subject to
the assumptions set forth below, that the Merger will constitute a tax-free
reorganization pursuant to Sections 368(a)(1)(A) of the Code and that,
accordingly, neither Simmons nor LBI will recognize gain or loss as a result of
the Merger, and (ii) holders of LBI common stock who receive shares of Simmons
Common Stock for their shares of LBI Stock will not recognize gain or loss in
the Merger, except to the extent of cash received in lieu of fractional shares
of Simmons Common Stock.
The foregoing opinion is based upon (i) certain representations of Simmons
and LBI, (ii) the assumption that the Merger will be consummated in accordance
with its terms, and (iii) the assumption that the "continuity of interest"
requirement for tax-free reorganization treatment will be satisfied. The
consummation of the Merger is conditioned on the receipt by Simmons and LBI of
an opinion of Williams & Anderson LLP confirming that the requirements for
tax-free reorganization treatment, including the continuity of interest
requirement, have been met and that accordingly, the Merger qualifies as a
tax-free reorganization. The discussion below summarizes certain federal income
tax consequences of the Merger to a LBI stockholder, assuming that the Merger
will qualify as a tax-free reorganization. This discussion does not address nor
does the opinion of Williams & Anderson LLP address the tax consequences to the
minority shareholders of BOL relating to their exchange of BOL common stock for
LBI common stock immediately prior to the consummation of the Merger.
GENERAL. Except as discussed below with respect to cash received in lieu of
a fractional share of Simmons Common Stock, the receipt of Simmons Common Stock
by a stockholder of LBI in exchange for such stockholder's shares of LBI common
stock will not cause the shareholder to recognize gain or loss. The tax basis of
the shares of Simmons Common Stock received will be the same as the tax basis of
the shares of LBI common stock exchanged, decreased by the basis of any
fractional share interest for which cash is received in the Merger. The holding
period of the shares of Simmons Common Stock received will include the holding
period of the shares of LBI common stock exchanged therefor.
FRACTIONAL SHARES. If a holder of shares of LBI common stock receives cash
in lieu of a fractional share of Simmons Common Stock in the Merger, such cash
amount will be treated as received in exchange for the fractional share of
Simmons Common Stock. Gain or loss recognized as a result of that exchange will
be equal to the cash amount received for the fractional share of Simmons Common
Stock reduced by the proportion of the holder's tax basis in shares of LBI
common stock exchanged and allocable to the fractional share of Simmons Common
Stock.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS, LBI STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX LAWS
AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
The tax opinion of Williams & Anderson LLP described in the first sentence
under "Tax Opinion" has been filed as an exhibit to the Registration Statement
of which this Proxy Statement/Prospectus is a part.
ACCOUNTING TREATMENT
Simmons intends to treat the merger as a pooling of interests for accounting
purposes. However, the acquisition of the minority interest (1,432 shares or
17.9%) in BOL by LBI immediately prior to the consummation of the
Merger will be accounted on a purchase accounting basis. Consequently, in
accordance with generally accepted accounting principles, Simmons anticipates
that certain adjustments will be made to the asset and liability accounts of LBI
related to the purchase accounting for the acquisition of the minority interest
in the BOL. No adjustments to the asset and liability accounts of LBI will
be made related to the Merger, but such accounts will be combined with the
corresponding accounts of the Company.
RIGHT OF DISSENT UNDER THE 1965 ACT
HOLDERS OF LBI COMMON STOCK WILL BE ENTITLED TO EXERCISE DISSENTER'S RIGHTS
EITHER UNDER THE 1965 ACT OR THE 1987 ACT. IF APPROVED, THE ELECTION TO BE
GOVERNED BY THE 1987 ACT BY THE STOCKHOLDERS OF LBI, AS DISCUSSED BELOW, WILL BE
MADE PRIOR TO CONSUMMATION OF THE MERGER BUT SUBSEQUENT TO A VOTE ON SUCH
MERGER. THEREFORE, SIMMONS WILL RECOGNIZE COMPLIANCE WITH EITHER THE 1965 ACT OR
THE 1987 ACT AS A VALID EXERCISE OF DISSENTER'S RIGHTS WITH RESPECT TO SUCH
MERGER. FOR A DISCUSSION OF THE PROCEDURE TO BE FOLLOWED UNDER THE 1987 ACT, SEE
"THE MERGER - RIGHT OF DISSENT UNDER THE 1987 ACT."
Under Arkansas law, holders of LBI common stock are entitled to
dissenters' rights pursuant to Ark. Code Ann. Section 4-26-1007 of the 1965 Act.
However, if a holder of shares of LBI common stock chooses to follow the
procedure under the 1965 Act, he shall only be entitled to such rights if he
complies with that statute. The following summary does not purport to be a
complete statement of the method of compliance with Section 4-26-1007 and is
qualified by reference to those statutory sections which are attached, hereto in
Annex II.
A holder of LBI stock who wishes to perfect his dissenter's rights in the
event that the Merger is approved must:
(a) File with the corporation, prior to or at the meeting of
stockholders at which the vote on the Agreement is to be made,
written objection to the Agreement; and
(b) Not have voted in favor of the Agreement.
Any written notice of objection to the Agreement pursuant to clause (a) of
the immediately proceeding paragraph should be mailed or delivered to Lincoln
Bankshares, Inc., West side of Square, P. O. Box 98, Lincoln, Arkansas 72744,
Attention: Loyd R. Swope, President and Chief Executive Officer. Because the
written objection must be delivered prior to or at the stockholder vote on the
Agreement, it is recommended, although not required, that a stockholder using
the mail should use certified or registered mail, return receipt requested, to
confirm that he has made timely delivery.
Within ten (10) days after the consummation of the Merger, any stockholder
objecting to the Merger must make a written demand on Simmons for payment of the
fair value of his shares as of the day before the vote on the Agreement was
taken. This second notice should be mailed to Simmons First National
Corporation, 501 Main Street P. O. Box 7009, Pine Bluff, Arkansas 71611,
Attention: Barry L. Crow, Executive Vice President and Chief Financial Officer.
The demand must state the number and class of shares owned. If a demand is not
made within the 10-day period, the stockholder is bound by the Agreement.
Within ten (10) days after the Merger is effected, Simmons shall give
notice to each dissenting stockholder who made demand as provided above for the
payment of the value of his shares. If the dissenting stockholder and Simmons
agree upon the value of the shares within thirty (30) days after the date of the
Merger, then payment shall be made within ninety (90) days of the Merger.
Simultaneously with the payment, the dissenting stockholder shall surrender the
certificates representing his shares.
If within the thirty-day period no agreement is reached as to the value of
the dissenting stockholder's shares, the dissenting stockholder must file a
petition in Jefferson County Circuit Court within 60 days after the expiration
of the 30-day period asking for a determination of the fair value of his shares.
The judgment will be final and is payable only upon and simultaneously with the
surrender of the certificates representing the shares to Simmons. If a
dissenting stockholder fails to file a petition within the 60-day period, he and
all persons claiming under him shall be bound by the terms of the Agreement.
RIGHT TO DISSENT UNDER THE 1987 ACT
HOLDERS OF LBI COMMON STOCK SHALL BE ENTITLED TO DISSENTER'S RIGHTS PURSUANT TO
ARK. CODE ANN. SECTION 4-27-1301 ET. SEQ. WITH RESPECT TO THE MERGER.
The following summary does not purport to be a complete statement of the
method of compliance with the applicable statute and is qualified by reference
to those statutory sections which are attached to this document in Annex III.
A holder of LBI Common Stock who wishes to perfect his dissenter's rights
in the event that the Merger is adopted must:
(a) File with the corporation, prior to or at the meeting of
stockholders at which the vote on the Agreement is to be made,
written objection to the Agreement; and
(b) Not have voted in favor of the Agreement.
Any written notice of objection to the Agreement pursuant to clause (a) of
the immediately preceding paragraph should be mailed or delivered to Lincoln
Bankshares, Inc., P. O. Box 98, West side of Square, Lincoln, Arkansas 72744,
Attention: Mr. Loyd R. Swope, President. Because the written objection must be
delivered prior to or at the stockholder vote on the Merger, it is recommended,
although not required, that a stockholder using the mail should use certified
or registered mail, return receipt requested, to confirm that he has made timely
delivery.
If the Merger is adopted at the stockholders meeting, the corporation must
send to the dissenting stockholder, no later than ten (10) days after the
corporate action was taken, a dissenter's notice which will inform the
stockholder where a demand for payment must be sent, where the stockholder's
share certificates must be deposited and provide a form for demanding payment.
The dissenter's notice will also notify the stockholder of a time period within
not less than thirty (30) nor more than sixty (60) days within which the
stockholder must deliver the payment demand form and stock certificates to the
corporation.
As soon as the Merger is consummated, or upon receipt of a payment demand
by the dissenting stockholder, Simmons must pay the dissenting stockholder the
amount Simmons estimates to be the fair value of the shares, plus accrued
interest and deliver to the dissenting stockholder the corporation's balance
sheet as of the most recent fiscal year, an income statement for that year, a
statement of changes in stockholder equity for that year, and the latest
available interim financial statement. At this time, Simmons shall also deliver
to the dissenting stockholder a statement of the corporation's estimate of fair
value of the shares, an explanation of how interest was calculated, a statement
of the dissenter's right to demand a higher value for his shares and a copy of
the appropriate statutory provisions governing the dissenters rights procedure.
Within thirty (30) days after the dissenting stockholder has received
payment in the amount the corporation estimates to be the fair value of the
shares, the dissenting stockholder must notify the corporation, in writing, of
his own estimate of fair value. If the dissenting stockholder does not notify
the corporation within this thirty (30) day period, he waives his right to
demand a higher payment.
If the demand for payment remains unsettled for sixty (60) days from the
date the corporation receives the dissenting stockholders demand for payment,
the corporation must commence a proceeding and file a petition in Jefferson
County Circuit Court to determine the fair value of the shares and the amount of
accrued interest to be paid.
EXCHANGE RATIO FOR THE MERGER
Simmons has agreed to issue 301,833 shares of its Class A common stock for
all of the shares of LBI outstanding upon the date of the Consummation of the
Merger. Currently, LBI has 8,050 shares of common stock outstanding and has
committed to issue an additional 1,874 shares of LBI common stock immediately
prior to the consummation of the Merger to the minority shareholders of BOL in
exchange for 1,432 shares of BOL common stock. Upon the completion of the
exchange of LBI stock for the minority shares in the BOL, LBI will have 9,924
shares outstanding. The computed exchange ratio for the Merger based upon 9,924
shares of LBI outstanding is 30.41445 shares of Simmons Common Stock for
each share of LBI stock.
EXPENSES OF THE MERGER
Simmons and LBI will bear their own expenses incident to preparing for,
entering into and carrying out the Agreement and the consummation of the Merger,
except that Simmons will pay all expenses incident to the preparation of this
Proxy Statement and its printing and distribution and for the filing of
necessary applications for approval of the Merger with the Federal Reserve and
the Department.
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements assume a
business combination between Simmons and Lincoln Bankshares, Inc., (in the form
of a merger) accounted for on a pooling of interests basis, except for the
acquisition of the minority shares (17.9%) of the Bank of Lincoln, which will be
accounted for on a purchase accounting basis. The pro forma combined balance
sheets combine the Simmons' June 30, 1998, consolidated balance sheet with
Lincoln Bankshares, Inc.'s, June 30, 1998 consolidated balance sheet,
respectively, giving effect to the merger as if such transaction had occurred as
of such dates. The pro forma combined statements of income combine Simmons'
historical consolidated statements of income for the unaudited six month period
ended June 30, 1998 and the three fiscal years ended December 31, 1997, 1996 and
1995, with the corresponding historical consolidated statements of income of
Lincoln Bankshares, Inc. for such periods, giving effect to the merger as if
such transaction had happened at the beginning of the respective periods.
The unaudited historical consolidated financial statement data of Simmons
as of June 30, 1998, and for the six month periods ended June 30, 1998 and 1997,
and the unaudited historical consolidated financial statement data of Lincoln
Bankshares, Inc. as of June 30, 1998, and the six month periods ended June 30,
1998 and 1997 and years ended December 31, 1996 and 1995, have been prepared on
the same basis as the historical information derived from audited financial
statements, and, in the opinion of their respective managements, reflect all
adjustments, consisting only of normal occurring accruals, necessary for a fair
presentation of the financial position and results of operations for such
periods.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the actual operating results or financial
position of the combined entity that would have been achieved had the merger
been consummated at the dates presented, nor is it necessarily indicative of the
combined entity's future operating results or financial position. The unaudited
pro forma combined financial statements do not incorporate any benefits from
costs savings or synergies of operations of the combined entity that may occur.
Simmons and Lincoln Bankshares, Inc. anticipate incurring direct transaction
costs and integration costs related to the merger. Such anticipated costs are
not reflected in the pro forma information.
The pro forma combined financial statements are based on the historical
consolidated financial statements of Simmons and Lincoln Bankshares, Inc. and
the notes thereto, and should be read in conjunction with the financial
statements of Simmons and Lincoln Bankshares, Inc. included elsewhere in this
document and incorporated by reference herein.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET (Unaudited)
June 30, 1998
(In Thousands)
<CAPTION>
Simmons First
Simmons First National
National Lincoln Corporation
Corporation Bankshares, Inc. Adjustments Pro Forma
------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 96,890 $ 8,100 -- $ 104,990
Investment securities 323,202 12,236 -- 335,438
Net loans 820,736 52,183 -- 872,919
Other earning assets 7,298 -- -- 7,298
Other assets 90,808 2,781 1,041 (a) 94,630
-------------- --------------- ------------- ---------------
Total assets $ 1,338,934 $ 75,300 $ 1,041 $ 1,415,275
============= ============== ============ ==============
Liabilities
Deposits $ 1,104,448 $ 68,016 -- $ 1,172,464
Other liabilities 117,636 2,595 (1,121)(a) 119,110
-------------- --------------- -------------- --------
Total liabilities 1,222,084 70,611 (1,121) 1,291,574
-------------- --------------- -------------- ---------------
Equity Capital
Common stock 5,741 10 57 (a) 6,043
235 (b)
Surplus 45,287 518 2,105 (a) 46,907
(1,003)(c)
Undivided profits 64,383 4,929 69,312
Treasury stock -- (768) 768 (d) --
Unrealized appreciation
on available-for-sale securities 1,439 -- -- 1,439
-------------- --------------- ------------- ---------------
Total stockholders' equity 116,850 4,689 2,162 123,701
-------------- --------------- ------------- ---------------
Total liabilities & stockholders' $ 1,338,934 $ 75,300 $ 1,041 $ 1,415,275
equity ============= ============= =========== ===============
</TABLE>
(a) To record the purchase of the minority interest in the Bank of Lincoln
Allocation of the purchase price to fair value of other assets and
liabilities is not expected to be material.
(b) Adjustment to common stock to account for the merger.
(c) Adjustment to surplus to account for the merger (d) Adjustment to eliminate
Lincoln Bankshares treasury stock.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For the Six Months Ended June 30, 1998
(In Thousands, Except Per Share Data)
<CAPTION>
Simmons First
Simmons First National
National Lincoln Corporation
Corporation Bankshares, Inc. Adjustments Pro Forma
------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 36,495 $ ,553 $ -- $ 39,048
Investment securities 9,828 383 -- 10,211
Other interest income 2,349 114 -- 2,463
-------------- ------------- ----------- ---------------
Total interest income 48,672 3,050 -- 51,722
-------------- ------------ ------------ ---------------
Interest expense
Deposits 21,759 1,484 -- 23,243
Other interest expense 3,328 49 -- 3,377
-------------- ------------ ------------ ---------------
Total interest expense 25,087 1,533 -- 26,620
-------------- ------------ ------------ ---------------
Net interest income 23,585 1,517 -- 25,102
Provision for loan losses 4,849 135 -- 4,984
-------------- ------------ ------------ ---------------
Net interest income after provision
for loan losses 18,736 1,382 -- 20,118
-------------- ------------ ------------ ---------------
Non-interest income
Trust 1,561 -- -- 1,561
Service charges on deposit accounts 2,675 178 -- 2,853
Other service charges and fees 699 76 -- 775
Credit card fees 4,518 -- -- 4,518
Mortgage servicing and fees 3,667 -- -- 3,667
All other non-interest income 4,839 29 -- 4,868
-------------- ------------ ------------ ---------------
Total non-interest income 17,959 283 -- 18,242
-------------- ------------ ------------ ---------------
Non-interest expense
Salaries and employee benefits 13,979 608 -- 14,587
Occupancy expense, net 1,659 55 -- 1,714
Furniture and equipment expense 1,830 80 -- 1,910
Other non-interest expense 10,370 354 44(a) 10,768
-------------- ------------ ------------ ---------------
Total non-interest expense 27,838 1,097 44 28,979
-------------- ------------ ------------ ---------------
Income before income taxes 8,857 568 (44) 9,381
Provision for income taxes 2,587 186 -- 2,773
-------------- ------------ ------------ ---------------
Net income before minority interest 6,270 382 (44) 6,608
Minority interest -- 72 (72)(b) --
-------------- ------------ ------------ ---------------
Net income $ 6,270 $ 310 $ 28 $ 6,608
============= =========== =========== ==============
Basic earnings per share $ 1.09 $ 38.51 $ 0.01 $ 1.10
============= =========== =========== =============
Diluted earnings per share $ 1.07 $ 38.51 $ 0.01 $ 1.08
============= =========== =========== ==============
</TABLE>
(a) Amortization of goodwill related to the purchase of minority interest in
the Bank of Lincoln.
(b) Elimination of minority interest.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
PRO FORMA COMBINED INCOME STATEMENTS
For the Year Ended December 31, 1997
(In Thousands, Except Per Share Data)
<CAPTION>
Simmons First
Simmons First National
National Lincoln Corporation
Corporation Bankshares, Inc. Adjustments Pro Forma
------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 58,544 $ 4,868 $ -- $ 63,412
Investment securities 16,490 841 -- 17,331
Other interest income 3,372 131 -- 3,503
-------------- ------------- ------------- -------------
Total interest income 78,406 5,840 -- 84,246
-------------- ------------- ------------- -------------
Interest expense
Deposits 33,869 2,761 -- 36,630
Other interest expense 4,122 123 -- 4,245
-------------- ------------- ------------- -------------
Total interest expense 37,991 2,884 -- 40,875
-------------- ------------- ------------- -------------
Net interest income 40,415 2,956 -- 43,371
Provision for loan losses 4,013 523 -- 4,536
-------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 36,402 2,433 -- 38,835
-------------- ------------- ------------- -------------
Non-interest income
Trust 2,536 -- -- 2,536
Service charges on deposit accounts 4,146 395 -- 4,541
Other service charges and fees 1,296 113 -- 1,409
Credit card fees 9,433 -- -- 9,433
Mortgage servicing and fees 7,766 -- -- 7,766
All other non-interest income 2,368 73 -- 2,441
-------------- ------------- ------------- -------------
Total non-interest income 27,545 581 -- 28,126
-------------- ------------- ------------- -------------
Non-interest expense
Salaries and employee benefits 23,793 1,174 -- 24,967
Occupancy expense, net 2,857 108 -- 2,965
Furniture and equipment expense 3,219 160 -- 3,379
Other non-interest expense 17,065 551 88(a) 17,704
-------------- ------------- ------------- -------------
Total non-interest expense 46,934 1,993 88 49,015
-------------- ------------- ------------- -------------
Income before income taxes 17,013 1,021 (88) 17,946
Provision for income taxes 5,024 423 -- 5,447
-------------- ------------- ------------- -------------
Net income before minority interest 11,989 598 (88) 12,499
Minority interest -- 126 (126)(b) --
-------------- ------------- ------------- -------
Net income $ 11,989 $ 472 $ 38 $ 12,499
============= ============ ============ ============
Basic earnings per share $ 2.10 $ 58.63 $ 0.01 $ 2.08
============= ============ ============ ============
Diluted earnings per share $ 2.07 $ 58.63 $ 0.01 $ 2.05
============= ============ ============ ============
</TABLE>
(a) Amortization of goodwill related to the purchase of minority interest in
the Bank of Lincoln.
(b) Elimination of minority interest.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For the Year Ended December 31, 1996
(In Thousands, Except Per Share Data)
<CAPTION>
Simmons First
Simmons First National
National Lincoln Corporation
Corporation Bankshares, Inc. Adjustments Pro Forma
------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 44,333 $ 4,237 $ -- $ 48,570
Investment securities 13,664 842 -- 14,506
Other interest income 3,370 143 -- 3,513
-------------- ------------- ------------- -------------
Total interest income 61,367 5,222 -- 66,589
-------------- ------------- ------------- -------------
Interest Expense
Deposits 25,769 2,471 -- 28,240
Other interest expense 1,793 139 -- 1,932
-------------- ------------- ------------- -------------
Total interest expense 27,562 2,610 -- 30,172
-------------- ------------- ------------- -------------
Net interest income 33,805 2,612 -- 36,417
Provision for loan losses 2,341 166 -- 2,507
-------------- ------------- ------------- -------------
Net interest income after provision 31,464 2,446 -- 33,910
-------------- ------------- ------------- -------------
for loan losses
Non-interest income
Trust 2,166 -- -- 2,166
Service charges on deposit accounts 3,222 353 -- 3,575
Other service charges and fees 1,069 116 -- 1,185
Credit card fees 9,601 -- -- 9,601
Mortgage servicing and mortgage-related fees 7,095 -- -- 7,095
All other non-interest income 1,963 80 -- 2,043
-------------- ------------- ------------- -------------
Total non-interest income 25,116 549 -- 25,665
-------------- ------------- ------------- -------------
Non-interest expense
Salaries and employee benefits 21,774 1,031 -- 22,805
Occupancy expense, net 2,310 105 -- 2,415
Furniture and equipment expense 2,416 158 -- 2,574
Other non-interest expense 15,456 483 88(a) 16,027
-------------- ------------- ------------- -------------
Total non-interest expense 41,956 1,777 88 43,821
-------------- ------------- ------------- -------------
Income before income taxes 14,624 1,218 (88) 15,754
Provision for income taxes 4,323 433 -- 4,756
-------------- ------------- ------------- -------------
Net income before minority interest 10,301 785 (88) 10,998
Minority interest -- 149 (149)(b) --
-------------- ------------- -------------- -------
Net income $ 10,301 $ 636 $ 61 $ 10,998
============= ============ ============ ============
Basic earnings per share $ 1.81 $ 79.01 $ 0.01 $ 1.83
============ ============ =========== ============
Diluted earnings per share $ 1.79 $ 79.01 $ 0.01 $ 1.81
============ ============ =========== ============
</TABLE>
(a) Amortization of goodwill related to the purchase of minority interest in
the Bank of Lincoln.
(b) Elimination of minority interest.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
PRO FORMA COMBINED INCOME STATEMENTS (Unaudited)
For the Year Ended December 31, 1995
(In Thousands, Except Per Share Data)
<CAPTION>
Simmons First
Simmons First National
National Lincoln Corporation
Corporation Bankshares, Inc. Adjustments Pro Forma
------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 39,917 $ 3,781 $ -- $ 43,698
Investment securities 12,996 651 -- 13,647
Other interest income 3,316 130 -- 3,446
-------------- ------------- ------------- -------------
Total interest income 56,229 4,562 -- 60,791
-------------- ------------- ------------- -------------
Interest expense
Deposits 22,264 2,155 -- 24,419
Other interest expense 2,201 153 -- 2,354
-------------- ------------- ------------- -------------
Total interest expense 24,465 2,308 -- 26,773
-------------- ------------- ------------- -------------
Net interest income 31,764 2,254 -- 34,018
Provision for loan losses 2,092 96 -- 2,188
-------------- ------------- ------------- -------------
Net interest income after provision 29,672 2,158 -- 31,830
-------------- ------------- ------------- -------------
for loan losses
Non-interest income
Trust 1,790 -- -- 1,790
Service charges on deposit accounts 2,768 326 -- 3,094
Other service charges and fees 825 87 -- 912
Credit card fees 10,114 -- -- 10,114
Mortgage servicing and mortgage-related fees 6,092 -- -- 6,092
All other non-interest income 2,776 71 -- 2,847
-------------- ------------- ------------- -------------
Total non-interest income 24,365 484 -- 24,849
-------------- ------------- ------------- -------------
Non-interest expense
Salaries and employee benefits 21,192 983 -- 22,175
Occupancy expense, net 2,512 93 -- 2,605
Furniture and equipment expense 2,167 148 -- 2,315
Other non-interest expense 13,949 513 88(a) 14,550
-------------- ------------- ------------- -------------
Total non-interest expense 39,820 1,737 88 41,645
-------------- ------------- ------------- -------------
Income before income taxes 14,217 905 (88) 15,034
Provision for income taxes 4,198 407 -- 4,605
-------------- ------------- ------------- -------------
Net income before minority interest 10,019 498 (88) 10,429
Minority interest -- 99 (99)(b) 99
-------------- ------------- -------------- -------------
Net income $ 10,019 $ 399 $ 11 $ 10,429
============= ============ ============ =============
Basic earnings per share $ 1.77 $ 49.57 $ 0.00 $ 1.74
============ ============ =========== ============
Diluted earnings per share $ 1.75 $ 49.57 $ 0.00 $ 1.73
============ ============ =========== ============
</TABLE>
(a) Amortization of goodwill related to the purchase of minority interest in
the Bank of Lincoln.
(b) Elimination of minority interest.
