As filed with the Securities and Exchange Commission on February 11, 2004.
Registration No._____________
================================================================================
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)
6022
Arkansas (Primary Standard 71-0407808
(State or other jurisdiction of Industrial (I.R.S. Employer
incorporation or organization) Classification Identification No.)
Code Number)
J. Thomas May
Chairman of the Board and
501 Main Street Chief Executive Officer
Pine Bluff, Arkansas 71601 Simmons First National Corporation
(870) 541-1000 501 Main Street
Pine Bluff, AR 71601
(Address, including zip code, (870) 541-1000
and telephone number, including (Name, address, including zip
area code, of registrant's code, and telephone number, including
principal executive offices) area code, of agent for service)
____________________
With a copy to:
Patrick A. Burrow, Esq. C. Bruce Crum, Esq.
Quattlebaum, Grooms, Tull & Burrow PLLC McAfee & Taft
111 Center Street, Suite 1900 A Professional Corporation
Little Rock, Arkansas 72201 Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
____________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effective date of this registration statement and the
effective time of the merger described in the Agreement and Plan of Merger
attached as Appendix A to the proxy statement forming a part 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: |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
____________________
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered(1) offering price aggregate registration
per share(2) offering price(2) fee
=======================================================================================================================
Common stock, $1.00
share par value per 545,000 N/A $1.00 $1.00
========================================================================================================================
(1) Represents the maximum number of shares of Common Stock that Simmons First
National Corporation may be required to issue to holders of common stock of
Alliance Bancorporation, Inc. upon consummation of the merger of ABI with SFNC.
(2) Calculated in accordance with Rule 457(f)(2). Based on the book value per
fully diluted share (computed as of September 30, 2003 the most recent date for
which such information is available) of the common stock of Alliance
Bancorporation, Inc. to be exchanged in the merger.
____________________
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.
================================================================================
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2004
ALLIANCE BANCORPORATION, INC.
100 Werner Street
Hot Springs, Arkansas 71913
SPECIAL MEETING OF SHAREHOLDERS
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
Dear ABI Shareholder:
This proxy statement/prospectus is being furnished to you because you own
common stock of Alliance Bancorporation, Inc. ("ABI"). The board of directors of
ABI has approved a merger combining ABI with Simmons First National Corporation
("SFNC") and has called a special meeting of the ABI shareholders for the
purpose of voting on the merger. The special meeting will be held at 5:00 p.m.
on Thursday, March 18, 2004, at the Chamber of Commerce Building, 659 Ouachita
Avenue, Hot Springs, Arkansas 71901.
At the special meeting, you will consider and vote on the merger. We cannot
complete the merger unless holders of at least a majority of the outstanding
common stock approve it. If the merger is completed, you will receive at your
election (subject to the election procedures and limitations described in this
proxy statement/prospectus) in exchange for each share of your ABI common stock,
either:
1. $379.978 in cash and 18.1021 shares of SFNC common stock;
2. A number of shares of SFNC common stock as determined by an exchange
ratio;
3. Cash in an amount determined by the average price of the SFNC stock
traded on the NASDAQ prior to the effective date of the merger; or
4. A combination of cash and shares of SFNC common stock in a proportion
selected by you..
Cash will be paid in lieu of any fractional share interest of SFNC common stock.
If you elect the first option set forth above, fluctuations in the price of
SFNC common stock will not affect the number of shares or amount of cash you
will receive. If you elect any of options 2, 3 or 4, the number of shares of
SFNC common stock and the amount of cash to be received will fluctuate,
depending on the market price of SFNC common stock. You must complete, sign and
return the enclosed Election Form on or prior to the seventh day following the
date of the special meeting in order to elect any of options 2, 3 or 4. For
purposes of determining the merger consideration, the market price of SFNC
common stock will be deemed to be the average ending trade price per share of
SFNC common stock for the ten (10) consecutive trading days ending on the fifth
trading day immediately preceding the merger.
SFNC's common stock is quoted on The Nasdaq Stock Market's National Market
System under the trading symbol "SFNC". On February 10, 2004, SFNC's common
stock closed at $28.25 per share.
Please carefully consider the risk factors outlined under "Risk Factors"
beginning on page 16.
At the special meeting, you will also consider and vote on a proposal to
approve certain amended benefits for David Bartlett, Steven Trusty and Ronnie
Twyford pursuant to amendments to their Executive Supplemental Retirement Plan
Executive Agreements and Life Insurance Endorsement Method Split Dollar
Agreements with Alliance Bank. These amendments to the agreements and the
proposed changes to their benefits are designed to address certain potential
adverse tax consequences that may arise under the agreements if the merger is
consummated.
Your Board of Directors has unanimously approved the merger agreement and
the merger and recommends that you vote "FOR" approval of the merger agreement
and merger. The merger requires the approval of at least a majority of the
outstanding shares of ABI common stock.
Your Board of Directors (with Mr. Bartlett abstaining) has unanimously
approved the amended benefits under the Executive Supplemental Retirement Plan
Executive Agreements and Life Insurance Endorsement Method Split Dollar
Agreements for Messrs. Bartlett, Trusty and Twyford and recommends that you vote
"FOR" approval of the amended benefits. SFNC has approved the proposal for the
amended benefits, subject to the approval of the ABI shareholders. The approval
of the proposal for the amended benefits requires the approval of at least 75%
of the outstanding shares of ABI common stock, excluding the shares of ABI
common stock owned by Messrs. Bartlett, Trusty and Twyford.
Your vote is important. Please vote your shares as soon as possible so that
they may be represented at the special meeting. Whether or not you plan to
attend the meeting, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY
CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Returning the proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
Very truly yours,
David Bartlett
President
Neither the Securities and Exchange Commission nor any state securities
commissioner has approved or disapproved of the shares of SFNC common stock to
be issued under this proxy statement/prospectus or determined if this proxy
statement/prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
This document serves as a prospectus for the offering of shares of SFNC
common stock to the ABI shareholders in exchange for their ABI shares. You
should note that the securities that SFNC is offering are not savings or deposit
accounts or other obligations of any bank or savings association, and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency.
This proxy statement is dated February 11, 2004, and was first mailed or
otherwise delivered to ABI shareholders on or about February ___, 2004
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 18, 2004
TO THE SHAREHOLDERS OF ALLIANCE BANCORPORATION, INC.:
This serves as notice to you that a special meeting of shareholders of
Alliance Bancorporation, Inc. ("ABI") will be held on March 18, 2004 at 5:00
p.m., central time, at the Chamber of Commerce Building, 659 Ouachita Avenue,
Hot Springs, Arkansas, for the purpose of considering and voting upon the
following:
o Proposal I - Approval of the Agreement and Plan of Merger, dated
as of October 8, 2003, between ABI and Simmons First National
Corporation ("SFNC"), and the merger of ABI with and into SFNC.
o Proposal II - Approval of Amended Benefits for David Bartlett,
Steven Trusty and Ronnie Twyford.
Only holders of record of ABI common stock at the close of business on
February 5, 2004 are entitled to notice of and to vote at the special meeting or
any adjournments or postponements of the special meeting. In order for the
agreement and plan of merger to be approved, at least a majority of the
outstanding shares of ABI common stock must be voted in favor of the agreement
and plan of merger.
If the agreement is approved and the merger is completed, each share of ABI
common stock, other than shares held by ABI shareholders who properly exercise
their rights to dissent from the merger, will be converted into the right to
receive, at the election of the holder (subject to the election procedures and
limitations described in this proxy statement/prospectus), (i) $379.978 in cash
plus 18.1021 shares of SFNC common stock ("Default Election"), (ii) solely cash
consisting of the sum of $379.978, plus the product of 18.1021 multiplied by the
SFNC Average Price, as defined below, (iii) solely SFNC common stock consisting
of the number of shares determined by dividing the cash amount that the ABI
shareholder could have received under (ii) above by the SFNC Average Price, or
(iv) a combination of the cash and shares of SFNC common stock specified by the
ABI shareholder as a percentage to be received in the form of cash and SFNC
common stock (with the sum of such percentages equal to 100%). In all such
cases, cash will be paid in lieu of any remaining fractional shares. The SFNC
Average Price will not be fixed until five (5) days immediately preceding the
merger and is dependent on the market price of SFNC common stock. The "SFNC
Average Price" will equal the average daily ending trade price of SFNC common
stock for the ten (10) consecutive trading days ending immediately prior to the
fifth trading day preceding the merger.
ABI and SFNC have agreed that the total merger consideration to be paid by
SFNC to the ABI shareholders will be 545,000 shares of SFNC common stock and the
sum of $11,440,000 in cash. The amount of the merger consideration that will be
paid in cash is therefore fixed at $11,440,000. Likewise, the amount of the
merger consideration that will be paid in SFNC common stock is therefore fixed
at 545,000 shares. If you make the Default Election, you will receive $379.978
in cash and 18.1021 shares of SFNC common stock for each share of ABI you own,
without regard to the elections of any other ABI shareholders. In the event that
you and some of the other holders of the outstanding shares of ABI common stock
elect to receive merger consideration in a combination of cash and/or SFNC
common stock, other than the Default Election, the amount of cash and SFNC
common stock that you will have the right to receive upon exchange of your
shares of ABI common stock will be adjusted on a pro rata basis so that, in the
aggregate the merger consideration to be paid will equal $11,440,000 in cash and
545,000 shares of SFNC common stock. As a result, if you elect to receive merger
consideration in a combination of cash and SFNC common stock, other than the
Default Election, you may receive a different combination of consideration than
you elected, based on the elections made by other ABI shareholders. The federal
income tax consequences of the merger to ABI shareholders will depend on whether
they receive cash, SFNC common stock or a combination of cash and SFNC common
stock.
ABI shareholders will also be asked to consider and vote on a proposal to
approve certain amended benefits for David Bartlett, Steven Trusty and Ronnie
Twyford pursuant to amendments to their Executive Supplemental Retirement Plan
Executive Agreements and Life Insurance Endorsement Method Split Dollar
Agreements with Alliance Bank. These amendments to the agreements and the
proposed changes to their benefits are designed to address certain potential
adverse tax consequences that may arise under the agreements, if the merger is
consummated.
Please mark, sign, date and return the enclosed proxy and the enclosed
election form to Simmons First Trust Company, N. A. ("SFTC") in the enclosed
envelope at the address listed on the proxy card whether or not you plan to
attend the special meeting. If your election form is not received by SFTC by
5:00 p.m., Central Standard Time, on March 25, 2004, you will be deemed to have
made the default election to receive $379.978 in cash and 18.1021 shares of SFNC
common stock per ABI share in exchange for your shares. All ABI shareholders are
cordially invited to attend the special meeting. To ensure your representation
at the special meeting, please complete and promptly mail the enclosed proxy
card in the enclosed return envelope. This will not prevent you from voting in
person, but will help to secure a quorum and avoid added solicitation costs. You
may revoke your proxy at any time before it is voted. Please review the proxy
statement/prospectus attached to this notice for more complete information
regarding the proposed merger and the special meeting.
The Board of Directors of ABI unanimously recommends that ABI shareholders
vote "FOR" approval of the agreement and plan of merger. Further, the Board of
Directors of ABI (with Mr. Bartlett abstaining) recommends that the ABI
shareholders vote "FOR" approval of Proposal II for the amended benefits for
David Bartlett, Steven Trusty and Ronnie Twyford.
BY ORDER OF THE BOARD OF DIRECTORS
Very truly yours,
/s/ David L. Bartlett
David L. Bartlett
President and Chairman of the Board of Directors
Alliance Bancorporation, Inc.
February___, 2004
TABLE OF CONTENTS
Page
____
QUESTIONS AND ANSWERS ABOUT THE MERGER...........................................................................1
SUMMARY..........................................................................................................5
SELECTED FINANCIAL DATA.........................................................................................12
RISK FACTORS....................................................................................................16
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION......................................................21
THE SPECIAL MEETING.............................................................................................22
General ..............................................................................................22
Proxies ..............................................................................................22
Solicitation of Proxies................................................................................23
Record Date and Voting Rights..........................................................................23
Recommendation of the Board of Directors...............................................................23
Dissenters' Rights.....................................................................................24
PROPOSAL I - THE MERGER.........................................................................................28
Description of the Merger..............................................................................28
Background of the Merger...............................................................................29
ABI's Reasons for the Merger; Recommendation of the Board of Directors.................................31
SFNC's Reasons for the Merger..........................................................................32
Regulatory Approval....................................................................................32
Certain U.S. Federal Income Tax Consequences...........................................................33
Interests of Certain Persons in the Merger.............................................................36
Comparison of Rights of Shareholders...................................................................37
Restrictions on Resales by Affiliates..................................................................37
Fairness Opinion of Financial Advisor .................................................................37
THE AGREEMENT AND PLAN OF MERGER ...............................................................................42
Default Election; Optional Election; Exchange of Certificates..........................................42
Conditions to the Merger...............................................................................43
Termination of the Agreement and Plan of Merger........................................................44
Conduct of Business Prior to the Merger and Other Covenants............................................44
Indemnification........................................................................................45
Amendment of the Agreement and Plan of Merger..........................................................45
Waiver ..............................................................................................46
Expenses ..............................................................................................46
Management and Operations Following the Merger.........................................................46
PRICE RANGE OF COMMON STOCK AND DIVIDENDS.......................................................................47
SFNC ..............................................................................................47
ABI ..............................................................................................47
PROPOSAL II - APPROVAL OF AMENDED BENEFITS FOR DAVID BARTLETT,
STEVEN TRUSTY AND RONNIE TWYFORD
General ..............................................................................................48
Executive Supplemental Retirement Plan Executive Agreements............................................48
Life Insurance Endorsement Method Split Dollar Plan Agreement..........................................50
Retention Bonus Agreement..............................................................................52
Other Payments and Benefits............................................................................53
Vote Required to Approve Amended Benefits..............................................................54
Effect if Proposal II is Not Approved..................................................................54
Recommendation of ABI Board............................................................................55
ABI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................56
Overview ..............................................................................................56
Ratios ..............................................................................................56
Net Interest Income....................................................................................57
Average Balance Sheets and Net Interest Income Analysis................................................58
Volume/rate Analysis...................................................................................59
Provision for Loan Losses..............................................................................59
Non-interest Income....................................................................................59
(i)
Non-interest Expense...................................................................................60
Income Taxes...........................................................................................61
Loan Portfolio.........................................................................................61
Asset Quality..........................................................................................62
Non-performing Assets..................................................................................63
Allowance for Loan Losses..............................................................................63
Investments and Securities.............................................................................64
Deposits ..............................................................................................66
Short-term Borrowings..................................................................................67
Long-term Debt.........................................................................................67
Capital ..............................................................................................68
Liquidity and Market Risk Management...................................................................69
INFORMATION ABOUT ABI...........................................................................................71
General ..............................................................................................71
Supervision and Regulation.............................................................................71
Employees..............................................................................................75
Certain Relationships and Related Transactions.........................................................75
Legal Proceedings......................................................................................75
Principal Shareholders and Management..................................................................76
COMPARISON OF RIGHTS OF SHAREHOLDERS............................................................................77
Change of Control......................................................................................77
Board of Directors.....................................................................................77
Removal of Directors...................................................................................78
Authorized Capital Stock...............................................................................78
Rights of Shareholders to Call Special Meetings........................................................78
REGISTRATION STATEMENT..........................................................................................79
WHERE YOU CAN FIND MORE INFORMATION ............................................................................79
LEGAL MATTERS...................................................................................................80
EXPERTS.........................................................................................................80
ATTACHMENTS
Annex A - Agreement and Plan of Merger.....................................................................A-1
Annex B - Provisions of Subchapter 13 of the Arkansas Business Corporation
Act of 1987, relating to dissenters' rights......................................................B-1
Annex C - Fairness Opinion by Southard Financial ..........................................................C-1
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROXY
STATEMENT/PROSPECTUS. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY
HOLDERS UPON ORAL OR WRITTEN REQUEST TO SIMMONS FIRST NATIONAL CORPORATION,
CORPORATE SECRETARY, P.O. BOX 7009, PINE BLUFF, ARKANSAS 71611. TO ENSURE TIMELY
DELIVERY OF THE REQUESTED INFORMATION, YOU SHOULD MAKE YOUR REQUEST BY MARCH 11,
2004 WHICH IS FIVE (5) BUSINESS DAYS BEFORE THE DATE UPON WHICH YOU MUST MAKE
THE INVESTMENT DECISION. THIS INFORMATION IS ALSO AVAILABLE FREE OF CHARGE
THROUGH THE INVESTOR RELATIONS SECTION OF SIMMONS FIRST NATIONAL CORPORATION'S
INTERNET WEB SITE AT WWW.SIMMONSFIRST.COM OR BY ACCESSING THE SEC'S WEBSITE AT
WWW.SEC.GOV.
________________________________________
(ii)
This proxy statement/prospectus is not an offer to sell or a solicitation of an
offer to purchase any securities other than shares of SFNC common stock to which
it relates or an offer to any person in any jurisdiction where such offer or
solicitation is not authorized or in which the person making such offer is not
qualified to do so or to any person to whom it is unlawful to make such an
offer.
________________________________________
For convenience, Simmons First National Corporation is referred to throughout
this proxy statement/prospectus as "SFNC" and Alliance Bancorporation, Inc. is
referred to as "ABI."
(iii)
QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: What is the proposed transaction?
A: Alliance Bancorporation, Inc. ("ABI") will merge into Simmons First
National Corporation ("SFNC"). As a result, ABI will cease to exist and ABI
shareholders will exchange their ABI common stock for cash, shares of SFNC
common stock, or a combination of both.
Q: What do I need to do now?
A: Whether or not you plan to attend the special meeting of ABI shareholders,
please vote your proxy promptly by indicating on the enclosed proxy how you
want to vote, and fill out your election form according to their
instructions. Please sign and mail the proxy and the election form in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting of shareholders and so that we may know
the amount of each type of consideration you wish to receive. If your proxy
is properly given and not revoked without indicating how you want to vote,
your proxy will be counted as a vote in favor of the agreement and plan of
merger between ABI and SFNC. If you don't vote on the agreement and plan of
merger or if you abstain, the effect will be a vote against the agreement
and plan of merger.
You are invited to the special meeting of shareholders to vote your shares
in person. If you do vote your proxy, you can take back your proxy at any
time until shareholders vote at the special meeting of shareholders and
either change your vote or attend the special meeting and vote in person.
You may change your vote in any of the following ways:
o by sending written notice to the Simmons First Trust Company, N. A.
("SFTC"), P. O. Box 7009, Pine Bluff, Arkansas 71611, Attention:
Corporate Trust, prior to the special meeting stating that you would
like to revoke your proxy;
o by completing, signing and dating another proxy card bearing a later
date and returning it by mail to SFTC prior to the special meeting; or
o by attending the special meeting and voting in person.
Regardless of whether you plan to attend the special meeting in person, we
encourage you to vote your proxy promptly. This will help to ensure that a
quorum is present at the special meeting and will help reduce the costs
associated with the solicitation of proxies.
Even if you choose not to return your proxy, please complete, sign and
return the enclosed election form indicating the type of consideration you
would like to receive if the merger is approved. Any ABI shareholder that
fails to submit an election form on or prior to March 25, 2004 will be
deemed to have elected to receive the default consideration of $379.978 in
cash and 18.1021 shares of SFNC common stock per share of ABI common stock.
The Board of Directors of ABI unanimously recommends that you vote "FOR"
approval of the agreement and plan of merger.
Q: What is the purpose of this proxy statement/prospectus?
A: This document serves as ABI's proxy statement and as SFNC's prospectus. As
a proxy statement, this document is being provided to ABI shareholders
because ABI's Board of Directors is soliciting their proxy to vote to
approve the agreement and plan of merger. As a prospectus, this document is
being provided to ABI shareholders by SFNC because SFNC is offering them
shares of SFNC common stock, in addition to cash, in exchange for their
shares of ABI common stock if the merger is completed, as possible
consideration for the merger.
1
Q: Is there other information I should consider?
A: Yes. Much of the business and financial information about SFNC that may be
important to you is not included directly in this document. Instead, this
information is incorporated into this document by reference to documents
separately filed by SFNC with the Securities and Exchange Commission. This
means that SFNC may satisfy its disclosure obligations to you by referring
you to one or more documents separately filed by it with the SEC. See
"WHERE YOU CAN FIND MORE INFORMATION" beginning on page 79 for a list of
documents that SFNC has incorporated by reference into this proxy
statement/prospectus and for instructions on how to obtain copies of these
documents. The documents are available to you without charge.
Q: What if I choose not to read the documents incorporated by reference?
A: Information contained in a document that is incorporated into this proxy
statement/prospectus by reference is part of this proxy
statement/prospectus, unless it is superseded by information contained
directly in this proxy statement/prospectus or in documents filed by SFNC
with the SEC after the date of this proxy statement/prospectus. Information
that is incorporated from another document is considered to have been
disclosed to you whether or not you choose to read the document.
Q: What will I receive in connection with the merger?
A: If the merger is completed, ABI shareholders, except for ABI shareholders
who properly exercise their rights to dissent from the merger, will
receive, $379.978 in cash, and 18.1021 shares of SFNC common for each share
of ABI common stock, which is referred to as the Default Election, unless
the shareholder makes an optional election to receive all cash, all SFNC
common stock or a different combination of cash and SFNC common stock. ABI
and SFNC have agreed that $11,440,000 in cash and 545,000 shares of SFNC
common stock will be the total merger consideration to be paid by SFNC to
the ABI shareholders. The aggregate amount of cash and SFNC common stock
that ABI shareholders will receive, whether pursuant to Default Elections
or Optional Elections, is therefore capped at $11,440,000 in cash and
545,000 shares of SFNC common stock. In the event that optional elections
are made which when aggregated with default elections exceeds $11,440,000
in cash, the amount of cash that an ABI shareholder making an optional
election will have the right to receive upon exchange of his or her shares
of ABI common stock will be adjusted on a pro rata basis so that, in the
aggregate, $11,440,000 cash will be paid and the remaining consideration
due the ABI shareholders making optional elections will be converted into
the right to receive SFNC common stock. Likewise, in the event that
optional elections are made which when aggregated with default elections
exceeds 545,000 shares of SFNC common stock, the amount of SFNC common
stock that an ABI shareholder making an optional election will have the
right to receive upon exchange of his or her shares of ABI common stock
will be adjusted on a pro rata basis so that, in the aggregate, 545,000
shares of SFNC common stock will be issued and the remaining consideration
due the ABI shareholders making such optional elections will be converted
into the right to receive cash. As a result, an ABI shareholder who makes
an optional election may receive a different combination of consideration
than he or she elected, based on the choices made by other ABI shareholders
who make optional elections.
The value of the SFNC common stock applicable to the computation of
consideration to be received pursuant to optional elections is dependent on
the market price of SFNC common stock. The value of SFNC common stock for
this purpose will be the average daily ending trade price per share of SFNC
common stock for the ten consecutive trading days ending immediately prior
to the fifth trading day preceding the merger. Therefore, the applicable
value of SFNC common stock for such purpose will not be subject to
determination until immediately prior to the consummation of the merger.
SFNC will not issue any fractional shares of SFNC common stock. Instead, an
ABI shareholder will be entitled to receive cash equal to the product of
the average of the last reported sale prices per share of SFNC common stock
as reported on the Nasdaq National Market System for the ten consecutive
trading days ending immediately prior to the fifth day before the date on
which the merger is completed, times the fraction of a share of SFNC common
stock to which the shareholder otherwise would be entitled.
2
Q: What are the tax consequences of the merger to me?
A: If you exchange your shares of ABI common stock solely for SFNC common
stock, you should not recognize any gain or loss (except with respect to
the cash you receive instead of a fractional share) for U.S. federal income
tax purposes. If you exchange your shares of ABI common stock solely for
cash, you should recognize gain or loss on the exchange. If you exchange
your shares of ABI common stock for a combination of SFNC common stock and
cash, you should recognize gain, but not loss, on the exchange to the
extent of the lesser of cash received or gain realized in the exchange.
THIS TAX TREATMENT MAY NOT APPLY TO ALL ABI SHAREHOLDERS. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES THAT ARE PARTICULAR TO YOU.
Q: Why have I been sent an election form?
A: If the agreement is approved and the merger is completed, unless you
exercise your right to dissent from the merger, each share of ABI common
stock held by you will be converted into the right to receive, $379.978 in
cash and 18.1021 shares of SFNC common stock, by default. However, you may
elect, to receive all cash, all SFNC common stock or a percentage of cash
and SFNC common stock by making an optional election. If you make an
optional election, the amount of cash, the number of shares of SFNC common
stock, or both, will be determined by the market value of SFNC common stock
at the time of the merger, as determined in accordance with the merger
agreement. In all instances, cash will be paid in lieu of any remaining
fractional interest in a share of SFNC common stock. The election form is
the document provided to you to select the amount of each type of
consideration you wish to receive.
Q: What happens if I do not send in my election form?