<PAGE>
ELECTION BY LINCOLN BANKSHARES, INC. STOCKHOLDERS UNDER THE 1987 ACT
ELECTION INCIDENTAL TO THE MERGER
THE ELECTION BY THE STOCKHOLDERS OF LBI TO BE GOVERNED BY THE ARKANSAS
BUSINESS CORPORATION ACT OF 1987 IS INCIDENTAL TO THE MERGER PROPOSAL AND
APPROVAL OF SUCH ELECTION WILL HAVE NO FORCE OR EFFECT UNLESS THE MERGER IS
LIKEWISE APPROVED.
REASON FOR THE ELECTION
LBI is an Arkansas corporation organized under the Arkansas Business
Corporation Act of 1965, codified at Ark. Code Ann. Section 4-26-101 et. seq.
The 1987 Act is applicable to corporations that were incorporated on or after
January 1, 1988 or those "1965 Act" corporations that elect to be governed by
the 1987 Act by amending their Articles of Incorporation to adopt the 1987 Act.
The stockholders of Simmons elected to be governed by the 1987 Act by amending
its Articles of Incorporation during 1994.
The 1965 Act and 1987 Act have statutory merger procedures that
must be followed in order to legally consummate a merger. Although both acts
contain similar provisions, it is advisable for LBI to elect to be governed by
the 1987 Act in order to facilitate compliance with the applicable statutory
requirements.
RESULT OF THE ELECTION
The affirmative vote of two-thirds of all outstanding shares of LBI common
stock will authorize LBI to amend its Articles of Incorporation and thereby
elect to be governed by the 1987 Act. Simmons is governed by the 1987 Act and
shares of Simmons Common Stock received by LBI stockholders upon consummation of
the Merger will entitle such stockholders to rights under the 1987 Act. The
following discussion is a summary analysis of the material differences between
the 1965 and 1987 Act with respect to Stockholders' rights.
Powers of Directors in Setting Preferences, Rights and Limitation of
Classes and Series of Stocks. The 1965 Act states that the preferences, rights
and limitations of classes of stock must be specified in the Articles, and that
the power to establish certain limited rights and preferences for a series may
be delegated to the Board. The 1987 Act, authorizes the inclusion of a provision
in the Articles granting the Board the power to set the preferences, rights and
limitations of any class or series of stock before issuance of any shares of the
class or series. The power so granted is exercised by the adoption by the Board
and the filing with the Secretary of State of Articles of Amendment, specifying
the terms of such class or series of stock.
Preemptive Rights. The 1987 Act denies stockholders preemptive rights
(i.e., the right of existing stockholders to acquire newly-issued shares of
stock on a pro rata basis of current ownership interest) unless the Articles
specifically authorize preemptive rights. In contrast, the 1965 Act grants
certain preemptive rights unless denied by the Articles.
Restrictions On Distributions. The 1987 Act allows a corporation to elect
in its Articles to restrict its ability to make distributions. The 1965 Act has
no such provision.
Quorum. The 1987 Act, like the 1965 Act, provides that a quorum, for
purposes of a stockholders meeting, will be a majority of the shares entitled to
vote unless the Articles provide otherwise. The 1965 Act provides that a quorum
may not be less that one-third of the shares entitled to vote, but the 1987 Act
does not provide a minimum size for the quorum.
Cumulative Voting. Cumulative voting is a method of voting for directors in
which each share entitled to vote is granted as many votes as there are board
positions being voted on. The shareholder may "cumulate" his votes by casting
all such votes for a one or more directors, rather than spreading his votes
among all available directors. The 1987 Act does not allow cumulative voting for
directors unless the Articles of Incorporation so provide. However, the 1965 Act
grants stockholders absolute cumulative voting rights.
Removal of Directors. The 1987 Act allows the Articles to provide that
directors may be removed only for cause. The 1965 Act provides generally that
directors may be removed with or without cause by a majority of the shares
entitled to vote.
Vacancy on Board of Directors. Unless the Articles provide otherwise, the
1987 Act grants authority to either the stockholders or the directors to fill
any vacancy on the Board, the 1965 Act only authorizes the Board to fill any
such vacancy.
Amendment of By-Laws. The 1987 Act provides that the Articles may reserve
to the stockholders the power to amend a corporation's by-laws. If the power is
not so reserved, both the board and the stockholders are authorized to amend the
by-laws. The 1965 Act grants the sole power to amend the by-laws to the board of
directors unless the Articles specifically reserve this power to the
stockholders.
By-Law Increasing Quorum or Voting Requirements for Stockholders. The 1987
Act allows the adoption of a by-law by the shareholders that fixes a greater
quorum or voting requirement for stockholder action than the statutory
requirement if such by-law is authorized by the Articles of Incorporation. The
1965 Act does not contain any such provision.
Voting to Adopt Merger. The 1987 Act sets the voting requirement for
approval of mergers at a majority of the shares entitled to vote, and further
provides that the Articles may establish a greater voting requirement for
mergers than the statutory minimum requirement. The 1965 Act requires two-thirds
of the votes entitled to be cast to approve a merger.
Notice of Stockholder Meetings. Both the 1987 Act and the 1965 Act requires
notice of the date, time, and place of each annual or special meeting of the
stockholders. The Arkansas Constitution requires that corporations give notice
to shareholders of a meeting, no less than 60 days nor more than 75 days, if a
proposal to increase the authorized capital stock or bonded indebtedness of the
corporation, is to be considered at the meeting. Under the 1987 Act, in all
other cases the notice must be given no fewer than 10 and no more than 60 days
before the meeting date. Under the 1965 Act in all other cases, notice cannot be
given fewer than 10 nor more than 50 days prior to the meeting.
Proxies. Both the 1965 Act and the 1987 Act allows a stockholder to vote
by proxy under the same procedures.
Voting. The 1987 Act, unlike the 1965 Act, does not count abstaining votes
in determining whether there are sufficient affirmative votes to approve a
measure. The 1965 Act states that (unless a greater number is required by
statute or by the Articles) approval by stockholders takes the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter. The 1987 Act, however, provides that the action is approved
if the votes cast within the voting group favoring the action exceed the votes
cast opposing the action.
Dissenting Stockholders. Those transactions giving rise to dissenters'
rights under the 1965 Act are as follows:
1. Consummation of a sale of all, or substantially all, of the assets of a
corporation, other than in the usual or ordinary course of its business.
2. Consummation of a merger or consolidation to which the corporation is a
party unless on the date the Articles of Merger are filed the surviving
corporation wholly owns the other corporations that are parties to the
Merger.
Under the 1987 Act, a stockholder is entitled to dissent from the following
corporate actions:
1. Consummation of a plan of merger to which the corporation is a party if
stockholder approval is required or if the corporation is a subsidiary
that is merged with its parent;
2. Consummation of a plan of share exchange to which the corporation is a
party and which requires stockholder approval;
3. Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation, other than in the usual and regular course
of business, if stockholder approval is required;
4. An amendment of the Articles of Incorporation that materially and
adversely affects the rights of dissenters' shares; or
5. Any other corporate action taken pursuant to a stockholder vote to the
extend the Articles of Incorporation, the By-Laws, or a resolution of
the board of directors provides that stockholders are entitled to
dissent.
For a summary of the procedure that would be followed in order to exercise
dissenters' rights under the 1965 Act, See "The Merger - Right of Dissent under
the 1965 Act." For a summary of the procedure that would be followed in order to
exercise dissenters' rights under the 1987 Act, See "The Merger - Right of
Dissent under the 1987 Act."
SIMMONS FIRST NATIONAL CORPORATION
GENERAL
Simmons is a multi-bank holding company incorporated in 1968 for the
purpose of holding all of the outstanding stock of Simmons First National Bank.
Subsequently, Simmons acquired six additional banks as summarized below
Bank Location Acquisition Date
Simmons First Bank of Jonesboro Jonesboro, Arkansas 1984
Simmons First Bank of South Arkansas Lake Village, Arkansas 1984
Simmons First Bank of Dumas Dumas, Arkansas 1995
Simmons First Bank of Northwest Arkansas Rogers, Arkansas 1995
Simmons First Bank of Russellville Russellville, Arkansas 1997
Simmons First Bank of Searcy Searcy, Arkansas 1997
Each of the banks are wholly-owned by Simmons.
Simmons is an Arkansas corporation which has registered with the Federal
Reserve as a bank holding company pursuant to the Bank Holding Company Act of
1956, as amended, and is regulated by the Federal Reserve. Simmons First
National Bank is organized under the laws of the United States and is regulated
by the Office of the Comptroller of the Currency. Simmons First Bank of
Jonesboro, Simmons First Bank of South Arkansas, Simmons First Bank of Dumas and
Simmons First Bank of Northwest Arkansas are organized under the laws of the
State of Arkansas and are regulated by the Arkansas Bank Department and the
Federal Deposit Insurance Corporation. Simmons First Bank of Russellville and
Simmons First Bank of Searcy Arkansas are organized under the laws of the State
of Arkansas and are regulated by the Arkansas Bank Department and as Federal
Reserve member banks are regulated by the Board of Governors of the Federal
Reserve System.
<PAGE>
Below are the assets, deposits and stockholders' equity as of June 30, 1998
for Simmons on a consolidated basis and separately for its seven bank
subsidiaries (collectively "subsidiary banks"):
<TABLE>
<CAPTION>
Assets Deposits Stockholders' Equity
<S> <C> <C> <C>
Simmons $1,338,934 $1,104,448 $ 116,850
SFNB (Pine Bluff) 687,251 559,975 60,154
SFB Jonesboro 131,059 115,404 9,651
SFB South Arkansas 54,346 49,163 4,775
SFB Dumas 32,553 28,788 3,297
SFB Northwest Arkansas 79,660 73,074 6,153
SFB Russellville 246,097 193,886 42,557
SFB Searcy 109,736 88,224 12,447
</TABLE>
The banks offer customary services of banks of similar size and similar
markets, including interest bearing and non-interest bearing deposit accounts;
credit card, commercial, real estate and personal loans; trust services;
mortgage banking; securities brokerage; correspondent banking services and safe
deposit box activities.
The financial services and banking industry is highly competitive. The
subsidiary banks of Simmons actively compete with national and state banks,
savings and loan associations, credit unions, securities dealers, mortgage
bankers, finance companies and insurance companies.
REGULATION
Simmons is a registered bank holding company pursuant to the Bank Holding
Company Act of 1956, as amended (the "Act"), and as such, is subject to
regulation and examination by the Federal Reserve and is required to file with
the Federal Reserve annual reports and other information regarding its business
operations and those of its subsidiaries. The Act provides that a bank holding
company may be required to obtain Federal Reserve Board approval for the
acquisition of more than 5% of the voting securities of, or substantially all of
the assets of, any bank or bank holding company, unless it already owns a
majority of the voting securities of such bank or bank holding company. The Act
prohibits Simmons and its subsidiaries from engaging in any business other than
banking or activities closely related to banking specifically allowed by the
Federal Reserve. The Act also prohibits Simmons and its subsidiaries from
engaging in certain tie-in arrangements in connection with the extension of
credit, the lease or sale of property or the provision of any services.
As a registered bank holding company, Simmons is subject to the Federal
Reserve's position that a bank holding company should serve as a "source of
strength" for its bank subsidiaries. In an early application of the doctrine the
Federal Reserve Board announced that failure to assist a troubled bank
subsidiary when its holding company was in a position to do so was an unsafe and
unsound practice and the Federal Reserve Board claimed the authority to order a
bank holding company to capitalize its subsidiary banks.
In 1991 Congress modified the source of strength doctrine by creating a
system of prompt corrective actions under which the federal banking agencies are
required to take certain actions to resolve the problems of depository
institutions based on their level of capitalization. In a bank holding company
organization, an undercapitalized insured depository institution must submit a
capital restoration plan to the appropriate agency which may not accept the plan
unless the company controlling the institution has guaranteed that the
institution will comply with the plan until the institution has been adequately
capitalized on average during each of four consecutive calendar quarters. The
aggregate liability to the guaranteeing companies is the lesser of an amount
equal to 5 percent of the institution's total assets at the time the institution
became undercapitalized, or the amount which is necessary to bring the
institution into compliance with applicable capital standards.
For a significantly undercapitalized institution, the appropriate agency
must prohibit a bank holding company from making any capital distribution
without prior Federal Reserve approval. The agency also may require a bank
holding company to divest or liquidate the institution.
Simmons and its subsidiaries are also subject to various federal banking
laws including the Financial Institutions, Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") which, among other things, made substantive changes to the
deposit insurance system. As a part of the reorganization of the deposit
insurance funds, the deposit premiums for insurance of Bank Insurance Fund
members were significantly increased. FIRREA also authorized bank holding
companies to acquire savings and thrift institutions without tandem operation
restrictions. Furthermore, FIRREA expanded the authority of regulatory agencies
to assess severe penalties ranging from $5,000 per day to $1,000,000 per day, on
persons or institutions that the agency finds in violation of a broad range of
activities.
Simmons and its subsidiaries are also subject to the provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991, which provided
for industry-wide standards in such areas as real estate lending, further
restrictions on brokered deposits and insider lending, establishment of a
risk-based deposit insurance system, enhanced examinations and audits of banking
institutions, the adoption of a Truth-in-Savings Act, various
merger-and-acquisitions related provisions, and the implementation of
legislation on foreign bank operations in the United States.
The provisions of the Community Reinvestment Act of 1977, as amended, are
applicable to the subsidiaries of Simmons. Federal regulators are required to
consider performance under the Community Reinvestment Act before approving an
application to establish a branch or acquire another financial institution. The
Federal Reserve has promulgated regulations governing compliance with the
Community Reinvestment Act in Regulation BB. Recent regulatory and statutory
developments show that compliance with the Community Reinvestment Act is subject
to strict scrutiny and is often grounds for denial of an application to federal
regulators. Simmons' subsidiary banks are all rated "satisfactory" for CRA
purposes.
On January 19, 1989, the Federal Reserve issued final guidelines to
implement risk-based capital requirements for bank holding companies. The
guidelines establish a framework that makes regulatory capital requirements more
sensitive to differences in risk profiles among banking organizations,
incorporates off-balance sheet exposures into the assessment of capital
adequacy, and minimizes disincentives to holding liquid, low-risk assets. The
guidelines provided for phasing in risk-based capital standards through the end
of 1992, at which time the standards became fully effective. Simmons' June 30,
1998 Tier I capital ratio of 11.67% and Total risk-based capital ratio of 12.92%
exceed the current minimum regulatory requirements of 6.00% and 10.00%,
respectively, for classification as a well-capitalized institution.
The table below illustrates all of the capital requirements applicable to
Simmons and its subsidiaries.
<TABLE>
REGULATORY COMPARISON OF CAPITAL RATIOS
SIMMONS FIRST NATIONAL CORPORATION
<CAPTION>
June 30, Regulatory
1998 Minimum
----------------- ------------------
<S> <C> <C>
Total Risk-Based Capital 12.92% 8.00%
Tier 1 Capital 11.67% 4.00%
Leverage Ratio 7.78% 4.00%
</TABLE>
Simmons and its subsidiary banks are subject to a variety of regulations
concerning the maintenance of reserves against deposits, limitations on the
rates that can be charged on loans or paid on deposits, branching, restrictions
on the nature and amounts of loans and investments that can be made and limits
on daylight overdrafts.
The subsidiary banks are limited in the amount of dividends they may
declare. Prior approval must be obtained from the appropriate regulatory
authorities before dividends can be paid by the Banks to Simmons if the amount
of adjusted capital, surplus and retained earnings is below defined regulatory
limits. Simmons and the subsidiary banks had available for payment of dividends
without regulatory approval, approximately $4 million of undistributed earnings
as of June 30, 1998. The subsidiary banks are also restricted from extending
credit or making loans to or investments in Simmons and certain other affiliates
as defined in the Act. Furthermore, loans and extensions of credit are subject
to certain other collateral requirements.
OFFICES
Simmons' executive offices are located in the offices of Simmons First
National Bank, 501 Main Street, Pine Bluff, Arkansas 71601.
EMPLOYEES
As of June 30, 1998, Simmons and the subsidiary banks had approximately 742
full-time equivalent employees, which are employed as set forth below:
<TABLE>
<CAPTION>
Entity Employees
------------------- ---------------
<S> <C>
Simmons 36
SFNB (Pine Bluff) 470
SFB Jonesboro 52
SFB South Arkansas 17
SFB Dumas 11
SFB Northwest Arkansas 28
SFB Russellville 86
SFB Searcy 42
</TABLE>
DESCRIPTION OF SIMMONS COMMON STOCK
The following summary of the terms of Simmons Common Stock does not
purport to be complete and is qualified in its entirety by reference to the
Arkansas Business Corporation Act of 1987 and Simmons's Amended and Restated
Articles of Incorporation. Simmons' Amended and Restated Articles of
Incorporation authorize the issuance of 30,000,000 shares of Common Stock,
$1.00 par value. As of September 28, 1998, there are 5,742,818 fully paid and
non-assessable shares of Simmons Common Stock issued and outstanding.
Each share of Simmons Common Stock is entitled to one vote on all
matters to be voted on by stockholders, and to dividends when and if declared
from time to time by the Board of Directors. There are no rights of preemption
or cumulative voting associated with the Simmons Common Stock. Upon liquidation,
each share would be entitled to share pro rata in all of the assets of Simmons
available for distribution to the holders of Common Stock. The transfer agent
for Simmons Common Stock is Simmons First National Bank. Simmons Common Stock is
traded on NASDAQ-National Market System over-the-counter under the symbol of
"SFNCA."
RESALE OF SIMMONS COMMON STOCK
The shares of Simmons Common Stock to be issued to LBI stockholders in the
Merger will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), thereby allowing such shares to be freely traded without
restriction by persons who will not be "affiliates" of Simmons and who were not
affiliates of LBI, as that term is defined in the Securities Act.
Directors and certain officers and stockholders of LBI may be deemed to be
"affiliates" of LBI within the meaning of the Securities Act. Accordingly,
resales by such persons of any shares of Simmons Common Stock received by them
in the Merger are restricted and may be made only if such stock is registered
under the Securities Act or an exemption from the registration requirements of
the Securities Act is available.
All such persons should carefully consider the limitations imposed by Rules
144 and 145 promulgated under the Securities Act ("Rule 144" and "Rule 145")
prior to effecting any resales of such Simmons Common Stock. Pursuant to Rule
145, the sale of Simmons Common Stock held by those persons who are affiliates
of LBI will be subject to certain restrictions. For one year following the
Effective Date, such persons may sell the Simmons First Stock only if (i)
Simmons has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), during the
preceding twelve months, (ii) such Simmons Common Stock is sold in "brokers'
transactions" as that term is defined in Section 4(4) of the Securities Act,
(iii) the person selling such Simmons Common Stock does not solicit or arrange
for the solicitation of orders to buy such Simmons Common Stock in anticipation
of or in connection with such transaction nor make any payment in connection
with the offer or sale of such Simmons Common Stock to any person other than the
broker who executes the order to sell, and (iv) sales made by such person within
the preceding three months do not exceed 1% of the outstanding shares of that
class. Shares of the Simmons Common Stock held for more than one year but less
than two years after the Effective Date of the Merger may be sold freely if
Simmons is in compliance with the above discussed Exchange Act reporting
requirements. Once the shares of Simmons Common Stock have been held for two
years after the Effective Date, they may be sold free from the restrictions of
Rules 144 and 145.
It is a condition of Simmons' obligation to consummate the Merger that
Simmons shall have received an agreement in form and substance satisfactory to
it, executed and delivered by each holder of LBI Stock who is determined to be
an affiliate of LBI, providing, among other things, that such holder (i) will
not sell, transfer or in any way reduce his risk with respect to his shares of
Simmons Common Stock until such time as Simmons shall have published financial
results covering at least 30 days of post-Merger combined operations, and (ii)
has no present intent to sell, transfer or otherwise dispose of any of his
shares of Simmons Common Stock.
NO SHAREHOLDER APPROVAL REQUIRED
The Board of Directors of Simmons approved the Merger on August 19, 1998.
The shareholders of Simmons are not required to approve the merger.
Consequently, no proxies will be solicited from shareholders of Simmons for
approval of this transaction. No dissenter's rights with respect to holders of
shares of Simmons Common Stock will arise due to the Merger.
OTHER PENDING TRANSACTIONS
Simmons First National Corporation entered into a definitive Agreement and
Plan of Merger with American Bancshares of Arkansas, Inc. on July 24, 1998. The
Agreement and merger has been approved by the Board of Directors, but has not
yet been submitted to its shareholders for approval. American Bancshares of
Arkansas, Inc. had consolidated assets of $87 million and consolidated net worth
of $9.4 million, as of June 30, 1998. If the American Bancshares merger is
approved by the shareholders, the Company will issue an aggregate of 464,894
shares of its Class A common stock to the shareholders of American Bancshares in
consummating the transaction. A Registration Statement concerning the American
Bancshares transaction was filed on October 28, 1998, but has not yet become
effective. It is expected that an effective Registration for the American
Bancshares transaction will be available for review prior to the date of the LBI
special shareholders meeting.
LINCOLN BANKSHARES, INC.
DESCRIPTION OF BUSINESS
Lincoln Bankshares, Inc. is a one-bank holding company which currently
owns 82.1% of the outstanding stock of Bank of Lincoln ("BOL"). LBI has entered
into agreements with the other stockholders of BOL to exchange LBI common stock
for the remaining BOL stock. The exchange is expected to be completed
immediately prior to the completion of the Merger.Pursuant to these agreements,
LBI will issue 1,874 shares of LBI common stock in exchange for 1,432 shares of
BOL stock. After the completion of these exchanges, LBI will own 100% of the
common stock of Bank of Lincoln, Lincoln, Arkansas ("BOL"). LBI may engage,
directly or through subsidiaries, in those activities closely related to banking
which are specifically permitted under the Bank Holding Company Act of 1956, as
amended.
LBI was organized as an Arkansas bank holding company in 1983. The sole
assets (other than cash and temporary investments) of Lincoln Bankshares, Inc.
are the stock it holds in BOL and Lincoln Land Company, a subsidiary which
owns certain real property. The subsidiary bank grants commercial,
installment, real estate and personal loans to customers principally in
Washington County, Arkansas. As of June 30, 1998, BOL had a total of $52.9
million of loans outstanding and a loan loss reserve of $765,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF LINCOLN BANKSHARES, INC.
The following discussion of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements of Lincoln Bankshares, Inc. and the related notes.
General
LBI's net earnings for 1997 decreased $164,000, or 25.8%, as compared to
1996. The changes from 1996 to 1997 were a $344,000 increase in net interest
income, an increase in the provision for loan losses for $357,000, an increase
in non-interest income of $32,000, a $193,000 increase in non-interest expense
(including minority interest) and a decrease in provision for income taxes for
$10,000. LBI's net earnings for 1996 increased $237,000, or 59.4%, as compared
to 1995. The changes from 1995 to 1996 were a $358,000 increase in net interest
income, a $70,000 increase in the provision for loan losses, an increase in
non-interest income of $65,000, an increase in non-interest expense (including
minority interest) of $90,000 and an increase in provision for income taxes for
$26,000. Net earnings for the six months ended June 30, 1998 increased $47,000,
or 17.9%, as compared to the same period in 1997. The changes in income and
expenses for the periods indicated above are discussed in more detail in the
following paragraphs.
Ratios
Following are key financial and operating ratios for LBI:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1998 1997 1997 1996
---------------- -------------
<S> <C> <C> <C> <C>
Return on average assets 0.84% 0.78% 0.66% 0.97%
Return on average equity 13.68% 12.92% 11.35% 17.51%
Average equity to assets 6.02% 5.83% 5.78% 5.55%
Dividend payout ratio -- -- 6.57% 3.77%
</TABLE>
Net Interest Income
Net interest income, LBI's principal source of earnings, is the
difference between the interest income generated by earning assets and the total
interest cost of the deposits and borrowings obtained to fund those assets.
Factors that determine the level of net interest income include the volume of
earning assets and interest bearing liabilities, yields earned and rates paid,
the level of non-performing loans and the amount of non-interest bearing
liabilities supporting earning assets.
The following table shows, for each major category of earning assets
and interest bearing liabilities, the average amount outstanding, the interest
earned or expensed on such amount and the average rate earned or expensed for
each of the years in the three-year period ended December 31, 1997. The table
also shows the average rate earned on all earning assets, the average rate
expensed on all interest bearing liabilities, the net interest spread and the
net interest margin for the same periods. Non-accrual loans were included in
average loans for the purpose of calculating the rate earned on total loans.
<PAGE>
<TABLE>
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
<CAPTION>
Years Ended December 31
---------------------------------------------------------------------------------
1997 1996 1995
--------------------------- ------------------------- -------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate(%) Balance Expense Rate(%) Balance Expense Rate(%)
- ------------------ ------- ------- ------ ------- ------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Federal funds sold $ 1,589 $ 86 5.41% $ 1,978 $ 95 4.80 $ 1,905 $ 95 4.99%
Balances due from banks 734 45 6.13 908 48 5.29 690 35 5.07
Investment securities - taxable 12,863 801 6.23 13,373 809 6.05 11,844 650 5.49
Investment securities - non-taxable 853 40 4.69 842 33 3.92 -- 1 --
Loans 50,516 4,868 9.64 44,132 4,237 9.60 42,352 3,781 8.93
--------- -------- --------- ------- ------ -----
Total interest earning assets 66,555 5,840 8.77 61,233 5,222 8.53 56,791 4,562 8.03
-------- ------- ------
Non-earning assets 5,343 4,212 3,261
--------- ------- ------
Total assets $ 71,898 $65,445 $ 60,052
======== ====== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts $ 12,863 $ 400 3.11 $11,374 $ 303 2.66 $10,489 $ 294 2.80
Time deposits 43,517 2,361 5.43 38,904 2,168 5.57 36,161 1,861 5.15
--------- -------- ------- ------ ------- -----
Total interest bearing deposits 56,380 2,761 4.90 50,278 2,471 4.91 46,650 2,155 4.62
Short-term debt 1,221 123 10.07 1,340 139 10.37 1,507 153 10.15
--------- -------- ------- ------ ------- ------
Total interest bearing liabilities 57,601 2,884 5.01 51,618 2,610 5.06 48,157 2,308 4.79
-------- -------- ------ ----- -------- -----
Non-interest bearing liabilities
Non-interest bearing deposits 8,335 7,878 7,290
Other liabilities 1,804 2,317 1,534
--------- ------- -------
Total liabilities 67,740 61,813 56,981
--------- ------- -------
Stockholders' equity 4,158 3,632 3,071
-------- ------- -------
Total liabilities and
stockholders' equity $ 71,898 $65,445 $60,052
======== ====== ======
Net interest margin $ 2,956 4.44% $2,612 4.27% $2,254 3.97%
======= ===== =====
</TABLE>
<PAGE>
The following table shows changes in interest income and interest expense,
resulting from changes in volume and changes in interest rates for each of the
years ended December 31, 1997 and 1996 as compared to prior years. The changes
in interest rate and volume have been allocated to changes in average volume and
changes in average rates, in proportion to the relationship of absolute dollar
amounts of the changes in rates and volume.
<TABLE>
VOLUME/RATE ANALYSIS
<CAPTION>
Years Ended December 31
1997 over 1996 1996 over 1995
Yield/ Yield/
(In thousands) Volume Rate Total Volume Rate Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
Interest income
Federal funds sold $ (19) $ 10 $ (9) $ 4 $ (4) $ --
Balances due from banks (9) 6 (3) 11 2 13
Investment securities - taxable (31) 23 (8) 84 75 159
Investment securities - non-taxable 0 7 7 0 32 32
Loans 613 18 631 159 297 456
------- ------- -------- -------- ------- -------
Total 554 64 618 258 402 660
-------- ------- -------- -------- ------- -------
Interest expense
Interest bearing transaction and
savings accounts 40 57 97 25 (16) 9
Time deposits 257 (64) 193 141 166 307
Short-term debt (12) (4) (16) (17) 3 (14)
--------- -------- --------- --------- -------- ---------
Total 285 (11) 274 149 153 302
-------- -------- -------- -------- ------- -------
Increase in net interest income $ 269 $ 75 $ 344 $ 109 $ 249 $ 358
======= ====== ======= ======= ======= =======
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses represents management's determination of the
amount necessary to be charged against the current period's earnings, in order
to maintain the allowance for loan losses at a level which is considered
adequate, in relation to the estimated risk inherent in the loan portfolio. The
provision for the six months ended June 30, 1998 and 1997 and years ended
December 31,1997, 1996 and 1995 was $135,000, $129,000, $523,000, $166,000 and
$96,000, respectively. The increase for each period was the result of the growth
in loans and cautions by management regarding reserve levels.
NON-INTEREST INCOME
Total non-interest income for 1997 was $581,000, compared to $549,000
in 1996 and $484,000 in 1995. Non-interest income is principally derived from
three sources: service charges on deposit accounts, service charges and fees on
other accounts and various miscellaneous fees.
Non-interest income decreased $4,000, or 1.4%, for the first six months
of 1998, compared to the same period of 1997.
The table below shows non-interest income for the years ended
December 31, 1997, 1996 and 1995, respectively, as well as changes in 1997 from
1996 and in 1996 from 1995. <TABLE>
NON-INTEREST INCOME
<CAPTION>
1997 1996
Years Ended December 31 Change from Change from
(In thousands) 1997 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 395 $ 353 $ 326 $ 42 11.9% $ 27 8.3%
Other service charges and fees 113 116 87 (3) (2.6)% 29 3.3%
Other income 73 80 71 (7) (8.8)% 9 12.7%
-------- --------- -------- ------- -------
Total non-interest income $ 581 $ 549 $ 484 $ 32 5.8% $ 65 13.4%
======= ======== ======= ===== ======
</TABLE>
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and employee benefits,
occupancy, equipment and other expenses necessary for the operation of LBI.
Non-interest expense for 1997 was $1,993,000, an increase of $216,000, or
12.2%, from 1996. Non-interest expense for 1996 was $1,777,000, an increase of
$40,000, or 2.3%, from 1996. The increase from 1996 to 1997 is attributable to
additional employees and a normal increase in the costs of doing business.
Non-interest expense for the first six months of 1998 was $1,097,000, an
increase of $166,000, or 17.9%, compared to the same period for 1997. The
increase attributable to additional employees and a normal increase in the
costs of doing business.
The table below shows non-interest expense for the years ended December
31, 1997, 1996 and 1995, respectively, as well as changes from 1997 to 1996 and
1996 to 1995, respectively.
<TABLE>
NON-INTEREST EXPENSE
<CAPTION>
1997 1996
Years Ended December 31 Change from Change from
(In thousands) 1997 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 1,174 $ 1,031 $ 983 $ 143 13.9% $ 48 4.9%
Occupancy expense, net 108 105 93 3 2.9 12 12.9
Furniture and equipment expense 160 158 148 2 1.3 10 6.8
Loss on foreclosed assets 1 6 -- (5) (83.3) 6 100.0
Other operating expenses
Professional services 38 36 40 2 5.6 (4) (10.0)
Postage 42 38 40 4 10.5 (2) (5.0)
Telephone 24 21 20 3 14.3 1 5.0
Operating supplies 63 60 63 3 5.0 (3) (4.8)
FDIC insurance 28 25 20 3 12.0 5 25.0
Miscellaneous expenses 355 297 330 58 19.5 (33) (10.0)
-------- --------- ------- ------- ---------
Total non-interest expense $ 1,993 $ 1,777 $ 1,737 $ 216 12.2% $ 40 2.3
======= ======== ======= ====== =========
</TABLE>
INCOME TAXES
The provision for income taxes was $186,000, $295,000, $423,000, $433,000
and $407,000 for the first six months ended June 30, 1998 and 1997 and years
ended December 31, 1997, 1996 and 1995, respectively. The effective income tax
rates for these periods were 32.7%, 46.0%, 41.4%, 35.6% and 44.9%, respectively.
LOAN PORTFOLIO
LBI's loan portfolio averaged $50.5 million during 1997 and $44.1
million during 1996. As of December 31, 1997, total loans were $51.0 million,
compared to $44.9 million on December 31, 1996. The most significant components
of the loan portfolio were commercial and residential real estate loans. The
loan portfolio had virtually no variable rate loans at December 31, 1997.
The amounts of loans outstanding at the indicated dates are reflected
in the following table, according to type of loan.
<TABLE>
LOAN PORTFOLIO
<CAPTION>
Years Ended December 31
(In thousands) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consumer $ 11,393 $ 9,976 $ 8,062 $ 7,353 $ 6,922
Real Estate
Construction 6,421 6,085 4,919 1,731 1,654
Single family residential 13,543 12,632 13,010 12,099 11,527
Other commercial 7,816 5,779 6,918 6,755 5,156
Commercial
Commercial 5,837 5,150 4,546 4,477 3,853
Agricultural 5,307 4,890 4,781 4,269 4,538
Other 649 423 523 485 965
---------- --------- ------- -------- -------
Total loans $ 50,966 $ 44,935 $ 42,759 $ 37,169 $ 34,615
========= ======== ======= ======= =======
</TABLE>
The following table reflects the remaining maturities of certain loan categories
at December 31, 1997.
<TABLE>
MATURITY OF LOANS
<CAPTION>
One One to Over
(In thousands) Year Five Years Five Years Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Single family residential $ 4,673 $ 8,680 $ 190 $ 13,543
Commercial and other 20,772 15,746 905 37,423
----------- ---------- --------- ----------
Total $ 25,445 $ 24,426 $ 1,095 $ 50,966
========== ========== ======== =========
</TABLE>
ASSET QUALITY
A loan is considered impaired when it is probable that LBI will not
receive all amounts due according to the contracted terms of the loans. This
includes nonaccrual loans and certain loans identified by management.
Non-performing loans are comprised of (a) nonaccrual loans, (b) loans
that are contractually past due 90 days and (c) other loans for which terms have
been restructured, to provide a reduction or deferral of interest or principal,
because of deterioration in the financial position of the borrower. LBI
recognizes income principally on the accrual basis of accounting. When loans are
classified as nonaccrual, the accrued interest is charged off and no further
interest is accrued. Loans are placed on a nonaccrual basis either: (1) when
there are serious doubts regarding the collectability of principal or interest,
or (2) when payment of interest or principal is 90 days or more past due and
either (i) not fully secured or (ii) in the process of collection. If a loan is
determined by management to be uncollectible, the portion of the loan determined
to be uncollectible is then charged to the allowance for loan losses. Litigation
accounts are placed on nonaccrual until such time as deemed uncollectible.
At June 30, 1998 and December 31, 1997 and 1996, impaired loans were
$1,316,000, $1,073,000 and $759,000, respectively. At June 30, 1998,
non-performing loans were $373,000 compared to $260,000 and $248,000 at December
31, 1997 and 1996, respectively.
The following tables present information concerning non-performing
assets, including nonaccrual and restructured loans and other real estate owned.
<TABLE>
NON-PERFORMING ASSETS
<CAPTION>
June 30 Years Ended December 31
----------- -------------------------------------------------
(In thousands) 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans $ 344 $ 226 $ 229 $ 177 $ 45 $ 65
Loans past due 90 days or more
(principal or interest payments) 29 34 19 66 -- 76
--------- --------- --------- -------- -------- -------
Total non-performing loans 373 260 248 243 45 141
Foreclosed assets held for sale 297 631 164 100 70 124
--------- --------- --------- -------- -------- -------
Total non-performing assets $ 670 $ 891 $ 412 $ 343 $ 115 $ 265
======== ======== ======== ======== ======== =======
Net charge-offs to average loans 0.27% 0.43 % 0.24% 0.23% 0.19% 0.13%
Allowance for loan losses to total loans 1.44% 1.51% 1.03% 0.94% 1.08% 1.19%
Allowance for loan losses to
non-performing loans 205.09% 295.77% 187.10% 165.43% 895.56% 290.78%
Non-performing loans to total loans 0.70% 0.51% 0.55% 0.57% 0.12% 0.41%
Non-performing assets to total assets 0.89% 1.22% 0.62% 0.57% 0.22% 0.52%
</TABLE>
No significant amount of interest income would have been recorded for
the periods ended June 30, 1998, and December 31, 1997 and 1996, respectively,
if the nonaccrual loans had been accruing interest in accordance with their
original terms. There was no interest income on the nonaccrual loans recorded
for the periods ended June 30, 1998, and December 31, 1997 and 1996.
<PAGE>
ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for June 30, 1998, and for
the last five years is shown in the table below:
<TABLE>
<CAPTION>
June 30 Years Ended December 31
----------- --------------------------------------------------
(In thousands) 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $ 769 $ 464 $ 402 $ 403 $ 410 $ 384
-------- -------- -------- -------- -------- --------
Loans charged off
Consumer 161 220 127 83 104 53
Real estate -- 16 -- 1 -- 14
Commercial 7 17 13 33 12 63
--------- --------- -------- -------- --------- --------
Total loans charged off 168 253 140 117 116 130
--------- --------- --------- -------- -------- --------
Recoveries of loans previously charged off
Consumer 26 29 34 18 39 49
Real estate -- 2 -- -- 3 5
Commercial 3 4 2 2 6 30
--------- --------- --------- -------- -------- --------
Total recoveries 29 35 36 20 48 84
--------- --------- --------- -------- -------- --------
Net loans charged off 139 218 104 97 68 46
Additions to reserve charged to
operating expense 135 523 166 96 61 72
--------- --------- --------- -------- -------- --------
Balance, end of period $ 765 $ 769 $ 464 $ 402 $ 403 $ 410
======== ======== ======== ========= ========= =========
</TABLE>
The amounts of additions to the allowance during the year 1997 were
based on management's judgment, with consideration given to the composition of
the portfolio, historical loan loss experience, assessment of current economic
conditions, past due loans, loans which could be future problems and net losses
from loans charged off for the last five years. It is management's practice to
review the allowance on an annual basis to determine whether additional
provisions should be made to the allowance after considering the factors noted
above.
LBI allocates the allowance for loan losses according to the amount
deemed to be reasonably necessary to provide for the possibility of losses being
incurred within the categories of loans set forth in the table below:
<TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<CAPTION>
December 31
1997 1996 1995 1994 1993
Allowance % of Allowance % of Allowance % of Allowance % of Allowance % of
(In thousands) Amount Loans* Amount Loans* Amount Loans* Amount Loans* Amount Loans*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer $ 154 22% $ 93 22% $ 68 19% $ 72 20% $ 74 20%
Real Estate Residential 184 27% 111 27% 101 28% 83 23% 73 20%
Real Estate Commercial 193 28% 117 28% 110 30% 118 32% 123 33%
Commercial 152 22% 93 22% 78 22% 86 24% 89 24%
Other 9 1% 4 1% 5 1% 4 1% 10 3%
Unallocated 77 46 40 40 41
----- ---- ------ ------ ----- ----- ------ ---- -----
Total $ 769 100% $ 464 100% $ 402 100% $ 403 100% $ 410 100%
====== ==== ====== ==== ===== ==== ====== ==== ===== ====
</TABLE>
*Percentage of loans in each category to total loans
INVESTMENTS AND SECURITIES
LBI's securities portfolio is the second largest component of earning
assets and provides a significant source of revenue. Securities within the
portfolio are classified as either held-to-maturity, available-for-sale or
trading.
Held-to-maturity securities, which include any security for which
management has the positive intent and ability to hold until maturity, are
carried at historical cost, adjusted for amortization of premiums and accretion
of discounts. Premiums and discounts are amortized and accreted, respectively,
to interest income using the constant yield method over the period to maturity.
LBI has classified its entire portfolio as held-to-maturity at December 31, 1997
and 1996.
Held-to-maturity investment securities were $13.5 million at December
31, 1997, compared to the held-to-maturity amount of $15.0 million at December
31, 1996. LBI's philosophy regarding investments is conservative, based on
investment type and maturity. Investments in the held-to-maturity portfolio
include U.S. Treasury securities, mortgage-backed securities and municipal
securities. As of December 31, 1997, $12.0 million, or 88.6%, of the
held-to-maturity securities were invested in U.S. Treasury securities, of which
approximately $5.0 million, or 41.6%, was invested in securities with maturities
of one year or less, and $7.0 million, or 58.4%, was invested in securities with
maturities of one to five years. In order to reduce LBI's income tax burden,
$932,000 of the held-to-maturity securities portfolio, was invested in
tax-exempt obligations of state and political subdivisions. There are no
securities of any one issuer exceeding ten percent of LBI's stockholders' equity
at December 31, 1997. LBI's general policy is not to invest in derivative type
investments, except for collateralized mortgage-backed securities for which
collection of principal and interest is not subordinated to significant superior
rights held by others.
As of December 31, 1997, the held-to-maturity investment portfolio had
gross unrealized gains of $67,000 and gross unrealized losses of $26,000.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
The table below presents the carrying value and fair value of
investment securities for each of the years indicated.
<TABLE>
INVESTMENT SECURITIES
<CAPTION>
Years Ended December 31
---------------------------------------------------------------------------------------
1997 1996
--------------------------------------------- -----------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
U.S. Treasury $ 12,004 $ 61 $ (19) $ 12,046 $ 13,503 $ 49 $ (76) $ 13,476
State and political
subdivisions 932 3 (4) 931 841 1 (11) 831
Mortgage-backed 106 3 (3) 106 124 5 (5) 124
Corporate bond 500 -- -- 500 503 -- (1) 502
--------- ------ ----- --------- --------- ------ ------- ---------
$ 13,542 $ 67 $ (26) $ 13,583 $ 14,971 $ 55 $ (93) $ 14,933
========= ====== ====== ========= ========= ====== ======= =========
</TABLE>
<PAGE>
The following table reflects the amortized cost and estimated fair value of
debt securities at December 31, 1997, by contractual maturity, the weighted
average yields (for tax-exempt obligations on a fully taxable basis, assuming a
34% tax rate) of such securities and the taxable equivalent adjustment used in
calculating yields. Expected maturities will differ from contractual maturities,
because borrowers may have the right to call or prepay obligations, with or
without call or prepayment penalties.
<TABLE>
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
<CAPTION>
December 31, 1997
Over Over
1 Year 5 Years
1 Through Through 10 Years No Fixed Par Fair
(In thousands) Year 5 Years 10 Years and Over Maturity Total Value Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
U.S. Treasury $ 5,001 $ 7,003 $ -- $ -- $ -- $ 12,004 $ 12,000 $ 12,046
State and political
subdivisions 15 61 365 491 -- 932 935 931
Mortgage-backed -- -- -- -- 106 106 106 106
Corporate bonds 500 -- -- -- -- 500 500 500
--------- ------- -------- ------- -------- -------- -------- --------
Total $ 5,516 $ 7,064 $ 365 $ 491 $ 106 $ 13,542 $ 13,541 $ 13,583
======== ======= ======== ======= ======== ======== ======== ========
Percentage of total 41% 52% 3% 3% 1% 100% -- --
======== ====== ======= ====== ======= ======= ======== ========
Weighted average yield 5.88% 5.88% 4.49% 4.88% 6.17% 5.81% -- --
======== ====== ======= ====== ======= ======= ======== ========
</TABLE>
DEPOSITS
Total average deposits for 1997 were $64.7 million, compared to $58.2
million in 1996. The period-end balances of time deposits over $100,000 were
$13.3 million, $13.4 million and $10.8 million at June 30, 1998 and December 31,
1997 and 1996, respectively.
The following table reflects the classification of the average deposits
and the average rate paid on each deposit category for the three years ended
December 31, 1997.
<TABLE>
AVERAGE DEPOSITS BALANCES AND RATES
<CAPTION>
December 31
1997 1996 1995
---------------------- ----------------------- ------------------------
Average Average Average Average Average Average
(In thousands) Amount Rate Paid Amount Rate Paid Amount Rate Paid
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand
deposits $ 8,335 $ 7,878 $ 7,290
Interest bearing transaction and
savings deposits 12,863 3.11% 11,374 2.66% 10,489 2.80%
Time deposits
$100,000 or more 12,115 5.43% 9,793 5.57% 7,092 5.15%
Other time deposits 31,402 5.43% 29,111 5.57% 29,069 5.15%
---------- ----------- ---------
Total $ 64,715 $ 58,156 $ 53,940
========= ========== =========
</TABLE>
<TABLE>
MATURITIES OF LARGE DENOMINATION TIME DEPOSITS
<CAPTION>
Time Certificates of Deposit
($100,000 or more)
December 31
-----------------------------------------------------
1997 1996
--------------------------- ------------------------
(In thousands) Balance Percent Balance Percent
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturing
Three months or less $ 4,926 36.7% $ 2,987 27.7%
Over 3 months to 12 months 6,471 48.2% 5,818 53.9%
Over 12 months 2,037 15.1% 1,991 18.4%
---------- ------- ---------- --------
Total $ 13,434 100.0% $ 10,796 100.0%
========== ====== ========== ======
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings of LBI consists of bank notes payable and
treasury, tax and loan balances with aggregate balances of $1,192,000 and
$1,250,000 for 1997 and 1996 respectively.
LBI has historically funded its growth in earning assets through the
use of core deposits, large certificates of deposits from local markets and
federal funds purchased. Management anticipates that these sources will provide
necessary funding in the foreseeable future. LBI's general policy is to avoid
the use of brokered deposits.
CAPITAL
At December 31, 1997, the total capital reached $4.4 million. At
year-end 1997, the Bank of Lincoln's, ("BOL"), equity to asset ratio was 6.01%
compared to 5.94% at year-end 1996.
The Federal Reserve Board's risk-based guidelines established a
risk-adjusted ratio, relating capital to different categories of assets and
off-balance sheet exposures, such as loan commitments and standby letters of
credit. These guidelines place a strong emphasis on tangible stockholders'
equity as the core element of the capital base, with appropriate recognition of
other components of capital. At December 31, 1997, the Tier 1 capital ratio was
12.2%, while the BOL's total risk-based ratio for total capital, as of December
31, 1997, was 13.7%, both of which exceed the capital minimums established in
the risk-based capital requirements.
<PAGE>
BOL's risk-based capital ratios at December 31, 1997 and 1996 are
presented below.
<TABLE>
RISK-BASED CAPITAL
<CAPTION>
December 31
(In thousands) 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 capital
Stockholder's equity $ 5,860 $ 5,581
---------- ---------
Total Tier 1 capital 5,860 5,581
---------- ---------
Tier 2 capital
Qualifying allowance for loan losses 769 464
----------- ---------
Total Tier 2 capital 769 464
----------- ---------
Total risk-based capital $ 6,629 $ 6,045
========== =========
Risk weighted assets $ 48,233 $ 42,009
========== =========
Ratios at end of year
Leverage ratio 8.1% 8.4%
Tier 1 capital 12.2% 13.3%
Total risk-based capital 13.7% 14.4%
Minimum guidelines
Leverage ratio 4.0% 4.0%
Tier 1 capital 4.0% 4.0%
Total risk-based capital 8.0% 8.0%
</TABLE>
LIQUIDITY AND MARKET RISK MANAGEMENT
PARENT COMPANY
LBI depends upon the dividends paid to it, as the majority shareholder
of BOL, as a principal source of funds. At December 31, 1997, undivided profits
of BOL was approximately $5,460,000, of which approximately $303,000 was
available for the payment of dividends to the parent company and minority
shareholders without regulatory approval.
BANKING SUBSIDIARY
Generally speaking, BOL relies upon net inflows of cash from financing
activities, supplemented by net inflows of cash from operating activities, to
provide cash used in investing activities. Typical of most banking companies,
significant financing activities include: deposit gathering; use of short-term
borrowing facilities, such as federal funds purchased and repurchase agreements;
and the issuance of long-term debt. BOL's primary investing activities include
loan originations and purchases of investment securities, offset by loan payoffs
and investment maturities.
Liquidity represents an institution's ability to provide funds to
satisfy demands from depositors and borrowers, by either converting assets into
cash or accessing new or existing sources of incremental funds. A major
responsibility of management is to maximize net interest income within prudent
liquidity constraints. At June 30, 1998, cash and cash equivalents were 10.8% of
total assets, as compared to 8.3% and 6.6% at December 31, 1997 and 1996,
respectively.
MARKET RISK MANAGEMENT
Market risk arises from changes in interest rates. LBI has risk
management policies to monitor and limit exposure to market risk. In asset and
liability management activities, policies are in place that are designed to
minimize structural interest rate risk. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified.
INTEREST RATE SENSITIVITY
Management continually reviews LBI's exposure to changes in interest
rates. Among the factors considered during its evaluations are changes in the
mix of earning assets, growth of earning assets, interest rate spreads and
repricing periods. Management primarily utilizes an income statement GAP model
developed by the Arkansas State Bank Department. This model assigns an earnings
change ratio to each rate sensitive asset and liability based on how volatile
the rate is for each account. The income statement GAP ratio is rate sensitive
assets times the assigned earnings change ratio minus rate sensitive liabilities
times the assigned earnings change ratio over twelve months expressed as a
percent of total assets. An alternative model measures the interest rate
sensitivity GAP, which presents, at a particular point in time, the matching of
interest rate sensitive assets with interest rate sensitive liabilities. The
following schedule presents the ratios of cumulative rate sensitive assets to
rate sensitive liabilities at December 31, 1997.
<TABLE>
INTEREST RATE SENSITIVITY
<CAPTION>
Interest Rate Sensitivity Period
Over three Over One Over Three Over Five
Three Months Year Years Years
Months or Through 12 Through Through Through 15 Over 15 No Fixed
(In thousands, except ratios) Less Months Three Years Five Years Years Years Maturity Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets
Short-term investments $ 4,350 $ -- $ -- $ -- $ -- $ -- $ -- $ 4,350
Investment securities 2,516 3,000 4,029 3,035 660 196 106 13,542
Loans 9,929 15,516 11,954 12,472 910 185 -- 50,966
--------- --------- --------- --------- --------- --------- --------- -----------
Total earning assets 16,795 18,516 15,983 15,507 1,570 381 106 68,858
--------- --------- --------- --------- --------- --------- --------- -----------
Interest bearing liabilities
Interest bearing transaction
and savings accounts 13,060 -- -- -- -- -- -- 13,060
Time deposits 14,987 22,290 6,308 926 -- -- -- 44,511
Short-term borrowings -- 1,192 -- -- -- -- -- 1,192
--------- --------- --------- --------- --------- --------- --------- -----------
Total interest bearing
liabilities 28,047 23,482 6,308 926 -- -- -- 58,763
--------- --------- --------- --------- --------- --------- --------- -----------
Interest rate sensitivity GAP$ (11,252) $ (4,966) $ 9,675 $ 14,581 $ 1,570 $ 381 $ 106 $ 10,095
========= ========= ======= ======= ======= ======= ======== ==========
Cumulative interest rate
sensitivity GAP $ (11,252) $(16,218) $ (6,543) $ 8,038 $ 9,608 $ 9,989 $ 10,095
Cumulative rate sensitive assets
to rate sensitive liabilities 59.9% 68.5% 88.7% 113.7% 116.4% 117.0% 117.2%
Cumulative GAP as a % of
earning assets (16.3)% (23.6)% (9.5)% 11.7% 14.0% 14.5% 14.7%
</TABLE>
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. LBI has now
completed the Year 2000 identification of mission critical systems, vendors,
large borrowers and large depositors requiring assessment and testing. During
the six months ended June 30, 1998, LBI upgraded its general ledger, investment,
and application software to address the Year 2000 issue. LBI is scheduled to
upgrade its operating system in the fourth quarter of 1998. LBI is expected to
complete the testing of its mission critical system by December 31, 1998. The
results of operations for the six months ended June 30, 1998 and the year ended
December 31, 1997 include no significant expenses associated with Year 2000. The
testing with vendors, large borrowers and large depositors has been started and
will be completed by June 30, 1999.