A: If you do not respond on or prior to March 25, 2004 and the merger is
approved and consummated, you will receive consideration of $379.978 in
cash and 18.1021 shares of SFNC common stock in exchange for each of your
shares of ABI common stock, unless you properly exercise dissenter's rights
(as described below).
Q: What happens if I miss the election deadline?
A: Missing the election deadline is the same as not responding - you will
receive consideration of $379.978 in cash and 18.1021 shares of SFNC common
stock in exchange for each of your shares of ABI common stock. The election
deadline is 5:00 p.m., Central Time, on March 25, 2004.
Q: Am I guaranteed to receive what I ask for on the election form?
A: If you make the Default Election, you will receive $379.978 in cash and
18.1021 shares of SFNC common stock for each share of ABI common stock,
subject to the payment of cash for any fractional shares of SFNC common
stock you would be entitled to receive. If you make an optional election to
receive a different combination of cash and SFNC common stock, then you are
not guaranteed to receive the form of consideration you elect. If the total
of all of the optional elections request more than $11,440,000 in cash or
545,000 shares of SFNC common stock, then the amount of cash and SFNC
common stock to be received by ABI shareholders who made optional elections
will be adjusted on a pro rata basis so that, in the aggregate, $11,440,000
in cash and 545,000 shares of SFNC common stock will be issued as merger
consideration. As a result, if you make an optional election regarding your
consideration, you may not receive the combination of cash and/or shares
you elected, based on the choices made by other ABI shareholders.
Q: Should I send in my ABI stock certificates now?
A: No. Following completion of the merger you will be sent a letter of
transmittal with instructions on how to submit your ABI stock certificates
in order to receive the merger consideration to which you are entitled.
3
Q: Whom do I contact if I have questions about the merger?
A: If you have more questions about the merger, you should contact:
David L. Bartlett
Alliance Bancorporation, Inc.
100 Werner Street
Hot Springs, Arkansas 71913
Telephone: 501-318-1000
Facsimile: 501-318-1015
Q: Are SFNC shareholders required to approve the merger?
A: No, SFNC shareholders are not required to approve the merger.
Q: Do I have dissenters' rights?
A: Yes, if you so choose, you are entitled to exercise dissenters' rights in
connection with the merger.
Q: When will the merger be completed?
A: We expect to complete the merger in the first quarter of 2004, promptly
after the ABI shareholders approve and adopt the agreement and plan of
merger, provided that all of the other conditions to the merger have been
satisfied at such time.
4
SUMMARY
--------------------------------------------------------------------------------
This summary highlights selected information from this document. It does
not contain all of the information that is important to you. You should
carefully read this entire document and the documents to which it refers you in
order to understand fully the merger and to obtain a more complete description
of the companies and the legal terms of the merger. For information on how to
obtain copies of documents referred to in this document, you should read the
section of this document entitled "Where You Can Find More Information." Each
item in this summary includes a page reference that directs you to a more
complete description in this document of the topic discussed.
The Companies (pages 71 and 79)
SIMMONS FIRST NATIONAL CORPORATION
__________________________________
Simmons First National Corporation
501 Main St.
Pine Bluff, Arkansas 71601
SFNC is an Arkansas corporation and a financial holding company with
commercial banking and financial services operations in Arkansas. It has seven
subsidiary banks: Simmons First National Bank, Simmons First Bank of
Russellville, Simmons First Bank of South Arkansas, Simmons First Bank of
Jonesboro, Simmons First Bank of Searcy, Simmons First Bank of Northwest
Arkansas and Simmons First Bank of El Dorado, N.A. For the year ended December
31, 2002, SFNC's net income and diluted earnings per share totaled $22.1 million
and $1.54, respectively, compared to $16.5 million and $1.15 per share,
respectively, for the year ended December 31, 2001. At December 31, 2002, SFNC
had total assets of $1.98 billion, loans of $1.26 billion, deposits of $1.62
billion, and stockholders' equity of $197.6 million compared to total assets of
$2.02 billion, loans of $1.26 billion, deposits of $1.69 billion and
stockholders' equity of $182.3 million at December 31, 2001. For a more detailed
description of SFNC and its business, please see the section of this document
entitled "WHERE YOU CAN FIND MORE INFORMATION."
On January 15, 2004, SFNC announced its unaudited results of operations for
the three months and the year ended December 31, 2003. Net income and diluted
earnings per share for the fourth quarter 2003 were $5.3 million and $0.37,
respectively, compared to $5.7 million and $0.40 per share, respectively, for
the three months ended December 31, 2002. Net income and diluted earnings per
share for the year ended December 31, 2003 were $23.8 million and $1.65,
respectively, compared to $22.1 million and $1.54 per share, respectively, for
the year ended December 31, 2002. At December 31, 2003, SFNC had total assets of
$2.24 billion, loans of $1.42 billion, deposits of $1.80 billion and
stockholders' equity of $210.0 million.
ALLIANCE BANCORPORATION, INC.
_____________________________
Alliance Bancorporation, Inc.
100 Werner Street
Hot Springs, Arkansas 71913
ABI is incorporated in Arkansas and is a bank holding company. It is based
in Hot Springs, Arkansas and conducts its operations through its subsidiary
bank, Alliance Bank of Hot Springs. For the year ended December 31, 2002, ABI
had net income of $1.2 million compared to $712,000 for the year ended December
31, 2001. As of December 31, 2002, ABI had total assets of $130.0 million,
deposits of $98.6 million and stockholders' equity of $10.3 million.
The Merger (page 28)
SFNC and ABI have entered into an agreement and plan of merger whereby ABI
will merge into SFNC, subject to the approval of ABI's shareholders, regulatory
approval and other conditions. The agreement and plan of merger is attached to
this proxy statement/prospectus as Annex A. You should read it carefully.
5
If the merger is completed, the businesses and operations of SFNC and ABI
will be combined into a single, larger company. ABI's subsidiary bank will
remain a separate bank, but will be renamed Simmons First Bank of Hot Springs
shortly after the consummation of the merger. SFNC and ABI hope to complete the
merger during the first quarter of 2004. The combined company will have banking
operations in 45 communities throughout Arkansas.
What ABI Shareholders will receive in the Merger (page 28)
If the merger is completed, ABI shareholders, except for ABI shareholders
who properly exercise their rights to dissent from the merger, will receive
$379.978 in cash and 18.1021 shares of SFNC common stock for each share of ABI
common stock, unless the shareholder makes an optional election to receive all
cash, all SFNC common stock or a different combination of cash and SFNC common
stock. ABI and SFNC have agreed that $11,440,000 in cash and 545,000 shares of
SFNC common stock will be the total merger consideration to be paid by SFNC to
the ABI shareholders. The aggregate amount of cash and SFNC common stock that
ABI shareholders will receive, whether pursuant to Default Elections or Optional
Elections, is therefore capped at $11,440,000 in cash and 545,000 shares of SFNC
common stock. In the event that optional elections are made which when
aggregated with default elections exceeds $11,440,000 in cash, the amount of
cash that an ABI shareholder making an optional election will have the right to
receive upon exchange of his or her shares of ABI common stock will be adjusted
on a pro rata basis so that, in the aggregate, $11,440,000 cash will be paid and
the remaining consideration due the ABI shareholders making optional elections
will be converted into the right to receive SFNC common stock. Likewise, in the
event that optional elections are made which when aggregated with default
elections exceeds 545,000 shares of SFNC common stock, the amount of SFNC common
stock that an ABI shareholder making an optional election will have the right to
receive upon exchange of his or her shares of ABI common stock will be adjusted
on a pro rata basis so that, in the aggregate, 545,000 shares of SFNC common
stock will be issued and the remaining consideration due the ABI shareholders
making such optional elections will be converted into the right to receive cash.
As a result, an ABI shareholder who makes an optional election may receive a
different combination of consideration than he or she elected, based on the
choices made by other ABI shareholders who make optional elections. To be
effective all optional elections by ABI shareholders must be submitted by March
25, 2004.
The value of the SFNC common stock applicable to the computation of
consideration to be received pursuant to optional elections is dependent on the
market price of SFNC common stock. The value of SFNC common stock for this
purpose will be the average daily ending trade price per share of SFNC common
stock for the ten consecutive trading days ending immediately prior to the fifth
trading day preceding the merger. Therefore, the applicable value of SFNC common
stock for such purpose will not be subject to determination until immediately
prior to the consummation of the merger.
SFNC will not issue any fractional shares of SFNC common stock. Instead, an
ABI shareholder will receive cash equal to the product of the average of the
last reported sale prices per share of SFNC common stock as reported on the
Nasdaq National Market System for the ten consecutive trading days ending
immediately prior to the fifth day before the date on which the merger is
completed, times the fraction of a share of SFNC common stock to which the
shareholder otherwise would be entitled.
If the merger is completed, ABI common stock will be canceled and will
cease to exist.
SFNC's Stock Price will Fluctuate (pages 29)
SFNC expects the market price of its common stock to fluctuate due to
market factors beyond its control before and following the merger.
Because the exchange ratio applicable to the optional elections fluctuates
based on the average daily ending trade price per share of SFNC common stock for
the ten consecutive trading days ending immediately prior to the fifth trading
day preceding the merger, the number of shares and the value of the shares of
SFNC common stock that ABI shareholders who make an optional election will
receive in the merger may increase or decrease prior to completion of the
merger.
SFNC cannot assure you that the market price of SFNC common stock will not
decrease before or after completion of the merger.
6
Special Shareholders Meeting (page 22)
A special meeting of the shareholders of ABI will be held on March 18, 2004
at the following time and place:
5:00 p.m., Central Time
Chamber of Commerce Building
659 Ouachita Avenue
Hot Springs, Arkansas
At the special meeting, shareholders of ABI will be asked to approve the
agreement and plan of merger between ABI and SFNC and to approve amended
benefits for David Bartlett, Steven Trusty and Ronnie Twyford.
THE BOARD OF DIRECTORS OF ABI RECOMMENDS THAT ITS SHAREHOLDERS APPROVE THE
AGREEMENT AND PLAN OF MERGER.
THE BOARD OF DIRECTORS OF ABI (WITH MR. BARTLETT ABSTAINING) RECOMMENDS THAT ITS
SHAREHOLDERS APPROVE THE AMENDED BENEFITS FOR DAVID BARTLETT, STEVEN TRUSTY AND
RONNIE TWYFORD.
The Board of Directors of ABI believes that the merger between ABI and SFNC
is in the best interests of ABI shareholders, and unanimously recommends that
ABI shareholders vote "FOR" the proposal to approve the agreement and plan of
merger. This belief is based on a number of factors described in this document.
Vote Required to Complete Merger (page 23)
In order for the merger to be approved, at least a majority of the
outstanding shares of ABI common stock must be voted in favor of the agreement
and plan of merger. ABI expects that its executive officers and directors will
vote all of their shares of ABI common stock in favor of the agreement and plan
of merger.
The following chart describes the ABI shareholder vote required to approve
the agreement and plan of merger:
=============================================================================================== ===========
Number of fully-diluted shares of common stock of ABI outstanding on February 5, 2004* 30,107
----------------------------------------------------------------------------------------------- -----------
Number of votes necessary to approve the agreement and plan of merger 15,054
----------------------------------------------------------------------------------------------- -----------
Percentage of outstanding shares of ABI common stock necessary to approve the agreement and 50.002%
plan of merger
----------------------------------------------------------------------------------------------- -----------
Number of votes that executive officers and directors of ABI and their affiliates can cast as 4,551
of February 5, 2004*
----------------------------------------------------------------------------------------------- -----------
Percentage of votes that executive officers and directors of ABI and their affiliates can 15.12%
cast as of February 5, 2004*
=============================================================================================== ===========
-----------------------------------------------------------------------------------------------------------
* Includes options to purchase 1,693 shares of ABI common stock which were
exercised prior to the record date for determining the ABI shareholders
entitled to vote on the merger.
Record Date; Voting Power (page 23)
You can vote at the special meeting of ABI shareholders if you owned ABI
common stock as of the close of business on February 5, 2004, the record date
set by ABI's Board of Directors. Each share of ABI common stock is entitled to
one vote. On February 5, 2004, there were 30,107 shares of ABI common stock
outstanding and entitled to vote on the agreement and plan of merger. As of
February 5, 2004, all outstanding stock options for ABI common stock had been
exercised and shares of ABI common stock had been issued therefor.
7
Reasons for the Merger (page 31)
Alliance Bancorporation, Inc. In reaching its determination to approve and
recommend the merger, ABI's Board consulted with its financial consultants and
counsel, and considered a variety of factors, including the following:
o The results that could be obtained by ABI by continuing to operate
independently, and the likely benefits to its shareholders, compared with
the value of the merger consideration being offered by SFNC.
o Information concerning the business, financial condition, results of
operations and prospects of SFNC, including the recent earning performance
and dividend payment history of SFNC and the liquidity of the SFNC common
stock.
o The terms of the Merger Agreement and the structure of the merger,
including the fact that ABI's shareholders have the ability to elect to
receive more or less of the merger consideration in cash or SFNC stock,
subject to certain proration requirements.
o The expectation that the merger will generally be a tax-free transaction to
ABI's shareholders to the extent ABI's shareholders receive SFNC common
stock under the Merger Agreement.
o The current and prospective economic, competitive and regulatory
environment facing ABI in particular and independent community banking
institutions in general.
o The likelihood that the merger would enable ABI to better serve its
customers as a result of being affiliated with a larger, more diversified
banking institution such as SFNC, therefore affording access to greater
financial and managerial resources and a broader array of potential
products, services and technologies.
The discussion above regarding the factors considered by the ABI Board is
not intended to be exhaustive, but includes all material factors considered. In
approving and recommending the Merger Agreement, the ABI Board did not assign
any specific or relative weights to any of the factors listed above and
individual directors may have weighed factors differently.
Simmons First National Corporation. The acquisition of ABI will allow SFNC
to enter a community where it does not currently have full-service branch
facilities. The SFNC Board of Directors considered various factors, including
the following, in making its determination to vote in favor of the merger:
o The consummation of the merger will allow SFNC to enter into a
strategically important growth market not currently served by branches of
SFNC's subsidiary banks;
o The favorable locations of the five banking offices of Alliance Bank
throughout the Hot Springs market;
o The high quality of ABI's banking operations;
o The compatibility of the business philosophy of ABI and SFNC;
o ABI's attractive loan and deposit customer base;
8
o The high quality of ABI's management and employees;
o The financial attractiveness of the acquisition to SFNC, including the
expected lack of a material impact on 2004 earnings per share and the
possible accretive impact on 2005 earnings per share; and
o The opportunity to expand SFNC's shareholder base within the Hot Springs
community by offering SFNC shares of common stock as partial consideration
in exchange for ABI shares.
Federal Income Tax Consequences (page 33)
Your federal income tax consequences will depend primarily on whether you
exchange your ABI common stock solely for SFNC common stock, solely for cash or
for a combination of SFNC common stock and cash pursuant to the election
process. If you make an optional election to receive and actually receive solely
SFNC common stock, you should not recognize any gain or loss (except with
respect to the cash you receive instead of a fractional share) for U.S. federal
income tax purposes. If you make the default election or make an election to
receive consideration in a combination of SFNC common stock and cash, you should
recognize a gain, but not any loss, on the exchange to the extent of the lesser
of cash received or gain realized in the exchange. If you make an optional
election to receive and actually receive solely cash, you should recognize gain
or loss on the exchange. The actual U.S. federal income tax consequences to you
of electing to receive all cash or a combination of cash and SFNC common stock
will not be ascertainable at the time you make your election because we will not
know at that time if, or to what extent, the allocation and proration procedures
will apply.
THIS TAX TREATMENT MAY NOT APPLY TO ALL ABI SHAREHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES THAT ARE PARTICULAR TO YOU.
SFNC and ABI will not be obligated to complete the merger unless they
receive an opinion from Quattlebaum, Grooms, Tull & Burrow PLLC, dated the
closing date, that the merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and that SFNC and ABI will each be a party to that
reorganization. If such opinion is rendered, the U.S. federal income tax
treatment of the merger should be as described above. The opinion of
Quattlebaum, Grooms, Tull & Burrow PLLC, however, does not bind the Internal
Revenue Service and does not preclude the IRS or the courts from adopting a
contrary position.
Interests of Certain Persons in the Merger (page 36)
Directors and executive officers of ABI will be issued shares of SFNC
common stock and /or cash in the merger on the same basis as other shareholders
of ABI. The following chart shows the number of shares of SFNC common stock that
may be issued to directors and executive officers of ABI in the merger assuming
that each such officer and director makes the default election to receive his or
her consideration in a combination of SFNC common stock and cash:
============================================================================================ ===========
Shares of ABI common stock beneficially owned by ABI executive officers and directors on 4,551
February 5, 2004
-------------------------------------------------------------------------------------------- -----------
The number of shares of SFNC common stock that may be received in the merger by ABI 82,379
executive officers and directors based upon a default election and this beneficial
ownership
============================================================================================ ===========
After the merger, SFNC will indemnify each of the present and former
officers and directors of ABI and Alliance Bank from and against specific
liabilities arising out of or pertaining to the merger agreement or the merger.
The merger agreement also provides for the continuation of director and officer
liability insurance for ABI's directors and officers.
9
On April 21, 2003, Mr. David L. Bartlett, President, Chief Executive
Officer and Chairman of the Board of Directors of ABI, Ronnie Twyford, Senior
Vice President of Alliance Bank and Steve Trusty, Senior Vice President of
Alliance Bank, each entered into a Retention Bonus Agreement with Alliance Bank,
wherein Alliance Bank agreed to pay to each of Messrs. Bartlett, Twyford and
Trusty, on the effective date of the merger, lump-sum retention payments in the
amounts of $330,000, $154,996 and $188,000, respectively, subject to the
condition the individuals have not voluntarily resigned employment with ABI
prior to the effective date of the merger.
Messrs. Bartlett, Twyford and Trusty each entered into Executive
Supplemental Retirement Plan Executive Agreements with Alliance Bank which
provide for certain retirement and death benefits to these individuals. The
benefits under these plans would ordinarily vest in pro rata increments over the
shorter of ten (10) years or the number of years remaining prior to the employee
reaching the specified retirement age. Upon a change in control of Alliance
Bank, the vesting of the retirement benefits is partially accelerated, however,
the retirement benefits are not payable until the employee reaches the specified
retirement age. If Proposal II described in this proxy statement is approved,
then the retirement and death benefits of the individuals will be 100% vested
upon consummation of the merger.
Messrs. Bartlett, Twyford and Trusty each entered into Life Insurance
Endorsement Method Split Dollar Agreements with Alliance Bank which provide for
certain death benefits to these individuals from certain life insurance policies
on the lives of these individuals owned by Alliance Bank. The benefits under
these plans would ordinarily vest in pro rata increments over the shorter of ten
(10) years or the number of years remaining prior to the employee reaching the
specified retirement age. Upon a change in control of Alliance Bank, the vesting
of the death benefits will be accelerated and the death benefits will be 100%
vested, if Proposal II described in this Proxy Statement is approved.
Messrs. Bartlett, Twyford and Trusty each anticipate continued employment
by Alliance Bank after the consummation of the merger transaction. The
acquisition of ABI by SFNC and their continued employment may provide additional
opportunities for advancement in employment than would be available if ABI
remained independent.
You May Dissent From the Merger (page 24)
Arkansas law permits ABI shareholders to dissent from the merger and to
receive the fair value of their shares of ABI common stock in cash. To do this,
an ABI shareholder must follow certain procedures, including filing certain
notices with ABI and refraining from voting their shares in favor of the merger.
If they dissent from the merger, their shares of ABI common stock will not be
exchanged for shares of SFNC common stock or cash in the merger, and their only
right will be to receive the appraised fair value of their shares of ABI common
stock in cash. A copy of the Arkansas statutes describing these dissenters'
rights and the procedures for exercising them is attached as Annex B to this
proxy statement/prospectus. ABI shareholders who perfect their dissenters'
rights and receive cash in exchange for their shares of ABI common stock may
recognize gain or loss for U.S. federal income tax purposes.
We Must Obtain Regulatory Approvals to Complete the Merger (page 32)
The completion of the merger requires the approval of the Board of
Governors of the Federal Reserve System and the Arkansas State Bank Board.
Formal applications were made in 2003 to these agencies. The Arkansas State Bank
Department approved the transaction on December 1, 2003 and the Federal Reserve
approved the transaction on December 11, 2003. While federal law allows the
Department of Justice a 15 day period to review and object to the merger, this
period has expired and no objection was received.
Conditions to Completion of the Merger (page 43)
The completion of the merger depends on a number of conditions being met,
including the following:
o Shareholders of ABI approving the agreement and plan of merger;
10
o The absence of any governmental order blocking completion of the merger, or
of any proceedings by a government body trying to block it; and
o Receipt of opinions of legal counsel to SFNC that the merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and that SFNC and
ABI will each be a party to that reorganization.
In cases where the law permits, a party to the agreement and plan of merger
could elect to waive a condition that has not been satisfied and complete the
merger although the party is entitled not to complete the merger. We cannot be
certain whether or when any of these conditions will be satisfied (or waived,
where permissible), or that the merger will be completed.
Termination of the Agreement and Plan of Merger (page 44)
SFNC and ABI can mutually agree at any time to terminate the agreement and
plan of merger without completing the merger, even if the shareholders of ABI
have already voted to approve it.
SFNC may terminate the agreement and plan of merger if the ABI shareholders
fail to approve the agreement and plan of merger. Moreover, either SFNC or ABI
can terminate the agreement and plan of merger in the following circumstances:
o If the merger is not completed by April 30, 2004; or
o If the other party violates, in a significant way, any of its
representations, warranties, covenants or obligations contained in the
agreement and plan of merger.
Generally, a party can only terminate the agreement and plan of merger in
one of these situations if that party is not in violation of the agreement and
plan of merger or if its violations of the agreement and plan of merger are not
the cause of the event permitting termination.
Comparative Per Share Market Price Information (page 47)
Shares of SFNC common stock are listed on the Nasdaq National Market
System. On October 7, 2003, the last full trading day prior to the public
announcement of the merger, SFNC common stock closed at $25.75 per share. On
February 10, 2004, SFNC common stock closed at $28.25 per share. Of course, the
market price of SFNC common stock will fluctuate prior to and after completion
of the merger. You should obtain current stock price quotations for SFNC common
stock.
There is no established trading market for shares of ABI common stock,
which is inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of ABI common
stock have been bought and sold.
11
SIMMONS FIRST NATIONAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following table shows selected historical consolidated financial data
for Simmons First National Corporation. The information in the table is based on
the historical financial information of Simmons First National Corporation that
has been presented in its prior filings with the Securities and Exchange
Commission (and which have been incorporated by reference into this statement).
All of the selected information provided in the following table should be read
in conjunction with this historical financial information.
SIMMONS FIRST NATIONAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended December 31
_____________________________________________________________
(In thousands, except per share data) 2002 2001 2000 1999 1998
________________________________________________________________________________________________________________
Income statement data:
Net interest income $ 75,708 $ 67,405 $ 67,061 $ 64,731 $ 60,466
Provision for loan losses 10,223 9,958 7,531 6,551 8,309
Net interest income after provision
for loan losses 65,485 57,447 59,530 58,180 52,157
Non-interest income 35,303 33,569 30,355 28,277 33,635
Non-interest expense 69,013 68,130 62,556 61,929 62,639
Provision for income taxes 9,697 6,358 8,460 7,360 6,666
Net income 22,078 16,528 18,869 17,168 16,487
Per share data (split adjusted):
Basic earnings 1.56 1.17 1.30 1.18 1.14
Diluted earnings 1.54 1.16 1.29 1.17 1.12
Book value 13.97 12.87 12.07 10.89 10.39
Dividends 0.48 0.44 0.40 0.36 0.32
Balance sheet data at period end:
Assets 1,977,579 2,016,918 1,912,493 1,697,430 1,687,010
Loans 1,257,305 1,258,784 1,294,710 1,113,635 1,034,462
Allowance for loan losses 21,948 20,496 21,157 17,085 16,812
Deposits 1,619,196 1,686,404 1,605,586 1,410,633 1,381,003
Long-term debt 54,282 42,150 41,681 46,219 49,899
Stockholders' equity 197,605 182,363 173,343 159,371 150,384
Capital ratios at period end:
Stockholders' equity to
total assets 9.99% 9.04% 9.06% 9.39% 8.91%
Leverage 9.29% 8.26% 8.41% 9.10% 8.39%
Tier 1 14.02% 12.76% 11.97% 13.67% 12.81%
Total risk-based 15.30% 14.04% 13.26% 14.96% 14.06%
Selected ratios:
Return on average assets 1.12% 0.84% 1.05% 1.02% 1.00%
Return on average equity 11.56% 9.23% 11.33% 10.92% 11.31%
Net interest margin 4.37% 3.92% 4.24% 4.41% 4.17%
Allowance/nonperforming loans 179.07% 137.12% 192.97% 167.37% 167.30%
Allowance for loan losses as a
percentage of period-end loans 1.75% 1.63% 1.63% 1.53% 1.63%
Nonperforming loans as a percentage
of period-end loans 0.97% 1.19% 0.85% 0.92% 0.97%
Net charge-offs as a percentage
of average total assets 0.46% 0.54% 0.34% 0.37% 0.41%
Dividend payout 30.75% 37.76% 30.85% 31.26% 29.83%
12
SIMMONS FIRST NATIONAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
Periods Ended September 30
___________________________
(In thousands, except per share data) 2003 2002
___________________________________________________________________________________________________________________
Income statement data:
Net interest income $ 58,002 $ 56,529
Provision for loan losses 6,589 7,661
Net interest income after provision
for loan losses 51,413 48,868
Non-interest income 29,668 26,052
Non-interest expense 54,079 51,398
Provision for income taxes 8,530 7,107
Net income 18,472 16,415
Per share data (split adjusted):
Basic earnings 1.31 1.16
Diluted earnings 1.28 1.14
Book value 14.71 13.71
Dividends 0.385 0.355
Balance sheet data at period end:
Assets 2,015,631 1,943,355
Loans 1,325,428 1,281,634
Allowance for loan losses 22,795 21,688
Deposits 1,624,649 1,614,038
Long-term debt 73,151 50,456
Stockholders' equity 207,198 193,650
Capital ratios at period end:
Stockholders' equity to
total assets 10.28% 9.96%
Leverage 9.65% 9.15%
Tier 1 14.16% 13.58%
Total risk-based 15.44% 14.86%
Selected ratios:
Return on average assets 1.24% 1.12%
Return on average equity 12.10% 11.62%
Net interest margin 4.41% 4.36%
Allowance/nonperforming loans 184.43% 175.04%
Allowance for loan losses as a
percentage of period-end loans 1.72% 1.69%
Nonperforming loans as a percentage
of period-end loans 0.93% 0.97%
Net charge-offs as a percentage
of average total assets 0.29% 0.34%
Dividend payout 29.41% 30.59%
13
ALLIANCE BANCORPORATION, INC. SELECTED CONSOLIDATED FINANCIAL DATA
The following table shows summarized historical consolidated financial data
for Alliance Bancorporation, Inc., which has been prepared by management of
Alliance Bancorporation, Inc.