LBI is expected to convert to Simmons' system and this conversion is
scheduled for the second quarter of 1999.
Management believes completion of the Year 2000 modifications will not
have a material effect on the LBI's future consolidated results of operations or
financial position.
REGULATORY ISSUES
Pursuant to the Interest Rate Control Amendment to the Constitution
of the State of Arkansas, "consumer loans and credit sales" have a maximum
limitation of 17% per annum and all "general loans" have a maximum limitation of
5% over the Federal Reserve Discount Rate in effect at the time the loans are
made. The Arkansas Supreme Court has determined that "consumer loans and credit
sales" are "general loans" and are subject to the limitation of 5% over the
Federal Reserve Discount Rate as well as a maximum limitation of 17% per annum.
As a general rule, LBI is required to comply with the Arkansas usury laws on
loans made within the State of Arkansas.
DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS OF LBI WILL BE DISSOLVED AND POSITIONS HELD BY EXECUTIVE
OFFICERS OF LBI WILL NO LONGER EXIST UPON THE CONSUMMATION OF THE MERGER. THE
BOARD OF DIRECTORS OF BOL WILL BE DISSOLVED AND POSITIONS HELD BY EXECUTIVE
OFFICERS OF BOL WILL NO LONGER EXIST UPON THE CONSUMMATION OF THE BANK MERGER.
AT THIS TIME NONE OF THE DIRECTORS OR EXECUTIVE OFFICERS OF LBI ARE EXPECTED TO
BE ON THE BOARD OF DIRECTORS OR AN EXECUTIVE OFFICER OF SIMMONS AFTER
CONSUMMATION OF THE MERGER. IT IS ANTICIPATED THAT LOYD R. SWOPE, CURRENTLY A
DIRECTOR OF LBI AND BOL, AND HERBERT A. LEWIS, JR., CURRENTLY A DIRECTOR OF BOL,
WILL BECOME A DIRECTOR OF SIMMONS FIRST BANK OF NORTHWEST ARKANSAS UPON THE
COMPLETION OF THE BANK MERGER. THE DIRECTORS OF LINCOLN BANKSHARES, INC. ARE SET
FORTH BELOW:
<TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF LINCOLN BANKSHARES, INC.
<CAPTION>
LBI Common Stock
Owned Beneficially as
Director(1) Principal Occupation of June 30, 1998 (2)
Name Age Since and Directorship Shares Percent of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loyd R. Swope 57 1983 Chairman of the Board, 2,000 24.84%
President and Director, Lincoln
Bankshares, Inc. and Bank
of Lincoln
Kenneth D. Cox 54 1983 Executive Vice President and 600 7.45%
Director, Lincoln Bankshares, Inc.
and Bank of Lincoln
Wanda K. Irwin 68 1987 Retired, Investments 2,000(3) 24.84%
</TABLE>
(1) This column represents the year in which the directorship commenced.
If a person serves as director for both Lincoln Bankshares, Inc. and its
subsidiary, the year disclosed reflects the date the directorship in Lincoln
Bankshares, Inc. commenced.
(2) The beneficial ownership is based upon 8,050 shares outstanding and does not
include the 1,874 additional shares of LBI which are expected to be issued to
the minority shareholders of BOL immediately prior to the consummation of the
Merger.
(3) The beneficial ownership of Ms. Irwin shown above includes 1,000 shares
owned outright and 1,000 owned by the James C. Irwin Trust, a trust created by
and for the benefit of her spouse, James C. Irwin.
LBI has designated Loyd R. Swope, Chairman and President, and Kenneth D.
Cox, Executive Vice President, as its executive officers.
During 1998, the Board of Directors of LBI held 10 meetings and all the
incumbent directors then in office were in attendance at more than seventy-five
percent of the meetings. The Board of Directors does not have a nominating,
compensation or audit committee.
TRANSACTIONS WITH MANAGEMENT
Directors and executive officers of LBI and its subsidiary, their
associates and members of their immediate families were customers of and had
transactions including loans and commitments to lend with subsidiaries of LBI in
the ordinary course of business during 1998. All such loans and commitments were
made by the subsidiary on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than normal risk of collectability or
present other unfavorable features. Similar transactions may be expected to take
place in the ordinary course of business in the future. On June 30, 1998, the
aggregate of these related party loans was approximately $632,000, or
approximately 1.19% of total loans outstanding of LBI and 13.48% of LBI's
capital accounts.
PRINCIPAL STOCKHOLDERS OF LINCOLN BANKSHARES, INC.
The following table sets forth, as of June 30, 1998, the only persons who
were known by LBI to own of record or beneficially more than five (5%) of
Lincoln Bankshares, Inc. Common Stock and the number of shares owned
beneficially by each of them. The beneficial ownership is based upon 8,050
shares outstanding and does not include the 1,874 additional shares of LBI which
are expected to be issued to the minority shareholders of BOL immediately prior
to the consummation of the Merger.
<TABLE>
<CAPTION>
Shares Owned Aggregate
Name Directly Indirectly Pct of Class
----------- ----------------------------- ---------------
<S> <C> <C> <C>
Loyd R. Swope 2,000 0 24.84%
Clark C. McClinton (1) 500 900 17.39%
Wanda K. Irwin (2) 1,000 1,000 24.84%
James C. Irwin Trust 1,000 0 12.42%
Herbert A. Lewis (3) 688 0 8.55%
Kenneth D. Cox 600 0 7.45%
Ellen M. Lewis 550 0 6.83%
Margaret A. Lewis 550 0 6.83%
</TABLE>
(1) The indirect ownership includes shares owned by the Clark C. McClinton and
Marie H. McClinton Trust.
(2) The indirect ownership includes shares owned by the James C. Irwin Trust
of which James C. Irwin, spouse of Wanda K. Irwin is the trustee,
beneficiary, and settler.
(3) The beneficial ownership includes 550 shares owned outright and 138 owned
in a self directed IRA account.
All directors and executive officers of LBI as a group (3 persons) as of
June 30, 1998 owned directly or indirectly 4,600 shares or 57.14% of the
outstanding shares of LBI Common Stock. No director or executive officer of LBI
owns any shares of Simmons Common Stock. Neither Simmons nor any of its
subsidiaries nor any director or executive officer of Simmons owns any shares of
LBI Common Stock.
COMPETITION
The banking subsidiary of LBI competes actively with national and state
banks, savings and loan associations, credit unions, securities dealers,
mortgage bankers, finance companies and insurance companies.
LITIGATION
There is no material pending litigation in which LBI or its subsidiaries is
a party.
OFFICES
LBI's executive offices are located in the offices of Bank of Lincoln, 101
Boyer Street, Lincoln, Arkansas 72744.
EMPLOYEES
As of June 30, 1998, LBI and its subsidiaries has 35 employees, 30 of whom
are located in Lincoln and 5 at Prairie Grove.
DESCRIPTION OF LINCOLN BANKSHARES, INC. STOCK
LBI has one class of common stock issued and outstanding. As of June 30,
1998, LBI had 8,050 shares of common stock outstanding, held by 15 stockholders.
LBI has agreed to issue an additional 1,874 shares of LBI common stock to two
minority shareholders of BOL immediately prior to the consummation of the
Merger. After such exchange transaction, LBI will have 9,924 shares of its
common stock outstanding. <TABLE>
Dividends Paid Per Share
<CAPTION>
For the periods ended
June 30, December 31,
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Common Stock $0.00 $4.00 $3.00
</TABLE>
COMPARISON OF RIGHTS OF HOLDERS OF LINCOLN BANKSHARES, INC.
COMMON STOCK AND SIMMONS COMMON STOCK
LBI is a corporation organized and existing under the laws of the
State of Arkansas, i.e., the Arkansas Business Corporation Act of 1965. Simmons
is a corporation organized and existing under the laws of the State of Arkansas,
i.e., the Arkansas Business Corporation Act of 1987. Holders of LBI common stock
have the rights, privileges and duties provided by the 1965 Act, while the
holders of Simmons Common Stock have the rights, privileges and duties provided
by the 1987 Act. For a detailed discussion of all material differences between
the rights of security holders of LBI, and the rights of security holders of
Simmons, see "Election by Lincoln Bankshares, Inc. Stockholders under the 1987
Act - Result of Election".
The holders of LBI common stock are entitled to cumulative voting
for directors. The holders of Simmons Common Stock are not entitled to
cumulative voting for directors. Pursuant to Simmons' By-Laws, the number of
directors of the corporation may not be less than five nor more than
twenty-five. The LBI Articles sets that the number of directors at three.
Furthermore, neither holders of LBI common stock nor holders of Simmons Common
Stock have preemptive rights with respect to issuance of additional securities.
Both LBI and Simmons have corporate power to indemnify their officers and
directors with respect to certain liabilities. Under the 1987 Act, the ability
to indemnify officers and directors with respect to liabilities incurred by them
in their conduct and good faith of the business of the corporation is broader
than under the 1965 Act. Such power is limited, however, by applicable federal
laws and regulations including federal banking laws and regulations and the
applicable state law. Further, pursuant to the 1987 Act Simmons has adopted a
provision in its Articles of Incorporation which limits the liability of its
directors for certain breaches of their fiduciary duties. LBI has not adopted
such a liability limitation provision since such provisions are not authorized
by the 1965 Act under which the corporate activities of LBI are governed.
Simmons' Articles of Incorporation contain several paragraphs that may have
the effect of operating as anti-takeover provisions. Article ELEVENTH contains a
restriction upon the ability of a stockholder owning more than 10% of Simmons
Common Stock to acquire any additional shares except through a cash tender offer
at a price not less than the highest closing price of Simmons Common Stock
during the most recent 24 months, unless such shareholder is excepted from the
application of the Article by the board of directors prior to becoming a 10%
shareholder. Further, Article ELEVENTH requires the approval of 80% of the
shareholders of Simmons for any acquisition of Simmons by merger or
consolidation or by asset acquisition unless approved by the affirmative vote of
80% of the directors who were in office prior to the proponent of the
acquisition acquiring 10% or more of Simmons Common Stock. Article THIRTEENTH of
the Articles of Incorporation of Simmons requires the Board to consider the
following matters in addition to any other matters required to be considered
prior to making any recommendation concerning a proposed business combination in
which Simmons will not be the surviving corporation: 1) the impact on the
corporation, its subsidiaries, shareholders and employees and the communities
served by the corporation, 2) the timeliness of the proposed transaction
considering the business climate and strategic plans of the Company, 3) the
existence of any legal defects or regulatory issues involved in the proposed
transaction, 4) the lack of non-consummation of the transaction due to lack of
financing, regulatory issues or identified issues, 5) current market price of
Simmons Common Stock and its consolidated assets, 6) book value of Simmons
Common Stock, 7) the relationship of the offered price for Simmons Common Stock
to the Board's opinion of the current value of Simmons in a negotiated
transaction, 8) the relationship of the offered price for Simmons Common Stock
to the Board's opinion of the future value of Simmons as an independent entity,
and 9) such other criteria as the Board may determine are appropriate. Article
FOURTEENTH, requires the affirmative vote of 80% of the shareholders to amend,
repeal or modify any provision of the Articles of Incorporation unless such
revision is approved by 80% of the directors who were in office prior to the
proponent of any business combination acquiring 10% or more of Simmons Common
Stock. The Lincoln Bankshares, Inc. Articles of Incorporation do not contain a
similar provisions. However, under the 1965 Act, LBI must have a two-thirds
(2/3) majority vote of all votes entitled to be cast to adopt a merger or
business combination.
LEGAL MATTERS AND EXPERTS
LEGAL OPINIONS
The legality of the Simmons Common Stock to be issued after the Merger has
been consummated by and between Simmons and Lincoln Bankshares, Inc. and certain
tax matters relating to the Merger will be passed upon by Williams & Anderson
LLP, 111 Center St., 22nd Floor, Little Rock, Arkansas 72201.
EXPERTS
The consolidated financial statements of Simmons First National Corporation
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997 are incorporated by reference in this Proxy
Statement and have been audited by Baird, Kurtz and Dobson, independent public
accountants, as indicated in their reports with respect thereto, and such
consolidated financial statements of Simmons have been incorporated by reference
herein in reliance upon the report of said firm given upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Lincoln Bankshares, Inc. as of
December 31, 1997 and for the year ended December 31, 1997, have been audited by
Baird, Kurtz & Dobson, whose report thereon appears elsewhere herein and in the
Registration Statement and have been so included in reliance upon the report of
Baird, Kurtz & Dobson given upon the authority of said firm as experts in
accounting and auditing.
GENERAL
As of the date of this Proxy Statement, the board of directors of LBI does
not intend to present, and has not been informed that another person intends to
present, any matter for action at the meeting of stockholders other than as
discussed in this Proxy Statement. If any other matters properly come before the
meeting, it is intended that the holders of the proxies will act in accordance
with their best judgment.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Lincoln Bankshares, Inc.
Lincoln, Arkansas
We have audited the accompanying consolidated balance sheet of LINCOLN
BANKSHARES, INC. as of December 31, 1997, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LINCOLN
BANKSHARES, INC. as of December 31, 1997 and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
September 18, 1998
<TABLE>
LINCOLN BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997 and 1996
<CAPTION>
December 31,
(In thousands) June 30, 1998 1997 1996
- ----------------------------------------------------- ------------------ ------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash & non-interest bearing balances due from banks $ 2,473 $ 1,664 $ 2,099
Interest bearing balances due from banks 952 500 950
Federal funds sold and securities purchased
under agreements to resell 4,675 3,850 1,325
------------------ ----------------- -----------------
Cash and cash equivalents 8,100 6,014 4,374
Investment securities 12,236 13,542 14,971
Loans 52,948 50,966 44,935
Allowance for loan losses (765) (769) (464)
------------------- ------------------ ------------------
Net loans 52,183 50,197 44,471
Premises and equipment 1,006 998 1,044
Foreclosed assets held for sale, net 297 631 164
Interest receivable 1,063 1,041 946
Other assets 415 410 356
------------------ -------------- ---------------
TOTAL ASSETS $ 75,300 $ 72,833 $ 66,326
================= ================ ================
LIABILITIES
Non-interest bearing transaction accounts $ 9,252 $ 8,239 $ 8,430
Interest bearing transaction accounts
and savings deposits 13,741 13,060 11,761
Time deposits 45,023 44,511 39,366
------------------ ----------------- -----------------
Total deposits 68,016 65,810 59,557
Short-term debt 1,120 1,192 1,250
Minority interest 1,121 1,049 999
Accrued interest and other liabilities 354 403 582
------------------ ----------------- -----------------
Total Liabilities 70,611 68,454 62,388
------------------ ----------------- -----------------
STOCKHOLDERS' EQUITY
Common stock, par value $1 a share,
50,000 shares authorized,
10,000 issued 10 10 10
Surplus 518 518 518
Treasury stock, at cost - 1,950 shares (768) (768) (768)
Undivided profits 4,929 4,619 4,178
------------------ ----------------- -----------------
Total stockholders' equity 4,689 4,379 3,938
------------------ ----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 75,300 $ 72,833 $ 66,326
================= ================ ================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
LINCOLN BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 1998 and 1997
and Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, December 31,
(In thousands, except per share data) 1998 1997 1998 1997 1997 1996 1995
- -------------------------------------- -------- -------- ------- --------- -------- ------ -------
(Unaudited) (Unaudited)(Unaudited) (Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,439 $ 1,029 $ 2,553 $ 2,301 $4,868 $4,237 $3,781
Federal funds sold 64 87 29 86 95 95
Investment securities 167 239 383 432 841 842 651
Interest bearing balances 13 14 27 27 45 48 35
due from banks ------ ------ ------ ------- ------- ------- ------
TOTAL INTEREST INCOME 1,683 1,282 3,050 2,789 5,840 5,222 4,562
-------- ------- ------- ------- ------ ------ ------
INTEREST EXPENSE
Deposits 840 577 1,484 1,314 2,761 2,471 2,155
Federal funds purchased 1 -- 1 2 1 1
Short-term debt 26 30 49 60 121 138 152
-------- ------- ------- ------- ------ ------ ------
TOTAL INTEREST EXPENSE 866 608 1,533 1,375 2,884 2,610 2,308
-------- ------- ------- ------- ------ ------ ------
NET INTEREST INCOME 817 674 1,517 1,414 2,956 2,612 2,254
Provision for loan losses 87 54 135 129 523 166 96
-------- ------- ------- ------- ------ ----- ------
NET INTEREST INCOME
AFTER PROVISION
FOR LOAN LOSSES 730 620 1,382 1,285 2,433 2,446 2,158
-------- ------- ------- ------- ------ ------ ------
NON-INTEREST INCOME
Service charges on deposit accounts 84 103 178 192 395 353 326
Other service charges and fees 34 27 76 65 113 116 87
Other income 13 17 29 30 73 80 71
-------- ------- ------- ------- ------ ------ ------
TOTAL NON-INTEREST INCOME 131 147 283 287 581 549 484
-------- ------- ------- ------- ------ ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits 334 255 608 556 1,174 1,031 983
Occupancy expense, net 31 24 55 48 108 105 93
Furniture and equipment expense 45 39 80 77 160 158 148
Loss on foreclosed assets -- 1 -- 1 1 6 --
Other operating expenses 227 105 354 249 550 477 513
-------- ------- ------- ------- ------ ----- ------
TOTAL NON-INTEREST EXPENSE 637 424 1,097 931 1,993 1,777 1,737
-------- ------- ------- ------- ------ ----- ------
INCOME BEFORE INCOME TAXES 224 343 568 641 1,021 1,218 905
Provision for income taxes 76 148 186 295 423 433 407
-------- ------- ------- ------- ------ ------ ------
NET INCOME BEFORE
MINORITY INTEREST 148 195 382 346 598 785 498
Minority interest 28 46 72 83 126 149 99
-------- ------- ------- ------- ------ ------ ------
NET INCOME $ 120 $ 149 $ 310 $ 263 $ 472 $ 636 $ 399
======= ====== ====== ====== ===== ===== =====
BASIC AND DILUTED
EARNINGS PER SHARE $ 14.91 $ 18.51 $ 38.51 $ 32.67 $58.63 $79.01 $49.57
======= ====== ====== ====== ===== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
LINCOLN BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended June 30, 1998 and 1997 and
Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997 1997 1996 1995
- ----------------------------------------------------- ----------------------- --------------------------------
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 310 $ 263 $ 472 $ 636 $ 399
Items not requiring (providing) cash
Depreciation and amortization 43 48 96 110 88
Provision for loan losses 135 129 523 166 96
Net amortization of investment securities 8 25 34 21 51
Deferred income taxes -- -- (123) (26) 181
Changes in
Interest receivable (22) (27) (95) (78) (188)
Other assets (5) 141 69 (119) (98)
Minority interest 72 83 50 79 75
Accrued interest and other liabilities 311 (91) (266) (68) 385
Income taxes payable (360) (164) 87 233 (165)
----------- ----------- ---------- ---------- ----------
Net cash provided by operating activities 492 407 847 954 824
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net origination of loans (2,121) (6,078) (6,888) (2,422) (5,717)
Purchase of premises and equipment (51) (35) (50) (53) (411)
Proceeds from sale of foreclosed assets 334 41 172 78 --
Purchases of available-for-sale securities (218) -- -- -- --
Proceeds from maturities of held-to-maturity securities 4,515 2,500 3,500 5,450 2,596
Purchases of held-to-maturity securities (2,999) (2,000) (2,105) (8,789) (2,898)
------------ --------- -------- ---------- ----------
Net cash used in investing activities (540) (5,572) (5,371) (5,736) (6,430)
------------ --------- -------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,206 2,831 6,253 5,076 7,019
Net advances (repayment) of short-tem debt (72) 131 (58) (180) (154)
Dividends paid -- -- (31) (24) --
Net increase in federal funds purchased -- 400 -- -- --
----------- ----------- ----------- ---------- -----------
Net cash provided by financing activities 2,134 3,362 6,164 4,872 6,865
----------- ----------- ----------- ---------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,086 (1,803) 1,640 90 1,259
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,014 4,374 4,374 4,284 3,025
----------- ----------- ----------- ---------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 8,100 $ 2,571 $ 6,014 $ 4,374 $ 4,284
========== ========== ========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
LINCOLN BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1998 and Years
Ended December 31, 1997, 1996, and 1995
<CAPTION>
Unrealized
Depreciation
On Available-
Common For-Sale Undivided Treasury
(In thousands) Stock Surplus Securities, Net Profits Stock Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1994 (unaudited) $ 10 $ 518 $ (111) $ 3,167 $ (768) $ 2,816
Comprehensive income
Net income (unaudited) 399 399
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $57 (unaudited) 111 111
--------
Comprehensive income (unaudited) 510
Balance, December 31, 1995 (unaudited) 10 518 -- 3,566 (768) 3,326
Net income (unaudited) 636 636
Cash dividends declared
--$3.00 per share (unaudited) (24) (24)
------- ------- ------- ------- ------ ---------
Balance, December 31, 1996 (unaudited) 10 518 -- 4,178 (768) 3,938
Net income 472 472
Cash dividends declared
--$4.00 per share (31) (31)
------- ------- -------- -------- ------- ---------
Balance, December 31, 1997 10 518 -- 4,619 (768) 4,379
Net income (unaudited) 310 310
------- ------- -------- -------- ------- --------
Balance, June 30, 1998 (unaudited) $ 10 $ 518 $ -- $ 4,929 $ (768) $ 4,689
======= ======== ======= ======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
.......
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
Lincoln Bankshares, Inc., ("LBI" ) operates as a one-bank holding
company. LBI's business primarily consists of the business of the Bank of
Lincoln ( "BOL"), which is primarily engaged in providing a full range of
banking services to individual and corporate customers through its facilities in
Lincoln, Arkansas. LBI is subject to competition from other financial
institutions. The Company also is subject to the regulation of certain federal
and state agencies and undergoes periodic examinations by those regulatory
authorities.
LBI owned 82.1% of the BOL's outstanding capital stock at June 30,
1998, and December 31, 1997 and 1996.
The consolidated financial statements as of June 30, 1998 and December
31, 1996 and for the periods ended June 30, 1998 and 1997 and December 31, 1996
and 1995 are unaudited, but in the opinion of management, include all
adjustments, consisting only of normal, recurring items, necessary for fair
presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for loan losses, the
valuation of foreclosed assets and the allowance for foreclosure expenses. In
connection with the determination of the allowance for loan losses and the
valuation of foreclosed assets, management obtains independent appraisals for
significant properties.
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize losses on loans,
changes in economic conditions, particularly in Arkansas, may necessitate
revision of these estimates in future years. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the Company
to recognize additional losses, based on their judgment of information available
to them at the time of their examination.
Principles of Consolidation
The consolidated financial statements include the accounts of LBI and
its subsidiary. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers due
from banks and federal funds sold as cash equivalents.
<PAGE>
Investments in Debt Securities
Held-to-maturity securities, which include any security for which the
banking subsidiary has the positive intent and ability to hold until maturity,
are carried at historical cost adjusted for amortization of premiums and
accretion of discounts. Premiums and discounts are amortized and accreted,
respectively, to interest income using the constant yield method over the period
to maturity.
Interest on debt securities is included in income when earned.
Loans
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-offs are reported at their
outstanding principal adjusted for any loans charged off and any deferred fees
or costs on originated loans and unamortized premiums or discounts on purchased
loans.
Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to
expense and reduced by loans charged off, net of recoveries. The allowance is
maintained at a level considered adequate to provide for potential loan losses,
based on management's evaluation of the loan portfolio, as well as on prevailing
and anticipated economic conditions and historical losses by loan category.
General reserves have been established, based upon the aforementioned factors
and allocated to the individual loan categories. Allowances are accrued on
specific loans evaluated for impairment for which the basis of each loan,
including accrued interest, exceeds the discounted amount of expected future
collections of interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the Company will
not receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued and interest accrued and unpaid is removed at the time such amounts
are delinquent 90 days. Interest is recognized for nonaccrual loans only upon
receipt and only after all principal amounts are current according to the terms
of the contract.
Premises and Equipment
Depreciable assets are stated at cost, less accumulated depreciation.
Depreciation is charged to expense, using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are capitalized and
amortized by the straight-line method over the terms of the respective leases or
the estimated useful lives of the improvements, whichever is shorter.
Foreclosed Assets Held For Sale
Assets acquired by foreclosure or in settlement of debt and held for
sale are valued at estimated fair value, as of the date of foreclosure.
Management evaluates the value of foreclosed assets held for sale periodically.
All costs to sell the foreclosed asset are charged to expense.
Fee Income
Loan fees, net of direct origination costs, are recognized as revenue
on a yield basis over the term of the loans.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects
of differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets,
if it is more likely than not that a deferred tax asset will not be realized.
Earnings Per Share
LBI adopted the provisions of SFAS No. 128, Earnings Per Share (EPS),
in the year ended December 31, 1997, by reclassifying earnings per share for all
periods presented. This Statement replaces the presentation of primary earnings
per share with a presentation of basic earnings per share.
Earnings per share are based on the weighted average number of shares
outstanding during each period less the weighted number of shares of treasury
stock. There were no common stock equivalents during any of the periods.
Weighted average shares outstanding were 8,050 for the period ended June 30,
1998, and 8,050 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Impact of Recent Accounting Pronouncements
The FASB recently adopted SFAS 130, Reporting Comprehensive Income.
This Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements. It does not
address issues of recognition or measurement. During the period ended June 30,
1998, LBI adopted the provisions of SFAS 130, by reclassification adjustments of
prior periods presented.
The FASB recently adopted SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating
segments. The Statement also establishes standards for related disclosures about
products and services, geographic area and major customers. SFAS 131 is
effective for years beginning after December 15, 1997. SFAS 131, which LBI will
initially adopt for calendar year 1998, is not expected to have a material
impact on the Company's financial statements.
The FASB recently adopted SFAS 133, Accounting for Derivative Financial
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999,
may be adopted early for periods beginning after issuance of the Statement and
may not be applied retroactively. LBI does not expect to adopt SFAS 133 early.
Management believes that SFAS 133 does not have a material impact on the LBI's
financial statements.
<PAGE>
NOTE 2: INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment
securities that are classified as held-to-maturity and available-for-sale are as
follows:
<TABLE>
<CAPTION>
June 30, 1998
Gross Gross
Amortized Unrealized Unrealized Approximate
In thousands Cost Gains (Losses) Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale
Other securities $ 218 $ -- $ -- $ 218
-------------- -------------- -------------- --------------
$ 218 $ -- $ -- $ 218
============== ============== ============== ==============
Held-to-maturity
U. S. Treasury $ 11,003 $ 63 $ (12) $ 11,054
State and political subdivision 916 12 (1) 927
Mortgage-backed securities 99 4 (4) 99
--------------- --------------- --------------- ---------------
$ 12,018 $ 79 $ (17) $ 12,080
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
Gross Gross
Amortized Unrealized Unrealized Approximate
In thousands Cost Gains (Losses) Fair Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity
U. S. Treasury $ 12,004 $ 61 $ (19) $ 12,046
State and political subdivision 932 3 (4) 931
Mortgage-backed securities 106 3 (3) 106
Corporate bond 500 -- -- 500
--------------- --------------- --------------- ---------------
$ 13,542 $ 67 $ (26) $ 13,583
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Approximate
In thousands Cost Gains (Losses) Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-maturity
U. S. Treasury $ 13,503 $ 49 $ (76) $ 13,476
State and political subdivision 841 1 (11) 831
Mortgage-backed securities 124 5 (5) 124
Corporate bond 503 -- (1) 502
--------------- --------------- --------------- ---------------
$ 14,971 $ 55 $ (93) $ 14,933
============== ============== ============== ==============
</TABLE>
Maturities of investment securities at June 30, 1998, and December 31, 1997, are
as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
--------------------------------- --------------------------
Amortized Approximate Amortized Approximate
In thousands Cost Fair Value Cost Fair Value
- ----------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Held-to-maturity
One year or less $ 2,999 $ 3,000 $ 5,516 $ 5,521
After one through five years 8,079 8,129 7,064 7,100
After five years through ten years 540 544 365 363
After ten years 301 308 491 493
Mortgage-backed securities
not due on a single date 99 99 106 106
--------------- --------------- --------------- ---------------
$ 12,018 $ 12,080 $ 13,542 $ 13,583
============== ============== ============== ==============
Available-for-Sale
Other securities not
due on a single date $ 218 $ 218 $ -- $ --
-------------- -------------- -------------- --------------
$ 218 $ 218 $ -- $ --
============== ============== ============== ==============
</TABLE>
Income earned on the above securities for June 30, 1998, June 30, 1997
and the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
June 30 December 31
------------------------- -----------------------------------------
(In thousands) 1998 1997 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Taxable
Held-to-maturity $ 361 $ 412 $ 801 $ 809 $ 650
Non-taxable
Held-to-maturity 22 20 40 33 1
------- ------- ------ ------- ------
Total $ 383 $ 432 $ 841 $ 842 $ 651
====== ====== ===== ====== =====
</TABLE>
The carrying value, which approximates the market value, of securities
pledged as collateral, to secure public deposits and for other purposes,
amounted to $7,750,000 at June 30, 1998 and $7,300,000 and $6,752,000 at
December 31, 1997 and 1996, respectively.
Most of the state and political subdivision debt obligations are
non-rated bonds and represent small issues, which are evaluated on an ongoing
basis.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories of loans are summarized as follows:
<TABLE>
<CAPTION>
June 30 December 31
----------------- ---------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer $ 11,692 $ 11,393 $ 9,976
Real estate
Construction 7,069 6,421 6,085
Single family residential 12,211 13,543 12,632
Other commercial 9,327 7,816 5,779
Commercial
Commercial 6,347 5,837 5,150
Agricultural 5,315 5,307 4,890
Other 987 649 423
--------------- --------------- ---------------
Total loans before allowance for loan losses $ 52,948 $ 50,966 $ 44,935
=============== ============== ==============
</TABLE>
At June 30, 1998 and December 31, 1997 and 1996, impaired loans totaled
$1,316,000 $1,073,000 and $759,000, respectively. All impaired loans had
designated reserves for possible loan losses. Reserves relative to impaired
loans at June 30, 1998 and December 31, 1997 and 1996 were $240,000, $140,000
and $161,000, respectively.
Interest of approximately $49,000, $47,000, $81,000, $76,000 and
$32,000 was recognized on average impaired loans of $1,344,000, $1,127,000,
$1,174,000, $982,000 and $791,000 for the six months ended June 30, 1998 and
1997 and the years ended December 31, 1997, 1996 and 1995, respectively.
Interest recognized on impaired loans on a cash basis during these period was
immaterial.
At June 30, 1998, single family residential loans comprised 23.1% of
the portfolio compared to 26.6% and 28.1% at December 31, 1997 and 1996.
<PAGE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
------------------ ---------------------
(In thousands) 1998 1997 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 769 $ 464 $ 464 $ 402 $ 403
Provision charged to expense 135 129 523 166 96
Losses charged to allowance (168) (169) (253) (140) (117)
Recovery of losses charged to allowance 29 11 35 36 20
--------- ---------- --------- ---------- ----------
Balance, end of period $ 765 $ 435 $ 769 $ 464 $ 402
========= ========= ========= ========= =========
</TABLE>
NOTE 4: TIME DEPOSITS
Time deposits included approximately $13,328,000, $13,434,000 and
$10,796,000 of certificates of deposit of $100,000 or more, at June 30, 1998 and
December 31, 1997 and 1996, respectively.
Deposits are LBI's primary funding source for loans and investment
securities. The mix and repricing alternatives can significantly affect the cost
of this source of funds and, therefore, impact the margin.
NOTE 5: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
------------------------ -------------------------
(In thousands) 1998 1997 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income taxes currently payable $ 186 $ 295 $ 546 $ 459 $ 226
Deferred income taxes -- -- (123) (26) 181
----------- ----------- ---------- --------- ----------
Provision for income taxes $ 186 $ 295 $ 423 $ 433 $ 407
========== =========== ========== ========= ==========
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet were:
<TABLE>
<CAPTION>
June 30 December 31
------------------- -------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets
Allowance for loan losses $ 217 $ 217 $ 113
Accrued vacation 16 16 --
-------------- ------------- -------------
233 233 113
-------------- ------------- -------------
Deferred tax liabilities
Discount accretion on bonds (3) (3) (6)
-------------- -------------- --------------
Net deferred tax assets included in other assets
on balance sheets $ 230 $ 230 $ 107
============= ============ ============
</TABLE>
<PAGE>
A reconciliation of income tax expense at the statutory rate to the LBI's
actual income tax expense is shown below.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
-------------------- ---------------------
(In thousands) 1998 1997 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computed at the statutory rate (34%) $ 193 $ 218 $ 347 $ 414 $ 308
Increase (decrease) resulting from
Tax exempt income (8) (7) (14) (11) --
State income taxes - net of federal tax benefit -- 19 38 31 13
Other differences, net 1 65 52 (1) 86
--------- ---------- --------- ----------- ------
Actual tax provision $ 186 $ 295 $ 423 $ 433 $ 407
========= ========= ========= ========= =========
</TABLE>
NOTE 6: OTHER EXPENSE
Other operating expenses consists of the following:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
--------------------- ----------------------------
(In thousands) 1998 1997 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Professional services $ 16 $ 19 $ 38 $ 36 $ 40
Postage 21 21 42 38 40
Telephone 14 12 24 21 20
Operating supplies 38 31 63 60 63
FDIC insurance 14 15 28 25 20
Miscellaneous expense 251 151 355 297 330
------------ ------------- ------------- ------------- -------------
Total $ 354 $ 249 $ 550 $ 477 $ 513
============ ============ ============ ============ ============
</TABLE>
NOTE 7: TRANSACTIONS WITH RELATED PARTIES
At June 30, 1998 and December 31, 1997 and 1996, LBI had loans
outstanding to executive officers, directors and to companies in which the
bank's executive officers or directors were principal owners, in the amount of
$632,000, $523,000 and $391,000, respectively.
<TABLE>
<CAPTION>
June 30 December 31
---------------- ------------------------
(In thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period $ 523 $ 391 $ 449
New loans 269 374 308
Repayments (160) (242) (366)
---------------- ----------------- ----------------
Balance, end of period $ 632 $ 523 $ 391
=============== =============== ==============
</TABLE>
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these loans did not involve more than the normal risk
of collectability or present other unfavorable features.
<PAGE>
NOTE 8: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
----------------------------- ------------------------------------------
(In thousands) 1998 1997 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest paid $ 1,547 $ 1,367 $ 2,859 $ 2,622 $ 2,238
Income taxes paid 240 510 581 322 310
</TABLE>
NOTE 9: PENSION PLAN
LBI's contribution to the plan are determined annually by the Board of
Directors. Substantially all full-time employees of LBI are covered by a defined
contribution pension plan. Amounts charged to expense were $42,600, $48,300,
$98,503, $75,327 and $72,050 for the six months ended June 30, 1998 and 1997,
and the years ended December 31, 1997, 1996 and 1995, respectively.
NOTE 10: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses and certain concentrations of
credit risk are reflected in Note 3.
Like all entities, LBI is exposed to risks associated with the Year
2000 Issue, which affects computer software and hardware; transactions with
customers, vendors and other entities; and equipment dependent on microchips.
LBI has begun but not yet completed the process of identifying and remediation
potential Year 2000 problems. It is not possible for any entity to guarantee the
results of its own remediation efforts or to accurately predict the impact of
the Year 2000 Issue on third parties with which LBI does business. If
remediation efforts of LBI or third parties with which it does business are not
successful, the Year 2000 problem could have negative effects on the LBI's
financial condition and results of operations in the near term.
NOTE 11: COMMITMENTS AND CREDIT RISK
LBI grants agri-business, commercial and residential loans to customers
in Northwestern Arkansas. Commitments to extend credit are agreements to lend to
a customer, as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since a portion of the commitments may
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Each customer's creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the counterparty.
Collateral held varies, but may include accounts receivable, inventory,
property, plant and equipment, commercial real estate and residential real
estate.
At June 30, 1998 and December 31, 1997 and 1996, LBI had outstanding
commitments to extend credit aggregating approximately $2,340,000, $1,681,000
and $1,409,000 for loan commitments, respectively.
NOTE 12: REGULATORY MATTERS
BOL is subject to a legal limitation on dividends that can be paid to the
parent company and minority shareholders interest without prior approval of the
applicable regulatory agencies. Arkansas bank regulators have specified that the
maximum dividend limit state banks may pay to the parent company and minority
interest shareholders without prior approval is 75% of the current year earnings
plus 75% of the retained net earnings of the preceding year. At June 30, 1998
and December 31, 1997, BOL had approximately $339,000 and $303,000 respectively,
in undivided profits available for payment of dividends to the parent company
and minority interest shareholders, without prior regulatory approval.
BOL is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the BOL's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the BOL must meet specific capital
guidelines that involve quantitative measures of BOL's assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. BOL's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital
adequacy requires BOL to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes that, as of June 30, 1998 and December
31, 1997, BOL meets all capital adequacy requirements to which it is subject.
As of June 30, 1998 and December 31, 1997, BOL was well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized, BOL must maintain minimum total risk-based, Tier 1 risk-based and
Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institutions' categories.
BOL's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
To Be
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
(In thousands) Amount Ratio-% Amount Ratio-% Amount Ratio-%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998
Total Risk-Based Capital Ratio $ 7,026 13.8% $ 4,062 8.0% $ 5,077 10.0%
Tier 1 Capital Ratio 6,261 12.3% 2,031 4.0% 3,046 6.0%
Leverage Ratio 6,261 8.3% 3,09 4.0% 3,761 5.0%
As of December 31, 1997
Total Risk-Based Capital Ratio $ 6,629 13.7% $ 3,859 8.0% $ 4,823 10.0%
Tier 1 Capital Ratio 5,860 12.2% 1,929 4.0% 2,894 6.0%
Leverage Ratio 5,860 8.1% 2,909 4.0% 3,637 5.0%
As of December 31, 1996
Total Risk-Based Capital Ratio $ 6,045 14.4% $ 3,361 8.0% $ 4,201 10.0%
Tier 1 Capital Ratio 5,581 13.3% 1,680 4.0% 2,521 6.0%
Leverage Ratio 5,581 8.4% 2,644 4.0% 3,304 5.0%
</TABLE>
NOTE 13: PARENT COMPANY ONLY INFORMATION
The financial statements of Lincoln Bankshares, Inc. (Parent) reflect its
investment in the Bank of Lincoln and its equity in BOL's distributed and
undistributed net assets. The Parent has no other significant assets,
liabilities or operating activities. At June 30, 1998 and December 31, 1997 and
1996, LBI's equity in undistributed earnings (excluding minority interest) of
BOL was $328,000, $229,000 and $362,000, respectively. BOL distributed dividends
to the Parent of $0, $349,000 and $320,000 for the six months ended June 30,
1998, and for the years ended December 31, 1997 and 1996, respectively. BOL may
distribute dividends without regulatory approval from undistributed earnings,
subject to maintenance of minimum capital requirements.
NOTE 14: MERGER AGREEMENT
On August 25, 1998 management of LBI, as authorized by the Board of
Directors, signed a merger agreement with Simmons First National Corporation, a
Arkansas based multi-bank holding company with approximately $1.3 billion in
total assets. The agreement formulates a transaction whereby all of the
outstanding stock of Lincoln Bankshares, Inc would be exchanged for 301,833
shares of Simmons First National Corporation. The merger is subject to
regulatory approval.
ANNEX I
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), is made as of the 25th
day of August, 1998, by and among SIMMONS FIRST NATIONAL CORPORATION, an
Arkansas corporation ("SFNC") and Lincoln Bancshares, Inc., an Arkansas
corporation ("LBI").
ARTICLE I
RECITALS
Section 1.01 SFNC. SFNC has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Arkansas,
with its principal executive offices located in Pine Bluff, Arkansas. SFNC is
registered as a bank holding company with the Board of Governors of the Federal
Reserve System ("FRB") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). As of the date hereof, SFNC has 30,000,000 authorized shares of
Class A common stock, par value $1.00 per share ("SFNC Stock"), of which
5,740,624 were outstanding as of June 30, 1998. No shares of the other classes
of SFNC's authorized capital stock are outstanding.
Section 1.02 SFNB. SFNB has been duly incorporated and is a validly
existing banking association in good standing under the laws of the United
States of America, with its principal executive offices located in Pine Bluff,
Arkansas.
Section 1.03 SFBNA. Simmons First Bank of Northwest Arkansas ("SFBNA") has
been duly incorporated and is a validly existing banking corporation in good
standing under the laws of the State of Arkansas, with its principal executive
offices located in Rogers, Arkansas. As of the date hereof, SFBNA has 18,000
authorized shares of common stock, par value $25.00 per share ("SFBNA Stock"),
of which 18,000 shares are outstanding as of June 30, 1998, no other class of
capital stock being authorized. As of June 30, 1998, all of outstanding shares
of the SFBNA Stock was owned by SFNC.
Section 1.04 LBI. LBI has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Arkansas, with its
principal executive offices located in Lincoln, Arkansas. LBI is registered as a
bank holding company with the FRB under the BHC Act. As of the date hereof, LBI
has 50,000 authorized shares of common stock, par value $1.00 per share ("LBI
Stock"), of which 8,050 shares are outstanding as of June 30, 1998. No other
class of capital stock being authorized.
Section 1.05 BOL. Bank of Lincoln ("BOL") has been duly incorporated and is
a validly existing banking corporation in good standing under the laws of the
State of Arkansas, with its principal executive offices located in Lincoln,
Arkansas. As of the date hereof, Bank of Lincoln has 8,000 authorized shares of
common stock, par value $25.00 per share ("BOL Stock"), of which 8,000 shares
are outstanding as of June 30, 1998, no other class of capital stock being
authorized. As of June 30, 1998, 6,568 shares of the outstanding BOL Stock
(82.1%) were owned by LBI.
Section 1.06 Compensatory Stock Options. SFNC has reserved 297,500 shares
of SFNC Stock ("Option Stock") for issuance pursuant to the terms of the stock
option and bonus share grants under the Simmons First National Corporation
Incentive and Non-qualified Stock Option Plan and the Simmons First National
Corporation Executive Stock Incentive Plan (collectively "Option Plans"), of
which options for 236,550 shares have been granted to various executive officers
of SFNC and its subsidiaries and are currently outstanding.
Section 1.07 Rights; Voting Debt. Except for (i) the Option Plans, (ii) the
pending merger with American Bancshares of Arkansas, Inc. and (iii) the
transactions contemplated under this Agreement, neither SFNC nor LBI has any
shares of its capital stock reserved for issuance, any outstanding option, call
or commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
to subscribe for or acquire from it, any shares of its capital stock
(collectively, "Rights"). Neither LBI nor SFNC nor any of their respective
subsidiaries have any bonds, debentures, notes or other indebtedness issued and
outstanding, having the right to vote, or convertible into securities having the
right to vote, on any matters on which shareholders may vote ("Voting Debt").
Section 1.08 Materiality. Unless the context otherwise requires, any
reference in this Agreement to materiality with respect to either party shall,
as to LBI, be deemed to be with respect to LBI and its wholly owned subsidiary,
BOL, taken as a whole and as to SFNC shall be deemed to be with respect to SFNC
and its subsidiaries, taken as a whole.
Section 1.09 Merger. The Board of Directors of SFNC and the Board of
Directors of LBI have each determined that it is desirable and in the best
interests of the corporation and its shareholders that LBI merge with and into
SFNC ("Merger") on the terms and subject to the conditions set forth in this
Agreement.
Section 1.10 Consolidation of BOL Ownership. As a condition to the Merger
and prior to the Effective Time, LBI will acquire the remaining shares of BOL
Stock in exchange for LBI shares in a transaction which will not adversely
affect the eligibility of the Merger to be accounted for under the pooling of
interest method of accounting. Any requirement that the transaction in which the
outstanding minority shares of BOL Stock are acquired by LBI be accounted for
under the purchase method of accounting, shall not be deemed to adversely affect
the eligibility to account for the Merger under the pooling of interest method
of accounting, so long as the balance of the Merger can be accounted for under
the pooling of interest method of accounting.
In consideration of their mutual promises and obligations hereunder, and
intending to be legally bound hereby, SFNC and LBI adopt and make this Agreement
and prescribe the terms and conditions hereof and the manner and basis of
carrying it into effect, which shall be as follows:
ARTICLE II
MERGER
Section 2.01 Merger. On the Effective Date, as defined in Section 8.01, LBI
will merge with and into SFNC, with SFNC being the surviving corporation
("Surviving Corporation"), pursuant to the provisions of, and with the effects
provided in, the Arkansas Business Corporation Act ("ABCA"). At the Effective
Time, the articles of incorporation and bylaws of SFNC, as the Surviving
Corporation, shall be the articles of incorporation and bylaws of SFNC in effect
immediately prior to the Effective Time; the directors and officers of SFNC
shall be the directors and officers of the Surviving Corporation; SFNC shall
continue to possess all of the rights, privileges and franchises possessed by it
and shall become vested with and possess all rights, privileges and franchises
possessed by LBI; and SFNC shall be responsible for all of the liabilities and
obligations of LBI in the same manner as if SFNC had itself incurred such
liabilities or obligations, and the Merger shall not affect or impair the rights
of the creditors or of any persons dealing with SFNC or LBI.
Section 2.02 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of SFNC, LBI or the holders of any
of the following securities:
(a) Each share of LBI Stock issued and outstanding immediately prior to the
Effective Time (excluding any Dissenting Shares, as defined in Section 2.05)
shall be converted into shares of SFNC Stock pursuant to the Exchange Ratio. The
Exchange Ratio shall equal 301,833 divided by the number of shares of LBI
outstanding on the Effective Date following the consummation of the transaction
in which LBI acquires the remaining shares of BOL Stock not owned by LBI ;
provided, however, that, in any event, if between the date of this Agreement and
the Effective Time the outstanding shares of SFNC Stock shall have been changed
into a different number of shares or a different class, by reason of any stock
issuance, stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares. No
adjustment of the Exchange Ratio shall occur by reason of issuance of any Option
Shares under the Option Plans or any other merger transaction. At the Effective
Time, all such shares of LBI Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter represent the
right to receive the Merger Consideration (as defined in Section 2.03(b)). The
holders of such certificates previously evidencing such shares of LBI Stock;
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of LBI Stock except as otherwise provided
herein or by law. Such certificates previously evidencing shares of LBI Stock
shall be exchanged for certificates evidencing whole shares of SFNC Stock issued
in consideration therefor upon the surrender of such certificates in accordance
with the provisions of Section 2.03, without interest. No fractional shares of
SFNC Stock shall be issued, and, in lieu thereof, a cash payment shall be made
pursuant to Section 2.02(b).
(b) (1) No certificates or scrip evidencing fractional shares of SFNC Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of SFNC. In lieu of any such fractional shares, each
holder of LBI Stock upon surrender of a Certificate for exchange pursuant to
Section 2.03 shall be paid an amount in cash, without interest, rounded to the
nearest cent, determined by multiplying (a) the SFNC Average Stock Price by (b)
the fractional interest to which such holder would otherwise be entitled, after
taking into account all shares of LBI Stock then held of record by such holder.
(2) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of LBI Stock with respect to any
fractional share interests, the Transfer Agent shall promptly pay such amounts
to such holders of LBI Stock subject to and in accordance with the terms of
Section 2.03(c).
(c) The SFNC Average Stock Price shall be the average (arithmetic mean) of
the closing price per share of SFNC Stock reported by the NASDAQ during the
period of ten (10) trading days on which one or more trades actually occurs,
which ends immediately prior to the fifth trading day preceding the Effective
Date.
(d) Each share of LBI Stock held in the treasury of LBI and each share of
LBI Stock owned by any direct or indirect wholly owned subsidiary of LBI
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
(e) At the Closing, LBI shall certify to SFNC the number of shares of LBI
Stock then outstanding and SFNC shall compute the Exchange Ratio for the
transaction.
Section 2.03 Exchange of Certificates. (a) Promptly after consummation of
the Merger, SFNC shall deposit, or shall cause to be deposited, with SFNB
("Transfer Agent"), for the benefit of the holders of shares of LBI Stock, for
exchange in accordance with this Article II, through the Transfer Agent, (i)
certificates evidencing such 301,833 shares of SFNC Stock and (ii) cash in the
amount of $750.00 ("Fractional Share Fund"). As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of LBI Stock
with respect to any fractional share interests, the Transfer Agent shall
promptly pay such amounts to such holders of LBI Stock subject to and in
accordance with the terms of Section 2.03(c). In the event the initial sum
deposited into the fractional Share Fund is insufficient to satisfy all payments
required to be paid from such fund, then SFNC shall immediately deposit funds to
remedy such deficiency.
(b) Promptly after the Effective Time, SFNC will instruct the Transfer
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of LBI
Stock (other than Dissenting Shares) ("Certificates"), (1) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Transfer Agent and shall be in such form and have such other
provisions as SFNC may reasonably specify) and (2) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
evidencing shares of SFNC Stock. Upon surrender of a Certificate for
cancellation to the Transfer Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor (A) certificates evidencing that number of whole shares of
SFNC Stock which such holder has the right to receive in respect of the shares
of LBI Stock formerly evidenced by such Certificate in accordance with Section
2.02 and (B) cash in lieu of fractional shares of SFNC Stock to which such
holder is entitled pursuant to Section 2.02(b), and (C) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.03(c), (the
shares of SFNC Stock, dividends, distributions and cash described in clauses
(A), (B), and (C) being collectively, the "Merger Consideration") and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of LBI Stock which is not registered in the
transfer records of LBI, a certificate evidencing the proper number of shares of
SFNC Stock may be issued and cash paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of LBI Stock is presented
to the Transfer Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.03, each
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender the Merger Consideration.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to SFNC Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of SFNC Stock evidenced thereby, and no other part of the Merger
Consideration shall be paid to any such holder, until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates evidencing whole shares of SFNC Stock
issued in exchange therefor, without interest, (1) promptly, the amount of any
cash payable with respect to a fractional share of SFNC Stock to which such
holder is entitled pursuant to Section 2.03(b) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of SFNC Stock, and (2) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of SFNC Stock. No
interest shall be paid on the Merger Consideration.