ALLIANCE BANCORPORATION, INC
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended December 31
_____________________________________________________________
(In thousands, except per share data) 2002 2001 2000 1999 1998
________________________________________________________________________________________________________________
Income statement data:
Net interest income $ 3,739 $ 2,968 $ 2,636 $ 2,219 $ 1,218
Provision for loan losses 145 214 120 238 132
Net interest income after provision
for loan losses 3,594 2,754 2,516 1,981 1,086
Non-interest income 1,218 958 663 600 199
Non-interest expense 3,214 2,831 2,338 2,198 1,542
Provision (benefit) for income taxes 403 169 271 148 (97)
Net income 1,195 712 570 235 (160)
Per share data:
Basic earnings 41.80 24.65 19.48 8.03 (8.57)
Diluted earnings 39.78 23.75 19.00 7.93 (8.57)
Book value 361.46 306.48 279.90 246.41 224.51
Dividends -- -- -- -- --
Balance sheet data at period end:
Assets 130,030 101,232 91,483 72,580 44,950
Loans 62,558 57,441 50,002 40,847 26,908
Allowance for loan losses 831 717 500 410 266
Deposits 98,528 82,069 73,738 56,362 39,639
Long-term debt 10,636 6,781 870 3,187 500
Stockholders' equity 10,334 8,854 8,191 7,211 4,190
Capital ratios at period end:
Stockholders' equity to
total assets 7.95% 8.75% 8.95% 9.94% 9.32%
Leverage 7.55% 8.64% 9.05% 10.42% 9.81%
Tier 1 14.63% 14.89% 17.19% 19.70% 17.01%
Total risk-based 15.86% 16.12% 18.25% 20.76% 18.11%
Selected ratios:
Return on average assets 1.06% 0.75% 0.69% 0.40% (0.49)%
Return on average equity 12.61% 8.26% 7.40% 4.14% (3.74)%
Net interest margin 3.60% 3.39% 3.46% 4.27% 4.05%
Allowance/nonperforming loans 372.65% 217.93% 328.95% 1,138.89% 0.00%
Allowance for loan losses as a
percentage of period-end loans 1.33% 1.25% 1.00% 1.00% 0.99%
Nonperforming loans as a percentage
of period-end loans 0.36% 0.57% 0.30% 0.09% 0.00%
Net charge-offs as a percentage
of average total assets 0.03% 0.00% 0.04% 0.16% 0.04%
Dividend payout 0.00% 0.00% 0.00% 0.00% 0.00%
14
ALLIANCE BANCORPORATION, INC
SELECTED CONSOLIDATED FINANCIAL DATA
Periods Ended September 30
___________________________
(In thousands, except per share data) 2003 2002
___________________________________________________________________________________________________________________
Income statement data:
Net interest income $ 3,112 $ 2,699
Provision for loan losses 155 100
Net interest income after provision
for loan losses 2,957 2,599
Non-interest income 1,332 924
Non-interest expense 2,701 2,347
Provision for income taxes 409 283
Net income 1,179 893
Per share data:
Basic earnings 41.24 31.24
Diluted earnings 39.19 29.73
Book value 390.71 348.98
Dividends -- --
Balance sheet data at period end:
Assets 135,620 125,023
Loans 65,799 61,040
Allowance for loan losses 966 794
Deposits 108,429 99,602
Long-term debt 11,930 11,102
Stockholders' equity 11,170 9,977
Capital ratios at period end:
Stockholders' equity to
total assets 8.24% 7.98%
Leverage 7.97% 8.36%
Tier 1 15.10% 14.47%
Total risk-based 16.35% 15.68%
Selected ratios:
Return on average assets 1.19% 1.12%
Return on average equity 14.60% 12.90%
Net interest margin 3.31% 3.67%
Allowance/nonperforming loans 125.62% 236.31%
Allowance for loan losses as a
percentage of period-end loans 1 .47% 1.30%
Nonperforming loans as a percentage
of period-end loans 1.16% 0.50%
Net charge-offs as a percentage
of average total assets 0.02% 0.02%
Dividend payout 0.00% 0.00%
15
RISK FACTORS
Each ABI shareholder voting in favor of the merger may be choosing to
invest in SFNC common stock. You should consider the following matters in
deciding how to vote. You also should consider the other information included or
incorporated by reference in this document.
Risk Factors Relating to the Merger
Shareholders of ABI may not know the exact amount of cash, SFNC common shares or
a combination of cash and SFNC common shares they will receive in the merger at
the time they vote their ABI shares
The merger agreement provides that shareholders of ABI may elect to receive
cash, SFNC common stock, or a combination of cash and SFNC common stock, as
calculated in accordance with the merger agreement. The optional elections made
by ABI shareholders, other than the Default Election to receive $379.978 in cash
and 18.1021 shares of SFNC common stock per ABI share, will be subject to
adjustment in accordance with the allocation and proration procedures set forth
in the merger agreement. Accordingly, a shareholder of ABI, who makes an
optional election, may not be sure, at the time the shareholder votes on whether
to adopt the merger agreement, of the exact consideration the shareholder will
receive in exchange for the shareholder's ABI common shares.
Shareholders of ABI cannot be sure of the market value of the SFNC common shares
they will receive in the merger
At the time the merger is completed, each share of ABI common stock held by an
ABI shareholder, other than ABI shareholders who properly exercise their rights
to dissent from the merger, will be converted into the right to receive, at the
election of the holder (subject to the election procedures and limitations
described in this proxy statement/prospectus), (i) $379.978 in cash plus 18.1021
shares of SFNC common stock ("Default Election"), (ii) solely cash consisting of
the sum of $379.978, plus the product of 18.1021 multiplied by the SFNC Average
Price, as defined below, (iii) solely SFNC common stock consisting of the number
of shares determined by dividing the cash amount that the ABI shareholder could
have received under (ii) above by the SFNC Average Price, or (iv) a combination
of the cash and shares of SFNC common stock specified by the ABI shareholder as
a percentage to be received in the form of cash and SFNC common stock (with the
sum of such percentages equal to 100%). In all such cases, cash will be paid in
lieu of any remaining fractional shares. The SFNC Average Price will not be
fixed until five (5) days immediately preceding the merger and is dependent on
the market price of SFNC common stock. The "SFNC Average Price" will equal the
average daily ending trade price of SFNC common stock for the ten (10)
consecutive trading days ending immediately prior to the fifth trading day
preceding the merger.
Due to the procedures for making your election and surrendering your ABI
certificates, you will not receive your SFNC common stock immediately upon
closing. The market price of SFNC common stock may be substantially higher or
lower before the date of the special meeting, during the ten (10) trading day
period over which the exchange ratio will be determined and between the
effective date of the merger and the time you receive your SFNC common shares.
The market price of SFNC common stock is subject to change at all times based on
the financial condition and operating results of SFNC, market conditions and
other factors. If the average daily closing price of SFNC common stock over the
ten (10) trading day period is higher than the market price of SFNC common stock
on the date on which you receive your SFNC common stock, then the total market
value of the SFNC common stock you actually receive in exchange for each of your
ABI common stock will be less on the date you receive your SFNC common stock
than the date you elected to exchange your shares. To the extent that the SFNC
Average Price is higher than the market price of SFNC common stock on the date
on which the SFNC common stock is actually received, shareholders of ABI who
receive SFNC common stock will be adversely affected.
16
The closing price of SFNC common stock on October 7, 2003, the last trading
day before the announcement of the merger, was $25.75. The closing price of SFNC
common stock on February 10, 2004, the last trading day before the date of this
proxy statement/prospectus, was $28.25.
Directors and executive officers of ABI may have interests that are different
from or in addition to your interests as a shareholder of ABI
When considering the recommendations of the Board of Directors of ABI, you
should be aware that some members of the ABI Board of Directors and some
executive officers of ABI may have interests in the merger that are different
from, or in addition to, your interests as shareholders. Some of these interests
are described below:
o After the merger, SFNC will indemnify each of the present and former
officers and directors of ABI and Alliance Bank from and against specific
liabilities arising out of or pertaining to the merger or the merger
agreement. The merger agreement also provides for the continuation of
director and officer liability insurance for ABI's directors and officers.
o Mr. David L. Bartlett, president, chief executive officer and chairman of
the board of directors of ABI, Ronnie Twyford, senior vice president of
Alliance Bank and Steve Trusty, senior vice president of Alliance Bank,
each entered into a retention bonus agreement with Alliance Bank, wherein
Alliance Bank agreed to pay to each of Messrs. Bartlett, Twyford and
Trusty, on the effective date of the merger, lump-sum retention payments in
the amounts of $330,000, $154,996 and $188,000, respectively, subject to
the condition the individuals have not voluntarily resigned employment with
ABI prior to the effective date of the merger. See PROPOSAL II- Approval of
Amended Benefits for David Bartlett, Steven Trusty and Ronnie Twyford -
Retention Bonus Agreement.
o Messrs. Bartlett, Twyford and Trusty each entered into Executive
Supplemental Retirement Plan Executive Agreements with Alliance Bank which
provide for certain retirement and death benefits to these individuals. The
benefits under these plans would ordinarily vest in pro rata increments
over the shorter of ten (10) years or the number of years remaining prior
to the employee reaching the specified retirement age. Upon a change in
control of Alliance Bank, the vesting of the retirement benefits is
partially accelerated, however such benefits are not payable until the
employee reaches the specified retirement age. If Proposal II described in
this proxy statement is approved, then the retirement and death benefits of
the individuals will be 100% vested upon consummation of the merger. See
PROPOSAL II- Approval of Amended Benefits for David Bartlett, Steven Trusty
and Ronnie Twyford - Executive Supplemental Retirement Plan Executive
Agreements.
o Messrs. Bartlett, Twyford and Trusty each entered into Life Insurance
Endorsement Method Split Dollar Agreements with Alliance Bank which provide
for certain death benefits to these individuals from certain life insurance
policies on the lives of these individuals owned by Alliance Bank. The
benefits under these plans would ordinarily vest in pro rata increments
over the shorter of ten (10) years or the number of years remaining prior
to the employee reaching the specified retirement age. Upon a change in
control of Alliance Bank, the vesting of the death benefits will be
accelerated and the death benefits will be 100% vested, if Proposal II
described in this Proxy Statement is approved. See PROPOSAL II- Approval of
Amended Benefits for David Bartlett, Steven Trusty and Ronnie Twyford -
Life Insurance Endorsement Method Split Dollar Agreements.
o Messrs. Bartlett, Twyford and Trusty each anticipate continued employment
by Alliance Bank after the consummation of the merger transaction. The
acquisition of ABI by SFNC and their continued employment may provide
additional opportunities for advancement in employment than would be
available if ABI remained independent.
17
You will have less influence as a shareholder of SFNC than as a shareholder of
ABI
The shareholders of ABI currently have the right to control ABI through
their ability to elect the Board of Directors of ABI and vote on other matters
affecting ABI. The merger will transfer control of ABI to SFNC. After completion
of the merger, the SFNC common shares received by former ABI shareholders will
total less than 4% of SFNC's outstanding common stock. Consequently, the ABI
shareholders will exercise much less influence over the management and policies
of SFNC than they currently exercise over the management and policies of ABI.
Risk Factors Relating to Simmons First National Corporation
Possibility of Decline in Asset Quality
As with ABI, SFNC's earnings are dependent upon its ability to originate,
underwrite and service loans. SFNC could sustain losses if it incorrectly
assesses the creditworthiness of its borrowers or fails to detect or respond to
a deterioration in asset quality in a timely manner. Problems with asset quality
could cause SFNC's interest income and net interest margin to decrease and its
provisions for loan losses to increase, which could materially adversely affect
its results of operations and financial condition.
Fluctuation in Interest Rates
SFNC's earnings depend substantially on "rate differentials," which are the
differences between the rates it earns on loans, securities and other earning
assets, and the interest rates it pays on deposits and other borrowings. These
rates are highly sensitive to many factors which are beyond SFNC's control,
including general economic conditions and the policies of various governmental
and regulatory authorities. Frequently the maturities of assets and liabilities
are not balanced, and an increase or decrease in interest rates could have a
material adverse effect on SFNC's net interest margin, results of operations and
financial condition.
Changes in Economic Conditions
SFNC's profitability depends on the profitability of its bank subsidiaries,
whose operating results and asset quality may be significantly affected by
national and local economic conditions. SFNC makes loans primarily to borrowers
who are located in Arkansas (except for its credit card portfolio) and secures
these loans in substantial part with real and personal property collateral
located in Arkansas. The banking business of SFNC is subject to adverse changes
in general economic conditions in the United States such as inflation, recession
and high levels of unemployment, consumer credit and bankruptcies. Its business
is also subject to unfavorable changes in economic conditions affecting its
markets which may have a material adverse effect on its results of operations
and financial condition. Such changes could result from any one or more of
numerous factors beyond SFNC's control, including a reduction in real estate
values, business closings or layoffs, inclement weather, natural disasters and
adverse trends or events affecting various industry groups such as agriculture,
real estate and real estate development and construction.
SFNC's asset quality ratios have not been substantially impacted by the
recent economic slowdown in the national and local economies, but it has seen an
increase in bankruptcy filings, layoff announcements and business closings in
its market area. There remains considerable uncertainty regarding the direction
of the economy and the potential for adverse effects from the continued military
presence in Iraq and Afghanistan, the continued threat of terrorism and other
geo-political events. Therefore, there can be no assurance that a continuation
of such events or a worsening of economic conditions will not ultimately have an
adverse impact on SFNC's borrowers or its financial condition or results of
operation.
18
Competition within the Banking Industry
The banking industry in Arkansas is highly competitive. SFNC competes with
many different financial and financial service institutions, including:
o other commercial and savings banks and savings and loan associations;
o credit unions;
o finance companies;
o mortgage companies;
o brokerage and investment banking firms; and
o asset-based non-bank lenders.
A substantial number of the commercial banks in SFNC's market area are
branches or subsidiaries of much larger organizations affiliated with regional
or national banking companies, and as a result may have greater resources and
lower cost of funds. SFNC also faces competition from de novo community banks,
including those with senior management who were previously with other local
banks or those controlled by investor groups with strong local business and
community ties.
Risks of Growth
In the last six (6) years, SFNC has pursued a growth philosophy involving
the acquisition of existing banks, the acquisition of existing branches from
other financial institutions and the creation of de novo branches. During such
time, SFNC has acquired three (3) banks, has acquired eighteen (18) branches and
has opened six (6) new branches. A growth strategy involves certain special
risks as follows:
Results of Operations. While SFNC has been successful in achieving
profitability in new offices and maintaining profitability in acquired banks and
offices, there is no assurance that SFNC will be able to maintain or achieve
deposit levels, loan balances or other operating results necessary to avoid
losses or produce profitability in existing offices or offices it may acquire or
establish in the future. Growth through de novo branching necessarily entails
increases in overhead as SFNC routinely adds new offices and staff. Growth
through acquisition of banks or branches involves payment of a premium for
existing assets and businesses. SFNC's historical results may not be indicative
of future results or results that may be achieved as it continues to increase
the number and concentration of its branch offices. Should any new office be
unprofitable or marginally profitable, or should any existing location
experience a decline in profitability or incur losses, such events may produce
an adverse effect on SFNC's results of operations and financial condition.
Management and Assimilation of Growth. SFNC's past and expected growth
involves a variety of risks including:
o maintaining loan quality during periods of significant loan growth in
existing and new geographic markets;
o maintaining qualified management personnel and systems to oversee such
growth;
o maintaining qualified and competent internal audit, loan review and
compliance functions;
o evaluating personnel and systems taken over in acquired banks and branches;
and
o implementing additional policies, procedures and operating systems required
to support such growth.
19
Regulatory and Economic Factors. SFNC's growth and expansion plans may be
adversely affected by a number of regulatory and economic developments or other
events. Failure to obtain required regulatory approvals, changes in laws and
regulations or other regulatory developments, changes in prevailing economic
conditions, the unavailability of capital for use in acquisition transactions or
other unanticipated events may prevent or adversely affect SFNC's continued
growth and expansion. Such factors may cause SFNC to alter its growth and
expansion plans or slow the growth and expansion process, which may prevent it
from entering certain target markets or allow competitors to gain or retain
market share in its existing or expected markets.
Recent Events
The price of SFNC's common stock could be adversely affected by the
uncertainty in world and domestic financial markets due to our military presence
in Iraq and Afghanistan and the threat of continuing terrorist attacks. The full
impact on financial markets of the recent military actions by the United States
is not yet known. A prolonged and expensive military presence in Iraq, or an
increased threat or incidence of terrorist attacks on the United States or other
countries, could adversely impact U.S. equity markets, including stocks traded
on Nasdaq.
Liquidity
The primary source of funds for SFNC is dividends from its bank
subsidiaries. The primary source of funds of the bank subsidiaries are customer
deposits and loan repayments. While scheduled loan repayments are a relatively
stable source of funds, they are subject to the ability of borrowers to repay
the loans, which can be adversely affected by a number of factors including
changes in economic conditions, adverse trends or events affecting business
industry groups, reductions in real estate values or markets, business closings
or lay-offs, inclement weather, natural disasters and international instability.
Additionally, deposit levels may be affected by a number of factors, including
rates paid by competitors, general interest rate levels, returns available to
customers on alternative investments and general economic conditions.
Accordingly, SFNC may be required from time to time to rely on secondary sources
of liquidity to meet withdrawal demands or otherwise fund operations. Such
sources include borrowings under Federal Home Loan Bank advances and federal
funds lines of credit from correspondent banks. While SFNC believes that its
sources are currently adequate, there can be no assurance they will be
sufficient to meet future liquidity demands. SFNC may be required to slow or
discontinue loan growth, capital expenditures or other investments or liquidate
assets should such sources not be adequate.
Government Regulation
SFNC, like all commercial banks, is subject to extensive government
regulation and supervision under various state and federal laws, rules and
regulations, including rules and regulations of the Board of Governors of the
Federal Reserve, the Comptroller of the Currency ("OCC"), the FDIC and the
Arkansas State Bank Department. These laws and regulations are designed
primarily to protect depositors, borrowers, and the insurance fund of the FDIC
and to further certain social policies; consequently, they may impose
limitations on SFNC that may not be consistent with its best business interests.
These federal and state laws, regulations, governmental policies, capital
requirements and accounting principles are subject to change from time to time.
The effects of any such potential changes cannot be predicted, but they may have
a material adverse effect on SFNC's results of operations and financial
condition.
20
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus, including the documents referred to and
incorporated by reference herein, include certain forward-looking statements
about the financial condition, results of operations and business of SFNC,
including the benefits of the proposed merger with ABI, the expected impact of
the proposed merger on SFNC's earnings per share, the receipt of regulatory
approvals for the merger and the anticipated tax consequences of the merger.
Such forward-looking statements and information are based on management's
beliefs, assumptions and expectations of SFNC's future economic performance,
taking into account information currently available and are not guarantees of
future performance. Words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions identify forward-looking statements. Such
statements reflect current views of SFNC's management regarding future events
and are subject to certain risks, uncertainties and assumptions that may cause
actual results or outcomes to vary materially from management's expectations.
Some of the important factors that could cause actual results of operation
or financial condition to differ materially from expectations include, but are
not limited to: (1) potential delays or other problems in implementing SFNC's
growth and expansion strategy, including delays in identifying satisfactory
sites and opening new offices; (2) the ability to continue to attract new
deposits and loans; (3) interest rate fluctuations; (4) competitive factors and
pricing pressures; (5) general economic conditions, including the impact of the
current economic slowdown, and its effect on the credit worthiness of borrowers
and collateral values; and (6) changes in legal and regulatory requirements.
Factors that could affect the expected impact of the proposed merger
include: (1) the possibility that the transaction does not close due to failure
to receive required approvals or satisfy other conditions; (2) the ability of
SFNC to successfully continue ABI's operations; (3) competitive factors in the
Hot Springs market, including the impact of the current economic slowdown; and
(4) the creditworthiness of ABI's borrowers and the ability to retain ABI's
deposit and loan customer base following consummation of the transaction.
Should one or more of the foregoing risks materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially from
those described in the forward-looking statements. These and other material risk
factors relating to the merger and SFNC's operations are more fully described in
this proxy statement/prospectus under the caption "Risk Factors."
21
THE SPECIAL MEETING
General
This proxy statement/prospectus is first being mailed, on or about February
__, 2004, to all persons who were ABI shareholders of record on February 5,
2004.
Along with this proxy statement/prospectus, ABI shareholders are being
provided with a Notice of Special Meeting, a form of proxy that is solicited by
ABI's Board of Directors for use at the special meeting of ABI shareholders and
at any adjournments or postponements of that meeting and an election form to
elect the form of consideration to be received if the merger is approved and
consummated.
At the special meeting, ABI shareholders will consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of October 8,
2003, between ABI and SFNC, which provides for the merger of ABI with and into
SFNC and to approve amended benefits for David Bartlett, Steven Trusty and
Ronnie Twyford..
The special meeting of ABI shareholders will be held at the following time
and place:
March 18, 2004
5:00 p.m., Central Time
Chamber of Commerce Building
659 Ouachita Avenue
Hot Springs, Arkansas
Proxies
We encourage ABI shareholders to promptly vote their proxies by completing,
signing, dating and returning the enclosed proxy solicited by ABI's Board of
Directors if they are unable to attend the special meeting in person or wish to
have their shares of ABI common stock voted by proxy even if they do attend the
meeting.
An ABI shareholder may revoke any proxy given in connection with this
solicitation by:
o Delivering a written notice revoking the proxy prior to the taking of the
vote at the special meeting;
o Delivering a duly executed proxy relating to the same shares bearing a
later date; or
o Attending the meeting and voting in person (however, attendance at the
special meeting without voting at the meeting will not in and of itself
constitute a revocation of a proxy).
ABI shareholders should address all written notices of revocation and other
communications with respect to the revocation of proxies to the following:
Simmons First Trust Company, N.A.
P. O. Box 7009
Pine Bluff, AR 71611
Attention: Corporate Trust
For a notice of revocation or later proxy to be valid, however, SFTC must
actually receive it prior to the vote of ABI shareholders at the special
meeting. All shares of ABI common stock represented by valid proxies received
through this solicitation and not revoked before they are exercised will be
voted as indicated on the proxy. If no specification is made, shares of ABI
common stock represented by proxies received will be voted for approval of the
agreement and plan of merger, for approval of the amended benefits for Messrs,
Bartlett, Trusty and Twyford and in the discretion of the proxy holder as to any
other matters that properly may come before the special meeting.
22
ABI is currently unaware of any other matters that may be presented for
action at the special meeting. If other matters do properly come before the
special meeting, then shares of ABI common stock represented by proxies will be
voted (or not voted) by the persons named in the proxies in their discretion.
Solicitation of Proxies
In addition to the solicitation of proxies by mail, if necessary, ABI may
use several of its regular employees to solicit proxies from ABI shareholders,
either personally or by telephone, telegram, facsimile or special delivery
letter. Such employees will not be specially compensated.
Record Date and Voting Rights
ABI's Board of Directors has fixed the close of business on February 5,
2004 as the record date for the determination of ABI shareholders entitled to
receive notice of and to vote at ABI's special meeting of shareholders.
Accordingly, only ABI shareholders of record at the close of business on
February 5, 2004 will be entitled to notice of and to vote at the special
meeting. At the close of business on ABI's record date, there were 30,107 shares
of ABI common stock entitled to vote at the special meeting held by
approximately 204 holders of record, and the directors and executive officers of
ABI beneficially owned approximately 15.12% of the outstanding shares of ABI
common stock.
The presence, in person or by proxy, of shares of ABI common stock
representing a majority of the votes entitled to be cast at the ABI special
meeting is necessary to constitute a quorum. Each share of ABI common stock
outstanding on ABI's record date entitles its holder to one vote as to the
approval of the agreement and plan of merger, the approval of the amended
benefits for David Bartlett, Steven Trusty and Ronnie Twyford, or any other
proposal that may properly come before the special meeting.
For purposes of determining the presence or absence of a quorum for the
transaction of business, ABI will count shares of ABI common stock present in
person at the special meeting but not voting, and shares of ABI common stock for
which it has received proxies but with respect to which holders of such shares
have abstained, as present at the special meeting. Abstentions are counted as
present at the ABI special meeting for purposes of determining whether a quorum
exists.
Under Arkansas law, approval of the agreement and plan of merger requires
the affirmative vote of the holders of a majority of all votes entitled to be
cast on the agreement and plan of merger. Because approval of the agreement and
plan of merger requires the affirmative vote of the holders of a majority of the
outstanding shares of ABI common stock, abstentions will have the same effect as
negative votes. Accordingly, ABI's Board of Directors urges ABI shareholders to
complete, date and sign the accompanying proxy card and return it promptly in
the enclosed, postage-paid envelope.
Recommendation of the Board of Directors
ABI's Board of Directors has unanimously approved the agreement and plan of
merger. ABI's Board of Directors believes that the merger is in the best
interests of ABI and ABI shareholders and recommends that ABI shareholders vote
"FOR" approval of the agreement and plan of merger. The conclusion of ABI's
Board of Directors with respect to the merger is based on a number of factors.
See "THE MERGER - ABI's Reasons for the Merger; Recommendation of the Board of
Directors."
ABI's Board of Directors (with Mr. Bartlett abstaining) has approved the
amended benefits for Messrs. Bartlett, Trusty and Twyford. ABI's Board of
Directors believes that the amended benefits provide fair and reasonable
compensation to these individuals, are in the best interests of ABI and ABI
shareholders and recommends that ABI shareholders vote "FOR" approval of the
mended benefits for Messrs. Bartlett, Trusty and Twyford.
23
Dissenters' Rights
Holders of ABI common stock who do not vote in favor of the merger and who
give ABI timely notice will be entitled to dissenters' rights and to demand
payment of the fair value of their shares as a result of the merger under
Subchapter 13 of the Arkansas Business Corporation Act of 1987. If the statutory
procedure is followed and dissenting holders and the surviving corporation do
not otherwise agree on the value of such holders' shares, these rights could
lead to a judicial determination of the fair value required to be paid in cash
to such dissenting holders for their shares. Arkansas law defines "fair value"
as the value of the shares immediately before consummation of the merger,
excluding any appreciation or depreciation in anticipation of the merger unless
such exclusion would be inequitable, but it does not prescribe a method for
determining fair value. Consequently, any judicial determination of the fair
value of the shares could be based upon any valuation method or combination of
methods the court deems appropriate, and the value so determined could be more
or less than the consideration paid in the merger. If any holder of shares who
demands payment under Arkansas law fails to perfect, or effectively waives, his
or her right to payment as a dissenting shareholder, as provided under Arkansas
law, each of the shares of the holder will be converted into the consideration
payable in the merger pursuant to a Default Election in accordance with the
agreement and plan of merger.
A person having a beneficial interest in shares of ABI common stock that
are held of record in the name of another person, such as a nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever dissenters' rights the
beneficial owner may have, or must submit to ABI the record shareholder's
written consent to the dissent not later than the time the beneficial owner
asserts dissenters' rights, and must do so with respect to all shares that such
person beneficially owns.
An ABI shareholder of record may assert dissenters' rights as to fewer than
all of the shares registered in such holder's name only if the holder dissents
with respect to all shares beneficially owned by any one person and notifies ABI
in writing of the name and address of each person on whose behalf the holder
asserts dissenters' rights. The rights of a partial dissenter are determined as
if the shares as to which the holder dissents and the holder's other shares were
registered in the names of different shareholders.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the Arkansas Business Corporation Act of 1987. Any
ABI shareholder who wishes to exercise such dissenters' rights, or who wishes to
preserve his or her right to do so, should review Subchapter 13 of the Arkansas
Business Corporation Act of 1987, a copy of which is attached as Annex B to this
proxy statement/prospectus, and the following discussion carefully.
The availability of dissenters' rights is conditioned upon full compliance
with the procedure set forth in Subchapter 13 of the Arkansas Business
Corporation Act of 1987. Failure to timely and properly comply with the
procedures specified will result in the complete loss of dissenters' rights.
Accordingly, any ABI shareholder who wishes to dissent from the merger and
receive the value of his or her ABI common stock in cash should consult with his
or her own legal counsel. No further notice of the events giving rise to
dissenters' rights or any steps associated with exercising dissenters' rights
will be furnished to ABI shareholders, except as indicated below or otherwise
required by law.
An ABI shareholder cannot vote for the merger and pursue dissenters'
rights. However, an ABI shareholder's failure to vote against the agreement and
plan of merger will not constitute a waiver of his or her dissenters' rights.
Moreover, a vote against the agreement and plan of merger will not be deemed to
satisfy all of the notice requirements under Arkansas law with respect to
dissenters' rights.
Procedure for the Exercise of ABI Shareholders Dissenters' Rights. In order
to be eligible to exercise the right to dissent, an ABI shareholder must:
o Notify ABI in writing prior to the vote on the agreement and plan of merger
that such ABI shareholder intends to demand payment for his or her shares
of ABI common stock if the merger is completed; and
o Not vote such shares of ABI common stock in favor of the agreement and plan
of merger.
24
The written notice of intent to dissent should be addressed as follows:
Alliance Bancorporation, Inc.
100 Werner Street
Hot Springs, Arkansas 71913
Attention: Cindy Baswell
Facsimile: (501) 318-1000
If the agreement and plan of merger is approved at the ABI special meeting,
SFNC must deliver a written dissenters' notice to all dissenting ABI
shareholders who satisfied the requirements referred to in the preceding
paragraph. SFNC must deliver the dissenters' notice within ten days after
completion of the merger. This notice must:
o State where the ABI shareholders must send demand for payment of their
shares of ABI common stock if the merger is completed and where and when
ABI common stock certificates must be deposited;
o Inform holders of uncertificated shares of ABI common stock to what extent
transfer of the shares will be restricted after the demand for payment is
received;
o Supply a form for demanding payment that includes the date of the first
announcement of the agreement and plan of merger to news media or to
shareholders and requires the dissenting shareholder to certify whether or
not he or she or, if a nominee asserting dissenters' rights on behalf of a
beneficial shareholder, the beneficial shareholder acquired beneficial
ownership before that date;
o Set a date by which SFNC must receive the demand for payment, which date
may not be fewer than 30 nor more than 60 days after the date the
dissenters' notice is delivered; and
o Be accompanied by a copy of Subchapter 13 of the Arkansas Business
Corporation Act of 1987.
An ABI shareholder of record who is sent a dissenters' notice must demand
payment in accordance with the terms of the dissenters' notice, certify that he
or she (or the beneficial shareholder on whose behalf such holder is asserting
dissenters' rights) acquired beneficial ownership of the shares of ABI common
stock before the date required to be set forth in the dissenters' notice and
deposit his or her certificates representing shares of ABI common stock in
accordance with the terms of the dissenters' notice.
An ABI shareholder who demands payment and deposits his or her stock
certificates in accordance with the previous paragraph retains all other rights
of an ABI shareholder until those rights are canceled or modified by the
completion of the merger.
An ABI shareholder who does not demand payment or deposit his or her stock
certificates where required, in each case by the date set forth in the
dissenters' notice, is not entitled to payment for his or her shares of ABI
common stock except pursuant to the terms of the agreement and plan of merger as
if such shareholder made a Default Election.
SFNC's Payment or Offer of Payment. Except as described below, as soon as
the merger is effective, or upon receipt of a demand for payment, SFNC must pay
each dissenting ABI shareholder who has complied with the payment demand and
deposit requirements described above the amount SFNC estimates to be the fair
value of the ABI shareholder's shares of ABI common stock, plus accrued interest
from the effective time of the merger. SFNC must pay the rate of interest in the
manner and amount described in Section 4-27-1301(4) of the Arkansas Business
Corporation Act of 1987. This offer of payment must be accompanied by the
following:
25
o ABI's balance sheet as of the end of a fiscal year ending not more than 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;
o A statement of SFNC's estimate of the fair value of the shares of ABI
common stock;
o An explanation of how the interest was calculated;
o A statement of the dissenting shareholder's right to demand payment under
Section 4-27-1328 of the Arkansas Business Corporation Act of 1987; and
o A copy of Subchapter 13 of the Arkansas Business Corporation Act of 1987.
SFNC may elect to withhold payment from a dissenting shareholder under
Section 4-27-1327 of the Arkansas Business Corporation Act of 1987 unless he or
she 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 agreement and plan of merger. To the extent SFNC elects to
withhold payment, it must estimate, after the completion of the merger, the fair
value of the ABI shareholder's shares of ABI common stock, plus accrued
interest, and must pay this amount to each dissenting shareholder who agrees to
accept it in full satisfaction of his or her demand. SFNC must 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 dissenting
shareholder's right to demand payment.
If dissatisfied with SFNC's offer of payment, a dissenting ABI shareholder
may notify SFNC in writing of the shareholder's own estimate of the fair value
of his or her shares of ABI common stock and amount of interest due. The
dissenting shareholder may demand payment of the shareholder's estimate (less
any payments previously made) or reject SFNC's offer and demand payment of the
fair value of the shareholder's shares of ABI common stock and interest due, if:
o The dissenting shareholder believes that the amount paid under Section
4-27-1325 or offered under Section 4-27-1327 of the Arkansas Business
Corporation Act of 1987 is less than the fair value of the shareholder's
shares of ABI common stock or that the interest due is incorrectly
calculated;
o SFNC fails to make payment within 60 days after the date set forth
demanding payment; or
o SFNC, having failed to complete the merger, does not return the deposited
certificates or release the transfer restrictions imposed on the
uncertificated shares of ABI common stock within 60 days after the date set
for demanding payment.
However, a dissenting ABI shareholder waives the right to demand such payment
unless the shareholder notifies SFNC of such demand in writing within 30 days
after SFNC made or offered payment for the shareholder's shares of ABI common
stock.
If SFNC does not complete the merger within 60 days after the date set for
demanding payment and depositing share certificates of a dissenting ABI
shareholder's shares of ABI common stock, SFNC must return the deposited
certificates and release the transfer restrictions imposed on the uncertificated
shares of ABI common stock. If SFNC, after returning deposited certificates and
releasing the transfer restrictions imposed upon the shareholder's shares of ABI
common stock, completes the merger, a new dissenters' notice must be delivered
to the shareholder and the payment demand procedure discussed above must be
repeated.
26
Judicial Appraisal of ABI Common Stock. If a demand for payment under
Section 4-27-1328 of the Arkansas Business Corporation Act of 1987 remains
unsettled, SFNC must commence a proceeding within 60 days after receiving the
demand for payment and petition the relevant court to determine the fair value
of the shares of ABI common stock and accrued interest. If SFNC does not
commence this proceeding within this 60-day period, it must pay each dissenting
ABI shareholder whose demand remains unsettled the amount demanded.
SFNC must commence any such proceeding relating to ABI common stock in the
circuit court of Jefferson County, Arkansas. SFNC must make all dissenting
shareholders whose demands remain unsettled, whether or not residents of
Arkansas, parties to the proceeding and must serve all parties with a copy of
the petition. The court may appoint one or more persons as appraisers to receive
evidence and recommend a fair value. The appraisers will have the powers
described in the order appointing them. Dissenting shareholders are entitled to
the same discovery rights as parties to other civil proceedings.
Each dissenting ABI shareholder made a party to the proceeding is entitled
to judgment for the amount the court finds as the fair value of such
shareholder's shares of ABI common stock, plus interest, less the amount paid by
SFNC, or for the fair value, plus accrued interest, of such shareholder's
after-acquired shares for which SFNC elected to withhold payment under Section
4-27-1327 of the Arkansas Business Corporation Act of 1987.
The court, in an appraisal proceeding, must determine all costs of the
proceeding, including the reasonable compensation and expense of appraisers
appointed by the court. The court must assess these costs against SFNC, except
that the court may assess costs against all or some of the dissenting
shareholders in amounts the court finds equitable, to the extent that the court
finds that the dissenting shareholders acted arbitrarily, vexatiously or not in
good faith in demanding payment.
The court may also assess the reasonable fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable, as
follows:
o Against SFNC or in favor of any and all dissenting shareholders if the
court finds that SFNC did not substantially comply with the requirements of
Sections 4-27-1320 through 4-27-1328 of the Arkansas Business Corporation
Act of 1987; or
o Against either SFNC or a dissenting shareholder, 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 Subchapter 13 of the Arkansas Business
Corporation Act of 1987.
If the court finds that the services of counsel for any dissenting ABI
shareholder were of substantial benefit to other dissenting shareholders
similarly situated, and that the fees for those services should not be assessed
against SFNC, the court may award to those counsel reasonable fees to be paid
out of the amounts awarded to the dissenting ABI shareholders who were
benefited.
Any dissenting ABI shareholder who perfects such holder's right to be paid
the fair value of his or her shares will recognize taxable gain or loss upon
receipt of cash for his or her shares for federal income tax purposes.
27
PROPOSAL I - THE MERGER
The discussion in this proxy statement/prospectus of the merger of ABI with
and into SFNC does not purport to be complete and is qualified by reference to
the full text of the agreement and plan of merger and the other annexes attached
to, and incorporated by reference into, this proxy statement/prospectus.
Description of the Merger
Upon completion of the merger, ABI will merge into SFNC, the separate
corporate existence of ABI will cease and SFNC will be the surviving
corporation. SFNC will continue to exist as an Arkansas corporation. Subject to
the satisfaction or waiver of certain conditions set forth in the agreement and
plan of merger, the merger will become effective upon the filing of articles of
merger in the office of the Secretary of State of the State of Arkansas in
accordance with the Arkansas Business Corporation Act of 1987. See "THE
AGREEMENT AND PLAN OF MERGER -- Conditions to the Merger."
The merger will have the effects set forth in Section 4-27-1106 of the
Arkansas Business Corporation Act of 1987 and Section 23-48-604 of the Arkansas
Banking Code of 1997.
SFNC's restated articles of incorporation and amended bylaws as in effect
upon completion of the merger will be those of the surviving corporation.
At the effective time of the merger, automatically by virtue of the merger
and without any action on the part of any party or shareholder, each share of
ABI common stock outstanding immediately prior to the effective time will become
and be converted into the right to receive $379.978 in cash and 18.1021 shares
of SFNC common stock ("Default Election"), or upon the election of the holder
("Optional Election"), subject to the limitations set forth below, (A ) solely
cash consisting of the sum of $379.978, plus the product of 18.1021 multiplied
by the SFNC Average Price, (B) solely SFNC common stock consisting of the number
of shares determined by dividing the cash amount that the ABI shareholder could
have received under (A) above by the SFNC Average Price, or (C) a combination of
cash and shares of SFNC common stock, specified by the ABI shareholder as a
percentage to be received in the form of cash and SFNC common stock (with the
sum of such percentages equal to 100%). ABI shareholders who do not return a
properly completed election form with respect to their shares of ABI common
stock on or before March 25, 2004 will be deemed to have made a Default Election
and will therefore, receive $379.978 in cash and 18.1021 shares of SFNC common
stock for each share of ABI common stock owned.
If a shareholder makes an Optional Election, the amount of cash and/or SFNC
common stock to be received will be determined by the SFNC Average Price which
may fluctuate. The SFNC Average Price will not be fixed until five (5) days
immediately preceding the merger and is dependent on the market price of SFNC
common stock. The "SFNC Average Price" will equal the average daily ending trade
price of SFNC common stock for the ten (10) consecutive trading days ending
immediately prior to the fifth trading day preceding the merger.
ABI and SFNC have agreed that the total merger consideration to be paid by
SFNC to the ABI shareholders will be 545,000 shares of SFNC common stock and the
sum of $11,440,000 in cash. The amount of the merger consideration that will be
paid in cash is therefore fixed at $11,440,000. Likewise, the amount of the
merger consideration that will be paid in SFNC common stock is fixed at 545,000
shares. If you make the Default Election, you will receive $379.978 in cash and
18.1021 shares of SFNC common stock for each share of ABI you own, without
regard to the elections of any other ABI shareholders. In the event that you and
some of the other holders of the outstanding shares of ABI common stock make
Optional Elections, the amount of cash and SFNC common stock that you will have
the right to receive upon exchange of your shares of ABI common stock will be
adjusted on a pro rata basis so that, in the aggregate the merger consideration
to be paid will equal $11,440,000 in cash and 545,000 shares of SFNC common
stock. As a result, if you make an Optional Election to receive merger
consideration in a combination of cash and SFNC common stock (other than the
Default Election), you may receive a different combination of consideration than
you elected, based on the Optional Elections made by other ABI shareholders.
28
SFNC anticipates that the market price of SFNC common stock will fluctuate
due to market factors beyond its control between the date of this proxy
statement/prospectus and the date on which the merger is completed and
thereafter. For further information concerning the historical market prices of
SFNC common stock, see "PRICE RANGE OF COMMON STOCK AND DIVIDENDS." SFNC cannot
assure you that the market price of SFNC common stock will not decrease before
or after the merger.
Shares of ABI common stock with respect to which dissenters' rights have
been properly demanded in accordance with Subchapter 13 of the Arkansas Business
Corporation Act of 1987 or held by ABI or any of its subsidiaries, in each case,
other than shares held in a fiduciary capacity or in connection with a debt
previously contracted, will not be converted into the consideration described
above automatically at the effective time of the merger. At the effective time,
all shares of ABI common stock held by ABI or its subsidiaries, other than
shares held in a fiduciary capacity or in connection with a debt previously
contracted, will be canceled and will cease to exist, and no SFNC common stock
or other consideration will be delivered in exchange for such shares. Also at
the effective time, all shares of SFNC common stock held by ABI or its
subsidiaries, other than shares held in a fiduciary capacity or in connection
with a debt previously contracted, will become treasury stock and all other
shares of SFNC common stock outstanding as of the effective time will remain
outstanding.
Shares of ABI common stock as to which dissenters' rights have been
properly demanded will not be converted into the right to receive, or be
exchangeable for, SFNC common stock. Instead, the holders of these shares will
be entitled to cash payment of the value of the shares in accordance with
Subchapter 13 of the Arkansas Business Corporation Act of 1987. For the purpose
of determining how much cash and SFNC common stock is available for distribution
in accordance with the agreement and plan of merger, the value of the dissenting
shares will be determined in the same manner as if an Optional Election solely
for cash had been made for such shares and the aggregate cash available for
distribution will be reduced by the aggregate value of the dissenting shares as
so computed. If any holder of these shares subsequently delivers a written
withdrawal of his or her demand for dissenters' rights, or if any holder fails
to establish his or her entitlement to dissenters' rights, the holder will
forfeit the right to dissent from the merger and his or her shares of ABI common
stock will be deemed to have been converted into the right to receive, and to
have become exchangeable for, the consideration due pursuant to a Default
Election under the agreement and plan of merger. See "SPECIAL MEETING --
Dissenters' Rights."
At the effective time of the merger, ABI shareholders, other than those who
perfect dissenters' rights, will have no further rights as ABI shareholders,
other than to receive the consideration to be issued to them in the merger.
After the effective time, there will be no transfers on ABI's stock transfer
books of shares of ABI common stock. If, after the effective time, stock
certificates representing shares of ABI common stock are presented for transfer
to SFTC, the exchange agent for the merger, they will be canceled and exchanged
for certificates representing shares of SFNC common stock as provided in the
agreement and plan of merger.
If, prior to the merger, shares of SFNC common stock are changed into a
different number or class of shares due to any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment, or
if a stock dividend is declared on the shares of SFNC common stock with a record
date prior to the merger, the exchange ratio will be adjusted accordingly.
Background of the Merger
As part of its regular planning process, management of ABI, from time to
time, has considered various strategic alternatives for maximizing shareholder
value through continued internal growth or a sale of ABI. Among these
considerations was the desire to provide ABI's shareholders with greater
liquidity for their investment in ABI. This assessment of alternatives did not
involve a formalized process until the Spring of 2003 when ABI's Board
authorized management to evaluate alternatives for the purpose of enhancing
shareholder value and liquidity. Pursuant to this authorization, ABI retained
DD&F Consulting Group, Inc., Little Rock, Arkansas ("DD&F"), to assist ABI in
exploring its strategic alternatives.
29
Over the next several months, David Bartlett, the President, Chief
Executive Officer and Chairman of the Board of Directors of ABI, met with J.
Thomas May, the Chairman, President and CEO of SFNC, to discuss SFNC's interest
in entering the Hot Springs banking market. This meeting occurred in May 2003 in
Little Rock. As background, Messrs. Bartlett and May had been acquainted for
several years and Mr. Bartlett was aware of SFNC's possible interest in entering
the Hot Springs market.
This initial meeting was followed by a second meeting between Messrs.
Bartlett and May in Pine Bluff, Arkansas. This meeting occurred in June 2003 and
dealt with the possibility of a transaction between SFNC and ABI, as well as
issues which would need to be addressed by SFNC were it to make a proposal to
acquire ABI.
This second meeting led to additional discussions of the terms of a
possible transaction between ABI and SFNC. In connection with these discussions,
and following SFNC's entering into a Confidentiality Agreement on July 11, 2003,
ABI provided to SFNC certain preliminary financial information with respect to
ABI.
Following these discussions and SFNC's analysis of the financial
information provided by ABI, SFNC sent ABI a letter dated July 25, 2003
expressing its interest in acquiring ABI in a merger transaction. That letter
proposed two alternative pricing structures for ABI's Board to consider. One
proposed the issuance of 690,000 shares of SFNC common stock together with
$6,510,000 in cash. The second proposed the issuance of 545,000 shares of SFNC
common stock together with $11,515,000 in cash.
The receipt of this initial letter from SFNC was followed by a special ABI
Board meeting called to consider whether the Board wished to pursue negotiations
with SFNC and, if so, which pricing structure was preferred. This meeting was
held August 13, 2003. Present at the meeting were ABI's legal counsel, Michael
McCrary, and Randy Dennis and Bob Fegtly of DD&F. In addition, at this meeting,
Messrs. Dennis and Fegtly and the law firm of McAfee & Taft were hired to
represent ABI in negotiating the transaction with SFNC. In addition, at the
meeting representatives of DD&F reviewed with the Board the provisions of SFNC's
initial letter, including the alternative pricing options, as well as the
pricing and other relevant terms of recent transactions involving banks and bank
holding companies similar to ABI.
At a Board meeting held August 18, 2003, ABI's Board decided to pursue
negotiations with SFNC and selected the second pricing option (545,000 shares
and $11,515,000 in cash). At this meeting the Board also reviewed the expected
timeline for a merger and merger-related expenses. The Board also appointed a
special committee comprised of Directors Bartlett, Stathakis and Newman to be
responsible for the negotiations and for initial document review.
Additional consideration to the possible terms of a transaction was given
by the ABI Board at its meeting held September 3, 2003. This meeting was also
attended by Messrs. McCrary, Dennis and Fegtly. At the meeting Messrs. Dennis
and Fegtly reviewed with the Board the stock trends of SFNC, as well as the
projected cash flows of ABI and the terms of additional comparable transactions.
Messrs. McCrary, Dennis and Fegtly also reviewed with the Board the option of
using a fixed exchange ratio (as had been proposed by SFNC) versus a pricing
formula with collars for the stock portion of the merger consideration.
Following this review, it was the conclusion of the Board that it preferred a
fixed exchange ratio for the SFNC common stock.
Following the September 3, 2003 Board meeting, SFNC submitted to ABI a
second letter, dated September 12, 2003, in which it indicated its interest to
acquire ABI. The terms of this letter were substantially similar to the July 25,
2003 letter received from SFNC except that this letter limited the proposed
merger consideration to 545,000 shares of SFNC common stock plus a cash payment
of $11,515,000 and indicated SFNC's willingness to permit ABI shareholders to
elect to receive all cash or all stock, subject to certain proration
requirements in order to ensure that the total merger consideration consisted of
the number of shares and total cash payment specified. This letter, which was
intended to constitute a non-binding letter of intent upon its acceptance, was
accepted in writing by ABI on September 12, 2003.