(d) All shares of SFNC Stock issued and cash paid in lieu of fractional
shares of LBI Stock in accordance with the terms hereof shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to such shares
of LBI Stock.
(e) Any portion of the Fractional Share Fund which remains undistributed to
the holders of LBI Stock on the date six months following the Effective Time
shall be delivered to SFNC, upon demand, and any holders of LBI Stock who have
not theretofore complied with this Article II shall thereafter look directly to
SFNC for the Merger Consideration to which they are entitled.
(f) SFNC shall not be liable to any holder of shares of LBI Stock for any
such shares of SFNC Stock, cash in lieu of fractional shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) SFNC shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of LBI
Stock such amounts as SFNC is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
SFNC, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of LBI Stock in respect of which
such deduction and withholding was made by SFNC.
Section 2.04 Stock Transfer Books. At the Effective Time, the stock
transfer books of LBI shall be closed and there shall be no further registration
of transfers of shares of LBI Stock thereafter on the records of LBI. On or
after the Effective Time, any certificates presented to the Transfer Agent or
SFNC for any reason shall be converted into the Merger Consideration.
Section 2.05 Dissenting Shares. Notwithstanding any other provisions of
this Agreement to the contrary, shares of LBI Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares
(collectively, the "Dissenting Shares") in accordance with Section 76 of the
Arkansas Business Corporation Act of 1965 (A.C.A. ss.4-26-1007) shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of LBI Stock held by them in accordance with such provisions of such
statute, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such shares of LBI Stock under such statute shall have been
converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Merger Consideration, as
if such shares of LBI Stock, upon surrender, in the manner provided in Section
2.03, of the certificate or certificates that formerly evidenced such shares of
LBI Stock.
Section 2.06 Lost LBI Stock Certificates. In the event any Certificate for
LBI Stock shall have been lost, stolen or destroyed, upon receipt of appropriate
evidence as to such loss, theft or destruction and to the ownership of such
Certificate by the person claiming such Certificate to be lost, stolen or
destroyed and the receipt by SFNC of appropriate and customary indemnification,
SFNC will issue in exchange for such lost, stolen or destroyed Certificate, a
certificate of shares of SFNC Stock and the cash payment, if any, deliverable in
respect thereof as determined in accordance with this Article II.
Section 2.07 Options and Rights. There are no options or rights granted by
LBI to purchase shares of LBI Stock, which are outstanding and unexercised and
there are no outstanding securities issued by LBI, or any other party,
convertible into LBI Stock.
ARTICLE III
ACTIONS PENDING MERGER
Section 3.01 Required Actions Pending Merger. LBI hereby covenants and
agrees with SFNC that prior to the Effective Time, unless the prior written
consent of SFNC shall have been obtained, and except as otherwise contemplated
herein, LBI will and will cause each of its subsidiaries to:
(a) give all required notices, make all necessary amendments (other than
amendments terminating the accrual of benefits) and cause its Board of Directors
to adopt a resolution terminating the Bank of Lincoln Profit Sharing Plan to be
effective on or before the Effective Date, to pay any and all termination, early
withdrawal penalties or similar fees with respect to the termination of the plan
and take all reasonable steps to preclude SFNC from having any liability to the
plan or to the officers, employees or directors of LBI or any of its
subsidiaries under such plan;
(b) use reasonable efforts to preserve intact their business organization
and assets, maintain their rights and franchises, retain the services of their
officers and key employees, except that they shall have the right to lawfully
terminate the employment of any officer or key employee if such termination is
in accordance with LBI's existing employment procedures;
(c) use reasonable efforts to maintain and keep their properties in as good
repair and condition as at present, except for depreciation due to ordinary wear
and tear;
(d) use reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained;
(e) perform in all material respects all obligations required to be
performed by them under all material contracts, leases, and documents relating
to or affecting their assets, properties, and business;
(f) give SFNC notice of all board of directors meetings of LBI and each of
its subsidiaries, allow SFNC to have a non-voting representative at each such
meeting provided however such representative shall be subject to exclusion from
any portion of any such meeting during any discussion or action concerning the
Merger or to the extent that LBI's legal counsel advises the directors that
permitting SFNC's presence would constitute a breach of their fiduciary duties,
and provide SFNC with all written materials and communications provided to the
directors in connection with such meetings;
(g) prior to the Effective Time, obtain written consents of the
participants for the termination of all of the deferred compensation
arrangements for the directors of LBI and its subsidiaries in exchange for the
distribution to each participant of the life insurance policy funding such
arrangement or the net realizable cash value of such policy, which termination
shall to be effective immediately after the Effective Date; and
(h) cooperate with SFNC in the preparation and execution of a definitive
merger agreement and plan of merger for the merger of BOL with and into Simmons
First Bank of Northwest Arkansas, to be effective after the Effective Time, and
the filing for all regulatory approvals necessary therefor.
Section 3.02 Prohibited Actions Pending Merger. Except as specifically
contemplated by this Agreement, from the date hereof until the earlier of the
termination of the Agreement or the Effective Time, LBI shall not do, and LBI
will cause each of its subsidiaries not to do, without the prior written consent
of SFNC, any of the following:
(a) make, declare or pay any dividend on LBI Stock (other than dividends
consistent with historic practices) or declare or make any distribution on, or
directly or indirectly combine, redeem, reclassify, purchase or otherwise
acquire, any share of its capital stock (other than in a fiduciary capacity or
in respect of a debt previously contracted in good faith) or authorize the
creation or issuance of or issue or sell or permit any subsidiary to issue or
sell any additional shares of LBI's capital stock (other than the issuance of
LBI shares in the transaction in the remaining outstanding shares of BOL Stock
are acquired by LBI) or the capital stock of any subsidiary, or any options,
calls or commitments relating to its capital stock or the capital stock of any
subsidiary, or any securities, obligations or agreements convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire,
shares of its capital stock or the capital stock of any of its subsidiaries;
(b) hire any additional staff or replace any staff members which terminate
employment or are discharged, except for personnel hired at an hourly rate to
fill vacancies or for seasonal part time staff in accordance with past
practices;
(c) enter into or permit any subsidiary to enter into any employment
contracts with, pay any bonus to, or increase the rate of compensation of, any
of its directors, officers or employees, except in the ordinary course of
business consistent with the past practice, including the (i) payment of a
Christmas Bonus to employees, in an amount not to exceed the amount of such
Christmas Bonus accrued by LBI and BOL in accordance with past practices for the
then current year through the payment date and (ii) the payment of a year-end
bonus to directors of BOL in an amount not to exceed the amount of such bonus
accrued by BOL in accordance with past practices for the then current year
through the payment date;
(d) except as required by this Agreement, enter into or modify or permit
any subsidiary to enter into or modify (except as may be required by applicable
law and except for the renewal of any existing plan or arrangement in the
ordinary course of business consistent with past practice) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees;
(e) except as contemplated by Section 5.01(l), substantially modify the
manner in which it and its subsidiaries have heretofore conducted their
business, taken as a whole, or amend its articles of incorporation or by-laws;
(f) subject to the fiduciary duties of directors and except as may be
required by applicable law, initiate, solicit or encourage, including by way or
furnishing information or assistance, or take any other action to facilitate,
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any Competing Transaction, as such term is defined
below, or negotiate with any person in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize any of their officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by LBI or any of its subsidiaries to take any such
action and, upon learning of such action by any representative, shall take
appropriate steps to terminate such action, LBI shall promptly notify SFNC
orally and in writing of all of the relevant details relating to all inquiries
and proposals which it may receive relating to any of such matters; for purposes
of this Agreement, "Competing Transaction" shall mean any of the following
involving LBI or any of its subsidiaries; any merger, consolidation, share
exchange or other business combination; a sale, lease, exchange, mortgage,
pledge, transfer or other disposition of a substantial portion of assets; a sale
of shares of capital stock or securities convertible or exchangeable into or
otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock;
(g) except in the ordinary course of business, acquire any assets or
business or permit any subsidiary to acquire any assets or business that are
material to such party;
(h) acquire any investment securities other than U. S.Treasury Securities,
municipal securities and U. S. Agency securities which are traditional fixed
rate debt securities and shall not include any floating rate securities,
multi-step rate securities, mortgage-backed securities, mutual funds or any
derivative securities;
(i) except in their fiduciary capacities, purchase any shares of SFNC
Stock;
(j) change any method of accounting in effect at December 31, 1997, or
change any method of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1997, except as may be required
by law or generally accepted accounting principles;
(k) take action which would or is reasonably likely to (1) adversely affect
the ability of either of SFNC or LBI to obtain any necessary approvals of
governmental authorities required for the transactions contemplated hereby; (2)
adversely affect LBI's ability to perform its covenants and agreements under
this Agreement; or (3) result in any of the conditions to the Merger set forth
herein not being satisfied;
(l) unless and except in accordance with existing loan policies, make any
single new loan or series of loans to one borrower or a related group of
borrowers in an aggregate amount greater than $100,000.00;
(m) sell or dispose of any real estate or other assets having a value in
excess of $25,000.00, other than properties acquired in foreclosure or otherwise
in the ordinary collection of indebtedness to LBI or its subsidiaries;
(n) take any action which would in the opinion of Baird, Kurtz & Dobson,
preclude the Merger from qualifying for the pooling of interest method of
accounting;
(o) take any other action or permit any subsidiary to take any action not
in the ordinary course of business of it and its subsidiaries, taken as a
whole; or
(q) directly or indirectly agree to take any of the foregoing actions.
Section 3.03 Conduct of LBI to Date. Except as contemplated by this
Agreement or as disclosed on Schedule 3.03, from and after December 31, 1997
through the date of this Agreement:
(a) LBI and BOL have carried on their respective businesses in the ordinary
and usual course consistent with past practices,
(b) neither LBI nor BOL have issued or sold any capital stock or issued or
sold any corporate debt securities which would be classified as long term debt
on the balance sheet of LBI or BOL,
(c) LBI has not declared, set aside, or paid any cash or stock dividend or
distribution in respect of its capital stock (other than dividends declared and
paid in accordance with past practices),
(d) neither LBI nor BOL have incurred any material obligation or liability
(absolute or contingent), except normal trade or business obligations or
liabilities incurred in the ordinary course of business, or in conjunction with
this Agreement, or mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance or restriction any of its assets or properties,
(e) neither LBI nor BOL has discharged or satisfied any material lien,
mortgage, pledge, claim, security interest, charges, encumbrance, or restriction
or paid any material obligation or liability (absolute or contingent), other
than in the ordinary course of business,
(f) neither LBI nor BOL has, since December 31, 1997, sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its properties
or assets other than for a fair consideration in the ordinary course of
business,
(g) neither LBI nor BOL increased the rate of compensation of, or paid any
bonus to, any of its directors, officers, or other employees, except merit or
promotion increases, in accordance with existing policy; entered into any new,
or amended or supplemented any existing, employment, management, consulting,
deferred compensation, severance, or other similar contract; adopted, entered
into, terminated, amended or modified any employee benefit plan in respect of
any of present or former directors, officers or other employees; or agreed to do
any of the foregoing,
(h) neither LBI nor BOL has suffered any material damage, destruction, or
loss, whether as the result of flood, fire, explosion, earthquake, accident,
casualty, labor trouble, requisition or taking of property by any government or
any agency of any government, windstorm, embargo, riot, act of God, or other
similar or dissimilar casualty or event or otherwise, whether or not covered by
insurance,
(i) neither LBI nor BOL has canceled or compromised any debt to an extent
exceeding $50,000.00 owed to it or any of its subsidiaries or any claim to an
extent exceeding $50,000.00 asserted by LBI or any of its subsidiaries,
(j) neither LBI nor BOL has entered into any transaction, contract, or
commitment outside the ordinary course of its business,
(k) neither LBI nor BOL has entered, or agreed to enter, into any agreement
or arrangement granting any preferential right to purchase any of its material
assets, properties or rights or requiring the consent of any party to the
transfer and assignment of any such material assets, properties or rights,
(l) there has not been any change in the method of accounting or
accounting practices of LBI or any of its subsidiaries, and
(m) LBI and BOL have kept all records substantially in accordance with its
record retention policy and has not received any comment, notice or criticism by
any bank regulatory agency which would lead a reasonable person to believe that
such policy is not substantially in compliance with regulatory and statutory
requirements and customary industry standards and have retained such records for
the periods required by its policy.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties. Except as disclosed on
Schedule 4.01, SFNC and its subsidiaries, to the extent applicable to such
subsidiaries, represent and warrant to LBI, and LBI and BOL, to the extent
applicable to BOL, represent and warrant to SFNC, that:
(a) The facts set forth in Article I of this Agreement with respect to it
are true and correct.
(b) All of the outstanding shares of capital stock of it and its
subsidiaries are duly authorized, validly issued and outstanding, fully paid and
non-assessable, and except for BOL Stock, are subject to no preemptive rights.
(c) Each of it and its subsidiaries has the power and authority, and is
duly qualified in all jurisdictions, except for such qualifications the absence
of which will not have a Material Adverse Effect, as hereinafter defined, where
such qualification is required, to carry on its business as it is now being
conducted and to own all its material properties and assets, and it has all
federal, state, local, and foreign governmental authorizations necessary for it
to own or lease its properties and assets and to carry on its business as it is
now being conducted, except for such powers and authorizations the absence of
which, either individually or in the aggregate, would not have a Material
Adverse Effect.
(d) Except as shown on Schedule 4.01, the shares of capital stock of each
of its subsidiaries are owned by it free and clear of all liens, claims,
encumbrances and restrictions on transfer and there are no Rights with respect
to such capital stock.
(e) The Board of Directors of each SFNC and LBI have, by all appropriate
action, approved this Agreement and the Merger. Subject, in the case of LBI, to
the receipt of approval of its shareholders and, subject to receipt of required
regulatory approvals, this Agreement is a valid and binding agreement of it
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(f) The execution, delivery and performance of this Agreement by it does
not, and the consummation of the transactions contemplated hereby by it will
not, constitute (1) a breach or violation of, or a default under, any law, rule
or regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or its subsidiaries or to which it or
its subsidiaries (or any of their respective properties) is subject, which
breach, violation or default is reasonably likely to have a material adverse
effect on the condition, financial or otherwise, properties, results of
operations or business of it and its subsidiaries, taken as a whole or on its
ability to perform its obligations hereunder and to consummate the transactions
contemplated hereby ("Material Adverse Effect"), or enable any person to enjoin
any of the transactions contemplated hereby or (2) a breach or violation of, or
a default under, the articles of incorporation or by-laws of it or any of its
subsidiaries; and the consummation of the transactions contemplated hereby will
not require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the consent or
approval of any other party to any such agreement, indenture or instrument,
other than the required approvals of applicable regulatory authorities referred
to in Section 6.01(b) and (c) and the approval of the shareholders of LBI
referred to in Section 4.01(e) and any consents and approvals the absence of
which will not have a Material Adverse Effect.
(g) In the case of SFNC, as of their respective dates, neither its Annual
Report on form 10-K for the fiscal year ended December 31, 1997, nor any other
document filed subsequent to December 31, 1997 under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), each
in the form, including exhibits, filed with the SEC, and the Statements of
Condition filed on behalf of its subsidiaries with the state and federal banking
agencies during 1996, 1997 and 1998, (collectively, the "SFNC Reports"), did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Each
of the balance sheets in or incorporated by reference into the SFNC Reports,
including the related notes and schedules, fairly presents the financial
position of the entity or entities to which it relates as of its date and each
of the statements of operations and retained earnings and of cash flow and
changes in financial position or equivalent statements in or incorporated by
reference into the SFNC Reports, including any related notes and schedules,
fairly presents the results of operations, retained earnings and cash flows and
changes in financial position, as the case may be, of the entity or entities to
which it relates for the periods set forth therein, subject, in the case of
unaudited interim statements or reports to normal year-end audit adjustments
that are not material in amount or effect, in each case in accordance with
generally accepted accounting principles applicable to bank holding companies
consistently applied during the periods involved, except as may be noted
therein. It has no material obligations or liabilities, contingent or otherwise,
except as disclosed in the SFNC Reports, and its consolidated allowance for loan
and lease losses, as shown on its most recent balance sheet or statement of
condition contained in the SFNC Reports was adequate, as of the date thereof,
within the meaning of generally accepted accounting principles and safe and
sound banking practices.
(h) In the case of LBI, its balance sheet for the fiscal year ended
December 31, 1997, and the Statements of Condition filed on behalf of its
subsidiaries with the state and federal banking agencies during 1997 and 1998,
and in the case of BOL, its Statements of Condition filed with the state and
federal bank agencies during 1997 and 1998 and its unaudited monthly financial
reports prepared subsequent to March 31, 1998 (collectively, the "LBI Reports"),
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Each of the balance sheets in the LBI Reports, including the related
notes and schedules, fairly presents the financial position of the entity or
entities to which it relates as of its date and each of the statements of
operations and retained earnings or equivalent statements in the LBI Reports,
including any related notes and schedules, fairly presents the results of
operations and retained earnings, as the case may be, of the entity or entities
to which it relates for the periods set forth therein in each case in accordance
with generally accepted accounting principles applicable to bank holding
companies consistently applied during the periods involved, except as may be
noted therein. It has no material obligations or liabilities, contingent or
otherwise, except as disclosed in the LBI Reports, and its consolidated
allowance for loan and lease losses, as shown on its most recent balance sheet
or statement of condition contained in its LBI Reports was adequate, as of the
date thereof, within the meaning of generally accepted accounting principles and
safe and sound banking practices to absorb reasonably expected losses in the
loan portfolio of BOL. In the case of LBI and its subsidiaries, the unaudited
monthly financial reports prepared subsequent to March 31, 1998 fairly present
the results of operations and the financial conditions of the entity or entities
to which it relates, subject to normal year-end adjustments that are not
material in amount or effect.
(i) Since December 31, 1997, in the case of SFNC and LBI, there has been no
material adverse change in the financial condition of either SFNC and its
subsidiaries, taken as a whole, or LBI and its subsidiaries, taken as a whole.
(j) All material federal, state, local, and foreign tax returns required to
be filed by or on behalf of it or any of its subsidiaries have been timely filed
or requests for extensions have been timely filed and any such extension shall
have been granted and not have expired, and all such returns filed are complete
and accurate in all material respects. All taxes shown on returns filed by it
have been paid in full or adequate provision has been made for any such taxes on
its balance sheet in accordance with generally accepted accounting principles.
As of the date of this Agreement, there is no audit examination, deficiency, or
refund litigation with respect to any taxes of it that would result in a
determination that would have a Material Adverse Effect. All taxes, interest,
additions, and penalties due with respect to completed and settled examinations
or concluded litigation relating to it have been paid in full or adequate
provision has been made for any such taxes on its balance sheet in accordance
with generally accepted accounting principles. It has not executed an extension
or waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect.
(k) (1) No material litigation, proceeding or controversy before any court
or governmental agency is pending, and there is no pending claim, action or
proceeding against it or any of its subsidiaries, which in its reasonable
judgment is likely to have a Material Adverse Effect or to prevent consummation
of the transactions contemplated hereby, and, to the best of its knowledge, no
such litigation, proceeding, controversy, claim or action has been threatened or
is contemplated, and (2) neither it nor any of its subsidiaries is subject to
cease and desist order, written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of, federal or
state governmental authorities charged with the supervision or regulation of
banks or bank holding companies or engaged in the insurance of bank deposits
("Bank Regulators"), nor has it been advised by any Bank Regulator that it is
contemplating issuing or requesting, or is considering the appropriateness of
issuing or requesting, any such order, directive, written agreement, memorandum
of understanding, extraordinary supervisory letter, commitment letter, board
resolution or similar understanding.
(l) Except for this Agreement, and arrangements made in the ordinary course
of business, neither LBI nor BOL is bound by any material contract, as defined
in Item 601(b)(10)(i) and (ii) of Regulation S-K, to be performed after the date
hereof that has not been disclosed to SFNC.
(m) All "employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), that cover any of its
or its subsidiaries' employees, comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws; neither it
nor any of its subsidiaries has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any
such plan which is likely to result in any material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code; no material liability to
the Pension Benefit Guaranty Corporation has been or is expected by it or them
to be incurred with respect to any such plan which is subject to Title IV of
ERISA ("pension plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA) currently or formerly maintained by it,
them or any entity which is considered one employer with it under Section 4001
of ERISA or Section 414 of the Code; no pension plan had an "accumulated funding
deficiency", as defined in Section 302 of ERISA (whether or not waived), as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each pension plan exceeds the
present value of the "benefit liabilities", as defined in Section 4001(a)(16) of
ERISA, under such pension plan as of the end of the most recent plan year with
respect to the respective plan ending prior to the date hereof, calculated on
the basis of the actuarial assumptions used in the most recent actuarial
valuation for such pension plan as of the date hereof; no notice of a
"reportable event", as defined in Section 4043 of ERISA, for which the 30-day
reporting requirement has not been waived has been required to be filed for any
pension plan within the 12-month period ending on the date hereof; neither it
nor any of its subsidiaries has provided, or is required to provide, security to
any pension plan pursuant to Section 401(a)(29) of the Code; it and its
subsidiaries have not contributed to a "multiemployer plan", as defined in
Section 3(37) of ERISA, on or after September 26, 1980; and it and its
subsidiaries do not have any obligations for retiree health and life benefits
under any benefit plan, contract or arrangement.
(n) Each of it and its subsidiaries has good title to its properties and
assets, other than property as to which it is lessee, free and clear of any
liens, security interests, claims, charges, options or other encumbrances not
set forth in the Reports, except such defects in title which would not, in the
aggregate, have a Material Adverse Effect and in the case of LBI substantially
all of the buildings and equipment in regular use by LBI and each of its
subsidiaries have been reasonably maintained and are in good and serviceable
condition, reasonable wear and tear excepted.
(o) It knows of no reason why the regulatory approvals referred to in
Sections 6.01(b) and (c) should not be obtained without the imposition of any
condition of the type referred to in the proviso following Sections 6.01(b) and
(c).
(p) It and each of its subsidiaries have all permits, licenses,
certificates of authority, orders, and approvals of, and have made all filings,
applications, and registrations with, federal, state, local, and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted and the absence of which
would have a Material Adverse Effect; all such permits, licenses, certificates
of authority, orders, and approvals are in full force and effect, and to the
best knowledge of it no suspension or cancellation of any of them is threatened.
(q) In the case of SFNC, the shares of SFNC Stock to be issued pursuant to
this Agreement, when issued in accordance with the terms of this Agreement, will
be duly authorized, validly issued, fully paid and non-assessable and subject to
no preemptive rights.
(r) Neither it nor any of its subsidiaries is a party to, or is bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
subsidiaries the subject of a proceeding asserting that it or any such
subsidiary has committed an unfair labor practice or seeking to compel it or
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries pending or threatened.
(s) Except for the employment of Stephens Inc., neither LBI nor any of its
subsidiaries, nor any of their respective officers, directors, or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for it or any of its subsidiaries, in
connection with this Agreement or the transactions contemplated hereby.
(t) The information to be supplied by it for inclusion in (1) the
Registration Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act of 1933, as amended
("Securities Act"), with the SEC by SFNC for the purpose of, among other things,
registering or obtaining an exemption from registration for, the SFNC Stock to
be issued to the shareholders of LBI in the Merger ("Registration Statement"),
or (2) the proxy statement to be distributed in connection with LBI's meeting of
its shareholders to vote upon this Agreement, as amended or supplemented from
time to time ("Proxy Statement"), and together with the prospectus included in
the Registration Statement, as amended or supplemented from time to time,
("Proxy Statement/Prospectus") will not at the time such Registration Statement
becomes effective, and in the case of the Proxy Statement/Prospectus at the time
it is mailed and at the time of the meeting of stockholders contemplated under
this Agreement, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
(u) For purposes of this section, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local laws
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (1) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, plant and animal life or any other
natural resource), and/or (2) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances. The term Environmental Law
includes without limitation (1) the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss.6901, et seq., the Clean Air Act, as amended, 42
U.S.C. ss.7401, et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss.1251, et seq., the Toxic Substances Control Act,
as amended, 15 U.S.C. ss.9601, et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. ss.11001, et seq., the Safe
Drinking Water Act, 42 U.S.C. ss.300f, et seq., all comparable state
and local laws, and (2) any common law, including without limitation
common law that may impose strict liability, that may impose liability
or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether
by type or by quantity, including any material containing any such
substance as a component. Hazardous Substances include without
limitation petroleum or any derivative or by-product thereof, asbestos,
radioactive material, and polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by SFNC or LBI or any of their
subsidiaries.
(1) To the best knowledge of it and its subsidiaries, neither
it nor any of its subsidiaries has been or is in violation of or liable
under any Environmental Law, except any such violations or liabilities
which would not reasonably be expected to singly or in the aggregate
have a Material Adverse Effect;
(2) To the best knowledge of it and its subsidiaries, none of
the Loan Portfolio Properties and Other Properties Owned by it or its
subsidiaries has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which
singly or in the aggregate will not have a Material Adverse Effect; and
(3) To the best knowledge of it and its subsidiaries, there
are no actions, suits, demands, notices, claims, investigations or
proceedings pending or threatened relating to the liability of the Loan
Portfolio Properties and Other Properties Owned by it or its
subsidiaries under any Environmental Law, including without limitation
any notices, demand letters or requests for information from any
federal or state environmental agency relating to any such liabilities
under or violations of Environmental Law, except such which will not
have, result in or relate to a Material Adverse Effect.