30
Following acceptance of SFNC's September 12, 2003 letter, the parties
negotiated the terms of a definitive acquisition agreement. As part of these
negotiations and in order to provide cash retention payments totaling $75,000 to
certain non-executive ABI employees subject to their remaining in the employment
of ABI through the closing of the acquisition, ABI agreed to reduce the cash
portion of the merger consideration from $11,515,000 to $11,440,000. Although
the cash portion of the consideration was reduced as a result of the probable
payment of these retention payments, this reduction was offset by the fact that
the Board did not award options to purchase 173 shares of ABI common stock to
those employees as a result of their cash retention agreements.
Negotiations with SFNC resulted in a proposed form of Merger Agreement
which was considered by the ABI Board of Directors at its meeting held October
8, 2003. Following discussion by the directors of the financial and other terms
of the proposed merger, as well as the terms of the proposed form of Merger
Agreement, the merger and the Merger Agreement were unanimously approved by the
Board. Following the meeting, the Merger Agreement was then entered into by ABI
and SFNC on October 8, 2003.
ABI's Reasons for the Merger; Recommendation of the Board of Directors
In reaching its determination to approve and recommend the merger, ABI's
Board consulted with its financial consultants and counsel, and considered a
variety of factors, including the following:
o The results that could be obtained by ABI by continuing to operate
independently, and the likely benefits to its shareholders, compared with
the value of the merger consideration being offered by SFNC.
o Information concerning the business, financial condition, results of
operations and prospects of SFNC, including the recent earning performance
and dividend payment history of SFNC and the liquidity of the SFNC common
stock.
o The terms of the Merger Agreement and the structure of the merger,
including the fact that ABI's shareholders have the ability to elect to
receive more or less of the merger consideration in cash or SFNC stock,
subject to certain proration requirements.
o The expectation that the merger will generally be a tax-free transaction to
ABI's shareholders to the extent ABI's shareholders receive SFNC common
stock under the Merger Agreement.
o The current and prospective economic, competitive and regulatory
environment facing ABI in particular and independent community banking
institutions in general.
o The likelihood that the merger would enable ABI to better serve its
customers as a result of being affiliated with a larger, more diversified
banking institution such as SFNC, therefore affording access to greater
financial and managerial resources and a broader array of potential
products, services and technologies.
The discussion above regarding the factors considered by the ABI Board is
not intended to be exhaustive, but includes all material factors considered. In
approving and recommending the Merger Agreement, the ABI Board did not assign
any specific or relative weights to any of the factors listed above and
individual directors may have weighed factors differently.
The ABI Board of Directors believes that the merger is in the best interest
of ABI and its shareholders. Accordingly, the ABI Board has unanimously approved
the Merger Agreement and unanimously recommends that you vote FOR approval of
the Merger Agreement and the merger.
31
SFNC's Reasons for the Merger
SFNC's Board of Directors deliberated and approved the agreement and plan
of merger at a Board meeting held on October 6, 2003. In reaching its
determination to approve and adopt the agreement and plan of merger, SFNC's
Board of Directors consulted with SFNC's management and professional advisors
and considered a number of factors. During these deliberations, SFNC's Board of
Directors identified a number of advantages from the expected merger, but did
not identify any material disadvantages expected to result from the merger.
The following discussion includes the material factors considered by SFNC's
Board of Directors. The Board did not assign any relative or specific weights to
the factors considered in reaching its determination, and individual members of
SFNC's Board of Directors may have given differing weights to different factors.
The SFNC Board considered various factors, including the following, in helping
to make its determination to vote in favor of the merger:
o The consummation of the merger will allow SFNC to enter into a
strategically important market not currently served by branches of SFNC's
subsidiary banks;
o The favorable locations of the five banking offices of Alliance Bank
throughout the Hot Springs market;
o The high quality of ABI's banking operations;
o The compatibility of the business philosophy of ABI and SFNC;
o ABI's attractive loan and deposit customer base;
o The high quality of ABI's management and employees;
o The financial attractiveness of the acquisition to SFNC, including the
expected lack of a material impact on 2004 earnings per share and the
possible accretive impact on 2005 earnings per share; and
o The opportunity to expand SFNC's shareholder base within the Hot Springs
community by offering SFNC shares of common stock as partial consideration
in exchange for ABI shares.
The SFNC Board of Directors also reviewed the terms of the agreement and plan of
merger, including the amount and form of consideration to be received by ABI
shareholders in the merger, as well as the general impact that the merger could
be expected to have on the constituencies served by SFNC, including its
customers and employees and communities it serves.
Regulatory Approval
The merger is subject to prior approval by the appropriate banking
regulatory authorities. Applications were filed for approval of the Merger with
the Board of Governors of the Federal Reserve System ("Federal Reserve") and the
Arkansas State Bank Department ("ASBD") for SFNC to acquire ABI in October,
2003. The ASBD and the Federal Reserve communicated their approval of the merger
by letters dated on December 1, 2003 and December 11, 2003, respectively. For a
period of 15 days following the approval by the Federal Reserve, the merger is
also subject to review by the Department of Justice as to its competitive
effects. This review period has expired and no objection was received from the
Department of Justice.
Certain U.S. Federal Income Tax Consequences
The following discussion summarizes the material anticipated United States
federal income tax consequences of the merger to ABI shareholders who hold their
shares of ABI common stock as capital assets. This discussion does not address
the tax consequences of transactions effectuated prior or subsequent to, or
concurrently with, the merger (whether or not such transactions are undertaken
in connection with the merger). In addition, this discussion does not address
all of the federal income tax consequences that may be important to each
taxpayer in light of its particular circumstances, nor does this discussion
address the federal income tax consequences that may be applicable to taxpayers
subject to special treatment under the Internal Revenue Code, such as:
32
o tax-exempt organizations;
o financial institutions, insurance companies and broker-dealers or persons
who have elected to use the mark-to-market method of accounting with
respect to their securities holdings;
o persons who acquired their ABI shares through the exercise of employee
stock options, through a benefit plan or otherwise in a compensatory
transaction;
o shareholders who are not U.S. persons within the meaning of the Internal
Revenue Code or that have a functional currency other than the U.S. dollar;
or
o shareholders who exercise their dissenters' rights.
No information is provided in this document or the tax opinions referred to
below with respect to the tax consequences, if any, of the merger under
applicable foreign, state, local and other tax laws. This discussion and the tax
opinions are based upon the provisions of the Internal Revenue Code, applicable
Treasury regulations, administrative rulings and judicial decisions, all as in
effect as of the date of this proxy statement/prospectus. There can be no
assurance that future legislative, administrative or judicial changes or
interpretations, which changes could apply retroactively, will not affect the
accuracy of this discussion or the statements or conclusions set forth in the
tax opinions referred to below.
In connection with the filing of the registration statement of which this
proxy statement/prospectus is a part, SFNC has received an opinion of
Quattlebaum, Grooms, Tull & Burrow PLLC ("QGTB"), that, as of the date of such
opinion, if certain factual circumstances exist, the merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code and that SFNC and ABI will each be a party
to that reorganization. The parties will not be required to consummate the
merger unless they each receive an additional opinion of QGTB, dated the closing
date of the merger, confirming that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code and that SFNC and ABI will each be a party to that
reorganization.
The opinion of QGTB regarding the merger has relied, and the opinions
regarding the merger as of the closing date will rely, on (1) representations
and covenants made by SFNC and ABI, including those contained in certificates of
officers of SFNC and ABI, and (2) specified assumptions, including an assumption
regarding the completion of the merger in the manner contemplated by the
agreement and plan of merger. In addition, QGTB in issuing the opinion has
assumed, and its ability to provide the opinion at the closing of the merger
will depend on, the absence of changes to the anticipated facts or changes in
law between the date of this proxy statement/prospectus and the closing date. If
any of those representations, covenants or assumptions is inaccurate, QGTB may
not be able to provide the required opinion to be delivered at the closing of
the merger and/or the tax consequences of the merger could differ from those
described in the opinion that counsel has delivered.
Opinions of counsel, including the opinions of QGTB, do not bind the
Internal Revenue Service and do not preclude the IRS or the courts from adopting
a contrary position. SFNC and ABI do not intend to obtain a ruling from the IRS
on the tax consequences of the merger. If the IRS were to assert successfully
that the merger is not a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, then each ABI shareholder would be required to
recognize gain or loss equal to the difference between (i) the sum of the fair
market value of the SFNC common stock and the amount of cash received in the
exchange and (ii) the shareholder's adjusted tax basis in the ABI stock
surrendered for such consideration. Such gain or loss would be a capital gain or
loss, provided that such shares of ABI common stock were held as capital assets
by the shareholder at the effective time of the merger. Such capital gain or
loss recognized would be long-term capital gain or loss if the ABI shareholder's
holding period for the ABI common stock was more than one year. In such event,
an ABI shareholder's total initial tax basis in the SFNC common stock received
would be equal to its fair market value at the effective time of the merger, and
the shareholder's holding period for the SFNC common stock would begin on the
day after the merger.
33
Assuming that the merger qualifies as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, neither SFNC nor ABI will
recognize any gain or loss as a result of the merger. The federal income tax
consequences of the merger qualifying as a reorganization to a particular ABI
shareholder will vary depending primarily on the form of merger consideration
received by the shareholder in exchange for his or her ABI common stock.
Regardless of whether an ABI shareholder elects to receive a combination of cash
and SFNC common stock, solely cash or solely SFNC common stock, the federal
income tax consequences to such shareholder will depend on the actual merger
consideration received by the shareholder.
ABI Shareholders Receiving Both Cash and SFNC Common Stock. If a holder of
ABI common stock makes or is deemed to have made the Default Election, or makes
an Optional Election to receive cash and SFNC common stock as the merger
consideration (other than cash in lieu of a fractional interest in SFNC common
stock) in the merger, that holder will recognize gain, if any, equal to the
lesser of
o the amount of cash received or
o the amount by which the sum of the amount of cash received and the fair
market value at the effective time of the SFNC common stock received
exceeds the holder's adjusted tax basis in the shares of ABI common stock
exchanged in the merger.
Any recognized gain could be taxed as a capital gain or a dividend. Such
gain will generally be capital gain (provided that such shares of ABI common
stock were held as capital assets by the shareholder at the effective time of
the merger), unless the holder's exchange of ABI common stock for cash and SFNC
common stock "has the effect of the distribution of a dividend" after giving
effect to the constructive ownership rules of the Internal Revenue Code, in
which case such gain might be treated as ordinary income. Any capital gain
recognized generally will be long-term capital gain to the extent that, at the
effective time of the merger, the holder has a holding period in the ABI common
stock exchanged in the merger of more than one year. Because the determination
of whether a cash payment will be treated as having the effect of a dividend is
an individual determination dependent primarily upon the facts and circumstances
of each separate ABI shareholder, ABI shareholders are urged to consult their
own tax advisors regarding the tax treatment of any cash received in the merger.
The aggregate tax basis of the shares of SFNC common stock received in the
merger (including any fractional shares of SFNC common stock deemed received)
will be the same as the aggregate tax basis of the shares of ABI common stock
surrendered in exchange for such SFNC common stock in the merger, increased by
the amount of gain recognized in the exchange (whether characterized as capital
gain or a dividend) and reduced by the amount of cash received in the exchange.
The holding period of the shares of SFNC common stock received (including any
fractional share of SFNC common stock deemed received) will include the holding
period of shares of ABI common stock surrendered in exchange for the SFNC common
stock, provided that such shares were held as capital assets of the shareholder
at the effective time of the merger. An ABI shareholder who receives a
combination of SFNC common stock and cash in exchange for his or her ABI common
stock will not be permitted to recognize any loss for federal income tax
purposes.
An ABI shareholder's federal income tax consequences will also depend on
whether his or her shares of ABI common stock were purchased at different times
at different prices. If they were, the ABI shareholder could realize gain with
respect to some of the shares of ABI common stock and loss with respect to other
shares. Such ABI shareholder would have to recognize such gain to the extent
such shareholder receives cash with respect to those shares in which the
shareholder's adjusted tax basis is less than the amount of cash plus the fair
market value at the effective time of the merger of the SFNC common stock
received, but could not recognize loss with respect to those shares in which the
ABI shareholder's adjusted tax basis is greater than the amount of cash plus the
fair market value at the effective time of the merger of the SFNC common stock
received. Any disallowed loss would be included in the adjusted basis of the
SFNC common stock. Any such ABI shareholder is urged to consult his or her own
tax advisor respecting the tax consequences of the merger to that shareholder.
34
ABI Shareholders Receiving Only SFNC Common Stock. No gain or loss will be
recognized by a holder of ABI common stock as a result of the surrender of
shares of ABI common stock solely in exchange for shares of SFNC common stock
pursuant to the merger (except with respect to cash received instead of
fractional shares of SFNC common stock, as discussed below). The aggregate tax
basis of the shares of SFNC common stock received in the merger (including any
fractional shares of SFNC common stock deemed received) will be the same as the
aggregate tax basis of the shares of ABI common stock surrendered in exchange
for the SFNC common stock. The holding period of the shares of SFNC common stock
received (including any fractional shares of SFNC common stock deemed received)
will include the holding period of shares of ABI common stock surrendered in
exchange for the SFNC common stock, provided that such shares were held as
capital assets of the shareholder at the effective time of the merger.
ABI Shareholders Receiving Only Cash. A holder of ABI common stock that
does not receive any shares of SFNC common stock pursuant to the merger (and is
not treated as constructively owning, after the merger, SFNC common stock held
by certain family members and entities affiliated with the holder under the
Internal Revenue Code) will generally recognize gain or loss equal to the
difference between the amount of cash received and the holder's adjusted tax
basis in the shares of ABI common stock exchanged in the merger. Such gain or
loss will be a capital gain or loss, provided that such shares of ABI common
stock were held as capital assets by the shareholder at the effective time of
the merger. Such capital gain or loss will be a long-term capital gain or loss
to the extent that, at the effective time of the merger, the holder has a
holding period in such ABI common stock of more than one year. The Internal
Revenue Code contains limitations on the extent to which a taxpayer may deduct
capital losses from ordinary income.
Cash Instead of Fractional Shares. Holders of ABI common stock who receive
cash instead of a fractional share of SFNC common stock will be treated as
having received the fractional share in the merger and then as having the
fractional share redeemed by SFNC in exchange for the cash actually distributed
instead of the fractional share, with such redemption qualifying as an exchange
under Section 302 of the Internal Revenue Code. Accordingly, such holders will
generally recognize gain or loss equal to the difference between the tax basis
of the holder's ABI common stock allocable to that fractional share and the
amount of cash received. The gain or loss generally will be capital gain or loss
and long-term capital gain or loss if the ABI stock exchanged has been held for
more than one year.
Backup Withholding. A holder of ABI common stock may be subject, under
certain circumstances, to backup withholding at a rate of 30.5% with respect to
the amount of cash, if any, received in the merger, including cash received
instead of fractional shares, unless the holder provides proof of an applicable
exemption or correct taxpayer identification number and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under the backup withholding rules is not additional tax and may be refunded or
credited against the holder's federal income tax liability, so long as the
required information is furnished to the IRS.
THE PRECEDING SUMMARY DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION
OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. ACCORDINGLY, ABI
SHAREHOLDERS 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, FOREIGN AND OTHER TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
35
Interests of Certain Persons in the Merger
Certain members of management of ABI and ABI's Board of Directors may be
deemed to have interests in the merger that are in addition to their interests
as ABI shareholders generally. ABI's Board of Directors was aware of these
interests and considered them, among other matters, in approving the agreement
and plan of merger.
Mr. David L. Bartlett, President, Chief Executive Officer and Chairman of
the Board of Directors of ABI, Ronnie Twyford, Senior Vice President of Alliance
Bank and Steve Trusty, Senior Vice President of Alliance Bank, each entered into
a Retention Bonus Agreement with Alliance Bank, wherein Alliance Bank agreed to
pay to each of Messrs. Bartlett, Twyford and Trusty, on the effective date of
the merger, lump-sum retention payments in the amounts of $330,000, $154,996 and
$188,000, respectively, subject to the condition the individuals have not
voluntarily resigned employment with ABI prior to the effective date of the
merger. See PROPOSAL II- Approval of Amended Benefits for David Bartlett, Steven
Trusty and Ronnie Twyford - Retention Bonus Agreement.
Messrs. Bartlett, Twyford and Trusty each entered into Executive
Supplemental Retirement Plan Executive Agreements with Alliance Bank which
provide for certain retirement and death benefits to these individuals. The
benefits under these plans would ordinarily vest in pro rata increments over the
shorter of ten (10) years or the number of years remaining prior to the employee
reaching the specified retirement age. Upon a change in control of Alliance
Bank, the vesting of the retirement benefits is partially accelerated, however
such benefits are not payable until the employee reaches the specified
retirement age. If Proposal II described in this proxy statement is approved,
then the retirement and death benefits of the individuals will be 100% vested
upon consummation of the merger. See PROPOSAL II- Approval of Amended Benefits
for David Bartlett, Steven Trusty and Ronnie Twyford - Executive Supplemental
Retirement Plan Executive Agreements.
Messrs. Bartlett, Twyford and Trusty each entered into Life Insurance
Endorsement Method Split Dollar Agreements with Alliance Bank which provide for
certain death benefits to these individuals from certain life insurance policies
on the lives of these individuals owned by Alliance Bank. The benefits under
these plans would ordinarily vest in pro rata increments over the shorter of ten
(10) years or the number of years remaining prior to the employee reaching the
specified retirement age. Upon a change in control of Alliance Bank, the vesting
of the death benefits will be accelerated and the death benefits will be 100%
vested, if Proposal II described in this Proxy Statement is approved. See
PROPOSAL II- Approval of Amended Benefits for David Bartlett, Steven Trusty and
Ronnie Twyford - Life Insurance Endorsement Method Split Dollar Agreements.
Messrs. Bartlett, Twyford and Trusty each anticipate continued employment
by Alliance Bank after the consummation of the merger transaction. The
acquisition of ABI by SFNC and their continued employment may provide additional
opportunities for advancement in employment than would be available if ABI
remained independent.
Directors and executive officers of ABI will receive shares of SFNC common
stock and/or cash in the merger on the same basis as other ABI shareholders. The
following table shows the number of shares of SFNC common stock that may be
issued to directors and executive officers of ABI, and their affiliates, in the
merger assuming that each such officer and director make the Default Election:
=======================================================================================================
Shares of ABI common stock beneficially owned by executive officers and directors 4,551
of ABI, and their affiliates, as of February 5, 2004
-------------------------------------------------------------------------------------------------------
Number of shares of SFNC common stock that would be received in the merger 82,379
pursuant to a Default Election by executive officers and directors, and their
affiliates based on this beneficial ownership
=======================================================================================================
36
Members of ABI's Board of Directors have certain interests under the
agreement and plan of merger regarding indemnification and continuation of
liability insurance coverage following the merger. See "THE AGREEMENT AND PLAN
OF MERGER -- Indemnification."
Comparison of Rights of Shareholders
At the effective time of the merger, ABI shareholders will automatically
become SFNC shareholders (except for those ABI shareholders who only receive
cash consideration for their shares of ABI common stock or who properly exercise
dissenters' rights). SFNC is an Arkansas corporation governed by provisions of
the Arkansas Business Corporation Act of 1987 and SFNC's restated articles of
incorporation and amended bylaws. ABI is also an Arkansas corporation governed
by provisions of the Arkansas Business Corporation Act of 1987 and ABI's
articles of incorporation, as amended, and bylaws. See "COMPARISON OF RIGHTS OF
SHAREHOLDERS."
Restrictions on Resales by Affiliates
The shares of SFNC common stock issuable to ABI shareholders upon
completion of the merger have been registered under the Securities Act of 1933.
These shares may be traded freely without restriction by those shareholders who
are not deemed to be "affiliates" of ABI or SFNC, as that term is defined in SEC
rules under the Securities Act. An "affiliate" of a company generally includes
its directors and executive officers and holders of a significant amount of the
company's voting stock.
Shares of SFNC common stock received by those ABI shareholders who are
deemed to be affiliates of ABI at the time of the ABI special meeting may be
resold without registration under the Securities Act only as permitted by Rule
145 under the Securities Act. Under Rule 145, during the one-year period
following completion of the merger, affiliates of ABI may resell shares of SFNC
common stock received by them in the merger subject to limitations on the number
of shares that may be sold during any three-month period and the manner in which
the shares may be sold, including the use of a broker and non-solicitation of a
buyer.
ABI has agreed in the agreement and plan of merger to use its reasonable
best efforts to cause each person who is an affiliate, for purposes of Rule 145
under the Securities Act, to deliver to SFNC a written agreement intended to
ensure compliance with the Securities Act.
OPINION OF FINANCIAL ADVISOR
ABI engaged Southard Financial ("Southard") to act as its financial advisor
in connection with the merger. On December 3, 2003, Southard rendered to the ABI
Board of Directors its written opinion (the "Southard Opinion") to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinions, the consideration to be paid in the merger is fair, from a
financial point of view, to the stockholders of ABI, including both stockholders
who will receive cash in the merger and those who will remain stockholders after
the merger. No limitations were imposed by the ABI Board upon Southard with
respect to the investigations made or the procedures followed by them in
rendering their opinions.
The full text of the written opinion of Southard dated December 3, 2003,
which sets forth the assumptions made, matters considered and limitations of the
review undertaken, is attached to this proxy statement/prospectus as Annex C and
is incorporated herein by reference. Southard's opinion is directed to the
Board, addresses only the fairness of the consideration to be paid in the merger
from a financial point of view, and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Special Meeting. The
summary of the opinion of Southard set forth herein is qualified in its entirety
by reference to the full text of such opinion.
Southard is a specialized consulting and valuation firm focusing on
providing stock valuations to companies and financial institutions located
throughout the United States, or to groups of individuals associated with
U.S.-based companies and financial institutions. As part of its line of
professional services, Southard specializes in rendering valuation opinions of
banks and bank holding companies nationwide. ABI selected Southard to serve as
its financial advisor based on Southard's reputation, expertise and familiarity
with Arkansas-based financial institutions.
37
In connection with its opinion, Southard reviewed and analyzed certain
publicly available financial information and other information concerning ABI
and SFNC and certain internal analyses and other information furnished to
Southard by ABI and SFNC. Southard also held discussions with members of senior
management of ABI and SFNC regarding the business and prospects of ABI and SFNC.
In addition, Southard (i) reviewed the reported prices and trading activity for
ABI and SFNC stock and (ii) performed such other studies and analyses and
considered such other factors as Southard deemed appropriate.
As described in its opinion, Southard assumed and relied upon, without
independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with Southard for
purposes of their opinion. With respect to the information relating to the
prospects of ABI and SFNC, Southard assumed that such information reflected the
best currently available judgments and estimates of the management of ABI and
SFNC as to the likely future financial performance of ABI and SFNC. Southard did
not verify through independent inspection or examination the specific assets or
liabilities of ABI and SFNC. Southard did not make nor were they provided with
an independent evaluation or appraisal of the assets or liabilities of ABI and
SFNC.
Approach to Opinion
In arriving at the Southard Opinion, Southard reviewed and analyzed, among
other things, the following: (i) the financial statements of ABI and SFNC and
their subsidiaries; (ii) certain other publicly available financial and other
information concerning ABI and SFNC and their subsidiaries; (iii) publicly
available information concerning other banks and bank holding companies, the
trading markets for their securities and the nature and terms of certain other
transactions relevant to Southard's inquiry; (iv) the competitive and economic
outlook for ABI's and SFNC's trade area; (v) the book value and financial
condition of ABI and SFNC and their subsidiaries; (vi) the future earnings and
dividend paying capacity of ABI and SFNC and their subsidiaries; (vii) previous
sales of ABI and SFNC stock; and (viii) the prevailing market prices for
selected banking organizations in Arkansas, the surrounding region, and the
United States. Southard held discussions with senior management of ABI and SFNC
concerning ABI's and SFNC's past and current operations, financial condition and
prospects, as well as the results of recent bank regulatory examinations.
In conducting its review and in arriving at the Southard Opinion, Southard
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available, and did not attempt to
independently verify the same. Southard did not make or obtain any evaluations
or appraisals of the properties of ABI or SFNC, nor did it examine any
individual loan credit files. For purposes of the Southard Opinion, Southard
assumed that the merger will have the tax, accounting and legal effects
described in the proxy statement/prospectus and assumed that the transaction
would be consummated on a timely basis in the manner presented by ABI and SFNC
and in compliance with applicable laws and regulations.
As more fully discussed below, Southard considered such financial and other
factors as it deemed appropriate under the circumstances, including among others
the following: (i) the historical and current financial position and results of
operations of ABI and SFNC, including interest income, interest expense, net
interest income, net interest margin, provision for loan losses, non-interest
income, non-interest expense, earnings, dividends, internal capital generation,
book value, intangible assets, return on assets, return on stockholders' equity,
capitalization, the amount and type of non-performing assets, loan losses and
the reserve for loan losses, all as set forth in the financial statements for
ABI and its subsidiaries; and, (ii) the assets and liabilities of ABI and its
subsidiaries, including the loan investment and mortgage portfolios, deposits,
other liabilities, historical and current liability sources and costs and
liquidity. Southard also took into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. The Southard Opinion is necessarily based upon conditions as
they existed and can be evaluated on the respective date thereof and the
information made available to Southard through such date.