(v) LBI does not and is not required to file reports pursuant to the
Exchange Act.
(w) It and its subsidiaries have complied in all material respects with the
provisions of the Community Reinvestment Act ("CRA") and the rules and
regulations thereunder, has a CRA rating of not less than "satisfactory," and
has received no material criticism from regulators with respect to
discriminatory lending practices.
(x) neither SFNC nor any of its subsidiaries know of any fact, event,
circumstance or occurrence concerning SFNC or any of its subsidiaries which it
reasonably believes would, in the opinion of Baird, Kurtz & Dobson, preclude the
Merger from qualifying for the pooling of interest method of accounting.
Section 4.02 Representations and Warranties of LBI. Except as disclosed in
writing in the Disclosure Letter, LBI and BOL, to the extent applicable to BOL,
to the best of their knowledge, represent and warrant to SFNC, that none of
LBI's executive management, consisting of Loyd R. Swope, Kenneth D. Cox and
Larry C. Karnes, knows of any circumstances, events, commitments, instruments or
facts that are known to be misrepresented or intentionally omitted from any
instrument, file, or other record of LBI or any of its subsidiaries, with
respect to loans to borrowers which are payable to LBI or any of its
subsidiaries either directly or as a participant and, to the best knowledge of
it and its subsidiaries and except for such imperfections in documentation which
when considered as a whole would not have a material adverse effect on the
business, operations or financial condition of any of LBI or BOL:
(a) All loans were made for good, valuable and adequate consideration in
the normal and ordinary course of business, and the notes and other evidences of
indebtedness and any loan agreements or security documents executed in
connection therewith are true and genuine and constitute the valid and legally
binding obligations of the borrowers to whom the loans were made and are legally
enforceable against such borrowers in accordance with their terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and similar
debtor relief laws from time to time in effect, as well as general principles of
equity applied by a court of proper jurisdiction, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(b) The amounts represented to SFNC as the balances owing on the loans are
the correct amounts actually and unconditionally owing, are undisputed, and are
not subject to any offsets, credits, deductions or counterclaims;
(c) The collateral securing each loan as referenced in a loan officer
worksheet, loan summary report or similar interoffice loan documentation is in
fact the collateral held by LBI or BOL to secure each loan;
(d) LBI or its subsidiaries have possession of all loan document files and
credit files for all loans held by them containing promissory notes and other
relevant evidences of indebtedness with original signatures of their borrowers
and guarantors;
(e) LBI or its subsidiaries hold validly perfected liens or security
interests in the collateral granted to them to secure all loans as referenced in
the loan officer worksheets, loan summary reports or similar interoffice loan
documentation and the loan or credit files contain the original security
agreements, mortgages, or other lien creation and perfection documents unless
originals of such documents are filed of public record;
(f) Each lien or security interest of LBI or its subsidiaries in the
collateral held for each loan is properly perfected in the priority described as
being held by LBI or its subsidiaries in the loan officer worksheets, loan
summary reports or similar interoffice loan documentation contained in the loan
document or credit files;
(g) LBI and its subsidiaries are in possession of all collateral that the
loan document files or credit files indicate they have in their possession;
(h) All guaranties granted to LBI or its subsidiaries to insure payment of
loans constitute the valid and legally binding obligations of the guarantors and
are enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar debtor relief
laws from time to time in effect, as well as general principles of equity
applied by a court of proper jurisdiction, regardless of whether in a proceeding
in equity or at law;
(i) With respect to any loans in which LBI or any of its subsidiaries have
sold participation interests to another bank or financial institution, none of
the buyers of such participation interests are in default under any
participation agreements.
(j) LBI and BOL have adopted and tested a compliance plan for Year 2000
computer hardware and software issues, are proceeding with implementation of
such plan so as to timely comply with such plan and BOL has disclosed to SFNC
the results of its most recent Year 2000 examination from its respective federal
regulators.
ARTICLE V
COVENANTS
Section 5.01 Covenants. SFNC hereby covenants with and to LBI, and LBI
hereby covenants with and to SFNC, that:
(a) It shall use its best efforts in good faith to take or cause to be
taken all action necessary or desirable under this Agreement on its part as
promptly as practicable so as to permit the consummation of the transactions
contemplated by this Agreement at the earliest reasonable date and cooperate
fully with the other party hereto to that end;
(b) In the case of LBI, it shall (1) take all steps necessary to duly call,
give notice of, convene and hold a meeting of its shareholders for the purpose
of approving this Agreement as soon as is reasonably practicable; (2) in each
case subject to the fiduciary duties of its directors, recommend to its
shareholders that they approve this Agreement and use its best efforts to obtain
such approval; (3) distribute to its shareholders the Proxy Statement/Prospectus
in accordance with applicable federal and state law (except, in the case of
SFNC, for state securities laws and "Blue Sky" permits which are covered by
Section 5.01(e)); and (4) cooperate and consult with SFNC with respect to each
of the foregoing matters;
(c) SFNC will file a Registration Statement on form S-4 for the shares to
be issued pursuant to the Merger and use its best efforts to have the
Registration Statement declared effective. LBI and SFNC will cooperate in the
preparation and filing of the Proxy Statement/Prospectus and Registration
Statement in order to consummate the transactions contemplated by this Agreement
as soon as is reasonably practicable;
(d) SFNC will advise LBI, promptly after SFNC receives notice thereof, of
the time when the Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop order or the suspension
of the qualification of the shares of SFNC Stock issuable pursuant to this
Agreement for offering or sale in any jurisdiction, of the initiation or threat
of any proceeding for any such purpose or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information;
(e) In the case of SFNC, it shall use its best efforts to obtain, prior to
the effective date of the Registration Statement, all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement;
(f) Subject to its disclosure obligations imposed by law, unless approved
by the other party hereto in advance, it will not issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby;
(g) It shall promptly furnish the other party with copies of written
communications received by it, or any of its respective subsidiaries, Affiliates
or Associates, (as such terms are defined in Rule 12b-2 under the Exchange Act
as in effect on the date hereof, from, or delivered by any of the foregoing to,
any governmental body or agency in connection with or material to the
transactions contemplated hereby;
(h) (1) Upon reasonable notice, it shall, and shall cause each of its
subsidiaries to, afford the other party hereto, and its officers, employees,
counsel, accountants and other authorized representatives (collectively, such
party's "Representatives") access, during normal business hours, to all of its
and its subsidiaries' properties, books, contracts, commitments and records; it
shall enable the other party's Representatives to discuss its business affairs,
condition, financial and otherwise, assets and liabilities with such third
persons, including, without limitation, its directors, officers, employees,
accountants, counsel and creditors, as the other party considers necessary or
appropriate; and it shall, and it shall cause each of its subsidiaries to,
furnish promptly to the other party hereto (a) a copy of each report, schedule
and other document filed by it pursuant to the requirements of federal or state
securities or banking laws since December 31, 1997, and (b) all other
information concerning its business properties and personnel as the other party
hereto may reasonably request, provided that no investigation pursuant to this
Paragraph (h) shall affect or be deemed to modify any representation or warranty
made by, or the conditions to the obligations to consummate this Agreement of,
the other party hereto; (2) it will, upon request, furnish the other party with
all information concerning it, its subsidiaries, directors, officers, partners
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement/Prospectus, the Registration
Statement or any other statement or application made by or on behalf of SFNC,
LBI or any of their respective subsidiaries to any governmental body or agency
in connection with or material to the Merger and the other transactions
contemplated by this Agreement; and (3) it will not use any information obtained
pursuant to this Paragraph (h) for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement and, if this Agreement is not
consummated, it will hold all information and documents obtained pursuant to
this Paragraph (h) in confidence unless and until such time as such information
or documents otherwise become publicly available or as it is advised by counsel
that any such information or document is required by law to be disclosed, and in
the event of the termination of this Agreement, it will deliver to the other
party hereto all documents so obtained by it and any copies thereof,
(i) It shall notify the other party hereto as promptly as practicable of
(1) any material breach of any of its warranties, representations or agreements
contained herein and (2) any change in its condition (financial or otherwise),
properties, business, results of operations or prospects that could have a
Material Adverse Effect.
(j) It shall cooperate and use its best efforts to promptly prepare and
file all documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, approvals and authorizations of all third parties and governmental
agencies, including, in the case of SFNC, submission of applications for
approval of this Agreement and the transactions contemplated herein to the FRB
in accordance with the provisions of the BHC Act, and to any other regulatory
agencies as required by law,
(k) It shall (1) permit the other to review in advance and, to the extent
practicable, will consult with the other party on all characterizations of the
information relating to the other party and any of its respective subsidiaries,
which appear in any filing made with, or written materials submitted to, any
third party or any governmental body or agency in connection with the
transactions contemplated by this Agreement; and (2) consult with the other with
respect to obtaining all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies or agencies
necessary or advisable to consummate the transactions contemplated by this
Agreement and will keep the other party informed of the status of matters
relating to completion of the transactions contemplated herein;
(l) Prior to the Effective Date, LBI shall, consistent with generally
accepted accounting principles, cause BOL to modify and change its loan,
litigation and real estate valuation policies and practices, including loan
classifications and levels of reserves and other pertinent accounting entries,
so as to be applied consistently on a mutually satisfactory basis with those of
SFNC; provided, however, that no such action pursuant to this subsection (l)
need be taken unless and until SFNC acknowledges that all conditions to its
obligation to consummate the Merger has been satisfied and no such accrual or
other adjustment made by LBI pursuant to the provisions of this subsection (l)
shall constitute an acknowledgment by LBI or create any implication for any
purpose, that such accrual or other adjustment was necessary for any purpose
other than to comply with the provisions of this subsection (l);
(m) From and after the Effective Date, SFNC shall cause its subsidiaries,
including BOL, to offer to all persons who were employees of LBI or BOL (as
reflected in the payroll records of such institutions) immediately prior to the
Effective Date and who become employees of SFNC or any of its subsidiaries,
including those who remain as employees of BOL immediately following the
Effective Date, the right to participate in the employee benefits of SFNC and
its subsidiaries (including but not limited to the Simmons First National
Corporation Employee Stock Ownership Plan, Simmons First National Corporation
ss.401(k) Plan, and such other benefits as are set forth in the Simmons First
National Corporation Personnel Policy Manual) on the same terms as the employees
of the other subsidiaries of SFNC. To the extent permitted by such plans and
policies and SFNC's prior administration of such plans and policies, (1) prior
service of employees of LBI and its subsidiaries will be credited for purposes
of eligibility to participate, vesting, and benefit accrual under such plans and
policies and (2) any waiting periods or exclusions pre-existing conditions shall
be waived.
(n) In the case of SFNC, immediately following the Effective Date,it shall
pay to Stephens Inc. all amounts owing to Stephens Inc. by LBI pursuant to that
certain retainer agreement, dated January 2, 1998, between Stephens Inc. and
LBI.
(o) In the case of SFNC, neither it nor any of its subsidiaries will take
any action which, in the opinion of Baird, Kurtz & Dobson, would preclude the
Merger from qualifying for the pooling of interest method of accounting.
ARTICLE VI
CONDITIONS TO CONSUMMATION
Section 6.01 Mutual Conditions. The respective obligations of SFNC and LBI
to effect the Merger shall be subject to the satisfaction prior to the Effective
Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite votes of the shareholders of LBI in accordance with
applicable law;
(b) The procurement by SFNC of approval of this Agreement and the
transactions contemplated hereby by the FRB and the expiration of any statutory
waiting periods;
(c) Procurement of all other regulatory consents and approvals, including,
without limitation, any required consents or approvals from the United States
Treasury, Office of the Comptroller of the Currency and state banking
authorities, which are necessary to the consummation of the transactions
contemplated by this Agreement; provided, however, that no approval or consent
described in Sections 6.01(b) and (c) shall be deemed to have been received if
it shall include any conditions or requirements which would reduce the benefits
of the transactions contemplated hereby to such a degree that SFNC or LBI would
not have entered into this Agreement had such conditions or requirements been
known at the date hereof;
(d) The receipt from Baird, Kurtz & Dobson of its opinion that the Merger
upon consummation may properly be accounted for under the pooling of interest
method pursuant to Generally Accepted Accounting Principles and the accounting
rules of the Securities Exchange Commission, provided that the opinion may
require that the transaction in which LBI acquired the minority interest in BOL
be accounted for using the purchase method of accounting;
(e) The satisfaction of all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Agreement;
(f) No party hereto shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger;
(g) No statute, rule, regulation, order, injunction or decree shall have
been enacted entered, promulgated or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Merger; and
(h) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC or an exemption from registration shall be effective.
(i) LBI shall cause each director, executive officer and other person who
is an "affiliate" (for purposes of Rule 145 under the Securities Act) to deliver
to SFNC as soon as practicable after the date hereof, but in no event after the
date of the LBI shareholders meeting called to approve the Merger, a letter
agreement satisfactory to SFNC providing, among other matters, that such person
will not sell, pledge (other than the continuation of existing pledges),
transfer or otherwise dispose of any shares of LBI Stock held by such
"affiliate" or the shares of SFNC Stock to be received by such "affiliate" in
the Merger in the case of shares of SFNC Stock only, except in compliance with
the applicable provisions of the Securities Act and the rules and regulations
thereunder and upon terms and conditions which will not adversely affect the
qualification of the Merger for the pooling of interest method of accounting.
Section 6.02 Additional Conditions for SFNC. The obligation of SFNC to
effect the Merger shall be subject to the satisfaction prior to the Effective
Time of the following additional conditions:
(a) SFNC shall have received an opinion, dated the Effective Date, of LBI's
counsel in the form and to the effect customarily received in transactions of
this type;
(b) SFNC shall have received agreements in satisfactory form from Loyd R.
Swope and Kenneth D. Cox agreeing not to become a shareholder of, associated
with, employed by, a consultant to or a member of the board of directors of any
other financial institution Insured by the Federal Deposit Insurance Corporation
("FDIC"), maintaining one or more places of business in Washington County or
Benton County, Arkansas for a period of two (2) years after the Effective Date,
provided, that such agreement shall not prohibit the ownership directly or
indirectly, in the aggregate, of less than one percent (1%) of any class of
securities of any such financial institution solely as a passive investment so
long as such securities are listed for trading on NASDAQ in the over-the-counter
market or are traded on a national securities exchange;
(c) LBI shall have acquired or acquire immediately prior to the Effective
Time all of the remaining shares of BOL Stock in a transaction which will not
adversely affect the eligibility of the Merger to be accounted for under the
pooling of interest method of accounting. Any requirement that the transaction
in which the outstanding minority shares of BOL Stock is acquired by LBI be
accounted for under the purchase method of accounting, shall not be deemed to
adversely affect the eligibility to account for the Merger under the pooling of
interest method of accounting, so long as the balance of the Merger can be
accounted for under the pooling of interest method of accounting.
(d) Each of the representations, warranties and covenants herein of LBI
shall, in all material respects, be true on, or complied with by, the Effective
Date as if made on such date, or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date, and
SFNC shall have received a certificate signed by the Chief Executive Officer and
the Treasurer of LBI, dated the Effective Date, to such effect;
(e) Phase I environmental audits of all real property owned by LBI or any
of its subsidiaries shall have been conducted at SFNC's expense and shall, to
SFNC's satisfaction, reflect no material problems under Environmental Laws;
(f) SFNC shall have received all state securities laws and "Blue Sky"
permits and other authorizations necessary to consummate the transactions
contemplated hereby;
(g) No litigation or proceeding is pending which (1) has been brought
against SFNC or LBI or any of their subsidiaries by any governmental agency
seeking to prevent consummation of the transactions contemplated hereby or (2)
in the reasonable judgment of the Board of Directors of SFNC is likely to have a
Material Adverse Effect on LBI or SFNC;
Section 6.03 Additional Conditions for LBI. The obligation of LBI to effect
the Merger shall be subject to the satisfaction prior to the Effective Time of
the following additional conditions:
(a) LBI shall have received an opinion, dated the Effective Date, of SFNC's
counsel in the form and to the effect customarily received in transactions of
this type;
(b) Each of the representations, warranties and covenants contained herein
of SFNC shall, in all material respects, be true on, or complied with by, the
Effective Date as if made on such date, or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date,
and LBI shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of SFNC, dated the Effective Date, to such
effect;
(c) No litigation or proceeding is pending which (1) has been brought
against SFNC or LBI or any of their subsidiaries by any governmental agency,
seeking to prevent consummation of the transactions contemplated hereby or (2)
in the reasonable judgment of the Board of Directors of LBI is likely to have a
Material Adverse Effect on LBI or SFNC;
(e) Williams & Anderson, LLP shall have delivered its opinion to SFNC and
LBI, dated as of the Effective Date, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing at the Effective Time, the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that, accordingly: (1) no
gain or loss will be recognized by the shareholders of LBI who exchange their
shares of LBI Stock for shares of SFNC Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in SFNC Stock);
(2) the tax basis of the shares of SFNC Stock received by shareholders who
exchange their shares of LBI Stock for shares of SFNC Stock in the Merger will
be the same as the tax basis of the shares of LBI Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest for
which cash is received); (3) the holding period of the shares of SFNC Stock
received in the Merger will include the period during which the shares of LBI
Stock surrendered in exchange therefor were held, provided such shares of LBI
Stock were held as capital assets at the Effective Time; and (4) satisfactorily
addresses any other significant federal income tax issues concerning the Merger.
In rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of LBI and others.
Section 6.04 Effect of Required Adjustments. Any effect on LBI as a result
of action taken by LBI pursuant to Section 5.01(l) shall be disregarded for
purposes of determining the truth or correctness of any representation or
warranty of LBI and for purposes of determining whether any conditions are
satisfied.
ARTICLE VII
TERMINATION
Section 7.01 Termination. This Agreement may be terminated prior to the
Effective Date, either before or after its approval by the stockholders of LBI:
(a) By the mutual consent of SFNC and LBI, if the Board of Directors of
each so determines by vote of a majority of the members of its entire Board;
(b) By SFNC or LBI, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event of the failure of the
shareholders of LBI to approve this Agreement at its meeting called to consider
such approval, or a material breach by the other party hereto of any
representation, warranty or agreement contained herein which is not cured or not
curable within 60 days after written notice of such breach is given to the party
committing such breach by the other party hereto;
(c) By SFNC or LBI, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that the Merger is not
consummated by March 31, 1999, unless the failure to so consummate by such time
is due to the breach of this Agreement by the party seeking to terminate;
(d) By SFNC, in the event Baird, Kurtz & Dobson notifies SFNC that it will
unable to give the opinion described in Section 6.01(d), or
Section 7.02 Effect of Termination. In the event of the termination of this
Agreement by either SFNC or LBI, as provided above, this Agreement shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective officers or directors, except that any such
termination shall be without prejudice to the rights of any party hereto arising
out of the willful breach by any other party of any covenant or willful
misrepresentation contained in this Agreement.
ARTICLE VIII
EFFECTIVE DATE AND EFFECTIVE TIME
Section 8.01 Effective Date and Effective Time. On the last business day of
the month during which the expiration of all applicable waiting periods in
connection with governmental approvals occurs and all conditions to the
consummation of this Agreement are satisfied or waived, or on such earlier or
later date as may be agreed by the parties, Articles of Merger shall be executed
in accordance with all appropriate legal requirements and shall be filed as
required by law, and the Merger provided for herein shall become effective upon
such filing or on such date as may be specified in such Articles of Merger,
herein called the "Effective Date". The "Effective Time" of the Merger shall be
6:01 P.M. in the State of Arkansas on the Effective Date, or such other time on
the Effective Date as may be agreed by the parties.
ARTICLE IX
OTHER MATTERS
Section 9.01 Survival. Except as hereinafter provided, the representations
and warranties contained in this Agreement and all other terms, covenants and
conditions hereof shall merge in the closing documents and shall not survive the
Effective Date or, after the Effective Date be the basis for any action by any
party, except as to any matter which is based upon willful fraud by a party with
respect to which the representations, warranties, terms, covenants and
conditions set forth in this Agreement shall expire only upon expiration of the
applicable statute of limitations. If this Agreement shall be terminated, the
agreements of the parties in Sections 5.01(h)(3), 7.02, 9.05 and 9.06 shall
survive such termination.
Section 9.02 Amendment; Modification; Waiver. Prior to the Effective Date,
any provision of this Agreement may be waived by the party benefited by the
provision or by both parties or amended or modified at any time, including the
structure of the transaction by an agreement in writing between the parties
hereto approved by their respective Boards of Directors, to the extent allowed
by law, except that, after the vote by the shareholders of LBI, Sections
2.02(a)-(d) shall not be amended or revised.
Section 9.03 Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
Section 9.04 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arkansas.
Section 9.05 Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby.
Section 9.06 Disclosure. Each of the parties and its respective agents,
attorneys and accountants will maintain the confidentiality of all information
provided in connection herewith which has not been publicly disclosed unless it
is advised by counsel that any such information is required by law to be
disclosed.
Section 9.07 Notices. All notices, acknowledgments, requests and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto:
If to LBI and BOL, to: LINCOLN BANCSHARES, INC.
Loyd R. Swope, Chairman and CEO
P. O. Box 98
Lincoln, Arkansas 72744
With Copies to: HORNE, HOLLINGSWORTH & PARKER, P.A.
Attn: Garland Binns
P. O. Box 3363
Little Rock, Arkansas 72203
And
STEPHENS INC.
Attn: Robert E. Ulrey
111 Center St., Suite 2400
Little Rock, Arkansas 72201
If to SFNC, to: SIMMONS FIRST NATIONAL CORPORATION
J. Thomas May, Chairman & CEO
P. O. Box 7009
Pine Bluff, Arkansas 71611-7009
With Copies to: WILLIAMS & ANDERSON LLP
ATTN: Patrick A. Burrow
111 Center St., 22nd Floor
Little Rock, Arkansas 72201
Section 9.08 No Third Party Beneficiaries. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as expressly provided
for herein, nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 9.09 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made.
Section 9.10 Assignment. This Agreement may not be assigned by any party
hereto without the written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers as of the day and
year first above written.
SIMMONS FIRST NATIONAL CORPORATION
By /s/ J. Thomas May
J. Thomas May, Chairman, President &
Chief Executive Officer
ATTEST:
/s/ John L. Rush
John L. Rush, Secretary
LINCOLN BANCSHARES, INC.
By /s/ Loyd R. Swope
Loyd R. Swope, Chairman and CEO
ATTEST:
/s/ Wanda K. Irwin
Secretary
SCHEDULE 4.01
1. Lien on 6,568 shares of Bank of Lincoln stock to First
National Bank, Fort Smith, Arkansas to secure an outstanding
indebtedness of the LBI to First National Bank.
ANNEX II
ARKANSAS BUSINESS CORPORATION ACT of 1965
4-26-1007. Rights of dissenting shareholders.
(a) If a shareholder of a corporation which is a party to a merger or
consolidation files with the corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to the plan of merger or consolidation and does not
vote in favor thereof, and the shareholder within ten (10) days after the date
on which the vote was taken makes written demand on the surviving or new
domestic or foreign corporation for payment of the fair value of his shares as
of the day prior to the date on which the vote was taken approving the merger or
consolidation, then, if the merger or consolidation is effected, the surviving
or new corporation shall pay to the shareholder, upon surrender of his
certificate or certificates representing the shares, the fair value thereof.
(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.
(c) Any shareholder failing to make demand within the ten-day period shall be
bound by the terms of the merger or consolidation.
(d) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.
(e)(1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing those shares.
(2) Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in those shares or in the corporation.
(f)(1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking for a finding and determination of the fair
value of the shares and shall be entitled to judgment against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgment.
(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.
(3) Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in the shares or in the surviving or new corporation.
(4) Unless the dissenting shareholder files the petition within the time
herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.
(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment entered, as in
this section provided, may be held and disposed of by the corporation as in the
case of other treasury shares.
(h) The provisions of this section shall not apply to a merger if, on the date
of the filing of the articles of merger, the surviving corporation is the owner
of all the outstanding shares of the other domestic or foreign corporations that
are parties to the merger.
Annex III
ARKANSAS BUSINESS CORPORATION ACT OF 1987
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
4-27-1301. Definitions.
In this subchapter:
1. "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
2. "Dissenter" means a shareholder who is entitled to dissent from corporate
action under 4-27-1302 and who exercises that right when and in the manner
required by 4-27-1320 - 4-27-1328;
3. "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion would be inequitable;
4. "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances;
5. "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation;
6. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
7. "Shareholder" means the record shareholder or the beneficial shareholder.
4-27-1302. Right of dissent.
A. A shareholder is entitled to dissent from and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by 4-27-1103 or the
articles of incorporation and the shareholder is entitled to vote on the
merger; or
(ii) If the corporation is a subsidiary that is merged with its parent under
4-27-1104;
2. Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
4. An amendment of the articles of incorporation that materially and adversely
affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
4-27-604; or
5. Any corporate action taken pursuant to a shareholder vote to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares under
this subchapter may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
4-27-1303. Dissent by nominees and beneficial owners.
A. A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
1. He submits to the corporation the record shareholder's written consent to
he dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
4-27-1320. Notice of dissenters' rights.
A. If proposed corporate action creating dissenters' rights under 4-27-1302 is
submitted to a vote at a shareholders' meeting, the meeting notice must state
that shareholders are or may be entitled to assert dissenters' rights under this
chapter and be accompanied by a copy of this chapter.
B. If corporate action creating dissenters' rights under 4-27-1302 is taken
without a vote of shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in 4-27-1322.
4-27-1321. Notice of intent to demand payment.
A. If proposed corporate action creating dissenters' rights under 4-27-1302 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice of
his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A. of
this section is not entitled to payment for his shares under this subchapter.
4-27-1322. Dissenters' notice.
A. If proposed corporate action creating dissenters' rights under 4-27-1302 is
authorized at a shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the requirements of
4-27-1321.
B. The dissenters' notice must be sent no later than ten (10) days after the
orporate action was taken, and must:
1. State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
2. Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
4. Set a date by which the corporation must receive the payment demand, which
date may not be fewer than thirty (30) nor more than sixty (60) days after the
date the notice required by subsection A. of this section is delivered; and
5. Be accompanied by a copy of this subchapter.
4-27-1323. Duty to demand payment.
A. A shareholder sent a dissenters' notice described in 4-27-1322 must demand
payment, certify whether he acquired beneficial ownership of the shares before
the date required to be set forth in the dissenters' notice pursuant to
4-27-1322B.3., and deposit his certificates in accordance with the terms of the
notice.
B. The shareholder who demands payment and deposits his share certificates
under subsection A. of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
C. A shareholder who does not demand payment or deposit his share certificates
where required, each by the date set in the dissenters' notice, is not entitled
to payment for his shares under this subchapter.
4-27-1324. Share restrictions.
A. The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under 4-27-1326.
B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
4-27-1325. Payment.
A. Except as provided in 4-27-1327, as soon as the proposed corporate action
is taken, or upon receipt of a payment demand, the corporation shall pay each
dissenter who complied with 4-27-1323 the amount the corporation estimates to be
the fair value of his shares, plus accrued interest.
B. The payment must be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
2. A statement of the corporation's estimate of the fair value of the shares;
3. An explanation of how the interest was calculated;
4. A statement of the dissenter's right to demand payment under 4-27-1328; and
5. A copy of this subchapter.
4-27-1326. Failure to take action.
A. If the corporation does not take the proposed action within sixty (60) days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under 4-27-1322 and repeat the payment demand procedure.
4-27-1327. After-acquired shares.
A. A corporation may elect to withhold payment required by 4-27-1325 from a
dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
B. To the extent the corporation elects to withhold payment under subsection
A. of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under 4-27-1328.
4-27-1328. Procedure if shareholder dissatisfied with payment or offer.
A. A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under 4-27-1325), or reject the corporation's
offer under 4-27-1327 and demand payment of the fair value of his shares and
interest due, if:
1. The dissenter believes that the amount paid under 4-27-1325 or offered
under 4-27-1327 is less than the fair value of his shares or that the interest
due is incorrectly calculated;
2. The corporation fails to make payment under 4-27-1325 within sixty (60)
days after the date set for demanding payment; or
3. The corporation, having failed to take the proposed action, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within sixty (60) days after the date set for demanding
payment.
B. A dissenter waives his right to demand payment under this section unless he
notifies the corporation of his demand in writing under subsection A. of this
section within thirty (30) days after the corporation made or offered payment
for his shares.
4-27-1330. Court action.
A. If a demand for payment under 4-27-1328 remains unsettled, the corporation
shall commence a proceeding within sixty (60) days after receiving the payment
demand and petition the court to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within the
sixty-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
B. The corporation shall commence the proceeding in the circuit court of the
county where the corporation's principal office (or, if none in this state, its
registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
C. The corporation shall make all dissenters (whether or not residents of this
state) whose demands remain unsettled parties to the proceeding as in an action
against their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law.
D. The jurisdiction of the court in which the proceeding is commenced under
subsection B. of this section is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired shares
for which the corporation elected to withhold payment under 4-27-1327.
4-27-1331. Court costs and counsel fees.
A. The court in an appraisal proceeding commenced under 4-27-1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under 4-27-1328.
B. The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the court
finds the corporation did not substantially comply with the requirements of
4-27-1320 - 4-27-1328; or
2. Against either the corporation or a dissenter, in favor of any other party,
if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
C. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Arkansas Code Annotated Section 4-27-850 ("Arkansas Code") provides as follows:
SECTION 4-27-850 - INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS - INSURANCE.
A. A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the court of chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court of chancery
or such other court shall deem proper.
C. To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in subsections A. and B. of this
section, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
D. Any indemnification under subsections A. and B. of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections A. and B. of this
section. Such determination shall be made:
(1) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding; or
(2) If such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or
(3) By the stockholders.
E. Expenses incurred by an officer or director in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
F. The indemnification and advancement of expenses provided by or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
G. A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
H. For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee, or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under the provisions of this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
I. For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
J. The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
Further, the Arkansas Code Section 4-27-202 provides as follows:
SECTION 4-27-202. ARTICLES OF INCORPORATION.
A. The articles of incorporation must set forth:
* * *
B. The articles of incorporation may set forth:
* * *
3. A provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
or limit the liability of a director:
(i) For any breach of the director's duty of loyalty to the corporation or
its stockholders;
(ii) For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(iii) Under Section 4-27-833 of this chapter;
(iv) For any transaction from which the director derived an improper
personal benefit; or
(v) For any action, omission, transaction, or breach of a director's duty
creating any third-party liability to any person or entity other than the
corporation or stockholder.
No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when such provision becomes
effective. All references in this subsection to a director shall also be deemed
to refer to a member of the governing body of a corporation which is not
authorized to issue capital stock.
THE REGISTRANT'S ARTICLES OF INCORPORATION AND BYLAWS PROVISIONS
The Registrant's Articles of Incorporation and Bylaws extend
indemnification rights to the fullest extent authorized by the Arkansas Code to
its directors and officers. In addition, the Articles of Incorporation and
Bylaws permit the Registrant to maintain insurance to protect itself and any of
its directors, officers or representatives against any liability assessed
against such person and incurred in any such capacity or arising out of such
status whether or not the Registrant would have the power to indemnify such
person under the Arkansas Code.
The Registrant's Articles of Incorporation include the following
provision, in reliance on Section 4-27-202 of the Arkansas Code:
SIXTEENTH: To the fullest extent permitted by the Arkansas Business
Corporation Act, as it now exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
Exhibit
Number Description
- ------ -------------
2 Agreement and Plan of Merger by and between
the Company and Lincoln Bankshares of
Arkansas, Inc., dated August 25, 1998.
(Included as Annex I to Part I of the
Registration Statement).
5 Opinion of Williams & Anderson LLP
(To be filed by amendment.)
8 Opinion of Williams & Anderson LLP
15 Form of Letter re: unaudited interim
financial information.
23(a) Consent of Baird, Kurtz & Dobson,
independent public accountants regarding
information from Simmons First National
Corporation 10-K for the year ended
12/31/97
23(b) Consent of Baird, Kurtz & Dobson,
independent public accountants regarding
inclusion of the audited financial
statements of Lincoln Bankshares, Inc.
*23(c) Consent of Williams & Anderson LLP will be
included in that firm's opinion filed as
Exhibit 5 hereto.
99(a) Letter to Lincoln Bankshares, Inc.
Shareholders
99(b) Notice of Special Shareholders Meeting
99(c) Form of Proxy
99(d) Form of Affiliate Letter
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes as follows that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(4) The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (3) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 (Section 230.415 of this chapter),
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) The undersigned registrant undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(6) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pine Bluff, State of Arkansas, on the 30th day of
October, 1998.
SIMMONS FIRST NATIONAL CORPORATION
By /s/ Barry L. Crow
-----------------------
Barry L. Crow, Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the _____ day of October, 1998.
Signature Title
/s/ J. Thomas May Chairman of the Board, Chief Executive Officer
J. Thomas May and President (Principal Executive Officer)
/s/ Barry L. Crow Chief Financial Officer
Barry L. Crow (Principal Financial and Accounting Officer)
W. E. Ayres Director
/s/ Ben V. Floriani Director
Ben V. Floriani
/s/ Lara F. Hutt, III Director
Lara F. Hutt, III
/s/ George Makris, Jr. Director
George Makris, Jr.
/s/ David R. Perdue Director
David R. Perdue
Harry L. Ryburn Director
Donald W. Stone Director
/s/ Henry F. Trotter, Jr. Director
Henry F. Trotter, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints J.
Thomas May and Barry L. Crow, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 of Simmons First
National Corporation (the "Company") pertaining to the registration of up to
301,833 shares of the Company's Class A Common Stock, $1.00 par value per share,
to be issued upon consummation of a merger with Lincoln Bankshares, Inc. and to
sign any and all amendments (including post-effective amendments) to the
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
- ---------- -----
/s/ J. Thomas May Director
J. Thomas May
W. E. Ayres Director
/s/ Ben V. Floriani Director
Ben V. Floriani
/s/ Lara F. Hutt, III Director
Lara F. Hutt, III
/s/ George Makris, Jr. Director
George Makris, Jr.
/s/ David R. Perdue Director
David R. Perdue
Harry L. Ryburn Director
Donald W. Stone Director
/s/ Henry F. Trotter, Jr. Director
Henry F. Trotter, Jr.
<PAGE>
Exhibit 8
WILLIAMS & ANDERSON, LLP
111 Center Street
Twenty-Second Floor
Little Rock, Arkansas 72201
(501) 372-0800
October 30, 1998
Simmons First National Corporation
P. O. Box 7009
Pine Bluff, Arkansas 71611
Lincoln Bankshares, Inc.
101 Boyer Street
Lincoln, Arkansas 72744
Re: Simmons First National Corporation Registration
Statement on Form S-4
Gentlemen:
We have acted as counsel to Simmons First National Corporation, an Arkansas
corporation ("Simmons"), in connection with the proposed merger (the "Merger")
of Lincoln Bankshares, Inc., an Arkansas corporation ("LBI") with and into
Simmons, pursuant to the terms of the Agreement and Plan of Merger, dated as of
August 24, 1998 (the "Agreement") by and between Simmons and LBI as described in
the Registration Statement on Form S-4 to be filed by Simmons with the
Securities and Exchange Commission (the "Registration Statement"). This opinion
is being rendered pursuant to the requirements of Item 21(a) of Form S-4 under
the Securities Act of 1933, as amended.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Agreement, (ii) the Registration Statement and (iii) such other
documents as we have deemed necessary or appropriate in order to enable us to
render the opinions below. In our examination, we have assumed the genuineness
of all signatures, the legal capacity of all natural persons, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. This
opinion is subject to the receipt by counsel prior to the Effective Date of
certain written representations and covenants of Simmons and LBI.
Based upon and subject to the foregoing, the discussion contained in the
prospectus included as part of the Registration Statement (the "Prospectus")
under the caption "Certain Federal Income Tax Consequences", except as otherwise
indicated, expresses our opinion as to the material Federal income tax
consequences applicable to holders of LBI Common Stock. We express no opinion as
to the tax consequences of the exchange by certain minority shareholders of the
Bank of Lincoln of for shares of LBI Common Stock immediately prior to the
consummation of the Merger. You should be aware, however, that the discussion
under the caption "Certain Federal Income Tax Consequences" in the Prospectus
represents our conclusions as to the application of existing law to the instant
transactions. There can be no assurance that contrary positions may not be taken
by the Internal Revenue Service.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement. We also consent to the references to
Williams & Anderson LLP under the heading "Certain Federal Income Tax
Consequences" in the Registration Statement and the Prospectus.
Very truly yours,
WILLIAMS & ANDERSON LLP
/s/ Patrick A. Burrow
Patrick A. Burrow
PAB/ms
<PAGE>
Exhibit 15
Baird, Kurtz & Dobson
200 East 11th Avenue
P. O. Box 8306
Pine Bluff, AR 71611
October 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Simmons First National Corporation has incorporated our
report dated August 6, 1998, by reference with respect to the unaudited
consolidated financial statements of Simmons First National Corporation included
in its Quarterly Report (Form 10-Q) for the three months and six months ended
June 30, 1998, in the Registration Statement (Form S-4) and the related
Prospectus for the registration of 301,833 shares of common stock of Simmons
First National Corporation. We are also aware of our responsibilities under the
Securities Act of 1933.
/s/ Baird, Kurtz & Dobson, CPAs
<PAGE>
Exhibit 23 (a)
CONSENT OF BAIRD, KURTZ & DOBSON, INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement (Form
S-4) and the related Prospectus for the registration of 301,833 shares of common
stock of Simmons First National Corporation of our report dated January 30,
1998, with respect to the consolidated financial statements of Simmons First
National Corporation as of December 31, 1997 and 1996, and for each of the years
in the three-year period ended December 31, 1997, included in its Annual Report
(Form 10-K) for the year ended December 31, 1997. We also consent to the
reference to our firm under the caption "Experts" appearing in the Registration
Statement.
/s/ Baird, Kurtz & Dobson
Pine Bluff, Arkansas
October 30, 1998
<PAGE>
Exhibit 23 (b)
CONSENT OF BAIRD, KURTZ & DOBSON, INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated September 18, 1998,
on the consolidated financial statements of Lincoln Bankshares, Inc. as of
December 31, 1997, and for the year then ended, in the Registration Statement
(Form S-4) and the related Prospectus of Simmons First National
Corporation for the registration of 301,833 shares of common stock of
Simmons First National Corporation.
/s/ Baird, Kurtz & Dobson, CPAs
Pine Bluff, Arkansas
October 30, 1998
Exhibit 99 (a)
LINCOLN BANKSHARES, INC.
101 Boyer Street
Lincoln, Arkansas 92933
__________, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of the shareholders
of Lincoln Bankshares, Inc. (the "Company") to be held at the offices of the
Company, 101 Boyer Street, West side of Square, Lincoln, Arkansas 72744, on
December 15, 1998, at 11:30 a.m., as set forth in the attached Notice of Special
Meeting of Shareholders, for the purpose of voting upon a proposed merger of
Lincoln Bankshares, Inc. with and into Simons First National Corporation (the
"Merger") pursuant to the terms of an Agreement and Plan of Merger, dated August
25, 1998 and to elect to be governed by the Arkansas Business Corporation Act of
1987. Pursuant to the Merger, shareholders of the Company will receive 30.41445
shares of the Class A common stock of Simmons First National Corporation for
each share of the common stock of the Company held, other than shares held by
dissenting shareholders and the payment of cash in lieu of the issuance of
fractional shares of Simmons stock. Consummation of the Merger will terminate
the existence of the Company. The election to be governed by the Arkansas
Business Corporation Act of 1987 will be effective only if the Merger is
approved.
Accompanying this letter is a Notice of Shareholders Meeting, Proxy
Statement (which includes in Annex II, A.C.A. ss.4-26-1007, a part of the
Arkansas Business Corporation Act of 1987 concerning dissenter's rights and in
Annex III, Subchapter 13 of the Arkansas Business Corporation Act of 1987
concerning dissenters rights) and Proxy. You are urged to read these materials
carefully and promptly. The Proxy Statement contains descriptions of the Merger
and the merger agreement, financial information about the Simmons and the
Company and other related information. Only by reading the entire Proxy
Statement will you be able to obtain sufficient information to enable you to
make an informed decision about how to vote on the Merger.
The owners of at least two-thirds of the shares of common stock of the
Company outstanding on October 29, 1998 must be voted in favor of the Plan and
the Amendment in order for this action to be approved. In view of the importance
of the meeting, it is highly recommended that your shares be represented,
whether or not you are able to attend in person.
The Company's board of directors has approved the Merger and the Agreement
and recommends voting FOR approval of the Merger. You are urged to vote FOR the
proposition and to complete, date, sign and return the enclosed proxy in the
envelope provided.
I look forward to visiting with you at the meeting.
Very truly yours,
= Loyd R. Swope
President and Chairman of the Board
<PAGE>
Exhibit 99 (b)
LINCOLN BANKSHARES, INC.
101 Boyer Street
Lincoln, Arkansas 727443
(501) 824-3232
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the shareholders of Lincoln Bankshares, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of
Lincoln Bankshares, Inc. (the "Company") will be held at 11:30 a.m. on December
15, 1998, at the offices of the Company, 101 Boyer St., West side of Square,
Lincoln, Arkansas 72744. A Proxy Statement relating to the business to be
conducted at the meeting is enclosed.
The meeting is for the purpose of considering and acting upon:
1. A proposal for the shareholders to approve the merger of
the Company with and into Simmons First National Corporation
("Simmons") pursuant to the terms of the Agreement and Plan of
Merger, dated August 25, 1998 under the terms of which Simmons
will issue 30.41445 shares of its Class A common stock for
each share of the Company's stock outstanding, all as more
fully set forth in the accompanying Proxy Statement.
2. A proposal to amend the articles of incorporation to adopt
the Arkansas Business Corporation Act of 1987 as the corporate
law to govern the affairs of this corporation: (This proposal
may only be adopted if Proposal (1) above is also adopted.)
3. Such other business as may properly come before
the meeting or any adjournment thereof. NOTE:
The board of directors is not aware of any other business
to come before the meeting.
Any shareholder of the Company who is opposed to the proposed action
described in Item #1 is entitled to dissent and obtain payment of the fair value
of his shares, by following the procedures set forth in either A.C.A. ss.
4-26-1007 under the Arkansas Business Corporation Act of 1965 or Subchapter 13
of the Arkansas Business Corporation Act of 1987, A.C.A. ss. 4-27-1301 et seq.,
copies of which are included in the Proxy Statement delivered herewith.
Any action may be taken at the meeting on the date specified or on any date
or dates to which the meeting may be adjourned. The close of business on October
29, 1998, has been fixed as the record date for determining the shareholders
entitled to notice of and vote at the meeting.
You are requested to complete and sign the enclosed proxy, which is
solicited by the board of directors, and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the meeting in
person. EACH SHAREHOLDER IS ENCOURAGED TO READ THE ENCLOSED PROXY STATEMENT
CAREFULLY PRIOR TO VOTING.
BY ORDER OF THE BOARD OF DIRECTORS.
Lincoln, Arkansas
November __, 1998 _________________________
Secretary
================================================================================
Important: The prompt return of proxies will save the Company the expense of
further requests for proxies in order to ensure a quorum. A pre-addressed
postage-paid envelope is enclosed for your convenience.
================================================================================
Exhibit 99 (c)
PROXY
SPECIAL MEETING OF SHAREHOLDERS
LINCOLN BANKSHARES OF ARKANSAS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Loyd R. Swope and Kenneth D. Cox and each
of them proxies, with full power of substitution to vote for the undersigned all
shares of the common stock of Lincoln Bankshares, Inc. which the undersigned
would be entitled to vote if personally present at the Special Meeting of
Shareholders to be held on Tuesday, December 15, 1998, at 11:30 A.M., and at any
adjournment or adjournments thereof, upon the matters described in the
accompanying Proxy Statement and upon any other business that may properly come
before the meeting or any adjournment thereof. Said proxies are directed to vote
or refrain from voting upon the following matters as indicated below, and
otherwise to vote in their discretion:
(1) PROPOSAL TO APPROVE THE MERGER OF THE COMPANY WITH AND INTO SIMMONS FIRST
NATIONAL CORPORATION: (mark only one box)
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(2) PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO ADOPT THE ARKANSAS
BUSINESS CORPORATION ACT OF 1987 AS THE CORPORATE LAW TO GOVERN THE AFFAIRS
OF THE COMPANY: (This proposal may only be adopted if Proposal (1) above is
also adopted.) (Mark only one box)
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(3) Upon such other business as may properly come before the meeting or any
adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS (1) AND (2).
The undersigned acknowledge(s) receipt with this proxy of a copy of the
Notice of Special Meeting and Proxy Statement.
Dated: _________________, 1998. __________________________________
-----------------------------------
Signature(s) of Shareholders(s)
IMPORTANT: Please date this proxy and sign your name exactly as
your name appears. If stock is held jointly, both should sign. Persons
signing in a representative or fiduciary capacity (executors, administrators,
trustees, guardians, etc.) should so indicate, giving full title.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE>
Exhibit 99 (d)
Simmons First National Corporation
P. O. Box 7009
Pine Bluff, Arkansas 71611
Gentlemen:
I may presently be considered to be an "affiliate", as defined in paragraph
(a) of Rule 144 of the Rules and Regulations of the Securities and Exchange
commission ("SEC") under the Securities Act of 1933, as amended (the "Act"), of
Lincoln Bankshares, Inc., Lincoln, Arkansas, a bank holding company ("LBI").
Pursuant to the merger (the "Merger") of ABA with and into Simmons First
National Corporation ("Simmons"), I will acquire ________ shares of the common
stock, par value $1 per share ("Common Stock"), of Simmons. I represent and
warrant that I will not make any sale, transfer or other disposition of the
Shares in violation of the Act or the General Rules and Regulations promulgated
thereunder by the SEC.
I have been advised that the Shares issued to me pursuant to the Merger
have been registered under the Act in the Registration Statement on SEC Form
S-4, as amended, Registration No. ________ ("Registration Statement") as filed
with the SEC, and have received a copy of the proxy/prospectus filed as part of
the Registration Statement. However, I have also been advised that any public
offering or sale by me of any of the Shares will, under current law, require
either (i) the further registration (by amendment of such Form S-4 or otherwise)
under the Act of the Shares to be sold or (ii) compliance with Rule 145
promulgated under the Act or (iii) the availability of another exemption from
such registration.
I agree that notwithstanding any provision herein or contained in the
Agreement and Plan of Reorganization that I will not sell, transfer, or
otherwise dispose of any of the Shares unless Simmons has made public disclosure
of financial results reflecting 30 days' of post-Merger combined operations of
LBI and Simmons within the meaning of Section 201.01 of the SEC's Codification
of Financial Reporting Policies. Simmons has agreed to make the required public
disclosure of financial results as set out above as soon as feasible after the
Merger is consummated. In addition, I hereby represent and warrant to Simmons
that I have not made any sales of LBI or Simmons common stock during the 30-day
period immediately preceding the date hereof and I further agree not to engage
in any such sales prior to the Merger, nor have I pledged or will I pledge any
Simmons or LBI common stock to secure any obligation during such period.
I represent and warrant to Simmons that:
1. I have carefully read this letter and discussed its requirements and
other applicable limitations upon the sale, transfer or other disposition of the
Shares, to the extent I felt necessary, with my counsel or counsel for LBI.
2. I have been informed by Simmons that any distribution by me of the Share
has not been registered under the Act and that the Shares must be held by me
indefinitely until (i) such distribution of the Shares has been registered under
the Act, (ii) a sale of the Shares is made in conformity with the volume and
other limitations of Rule 145 promulgated by the SEC under the Act, or (iii)
some other exemption from registration is available with respect to any such
proposed sale, transfer or other disposition of the Shares.
3. I have been informed by Simmons that it is required to file periodic
reports with the SEC and the NASDAQ and that certain sales of the Shares by me
may not be required to be registered under the Act by virtue of Rule 145
promulgated by the SEC under the Act, provided that such sales are made in
accordance with all of the terms and conditions of such Rules, including among
other things the following:
(a) The amount of Simmons Common Stock sold by me pursuant to
Rule 145 during any period of three months cannot exceed the greater of (i) one
percent of the total outstanding Simmons Common Stock or (ii) the average
reported weekly trading volume on NASDAQ during the four week period immediately
preceding receipt of the order by the broker to execute the transaction. In
computing the foregoing quantity limit it is necessary to count sales not only
by me but also by certain immediate family members and other related persons and
others with whom I may act in concert.
(b) Sales must be made in brokers' transactions as defined by
the SEC Rule 144 (certain provisions of which are incorporated by reference into
Rule 145).
(c) No sales may be made under the Rule unless Simmons has
filed all SEC reports required to be filed by Simmons.
4. I understand that Simmons is under no obligation to register the sale,
transfer or other disposition of the Shares by me or on my behalf.
5. I understand and agree that stop transfer instruction will be issued
with respect to the Shares and there will be placed on the certificates
representing such Shares, or any certificate delivered in substitution therefor,
a legend stating in substance:
"The shares represented by this Certificate have been issued to the
registered holder as a result of a transaction to which Rule 145 under
the Securities Act of 1933, as amended, (the "1933 Act") applies. The
shares represented by this certificate may not be sold, transferred or
assigned, and the issuer shall not be required to give effect to any
attempted sale, transfer or assignment, except pursuant to (i) a
registration statement then in effect under the 1933 Act, (ii) a
transaction permitted by Rule 145 as to which the issuer has received
evidence of compliance with the provisions of said Rule 145 reasonably
satisfactory to it or (iii) a transaction which, in the opinion of
counsel for the Affiliate or as described in a "no-action" or
interpretive letter from the staff of the Securities and Exchange
Commission, in each case reasonably satisfactory in form and substance
to the issuer, is exempt from the registration requirements of the 1933
Act. The restrictions of this paragraph shall become null and void and
this paragraph shall have no effect on and after _____________."
6. I have been informed by Simmons that if I propose to sell to any of
these Shares pursuant to Rule 145, and if such sale would be permitted under the
terms of this letter, Simmons will, upon my written request, supply me with the
following:
(a) A statement as to whether Simmons has complied with the
provisions of Rule 145 regarding filing of SEC reports as a condition to sales
made pursuant to that Rule;
(b) A confirmation as to the number of shares of Simmons
Common Stock outstanding as shown by the most recent report or statement
published by it; and
(c) Simmons' taxpayer identification number and SEC file
number.
I have carefully read this letter and have had an adequate opportunity to
review the Merger Agreement and understand the requirements and the limitations
imposed upon the distribution, sale, transfer, or other disposition of ABA
common stock or Shares of Simmons.
Sincerely,