38
In connection with rendering the Southard Opinion, Southard performed
certain financial analyses, which are summarized below. Southard believes that
its analysis must be considered as a whole, and that selecting portions of such
analysis and the factors considered therein, without considering all factors and
analysis, could create an incomplete view of the analysis and the processes
underlying the Southard Opinion. The preparation of a fairness opinion is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. In its analyses,
Southard made numerous assumptions with respect to industry performance,
business and economic conditions, and other matters, many of which are beyond
the control of ABI and SFNC. Any estimates contained in Southard's analyses are
not necessarily indicative of future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals of such companies or necessarily
reflect the prices at which such companies or their securities may actually be
sold.
Adequacy of Total Price
The key consideration in this fairness opinion is the adequacy of the total
price to be paid by SFNC. Under the terms of the merger agreement, ABI
shareholders will receive a combination of cash in the amount of $379.978 and
18.1021 shares of SFNC common stock per share of ABI common stock (the "default
election"), unless they make an optional election. The ABI shareholders may
optionally elect to receive: (1) all shares of SFNC common stock for each ABI
share exchanged, with such number of shares to be the sum of (a) 18.1021, plus
(b) $379.978 divided by the average ending trade price of SFNC for the ten
consecutive trading days ending immediately prior to the fifth trading day prior
to the consummation of the merger , (2) all cash for each ABI share exchanged,
with such amount of cash to be the sum of (a) 379.978, plus (b) the product of
18.021 times the average ending trade price of SFNC for the ten consecutive
trading days ending immediately prior to the fifth trading day prior to the
consummation of the merger, or (3) a combination of cash and stock in such
amounts as may be requested by the ABI shareholder. In the aggregate, the
transaction will consist of $11,440,000 in cash and 545,000 shares of SFNC
common stock, for a total purchase price of $25,610,000, based upon a value of
$26.00 per share for SFNC common stock. Depending on the optional elections made
by the ABI shareholders, the consideration will be reallocated to achieve these
terms.
Analysis of Market Transactions
Based upon the merger terms, and a market price of $27.00 for SFNC common
shares, ABI shareholders will receive about 221% of projected December 31, 2003
book value, 18 times estimated 2003 earnings, and 18.7% of projected December
31, 2003 assets. Based upon the review conducted by Southard, and given the
financial characteristics and performance of ABI, the pricing for ABI in the
merger is within the range of multiples seen in recent acquisitions of banks.
Discounted Cash Flow Analysis
Southard prepared a pro-forma discounted cash flow analysis to determine a
range of present values of ABI assuming ABI continued to operate as a
stand-alone entity. This range was determined by adding (i) the present value of
the estimated future dividend stream that ABI could generate over the ten year
period from 2004 to 2013 and (ii) the present value of the "terminal value" of
ABI common stock at the end of 2013. To determine a projected dividend stream,
Southard assumed a maximum equity to assets ratio of 8.0%. Southard used
management's budgeted earnings for 2003 and assumed annual growth in earnings
and assets of between 5% and 10%. The "terminal value" of ABI common stock at
the end of the ten-year period was determined by applying a price/earnings
multiple of 19 times projected net income for ABI in 2013. The dividend stream
and terminal value were discounted to the present using discount rates of 13% to
18%, which Southard viewed as appropriate for a company with ABI's risk
characteristics. Using this analysis, the implied value of ABI was consistently
near or below the estimated merger price.
39
Liquidity
SFNC shares are traded on the Nasdaq National Market. Trading volume is
variable, and generally ranges from 1,000 shares to 40,000 shares per day.
Further, except in the case of Affiliates (as defined in the merger agreement),
SFNC shares received will be freely tradable with no restrictions.
Merger Premium
Based upon the merger terms, ABI shareholders will receive a premium in
excess of 170% over the most recent minority trading price range of ABI shares
($300.00 per share). The merger premium for ABI is much higher than the normal
range for similar transactions.
Analysis of Alternatives
In evaluating the fairness of the proposed merger to the shareholders of
ABI, Southard reviewed with ABI management the process undertaken for the sale
of the company. Given the age of the company and the need for more capital to
continue expansion, the ABI Board decided to pursue affiliation partners through
negotiation. No formal marketing efforts were undertaken.
After receiving the negotiated offer from SFNC, ABI's Board did not pursue
affiliation possibilities with other institutions. The Board determined that it
was unlikely the Board would receive a significantly better offer. Further,
negotiations took place with SFNC before a definitive agreement was reached. The
terms of the merger agreement are materially unchanged from the original terms
contemplated by the parties.
Impact of an Exchange of ABI Stock For SFNC Stock
For evaluating the impact of the transaction on those who elect to receive
SNFC shares, the default exchange ratio of 18.1021 shares of SNFC for each share
of ABI was assumed. This allocation of shares represented consideration for 51%
of ABI. The analysis presented below considers the impact of the share exchange
only. In evaluating the impact of receiving SFNC common stock in the merger, the
following factors are relevant:
Dividend Yield Analysis
In evaluating the impact of the proposed merger on the shareholders of ABI,
Southard reviewed the dividend paying histories of ABI and SFNC. ABI does not
pay dividends to its shareholders. SFNC paid a dividend of $0.48 per share in
2002 (split adjusted). Further, dividends during the first nine months of 2003
totaled $0.385 per share. Based upon this review, the impact on the dividends
received by ABI shareholders will be highly positive.
Earnings Yield Analysis
In evaluating the impact of the proposed merger on the shareholders of ABI,
Southard determined that, for the stock portion of the default exchange, the
shareholders of ABI would see about a 21% increase in earnings per share
(defined as post merger combined earnings per share times the assumed exchange
ratio) for the year ended December 31, 2003, assuming that the merger had been
consummated on January 1, 2003.
Book Value Analysis
In evaluating the impact of the proposed merger on the shareholders of ABI,
Southard estimates that the shareholders of ABI will experience about a 35%
increase in the book value of their stock investment, based upon the projected
book values of ABI and SFNC at December 31, 2003.
40
Fundamental Analysis
Southard reviewed the financial characteristics of ABI and SFNC with
respect to profitability, capital ratios, liquidity, asset quality, and other
factors. Southard compared ABI and SFNC to a universe of publicly traded banks
and bank holding companies and to peer groups prepared by the Federal Financial
Institutions Examination Council (FFIEC). Southard found that the post-merger
combined entity will have capital ratios and profitability ratios within the
range of those of the public peer group.
Summary of Analyses
The summary set forth does not purport to be a complete description of the
analyses performed by Southard. The analyses performed by Southard are not
necessarily indicative of actual values, which may differ significantly from
those suggested by such analyses. Southard did not appraise any individual
assets or liabilities of ABI or SFNC. Throughout the due diligence process, all
information provided by ABI, SFNC, and third party sources was relied upon by
Southard without independent verification.
Accordingly, based on all factors that Southard deems relevant and assuming
the accuracy and completeness of the information and data provided, Southard
concludes that the consideration of $379.978 in cash and 18.1021 shares of SFNC
common stock, or such other combination of cash and SFNC common stock which may
be received pursuant to an optional election, per share of ABI common stock that
the stockholders are entitled to receive in connection with the merger, is fair,
from a financial standpoint, to all stockholders of ABI, regardless of the
combination of cash and SFNC common stock received in the merger.
Southard had not previously provided valuation or other professional
services to ABI. Southard has not previously served as a market maker for ABI's
common stock.
ABI paid Southard $13,500 for rendering the Southard Opinion and also
reimbursed Southard for its reasonable out-of-pocket expenses. ABI also agreed
to indemnify Southard against certain liabilities, including liabilities under
the federal securities laws.
YOU ARE ENCOURAGED TO READ THE SOUTHARD OPINION IN ITS ENTIRETY. THE FULL
TEXT OF THE SOUTHARD OPINION IS ATTACHED AS ANNEX C TO THIS PROXY STATEMENT.
41
THE AGREEMENT AND PLAN OF MERGER
The following summary of certain terms and provisions of the agreement and
plan of merger is qualified in its entirety by reference to the agreement and
plan of merger, which is incorporated into this document by reference and, with
the exception of exhibits and schedules to the agreement and plan of merger, is
attached as Annex A to this proxy statement/prospectus.
Default Election; Optional Election; Exchange of Certificates
Enclosed with this proxy statement/prospectus is an election form. The
election form enables ABI shareholders to choose to exchange their ABI common
stock for a combination of cash and shares of SFNC common stock, solely for cash
or solely for shares of SFNC common stock, subject to the limitations described
below. ABI shareholders have until 5:00 p.m., Central Time, on March 25, 2004 to
make their election and return their election forms to ABI.
By timely completing and delivering the election form, each holder of ABI
common stock may elect to receive (i) $379.978 in cash and 18.1021 shares of
SFNC common stock ("Default Election"), or may make an optional election
("Optional Election"), subject to the limitations set forth below, to receive
(ii) solely cash consisting of the sum of $379.978, plus the product of 18.1021
multiplied by the SFNC Average Price, as defined below, (iii) solely SFNC common
stock consisting of the number of shares determined by dividing the cash amount
that the ABI shareholder could have received under (ii) above by the SFNC
Average Price, or (iv) a combination of the cash and shares of SFNC common stock
specified by the ABI shareholder as a percentage to be received in the form of
cash and SFNC common stock (with the sum of such percentages equal to 100%). ABI
shareholders who do not return a properly completed election form with respect
to their shares of ABI common stock on or prior to March 25, 2004 will be deemed
to have made a Default Election and will therefore, receive $379.978 in cash and
18.1021 shares of SFNC common stock for each share of ABI common stock owned.
If a shareholder makes an Optional Election, the amount of cash and/or SFNC
common stock to be received will be determined by the SFNC Average Price which
may fluctuate. The SFNC Average Price will not be fixed until five (5) days
immediately preceding the merger and is dependent on the market price of SFNC
common stock. The "SFNC Average Price" will equal the average daily ending trade
price of SFNC common stock for the ten (10) consecutive trading days ending
immediately prior to the fifth trading day preceding the merger.
ABI and SFNC have agreed that the total merger consideration to be paid by
SFNC to the ABI shareholders will be 545,000 shares of SFNC common stock and the
sum of $11,440,000 in cash. The amount of the merger consideration that will be
paid in cash is therefore fixed at $11,440,000. Likewise, the amount of the
merger consideration that will be paid in SFNC common stock is fixed at 545,000
shares. If you make the Default Election, you will receive $379.978 in cash and
18.1021 shares of SFNC common stock for each share of ABI you own, without
regard to the elections of any other ABI shareholders. In the event that you and
some of the other holders of the outstanding shares of ABI common stock make
Optional Elections, the amount of cash and SFNC common stock that you will have
the right to receive upon exchange of your shares of ABI common stock will be
adjusted on a pro rata basis so that, in the aggregate the merger consideration
to be paid will equal $11,440,000 in cash and 545,000 shares of SFNC common
stock. As a result, if you make an Optional Election to receive merger
consideration in a combination of cash and SFNC common stock (other than the
Default Election), you may receive a different combination of consideration than
you elected, based on the Optional Elections made by other ABI shareholders.
Promptly after the completion of the merger, SFNC will deposit in a
segregated account within SFTC, as the exchange agent for the merger,
certificates representing shares of SFNC common stock, the cash consideration
and cash to be paid in lieu of fractional shares to which a holder of
certificates formerly representing ABI common stock would otherwise be entitled.
42
A letter of transmittal will be mailed to each ABI shareholder promptly
after the completion of the merger. The letter of transmittal will provide that,
upon surrender of an ABI certificate for exchange and cancellation to the
exchange agent, together with the duly executed letter of transmittal, the
holder of an ABI certificate will be entitled to receive the amount of cash
elected and/or the number of whole shares of SFNC common stock elected, unless
adjusted on a pro rata basis by the exchange agent, and cash for any fractional
shares to which such holder has become entitled in accordance with the agreement
and plan of merger. SFNC will pay to each ABI shareholder who would otherwise be
entitled to a fractional share of SFNC common stock, after taking into account
all ABI certificates delivered by the shareholder, an amount in cash, determined
by multiplying such fraction by the SFNC Average Price. ABI certificates so
surrendered will immediately be canceled. No interest will be paid or accrued on
any cash to be paid upon such surrender, whether as merger consideration, in
lieu of fractional shares of SFNC common stock or with respect to unpaid
dividends or distributions on such shares.
Any part of the SFNC common stock certificates and cash deposited with the
exchange agent that remains unclaimed by ABI shareholders for six months after
the merger will be returned to SFNC. After such time, ABI shareholders may look
only to SFNC for payment of their portion of the cash consideration and their
shares of SFNC common stock, cash in lieu of fractional shares, and unpaid
dividends and distributions on ABI common stock deliverable in respect of each
share of SFNC common stock held by the shareholder, as determined pursuant to
the agreement and plan of merger, in each case, without interest. SFNC will not
be liable to any former ABI shareholder for any amounts properly delivered to a
public official under applicable abandoned property, escheat or similar laws.
If any certificate formerly representing ABI common stock is lost, stolen
or destroyed, SFNC can require the holder to give an affidavit of that fact and
to post a bond in an amount that is customarily required by SFNC and the
exchange agent as indemnity against any claim that may be made with respect to
this ABI certificate. Upon making such affidavit and/or posting such bond, the
exchange agent will issue the consideration due under the agreement and plan of
merger.
No dividends or other distributions with respect to SFNC common stock
declared after the merger and payable to SFNC shareholders of record will be
paid to the holder of any unsurrendered ABI certificate until the holder of the
certificate surrenders the ABI certificate. After the proper surrender of an ABI
certificate, the record holder of the certificate will receive any such
dividends or other distributions, without any interest, which the holder would
have received if he or she had exchanged his or her ABI certificate immediately
after the merger.
Conditions to the Merger
The obligations of ABI and SFNC to complete the merger are subject to the
satisfaction (or waiver, where legally allowed), at or prior to the effective
time of the merger, of a number of conditions, which are set forth in the
agreement and plan of merger. These conditions include:
o Approval of the agreement and plan of merger by ABI shareholders;
o Receipt of the required regulatory approvals, including approval by
the Federal Reserve and the Arkansas State Bank Department;
o The absence of any legal prohibition to completion of the merger;
o The accuracy of the parties' representations and performance of the
parties' obligations under the agreement and plan of merger; and
o Receipt of the required tax opinion.
43
While we have received the approval of the Federal Reserve and the Arkansas
State Bank Department, we cannot guarantee that any other required regulatory
approvals will be obtained or that all of the other conditions precedent to the
merger will be satisfied or, where legally permitted, waived by the party
permitted to do so.
Termination of the Agreement and Plan of Merger
The agreement and plan of merger may be terminated at any time prior to the
effective time of the merger, whether before or after approval of the merger by
ABI shareholders, by mutual consent of SFNC and ABI. The agreement and plan of
merger may also be terminated by either party if:
o The merger is not completed on or before April 30, 2004; or
o The other party materially breaches its representations or covenants
set forth in the agreement and plan of merger and fails to cure that
breach within 60 days after notice; or
o The ABI shareholders fail to approve the agreement and plan of merger.
In the event of termination of the agreement and plan of merger, the
agreement and plan of merger will become void and have no effect, except with
respect to the parties' obligations regarding confidential information and
expenses, and SFNC's non-solicitation covenant, each as set forth in the
agreement and plan of merger. Termination also will not relieve or release a
breaching party from liability or damages for its willful breach of the
agreement and plan of merger.
Conduct of Business Prior to the Merger and Other Covenants
In the agreement and plan of merger, ABI and SFNC agreed to refrain from
engaging in, or permitting its subsidiaries to engage in, certain activities
which are described in the agreement and plan of merger.
ABI has agreed to refrain from:
o Declaring or paying any dividends on, or making other distributions in
respect of, any of its capital stock during any period, other than
dividends or distributions consistent with historic practices;
o Issuing or acquiring its capital stock other than for the issuance of
common stock upon the exercise or fulfillment of rights or options
issued or existing pursuant to the ABI option plan all to the extent
outstanding and in existence on the date of the agreement and plan of
merger and in accordance with their terms as of such date;
o Issuing any options or other securities convertible into or
exchangeable for its capital stock;
o Hire additional staff, except to fill vacancies;
o Enter into any employment contracts, pay any bonus to or increase the
rate of compensation of any directors, officers or employees, except
consistent with historic practices;
o Adopting or amending any employee benefit plan or compensation
arrangement, except as otherwise requested or approved by SFNC;
o Substantially modify the manner in which it conducts business
including amending its articles of incorporation or bylaws;
o Acquiring any material assets or business, outside the ordinary course
of business,;
44
o Acquire any investment securities, other than U. S. Treasury
securities, Arkansas municipal securities, U. S. Agency securities
which are traditional fixed rate debt securities;
o Acquire any shares of SFNC common stock, except in a fiduciary
capacity;
o Changing its methods of accounting in effect at December 31, 2002,
except as requested by SFNC or required by changes in generally
accepted accounting principles or regulatory accounting principles;
o Take any action which would or is reasonably likely to adversely
affect the ability of either party to obtain the required regulatory
approvals, adversely affect ABI's ability to perform its covenants in
the agreement and plan of merger, or in any of the conditions to the
merger set forth in the agreement and plan of merger not being
satisfied;
o Enter into any loan or series of loans to a single borrower or related
group of borrowers in an original principal amount in excess of
$150,000, unless in accordance with ABI's existing loan policies;
o Disposing of any assets, properties or other rights or agreements
having a value in excess of $75,000, other than properties acquired in
foreclosure or in the ordinary collections of debts; or
The agreement and plan of merger also contains certain other agreements
relating to the conduct of the parties prior to the merger, including, among
other things, those requiring each party:
o To apply for and obtain all consents and approvals required to complete the
merger;
o To afford to the other party and its representatives access to certain of
such party's information concerning its business, properties and personnel
as the other party may reasonably request; and
o To use its best efforts to comply with any legal requirements to complete
the merger.
ABI agreed to cause each director, executive officer and other person who
is an "affiliate" of ABI for purposes of Rule 145 under the Securities Act to
deliver to SFNC a written agreement intended to ensure compliance with the
Securities Act.
ABI agreed to call and hold a special meeting of its shareholders and,
through its Board of Directors, to recommend the agreement and plan of merger
for approval to its shareholders, subject to the fiduciary duties of the
directors. SFNC agreed to cause the shares of SFNC common stock to be issued in
the merger to be approved for listing on the Nasdaq National Market System.
Indemnification
SFNC agreed to provide indemnification following the merger to the present
and former officers and directors of ABI and Alliance Bank for specified
liabilities arising out of or pertaining to the merger agreement or the merger
and to provide for either the continuation of the existing directors' and
officers' liability insurance for the directors and officers of ABI or to
provide substantially similar coverage under the SFNC directors and officers
liability insurance policy.
Amendment of the Agreement and Plan of Merger
Subject to compliance with applicable law, the agreement and plan of merger
may be amended by ABI and SFNC, by action taken or authorized by their
respective Boards of Directors, at any time before or after the ABI shareholders
approve the agreement and plan of merger. However, after any approval of the
agreement and plan of merger by ABI shareholders, there may not be, without
further approval of the ABI shareholders, any amendment of the agreement and
plan of merger which reduces the amount or changes the form of the consideration
due under the agreement and plan of merger, other than as contemplated in the
agreement and plan of merger. The agreement and plan of merger provides that it
may not be amended except by an instrument in writing signed on behalf of SFNC
and ABI.
45
Waiver
Prior to the merger, SFNC and ABI may extend the time for the performance
of any of the obligations or other acts of the other party to the agreement and
plan of merger, waive any inaccuracies in the representations or warranties of
the other party contained in the agreement and plan of merger or, where the law
permits, waive compliance with any of the agreements or conditions of the other
party contained in the agreement and plan of merger.
Expenses
Each party to the agreement and plan of merger will bear all expenses
incurred by it in connection with the agreement and plan of merger and the
merger.
Management and Operations Following the Merger
After the merger, SFNC will be managed by the same Board of Directors and
executive officers as existed prior to the merger. ABI will be merged with and
into SFNC. The surviving corporation will operate under the name "Simmons First
National Corporation" and will continue to engage in the same business as prior
to the merger. Alliance Bank will continue to operate as a separate bank, but
its name will be changed to "Simmons First Bank of Hot Springs."
46
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
SFNC
SFNC common stock is listed on the Nasdaq National Market System under the
symbol "SFNC." As of October 8, 2003, SFNC common stock was held by
approximately 1,383 holders of record. The following table sets forth the high
and low closing prices for SFNC common stock as reported on the Nasdaq National
Market System, and cash dividends declared per share of SFNC common stock, for
the periods indicated:
Stock Prices* Cash Dividends*
____________________ _______________
High Low Per Share
____ ___ _________
2004
First Quarter (through February 10, 2004) $30.00 $27.00
2003
First Quarter $18.45 $17.06 $0.125
Second Quarter 21.50 18.13 0.13
Third Quarter 26.31 20.90 0.13
Fourth Quarter 28.90 23.95 0.14
2002
First Quarter $16.53 $15.64 $0.115
Second Quarter 21.30 16.25 0.12
Third Quarter 20.57 16.95 0.12
Fourth Quarter 19.22 17.20 0.125
2001
First Quarter $12.16 $11.13 $0.105
Second Quarter 17.15 11.44 0.11
Third Quarter 18.90 15.85 0.11
Fourth Quarter 17.20 15.89 0.115
* Adjusted to give effect to 2-for-1 stock split effective May 1, 2003.
ABI
There is no established trading market for shares of ABI common stock,
which is inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of ABI common
stock have been bought and sold. As of October 8, 2003, ABI common stock was
held of record by 201 persons. ABI has never paid any cash dividends on its
common stock.
47
PROPOSAL II - APPROVAL OF AMENDED BENEFITS FOR
DAVID BARTLETT, STEVEN TRUSTY AND RONNIE TWYFORD
General
Section 280G of the Internal Revenue Code governs the treatment of so
called "parachute payments" to corporate officers, highly-compensated
individuals or shareholders who own more than 1% of the fair market value of any
company's outstanding stock. As executive officers of ABI, David Bartlett,
Steven Trusty and Ronnie Twyford are covered by Section 280G of the Internal
Revenue Code.
If the payments and benefits payable to these individuals, which are
contingent on the merger equal or exceed three times each officer's respective
average taxable compensation for the five calendar years preceding the year in
which the merger is completed, then such officer is subject to a 20% excise tax
and ABI loses its tax deduction for the excess parachute payment. An excess
parachute payment is defined as the total parachute payments to an officer,
minus one times the average taxable compensation of such officer for the five
calendar years preceding the year in which the merger is completed.
The average taxable compensation of Messrs. Bartlett, Trusty and Twyford
will be based on the five years ending December 31, 2003. The average taxable
compensation for each such officer for the five calendar years preceding the
year in which the merger is completed is set forth below:
Officer Average taxable Compensation
David Bartlett $173,702
Steven Trusty $ 82,790
Ronnie Twyford $ 72,727
Based on current estimates of the value of the change in control payments
and benefits, set forth below, the Board of Directors of ABI believes that the
payments and benefits to Messrs. Bartlett, Trusty and Twyford will exceed three
times their respective five-year average compensation unless this proposal is
approved.
The Board of Directors of ABI is seeking shareholder approval for the
payment of certain benefits under the Executive Supplemental Retirement Plan
Executive Agreements ("SERPs"), as amended, and the Life Insurance Endorsement
Method Split Dollar Agreements ("Split Dollar Agreements"), as amended, for each
of David Bartlett, Steven Trusty and Ronnie Twyford in order to exempt such
benefits from Section 280G of the Internal Revenue Code. The benefits to be
approved are (i) accelerated vesting of their retirement benefits under the
SERPs, (ii) the entitlement to death benefits under the SERPs and (iii) the
accelerated vesting under their Split Dollar Agreements ("Amended Benefits").
Section 280G and the regulations under such section permit the shareholders of
ABI to exempt all or part of any change in control payments to Messrs. Bartlett,
Trusty and Twyford by the affirmative vote of more than 75% of the outstanding
common stock of ABI, excluding any shares held by these officers. If ABI
shareholder approval is not received, then Messrs. Bartlett, Trusty and Twyford
will not receive certain accelerated vesting of their retirement benefits under
the SERPs or of their benefits under the Split Dollar Agreement upon
consummation of the Merger, and will forfeit their entitlement to death benefits
under the SERPs.
Executive Supplemental Retirement Plan Executive Agreements
On September 25, 2001, Alliance Bank entered into separate Executive
Supplemental Retirement Plan Executive Agreements with Messrs. Bartlett, Twyford
and Trusty.
Retirement Benefit
The benefits under the SERPs for each of officers were based upon the terms
and investment performance of insurance policies purchased by Alliance Bank on
the lives of the three officers. These plans, known as index benefit plans,
originally accrued a retirement benefit for the participant based upon the
annual increase in the cash value of the life insurance policy or policies less
an assumed investment return on Alliance Bank's investment in the policies,
adjusted for certain income tax effects. The assumed return on the Alliance
Bank's investment was the average Fed Funds Rate during the year. Prior to the
officer's retirement, the annual benefit accrual was credited to an accounting
reserve for payment to the officer after his retirement or upon his death
("Pre-Retirement Account"). After the officer's retirement the benefit would
continue to be calculated in the same manner, but would be paid out annually to
the officer for the remainder of his life, rather than credited to an accounting
reserve.
48
In order for the officer to receive all of the retirement benefits provided by
his SERP, he was required to remain in the employment of the bank until normal
retirement age as defined in his SERP. The normal retirement age set for Mr.
Bartlett was 62, however, if Mr. Bartlett exercised the stock options granted to
him by ABI the normal retirement age was reduced to 56. The normal retirement
age for Mr. Trusty and Mr. Twyford under their SERPs was ages 62 and 65,
respectively. In the event an officer left the employment of Alliance Bank,
prior to attaining normal retirement age (other than as a result of termination
for cause), the benefit payable to the officer is an amount equal to the benefit
that would otherwise be payable to the officer at normal retirement age
multiplied by his vested percentage at the time of termination of employment. If
an officer leaves the employment of the bank prior to normal retirement age, the
amount payable to the officer under the SERP is not accelerated, but remains
payable commencing upon the officer's normal retirement age under his SERP.
Each officer vests in his retirement benefit in accordance with the vesting
schedule contained in his SERP. Mr. Bartlett vests in his benefit at the rate of
ten percent (10%) per year for ten (10) years, commencing upon the date of
adoption of his SERP, September 25, 2001. Further, in the event he exercised his
stock options, Mr. Bartlett would become 100% vested in his benefit. The vesting
schedule for Mr. Trusty was ten percent (10%) per year for ten (10) years
commencing upon the date of adoption of his SERP, September 25, 2001. The
vesting schedule for Mr. Twyford was fourteen and 29/100 percent (14.29%) per
year for seven (7) years commencing upon the date of adoption of his SERP,
September 25, 2001. Notwithstanding the vesting of the retirement benefits the
SERPs provided that in the event the officer was terminated for cause all
benefits under the SERP were forfeited. Additionally, each SERP originally
provided that the officer would receive one hundred percent of the retirement
benefits provided by the SERP as if he had been continuously employed by the
bank until his normal retirement age, in the event a cumulative change in the
ownership of fifty percent (50%) or more of the voting stock of Alliance Bank
occurs ("Change in Control").
Under the original index benefit formula, the benefits payable under the
SERPs were dependent on future investment performance of the life insurance
policies and future performance of interest rates, particularly the Fed Funds
Rate. While these benefits may be estimated using certain assumptions about
future investment performance and interest rates, such estimates may not be
accurate, if the actual investment performance and interest rate experience
varies materially from the assumptions.
Effective December 31, 2003, each of the officers and Alliance Bank entered
into amendments to the SERPs which converted the retirement benefit from an
index benefit to a fixed annual benefit for life commencing at the normal
retirement age. The fixed annual benefits for Messrs. Bartlett, Trusty and
Twyford were established at $125,000, $60,000 and $40,000, respectively. The
normal retirement age was amended for Messrs. Bartlett and Trusty to age 65 and
all contingencies regarding the exercise of the stock options by Mr. Bartlett
were removed. Further, the December 31, 2003 Amendment deleted the provisions in
the SERPs requiring forfeiture of benefits under the SERPs upon a termination of
the officer for cause.
Disability Benefits
In the event an officer becomes disabled prior to termination of service
for Alliance Bank and his employment is terminated because of such disability,
the requirement that the payments of retirement benefits be deferred until
attaining the normal retirement age is waived, and the officer is entitled to
immediately start drawing his retirement benefits under the SERP. Upon becoming
disabled an officer becomes 100% vested without regard to the vesting schedule.
49
Death Benefits
In addition to the retirement and disability benefits payable under the
original SERP, each officer was entitled to a death benefit, if the officer dies
while there is an amount in his Pre-Retirement Account. Upon the death of an
officer, the balance then held in the Pre-Retirement Account was payable to the
designated beneficiary of the officer or in the absence of a designated
beneficiary to his estate.
The conversion to the fixed retirement benefit eliminated the need to
maintain the Pre-Retirement Account under the SERP, upon which the death benefit
was computed. Each of the officers and Alliance Bank agreed to amend the SERP to
provide a death benefit as set forth on the schedule contained in the December
31, 2003 amendment. The scheduled death benefit amounts were derived from the
most recent projections of the sums anticipated to be in the Pre-Retirement
Account in the specified years. The following table sets forth the death benefit
as provided in the December 31, 2003 amendment for each of the officers upon a
death occurring within the next ten (10) years:
Death Benefits payable under SERP
Year Bartlett Trusty Twyford
2004 $ 185,900 $ 36,047 $ 74,365
2005 239,052 46,390 94,885
2006 298,616 57,956 117,624
2007 365,023 70,753 142,380
2008 438,878 84,975 134,696
2009 520,913 100,754 120,002
2010 611,574 118,284 105,308
2011 711,488 137,714 90,614
2012 820,979 159,081 75,920
2013 854,132 182,692 61,225
Life Insurance Endorsement Method Split Dollar Plan Agreements
In order to provide the officers with death benefits in addition to the
death benefits under the SERP, Alliance Bank entered into Life Insurance
Endorsement Split Dollar Plan Agreements ("Split Dollar Agreements") with David
L. Bartlett, Ronnie Twyford and Steve Trusty on September 25, 2001. The Split
Dollar Agreements apply to the life insurance polices on the lives of the
officers that are used for the calculation of the SERP benefits. These policies
are single premium policies for which all premiums due during the life of the
policy were paid at the issuance of the policy. In the event of the death of the
officer, the accumulated cash value under the policy will be divided between
Alliance Bank, as (1) return of its investment in the insurance policy, (2) the
accrued return on its investment computed at the average Fed Funds rate and (3)
reimbursement for any benefits paid under the SERP, and the officers designated
beneficiary as the SERP death benefit, if any. The Split Dollar Agreements
control the disposition of the proceeds of the policies payable upon death of
the insured in excess of the accumulated cash value of the policy prior to death
("At Risk Death Proceeds").
Under the Split Dollar Agreements, if the officer is employed by the bank
at the time of his death, the At Risk Death Proceeds under each of the policies
on the life of the officer is payable 80% to the officer's designated
beneficiary (or his estate if no beneficiary is designated) and 20% to Alliance
Bank. If the officer is not employed at Alliance Bank at the time of his death,
then the officer's designated beneficiary is entitled to receive a sum equal to
80% of the At Risk Death Proceeds multiplied by the officer's vested percentage
and Alliance Bank is entitled to receive the balance of the At Risk Death
Proceeds.
50
Mr. Bartlett vests in his benefit at the rate of ten percent (10%) per year
for ten (10) years, commencing upon the date of adoption of his Split Dollar
Agreement, September 25, 2001. Further, in the event he exercises his stock
options, Mr. Bartlett would become 100% vested in the benefits under his Split
Dollar Agreement. The vesting schedule for Mr. Trusty is ten percent (10%) per
year for ten (10) years commencing upon the date of adoption of his Split Dollar
Agreement, September 25, 2001. The vesting schedule for Mr. Twyford is fourteen
and 29/100 percent (14.29%) per year for seven (7) years commencing upon the
date of adoption of his Split Dollar Agreement, September 25, 2001.
Additionally, each Split Dollar Agreement provides that the officer becomes
fully vested in the benefits under the Split Dollar Agreement, in the event a
cumulative change in the ownership of fifty percent (50%) or more of the voting
stock of Alliance Bank occurs. The table below shows the most recent projection
of the allocation of the At Risk Death Proceeds payable under the Split Dollar
Agreements for the officers in the event of a death of the officer in the plan
year ending in the year indicated. The plan years begin on September 25 of each
calendar year and end on September 24 of the next calendar year.
David Bartlett
Plan At Risk Vested Benefit 100% Vested
Year Vesting* Death Proceeds to Beneficiary Benefit
____ _______ ______________ ______________ ____________
2004 20% $2,176,485 $ 348,238 $1,741,188
2005 30% $2,173,541 $ 521,650 $1,738,833
2006 40% $2,181,287 $ 698,012 $1,745,030
2007 50% $2,175,445 $ 870,178 $1,740,356
2008 60% $2,174,819 $1,043,913 $1,739,855
2009 70% $2,169,991 $1,215,195 $1,735,993
2010 80% $2,171,712 $1,389,896 $1,737,370
2011 90% $2,157,757 $1,553,585 $1,726,206
2012 100% $2,150,815 $1,720,652 $1,720,652
2013 100% $2,139,356 $1,711,485 $1,711,485
* Mr. Bartlett would become 100% vested in the year he exercised his stock
options without regard to the vesting schedule.
Steven Trusty
Plan At Risk Vested Benefit 100% Vested
Year Vesting Death Proceeds to Beneficiary Benefit
____ _______ ______________ ______________ ____________
2004 20% $557,798 $ 89,248 $446,238
2005 30% $561,222 $134,693 $448,978
2006 40% $563,821 $180,423 $451,057
2007 50% $567,203 $226,881 $453,762
2008 60% $567,968 $272,625 $454,374
2009 70% $569,561 $318,201 $455,649
2010 80% $572,189 $366,201 $457,751
2011 90% $571,870 $411,746 $457,496
2012 100% $572,632 $458,106 $458,106
2013 100% $574,677 $459,742 $459,742
51
Ronnie Twyford
Plan At Risk Vested Benefit 100% Vested
Year Vesting Death Proceeds to Beneficiary Benefit
____ _______ ______________ ______________ ____________
2004 14% $550,620 $125,856 $440,496
2005 29% $547,985 $187,881 $438,388
2006 43% $544,140 $248,750 $435,312
2007 57% $542,573 $310,042 $434,058
2008 71% $536,250 $367,714 $429,000
2009 86% $532,435 $425,948 $425,948
2010 100% $527,390 $421,912 $421,912
2011 100% $521,778 $417,422 $417,422
2012 100% $514,723 $411,778 $411,778
2013 100% $510,917 $408,734 $408,734
Retention Bonus Agreement
In order to provide assurance to ABI and Alliance Bank that the senior
executive officers of Alliance Bank would be available to assist the ABI Board
in evaluating and, if approved, consummating a sale or corporate acquisition
transaction involving ABI and Alliance Bank, Alliance Bank entered into
Retention Bonus Agreements with David Bartlett, Ronnie Twyford and Steve Trusty
on April 21, 2003. The agreements provide that upon the consummation of a change
in control transaction the officer will be paid a retention bonus in an amount
equal to twice his then current annual salary. The agreements provide that if
the amount of the retention bonus payable plus all other sums payable to the
officer by reason of the change in control transaction constitute a parachute
payment as defined in Section 280G of the Internal Revenue Code then the amount
of the retention bonus shall be reduced to an amount which will cause the
aggregate of such payments due the officer to not be a parachute payment under
Section 280G. If the merger is consummated, the officers will be entitled to
receive retention bonuses in the amounts set forth below.
Officer Retention Bonus
_____________ _______________
David Bartlett $330,000
Steven Trusty 188,000
Ronnie Twyford 154,996
Based upon the amendments made to the SERP and the Split Dollar Agreements,
it is not expected that any portion of the Retention Bonuses payable to Messrs.
Bartlett, Trusty or Twyford will be reduced by reason of payments being received
by such officers constituting parachute payments under Section 280G.
2004 Amendments
_______________
In order to minimize the possibility that ABI would be subject to the loss
of deductions under Section 280G Internal Revenue Code and Messrs. Bartlett,
Trusty and Twyford would be subject to the 20% excise tax under Section 4999,
the officers and Alliance Bank entered into additional amendments to the SERPs
and the Split Dollar Agreements on January 4, 2004.
2004 SERP Amendment
The SERPs for each officer were amended to provide that upon a change in
control of Alliance Bank, the vesting regarding the retirement benefits payable
commencing at normal retirement age would not be accelerated to 100%, but to
85%, 83% and 82.5% for Messrs. Bartlett, Trusty and Twyford, respectively. The
remaining unvested retirement benefit would continue to be subject to vesting
under an amended vesting schedule. The remaining unvested retirement benefit and
the vesting schedule for the remaining benefit are set forth in the table below:
52
Unvested Years of
Annual Employment Vesting Percentage in
Officer Benefit under SERP Remaining Benefit
David Bartlett $18,750 9 33%
10 100%
Steven Trusty $10,200 9 41%
10 100%
Ronnie Twyford $ 7,000 6 22%
7 100%
In the absence of a change in control of Alliance Bank, the applicable
vesting schedules provide for vesting of the retirement benefit over 10 years
(10% per year) for Messrs. Bartlett and Trusty and over 7 years for Mr. Twyford
from the effective date of their SERP. Messrs. Bartlett and Trusty are currently
20% vested and Mr. Twyford is 28.57% vested.
The Amendment also provides that, upon approval of the shareholders in
accordance with the regulations issued under Section 280G of the Internal
Revenue, the unvested retirement benefit for the each of the officers will fully
vest upon the occurrence of a change in control of Alliance Bank. Consequently,
the officers will become 100% vested in their retirement benefits payable
commencing at normal retirement age under their SERP upon the completion of the
merger, if the ABI shareholders approve Proposal II.
The 2004 Amendment further provides that the death benefit under the SERP
will not be payable to the officers under their respective SERPs, unless the ABI
shareholders approve the payment of the death benefit pursuant to the terms of
the 2004 Amendment prior to the consummation of the merger. If the ABI
shareholders approve Proposal II, then each officer will be entitled to the
death benefits and will be 100% vested in his death benefit under the SERP upon
the consummation of the change in control transaction. If the ABI shareholders
do not approve Proposal II, the officers will not be entitled to a death benefit
under their SERPs
2004 Split Dollar Amendment
The Amendment to the Split Dollar Agreement removes the acceleration of
vesting for the officers upon a change in control. The Amendment specifies that
the vesting schedule applicable in the Split Dollar Agreement shall continue to
apply in the event of a change in control. The applicable vesting schedules
provide for vesting of the benefit over 10 years (10% per year) for Messrs.
Bartlett and Trusty and over 7 years (14.29% per year) for Mr. Twyford from the
effective date of their Split Dollar Agreements. Messrs. Bartlett and Trusty are
currently 20% vested and Mr. Twyford is 28.57% vested. The Amendment also
provides that upon approval of the shareholders in accordance with the
regulations issued under Section 280G of the Internal Revenue prior to the
consummation of a change in control transaction, the unvested benefit for the
each of the officers will fully vest upon the occurrence of the change in
control. Consequently, the officers will become 100% vested in their benefits
under the Split Dollar Agreements upon completion of the merger, if the ABI
shareholders approve Proposal II.
Other Payments and Benefits
Messrs Bartlett, Trusty and Twyford will receive the following additional
payments and benefits:
- continued employment at their present salaries, incentive compensation
and general employee benefits, excluding participation in the
qualified retirement plans of SFNC; and
- the retention bonus payments pursuant to the retention bonus
agreements.
53
The other payments and other benefits to the officers are summarized in the
table below:
Bartlett Trusty Twyford
Salary $165,000 $ 94,000 $ 77,498
Retention Bonus $330,000 $188,000 $154,996
The salary, incentive compensation and fringe benefits to be made pursuant
to the employment of the officers by Alliance Bank are considered reasonable
compensation for the services to be rendered by Messrs Bartlett, Trusty and
Twyford. Their salaries are being continued at their current rate. As long as
such payments and benefits are reasonable compensation for services actually
rendered, they are not considered to be change in control payments covered by
Section 280G of the Internal Revenue Code.
SFNC, ABI and the officers believe that the retention bonus payments, when
aggregated with the other change in control payments and benefits will not
exceed three times the average taxable compensation of the respective officers
for the five calendar years ending December 31, 2003 and therefore the retention
bonus will not be a parachute payment covered by Section 280G of the Internal
Revenue Code.
Vote Required to Approve the Amended Benefits
Under Section 280G of the Internal Revenue Code and the regulations under
such section, the accelerated vesting of the remaining unvested retirement
benefits upon a change in control under the SERPs, the entitlement to receive
the death benefit under the SERP and the grant of accelerated vesting of the
benefits under the Split Dollar Agreement upon a change in control ("Amended
Benefits") for Messrs. Bartlett, Trusty and Twyford will be exempt from the
application of Section 280G and 4999 of the Internal Revenue Code, if approved
by holders of more than 75% of the outstanding common stock of ABI, excluding
any shares held directly or indirectly by Messrs. Bartlett, Trusty or Twyford,.
For any ABI shareholder that is not an individual (such as a corporation,
partnership or trust), the vote on the Amended Benefits must generally be made
by the person authorized by the entity shareholder to approve the grant of the
award. However, in order to approve the grant of the award, the entity
shareholder must receive a separate affirmative vote of the persons who hold
more than 75% of the voting power of the entity shareholder if both of the
following conditions exist:
- the entity shareholder owns, directly or indirectly, more than 1% of
the outstanding common stock of ABI, and
- the value of the ABI common stock held by the entity shareholder
equals or exceeds one-third of the total gross fair market value of
all of the assets of the entity shareholder.
Five entities own more than 1% of ABI, but based on information from such
entities, the second condition set forth above only applies to two of such
entities. Both such entities have been informed by ABI of this special voting
requirement and have indicated that appropriate arrangements will be made to
comply with the special voting requirements.
The directors of ABI (excluding Mr. Bartlett) have each indicated that they
intend to vote FOR Proposal II to approve the Amended Benefits for Messrs.
Bartlett, Trusty and Twyford. These individuals (excluding Mr. Bartlett)
beneficially own 2,838 shares or 8.98% of the outstanding ABI common stock, as
computed for the purposes of the proposal.
If an ABI shareholder fails to vote or abstains on Proposal II, the failure
to vote or the abstention will have the same effect as a vote against the
proposal.
Effect if Proposal II is Not Approved by ABI Shareholders
If holders of more than 75% of the outstanding common stock of ABI
(excluding any shares held directly or indirectly by Messrs. Bartlett, Trusty or
Twyford) do not vote in favor of the proposal, then the death benefit under the
SERPs for each of the officers will be deemed forfeited and upon the merger the
remaining unvested portion of the retirement benefits under the SERPs, as
amended, and the benefits under the Split Dollar Agreements, as amended, will
vest in accordance with the applicable vesting schedules, without any
acceleration of vesting due to the merger.
54
Recommendation of the ABI Board of Directors
The Board of Directors of ABI (with Mr. Bartlett abstaining) approved the
Amended Benefits for Messrs. Bartlett, Trusty and Twyford in order to ensure
that their efforts in connection with the merger are adequately recognized and
rewarded. The Board of Directors of ABI (with Mr. Bartlett abstaining )
recommends that you vote FOR Proposal II to approve the grant of the Amended
Benefits.
55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF ALLIANCE BANCORPORATION, INC.
The discussion presents an analysis of the consolidated financial
statements of Alliance Bancorporation, Inc. ("ABI") and its subsidiary, Alliance
Bank of Hot Springs for the periods indicated.
OVERVIEW
ABI's net earnings for the year ended December 31, 2002 were $1,195,000, an
increase of $483,000 or 67.8% when compared to $712,000 reported for the year
ended 2001. The changes from 2001 to 2002 were a $771,000 increase in net
interest income, a decrease in the provision for loan losses for $69,000, an
increase in non-interest income of $260,000, a $383,000 increase in non-interest
expense and an increase in provision for income taxes for $234,000.
ABI's net earnings for the year ended December 31, 2001 improved by
$141,000, or 24.7% as compared to the $571,000 reported for the year ended 2000.
The changes from 2000 to 2001 were a $332,000 increase in net interest income, a
$94,000 increase in the provision for loan losses, an increase in non-interest
income of $295,000, an increase in non-interest expense for $493,000 and a
decrease in provision for income taxes of $101,000.
ABI's net earnings for the nine months ended September 30, 2003 were
$1,179,000, an increase of $286,000, or 32.0%, as compared to the same period in
2002. The changes for the nine months ended September 30, 2003 to the same
period in 2002 were a $413,000 increase in net interest income, an $55,000
increase in the provision for loan losses, an increase in non-interest income of
$408,000, an increase in non-interest expense for $354,000 and an increase in
provision for income taxes of $126,000.
The significant 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 ABI:
Nine months Ended Year Ended
September 30, December 31,
_________________ _________________
2003 2002 2002 2001
_________________ _________________
Return on average assets 1.19% 1.12% 1.06% 0.75%
Return on average equity 14.60% 12.90% 12.61% 8.26%
Average equity to assets 8.14% 8.71% 8.42% 9.13%
56
NET INTEREST INCOME
Net interest income, ABI'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.
For the nine months ended September 30, 2003, net interest income increased
$413,000, or 15.3%, from comparable figures in 2002. For the year ended December
31, 2002, net interest income increased $771,000, or 26.0%, from 2001 interest
income. For the year ended December 31, 2001, net interest income increased
$332,000, or 12.6%, from comparable figures in 2000. The increases in net
interest income resulted primarily from general growth in ABI accompanied by a
decrease in cost of funds, offset by a decrease in the yield on earning assets.
During this period, ABI leveraged its balance sheet through the use of federal
funds.
Throughout 2001, the Federal Reserve Bank steadily decreased the Federal
Funds rate by a total of 475 basis points to 1.75% in an effort to stimulate
economic growth. In 2002, the Federal Reserve continued to decrease the Federal
Funds rate from 1.75% at the end of 2001 to 1.25% at the end of 2002. This
decline has continued in 2003, with another 25 basis point decrease during the
second quarter, bringing the Federal Funds rate to 1.00% at September 30, 2003.
Although ABI was growing, this declining rate environment contributed to the
decline in interest expense and relatively flat interest income from 2001 to
2002.
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 amounts and the average rate earned or expensed for
each of the years in the three-year period ended December 31, 2002. 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.
57
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
Years Ended December 31
________________________________________________________________________________________
2002 2001 2000
___________________________ ___________________________ _____________________________
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate(%) Balance Expense Rate(%) Balance Expense Rate(%)
___________________________________________________________________________________________________________________________
ASSETS
Earning Assets
Federal funds sold $ 1,675 $ 28 1.67 $ 2,898 $ 95 3.28 $ 1,347 $ 80 5.94
Certificates of deposit 1,386 56 4.04 891 37 4.15 -- -- --
Investment securities - taxable 32,374 1,447 4.47 21,463 1,333 6.21 28,555 1,847 6.47
Investment securities - non-taxable 9,923 468 4.72 8,110 394 4.86 2,180 81 3.72
Loans 58,626 4,230 7.72 54,127 4,279 7.91 44,177 3,715 8.41
--------- ------ ----- -------- ------ ----- ------- ------ -----
Total interest earning assets 103,984 6,229 5.99 87,489 6,138 7.02 76,259 5,723 7.50
Non-earning assets 8,594 ------ 6,897 ------ 5,772 ------
--------- -------- -------
Total assets $ 112,578 $94,386 $82,031
========= ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts $41,089 $ 800 1.95 $32,499 $ 1,006 3.10 $ 24,692 $ 1,057 4.28
Time deposits 33,893 1,222 3.61 31,349 1,707 5.45 28,276 1,462 5.17
--------- ------ ----- -------- ------ ----- ------- ------ -----
Total interest bearing deposits 74,982 2,022 2.70 63,848 2,713 4.25 52,968 2,519 4.76
Federal funds purchased and
securities sold under agreement
to repurchase 5,004 77 1.54 3,955 166 4.20 6,732 305 4.53
Other borrowings 7,918 391 4.94 5,329 291 5.46 4,228 263 6.22
--------- ------ ----- -------- ------ ----- ------- ------ -----
Total interest bearing deposits 87,904 2,490 2.83 73,132 3,170 4.33 63,928 3,087 4.83
Non-interest bearing liabilities ------ ------ ------
Non-interest bearing deposits 14,641 12,136 9,882
Other liabilities 552 501 520
--------- -------- -------
Total liabilities 103,097 85,769 74,330
--------- -------- -------
Stockholders' equity 9,481 8,617 7,701
--------- -------- -------
Total liabilities and
stockholders' equity $112,578 $94,386 $82,031
========= ======== =======
Net interest spread 3.16 2.69 2.67
Net interest margin $ 3,739 3.60 $ 2,968 3.39 $ 2,636 3.46
====== ====== ======
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, 2002 and 2001 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.
58
VOLUME/RATE ANALYSIS
Years Ended December 31
_______________________________________________________
2002 over 2001 2001 over 2000
__________________________ ________________________
Yield/ Yield/
(In thousands) Volume Rate Total Volume Rate Total
___________________________________________________________________________________________
Increase (decrease) in
Interest income
Federal funds sold $ (31) $ (36) $ (67) $ 63 $ (48) $ 15
Certificates of deposit 20 (1) 19 37 0 37
Investment securities 641 (453) 188 (162) (39) (201)
Loans 341 (390) (49) 798 (234) 564
----- ----- ----- ----- ---- - -----
Total 971 (880) 91 736 (321) 415
----- ----- ----- ----- ---- - -----
Interest expense
Interest bearing transaction and
savings accounts 225 (431) (206) 284 (335) (51)
Time deposits 130 (615) (485) 164 81 245
Federal funds purchased
and securities sold under
agreements to repurchase 36 (125) (89) (118) (21) (139)
Other borrowings 129 (29) 100 63 (35) 28
----- ----- ----- ----- ---- - -----
Total 520 (1,200) (680) 393 (310) 83
----- ----- ----- ----- ---- - -----
Increase in
net interest income $ 451 $ 320 $ 771 $ 343 $ (11) $ 332
===== ===== ===== ===== ===== =====
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 nine months ended September 30, 2003 and 2002 and years ended
December 31, 2002, 2001 and 2000 was $155,000, $100,000, $145,000, $214,000 and
$120,000, respectively. The changes in the provision for each of periods were
the result of the growth in loans, changes in non-performing loans and
management's judgment as to the adequacy of reserve levels for each particular
period.
NON-INTEREST INCOME
Total non-interest income for 2002 was $1,218,000, compared to $958,000 in
2001 and $663,000 in 2000. Non-interest income is principally derived from three
sources: service charges on deposit accounts, loan fees and dividend income. The
$260,000 increase in non-interest income for 2002 from 2001 is primarily
associated with the $253,000 increase in loan fees. The increase in loan fees
was the result of higher mortgage loan production, which was associated with the
lower interest rate environment during 2002 versus 2001. The $295,000 increase
in non-interest income for 2000 from 2001 is primarily associated with the
$298,000 increase in service charges on deposit accounts. The increase in
service charges was the result of deposit growth combined with an increase in
the collection of overdraft fees from 2000 to 2001.
59
Non-interest income was $1,332,000, an increase of approximately $408,000,
or 44.2%, for the first nine months of 2003, compared to the same period of
2002. Approximately, 75% of this increase was the result of higher mortgage loan
production, which was associated with the lower interest rate environment during
2003 versus 2002. Also, contributing to the 2003 increase was an increase on
sale of available-for-sale securities and a gain on the sale of other real
estate owned.
The table below shows non-interest income for the years ended December 31,
2002, 2001 and 2000, respectively, as well as changes in 2002 from 2001 and in
2001 from 2000.
NON-INTEREST INCOME
Years Ended December 31 2002 2001
______________________________ Change from Change from
(In thousands) 2002 2001 2000 2001 2000
________________________________________________________________________________________________________
Service charges on deposit accounts $ 737 $ 863 $ 565 $ (126) (14.60)% $ 298 52.74%
Loan fees 338 85 92 253 297.65 (7) (7.61)
Dividend income 112 14 18 98 700.00 (4) (22.22)
Other income 28 57 20 (29) (50.88) 37 185.00
Gains (losses) on sale of
securities, net 36 0 (32) 36 N/A 32 (100.00)
Loss on disposal of fixed assets (33) (61) 0 28 (45.90) (61) N/A
------- ------ ------ ------ ------ ----- -------
Total non-interest income $ 1,218 $ 958 $ 663 $ 260 27.14% $ 295 44.49%
======= ====== ====== ====== ====== ===== =======
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and employee benefits, occupancy
and equipment and other expenses necessary for the operation and growth of ABI.
Non-interest expense for 2002 was $3,214,000, an increase of $383,000, or
13.5%, from 2001. Non-interest expense for 2001 was $2,831,000, an increase of
$493,000, or 21.1%, from 2000. Non-interest expense for the first nine months of
2003 was approximately $2,701,000, an increase of approximately $354,000, or
15.1%, compared to the same period for 2002. The increase for each of the
periods was primarily due to the growing salary and occupancy costs associated
with the expanding and improving the infrastructure of ABI. This expansion was
the result of ABI opening new financial centers in Hot Springs, Arkansas.
The table below shows non-interest expense for the years ended December 31,
2002, 2001 and 2000, respectively, as well as changes in 2002 from 2001 and in
2001 from 2000, respectively.
60
NON-INTEREST EXPENSE
Years Ended December 31 2002 2001
______________________________ Change from Change from
(In thousands) 2002 2001 2000 2001 2000
________________________________________________________________________________________________________
Salaries and employee benefits $ 1,794 $ 1,575 $ 1,258 $ 219 13.90% $ 317 25.20%
Occupancy and equipment
expense, net 588 507 394 81 15.98 113 28.68
Other operating expenses
Legal and accounting 54 43 55 11 25.58 (12) (21.82)
Postage and office 172 172 132 -- -- 40 30.30
Data processing 221 212 190 9 4.25 22 11.58
Advertising 95 92 97 3 3.26 (5) (5.15)
FDIC and state assessments 51 44 26 7 15.91 18 69.23
Other expenses 239 186 186 53 28.49 -- 0.00
------- ------ ------ ------ ------ ----- -------
Total non-interest expense $ 3,214 $ 2,831 $ 2,338 $ 383 13.53% $ 493 21.09%
======= ====== ====== ====== ====== ===== =======
INCOME TAXES
The provision for income taxes was $409,000, $283,000, $404,000, $170,000
and $271,000 for the first nine months ended September 30, 2003 and 2002 and
years ended December 31, 2002, 2001 and 2000, respectively. The effective income
tax rates for these periods were 26%, 24%, 25%, 26% and 28%, respectively.
LOAN PORTFOLIO
ABI's loan portfolio averaged $58.6 million during 2002 and $54.1 million
during 2001. As of September 30, 2003, total loans were $65.8 million, compared
to $62.6 million and $57.4 million on December 31, 2002 and 2001, respectively.
The most significant components of the loan portfolio were commercial real
estate and residential real estate loans. The growth of the loan portfolio
reflects the vision of management concerning the cultivation of new business in
an effort to expand their relatively young company. The loan portfolio had
virtually no variable rate loans at December 31, 2002.
The amounts of loans outstanding at the indicated dates are reflected in
the following table, according to type of loan.
61
LOAN PORTFOLIO
Years Ended December 31
_____________________________________________________________
(In thousands) 2002 2001 2000 1999 1998
________________________________________________________________________________________________________
Consumer $ 4,228 $ 4,199 $ 3,386 $ 3,001 $ 2,171
Real Estate
Construction 5,238 6,702 2,519 1,868 1,287
Single family residential 27,441 25,059 26,727 20,815 15,650
Other commercial 19,188 12,428 10,975 8,617 4,103
Commercial
Commercial 5,529 7,914 5,917 5,860 3,595
Agricultural 494 927 235 -- --
Other 440 212 243 686 102
---------- ---------- ---------- --------- -----------
Total loans $ 62,558 $ 57,441 $ 50,002 $ 40,847 $ 26,908
========== ========== ========== ========= ===========
The following table reflects the remaining maturities of certain loan
categories at December 31, 2002.
MATURITY OF LOANS
One Year One to Over
(In thousands) or Less Five Years Five Years Total
__________________________________________________________________________________________________
Single family residential $ 12,827 $ 13,168 $ 1,446 $ 27,441
Commercial and other 15,435 18,196 1,486 35,117
----------- ---------- --------- ----------
Total $ 28,262 $ 31,364 $ 2,932 $ 62,558
=========== ========== ========= ==========
ASSET QUALITY
A loan is considered impaired when it is probable that ABI 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. ABI
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) not 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 September 30, 2003, non-performing loans were $769,000 compared to
$223,000 and $329,000 at December 31, 2002 and 2001, respectively.
62
The following tables present information concerning non-performing assets,
including nonaccrual and restructured loans and other real estate owned.
NON-PERFORMING ASSETS
September 30 Years Ended December 31
_____________ _______________________________________________
(In thousands) 2003 2002 2001 2000 1999 1998
_________________________________________________________________________________________________________________
Nonaccrual loans $ 757 $ 221 $ 329 $ 152 $ 36 $ --
Loans past due 90 days or more
(principal or interest payments) 12 2 -- -- -- --
------- ------- ------- ------- ------- -------
Total non-performing loans 769 223 329 152 36 --
======= ======= ======= ======= ======= =======
Foreclosed assets held for sale -- 73 -- -- -- --
------- ------- ------- ------- ------- -------
Total non-performing assets $ 769 $ 296 $ 329 $ 152 $ 36 $ --
======= ======= ======= ======= ======= =======
Net charge-offs to average loans 0.03% 0.05% (0.01)% 0.66% N/A% N/A%
Allowance for loan losses to total loans 1.45% 1.33% 1.25% 1.00% 1.00% 0.99%
Allowance for loan losses to
non-performing loans 125.62% 372.65% 217.93% 328.95% 1,138.89% --%
Non-performing loans to total loans 1.16% 0.36% 0.57% 0.30% 0.09% --%
Non-performing assets to total assets 0.57% 0.23% 0.32% 0.17% 0.05% --%
No significant amount of interest income would have been recorded for the
periods ended September 30, 2003 and December 31, 2002 and 2001, respectively,
if the nonaccrual loans had been accruing interest in accordance with their
original terms. There was no significant interest income on the nonaccrual loans
recorded for the periods ended September 30, 2003 and December 31, 2002 and
2001.
ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses for September 30, 2003, and
the last five years is shown in the table below:
September 30 Years Ended December 31
_____________ _______________________________________________
(In thousands) 2003 2002 2001 2000 1999 1998
_________________________________________________________________________________________________________________
Balance, beginning of period $ 831 $ 717 $ 500 $ 410 $ 266 $ 146
------- ------- ------- ------- ------- -------
Loans charged off
Consumer 19 11 1 21 17 7
Real estate -- 7 2 10 8 --
Commercial 6 13 -- 5 70 5
------- ------- ------- ------- ------- -------
Total loans charged off 25 31 3 36 95 12
------- ------- ------- ------- ------- -------
Recoveries of loans previously charged off
Consumer 3 -- -- 4 -- --
Real estate -- -- 6 2 1 --
Commercial 2 -- -- -- -- --
------- ------- ------- ------- ------- -------
Total recoveries 5 -- 6 6 1 --
------- ------- ------- ------- ------- -------
Net loans charged off 20 31 (3) 30 94 12
Additions to reserve charged to
operating expense 155 145 214 120 238 132
------- ------- ------- ------- ------- -------
Balance, end of period $ 966 $ 831 $ 717 $ 500 $ 410 $ 266
======= ======= ======= ======= ======= =======
63
The amounts of additions to the allowance during the years 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. ABI establishes the allowance
for loan losses using risk ratings in accordance with the guidelines established
by the regulatory agencies. It is management's practice to review the allowance
on a monthly basis to determine whether additional provisions should be made to
the allowance after considering the factors noted above.
The Company establishes allocations for loans rated "excellent" through
"doubtful" in accordance with the guidelines established by the regulatory
agencies. A percentage rate is applied to each category of these loan categories
to determine the level of dollar allocation, except for consumer loans which are
allocated according to past due status. As a result, the allowance is not
allocated by loan types other than consumer.
INVESTMENTS AND SECURITIES
ABI'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 or available-for-sale.
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.
Available-for-sale securities, which include any security for which
management has no immediate plans to sell, but which may be sold in the future,
are carried at fair value. Realized gains and losses, based on specifically
identified amortized cost of the specific security, are included in other
income. Unrealized gains and losses are recorded, net of related income tax
effects, in stockholders' equity. Premiums and discounts are amortized and
accreted, respectively, to interest income using the constant yield method over
the period to maturity.
Held-to-maturity and available-for-sale investment securities were $0.4
million and $59.0 million, respectively, at December 31, 2002, compared to the
held-to-maturity amount of $1.0 million and available-for-sale amount of $26.9
million at December 31, 2001. ABI's philosophy regarding investments is
conservative, based on investment type and maturity. Investments in the
available-for-sale portfolio include U.S. government agencies, collateralized
mortgage obligations and mortgage-backed securities. As of December 31, 2002,
$41.0 million, or 69.4%, of the available-for-sale securities were invested in
obligations of U.S. government agencies, with maturities of one to five years.
In order to reduce ABI's income tax burden, the available-for-sale securities
portfolio includes approximately $10.3 million in tax-exempt obligations of
state and political subdivisions at December 31, 2002. There are no securities
of any one state or political subdivision issuer exceeding ten percent of ABI's
stockholders' equity at December 31, 2002. ABI'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, 2002, the held-to-maturity investment portfolio had
gross unrealized gains of $8,000. Net realized gains and (losses) from called or
sold available-for-sale securities for 2002, 2001 and 2000 were $36,000, $0 and
($32,000), respectively.
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.
64
INVESTMENT SECURITIES
Years Ended December 31
_______________________________________________________________________________________
2002 2001
__________________________________________ _________________________________________
Gross Gross Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
________________________________________________________________________________________________________________
Held-to-Maturity
Mortgage-backed $ 357 $ 8 $ -- $ 365 $ 976 $ -- $ (12) $ 964
---------- ------- ------ ------- ------- ------- ----- -------
$ 357 $ 8 $ -- $ 365 $ 976 $ -- $ (12) $ 964
========== ======= ====== ======= ======= ======= ====== =======
Available-for-Sale
State and Political $ 9,913 $ 400 $ -- $10,313 $ 9,347 $ 38 $ -- $ 9,385
subdivisions
U.S. Government
agencies 40,705 246 -- 40,951 9,500 81 -- 9,581
Collateralized mortgage
obligations 7,687 91 -- 7,778 7,879 56 -- 7,935
---------- ------- ------ ------- ------- ------- ----- -------
$ 58,305 $ 737 $ -- $59,042 $ 26,726 $ 175 $ -- $ 26,901
========== ======= ====== ======= ======= ======= ====== =======
Year Ended December 31
____________________________________________
2000
____________________________________________
Gross Gross Gross
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value
____________________________________________________________________
Held-to-Maturity
Mortgage-backed $ 996 $ -- $ (13) $ 983
------- ----- ------ -------
$ 996 $ -- $ (13) $ 983
======= ===== ====== =======
Available-for-Sale
State and Political $ 4,277 $ 83 $ -- $ 4,360
subdivisions
U.S. Government
agencies 29,911 -- (78) 29,833
------- ----- ------ -------
$34,188 $ 83 $ (78) $34,193
======= ===== ====== =======
The following table reflects the amortized cost and estimated fair value of
debt securities at December 31, 2002, by contractual maturity and the weighted
average 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.
65
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
December 31, 2002
_______________________________________________________________________
Over Over
1 Year 5 Years
1 Year Through Through Over Par Fair
(In thousands) or Less 5 Years 10 Years 10 Years Total Value Value
_____________________________________________________________________________________________________________
Held-to-Maturity
Mortgage-backed Total $ 222 $ 57 $ 71 $ 7 $ 357 $ 357 $ 365
------ ------ ------ ------ ------ ------ ------
$ 222 $ 57 $ 71 $ 7 $ 357 $ 357 $ 365
====== ====== ====== ====== ====== ====== ======
Percentage of total 62% 16% 20% 2% 100%
====== ====== ====== ====== ======
Weighted average yield 3.92% 3.93% 3.92% 3.92% 3.92%
====== ====== ====== ====== ======
Available-for-Sale
State and Political subdivisions $ -- $ 1,809 $ 4,767 $ 3,337 $ 9,913 $ 9,882 $ 10,313
U.S. Government agencies -- 40,705 -- -- 40,705 40,705 40,951
Collateralized mortgage obligations 3,018 2,687 1,982 -- 7,687 7,673 7,778
------ ------ ------ ------ ------ ------ ------
Total $ 3,018 $ 45,201 $ 6,749 $ 3,337 $ 58,305 $58,260 $ 59,042
====== ====== ====== ====== ====== ====== ======
Percentage of total 5% 78% 12% 5% 100%
====== ====== ====== ====== ======
Weighted average yield 5.01% 3.60% 4.82% 5.13% 3.90%
====== ====== ====== ====== ======
DEPOSITS
Total average deposits for 2002 were $89.6 million, compared to $76.0
million in 2001. Total deposits at September 30, 2003 and December 31, 2002 and
2001 were $108.4 million, $98.5 million and $82.1 million, respectively. The
balances of time deposits over $100,000 were $11.2 million, $12.0 million and
$10.4 million at September 30, 2003 and December 31, 2002 and 2001,
respectively. The growth of deposits reflects the vision of management
concerning the cultivation of new business in an effort to expand their
relatively young company.
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, 2002.
66
AVERAGE DEPOSITS BALANCES AND RATES
December 31
2002 2001 2000
________________________________________________________________________
Average Average Average Average Average Average
(In thousands) Amount Rate Paid Amount Rate Paid Amount Rate Paid
____________________________________________________________________________________________________________
Non-interest bearing demand
deposits $ 14,641 $ 12,136 $ 12,082
Interest bearing transaction and
savings deposits 41,089 1.95% 32,499 3.10% 24,692 4.28%
Time deposits
$100,000 or more 10,800 3.07% 12,143 3.40% 16,083 3.35%
Other time deposits 23,093 3.85% 19,206 6.74% 12,193 7.57%
---------- ----------- ----------
Total $ 89,623 $ 75,984 $ 65,050
========== =========== ==========
MATURITIES OF LARGE DENOMINATION TIME DEPOSITS
Time Certificates of Deposit
($100,000 or more)
______________________________________________________
December 31
______________________________________________________
2002 2001
______________________________________________________
(In thousands) Balance Percent Balance Percent
__________________________________________________________________________________________________
Maturing
Three months or less $ 3,184 26.5% $ 3,398 32.6%
Over 3 months to 12 months 4,937 41.1% 4,401 42.3%
Over 12 months 3,883 32.4% 2,610 25.1%
----------- ------ ----------- -------
Total $ 12,004 100.0% $ 10,409 100.0%
=========== ====== =========== =======
SHORT-TERM BORROWINGS
Federal funds purchased and securities sold under agreements to repurchase
were $9.4 million at December 31, 2002, as compared to $3.1 million at December
31, 2001.
Currently, ABI has 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. Excluding the first few years of
operation, ABI's general policy has been to avoid the use of brokered deposits.
LONG-TERM DEBT
ABI's long-term debt was $10.6 million and $6.8 million at December 31,
2002 and 2001, respectively. This increase was a result of borrowing from the
Federal Home Loan Bank of Dallas in order to match rates and maturities on
long-term loans made in 2002 and 2001.
67
CAPITAL
At December 31, 2002, ABI's total capital reached $10.3 million. At
year-end 2002, ABI's equity to asset ratio was 8.0% compared to 8.8% at year-end
2001.
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, 2002, the Tier 1 capital ratio was
14.6%, while the Bank's total risk-based ratio for total capital, as of December
31, 2002, was 15.9%, both of which exceed the capital minimums established in
the risk-based capital requirements.
Alliance Bank's risk-based capital ratios at December 31, 2002 and 2001 are
presented below.
RISK-BASED CAPITAL
December 31
_____________________________
(In thousands) 2002 2001
_______________________________________________________________________________________________________
Tier 1 capital
Stockholder's equity $ 10,318 $ 8,832
Unrealized gain on
available-for-sale securities (479) (114)
----------- ----------
Total Tier 1 capital 9,839 8,718
----------- ----------
Tier 2 capital
Qualifying allowance for loan losses 831 717
----------- ----------
Total Tier 2 capital 831 717
----------- ----------
Total risk-based capital $ 10,670 $ 9,435
=========== ==========
Risk weighted assets $ 67,274 $ 58,530
=========== ==========
Ratios at end of year
Leverage ratio 7.55% 8.64%
Tier 1 capital 14.63% 14.89%
Total risk-based capital 15.86% 16.12%
Minimum guidelines
Leverage ratio 4.00% 4.00%
Tier 1 capital 4.00% 4.00%
Total risk-based capital 8.00% 8.00%
68
LIQUIDITY AND MARKET RISK MANAGEMENT
BANKING SUBSIDIARY
Generally speaking, ABI's banking subsidiary 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. The
Banks' 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 September 30, 2003, cash and due from banks, certificates of
deposit, federal funds sold and available-for-sale securities were 44.9% of
total assets, as compared to 48.2% and 38.4% at December 31, 2002 and 2001,
respectively.
MARKET RISK MANAGEMENT
Market risk arises from changes in interest rates. ABI 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 ABI'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 time
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, 2002.
69
INTEREST RATE SENSITIVITY
Interest Rate Sensitivity Period as of 12/31/02
________________________________________________________________________________________
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
______________________________________________________________________________________________________________________
Earning assets
Short-term investments $ -- $ 198 $ -- $ -- $ -- $ -- $ -- $ 198
Investment securities 19,713 17,720 6,492 7,254 8,220 -- -- 59,399
Loans 18,030 21,135 14,521 2,793 1,494 375 4,210 62,558
-------- -------- -------- -------- -------- -------- -------- --------
Total earning assets 37,743 39,053 21,013 10,047 9,714 375 4,210 122,155
-------- -------- -------- -------- -------- -------- -------- --------
Interest bearing liabilities
Interest bearing transaction
and savings accounts -- -- 49,067 -- -- -- 11,801 60,868
Time deposits 9,357 15,441 12,246 616 -- -- -- 37,660
Other borrowings 5,275 1,395 3,720 3,720 1,336 -- 4,635 20,081
-------- -------- -------- -------- -------- -------- -------- --------
Total interest bearing --
liabilities 14,632 16,836 65,033 4,336 1,336 -- 16,436 118,609
-------- -------- -------- -------- -------- -------- -------- --------
Interest rate sensitivity GAP $23,111 $ 22,217 $(44,020) $ 5,711 $ 8,378 $ 375 $(12,226) $ 3,546
======== ======== ========= ======== ======== ======== ======== ========
Cumulative interest rate
sensitivity GAP $23,111 $ 45,328 $ 1,308 $ 7,019 $ 15,397 $ 15,772 $ 3,546
Cumulative rate sensitive
assets to rate
sensitive liabilities 257.9% 244.0% 101.4% 107.0% 115.1% 115.4% 103.0%
Cumulative GAP as a % of
total earning assets 18.9% 37.1% 1.1% 5.7% 12.6% 12.9% 2.9%
70
INFORMATION ABOUT ABI
General
Alliance Bancorporation, Inc. ABI is an Arkansas business corporation
registered under the Bank Holding Company Act of 1956. ABI owns all of the
issued and outstanding capital stock of its state chartered subsidiary bank,
Alliance Bank of Hot Springs, which conducts banking operations through five
full service offices in Hot Springs, Arkansas.
As of September 30, 2003, ABI had, on a consolidated basis, total assets of
$135.6 million, total deposits of $108.4 million, total loans of $65.8 million
and total shareholders' equity of $11.2 million.
ABI does not, as an entity, engage in separate business activities of a
material nature apart from the activities it performs for Alliance Bank. The
primary activities of ABI are to provide assistance in the management and
coordination of Alliance Bank's financial resources and to provide capital and
public relations services for Alliance Bank. Alliance Bank has a separate board
of directors and operates under the day-to-day management of its own officers.
Alliance Bank formulates its own policies with respect to banking and business
matters.
As a bank holding company, ABI is subject to regulation by the Federal
Reserve Board in accordance with the requirements set forth in the Bank Holding
Company Act and by the rules and regulations promulgated under this Act by the
Federal Reserve Board. Certain of these rules and regulations are summarized
below.
Alliance Bank of Hot Springs. Alliance Bank is an Arkansas banking
corporation with its main office in Hot Springs, Arkansas. The bank was
chartered in 1997 under the laws of Arkansas. As an Arkansas banking
corporation, Alliance Bank is subject to regulation by the Arkansas Banking
Department and the FDIC. Certain of these rules and regulations applicable to
Alliance Bank are summarized in this section below.
Alliance Bank provides a wide range of retail and commercial banking
services. Deposit services include checking, savings, money market, time deposit
and individual retirement accounts. Loan services include various types of real
estate, consumer, commercial, industrial and agricultural loans. Alliance Bank
also provides direct deposit services, wire transfer facilities, ATMs, telephone
banking, internet banking and debit cards (with access to local, state and
nationwide networks). Deposits of Alliance Bank are insured by the FDIC.
The most significant components of Alliance Bank's loan portfolio consist
of commercial and residential real estate loans.
Alliance Bank considers its primary market to be Garland County. Alliance
Bank uses five locations for its banking operations. All of its office
facilities are leased. Management of Alliance Bank considers these facilities to
be adequate for the current operations of the bank.
Supervision And Regulation
In addition to the generally applicable state and federal laws governing
businesses and employers, bank holding companies and banks are extensively
regulated under both federal and state law. With few exceptions, state and
federal banking laws have as their principal objective either the maintenance of
the safety and soundness of the Bank Insurance Fund of the FDIC or the
protection of consumers or classes of consumers, rather than the specific
protection of the shareholders of ABI.
Alliance Bancorporation, Inc. ABI is a bank holding company registered
under the Bank Holding Company Act, and it operates one banking subsidiary,
Alliance Bank of Hot Springs. As a registered bank holding company, ABI is
subject to supervision and regulation by the Federal Reserve Board under the
Bank Holding Company Act. As a bank holding company, ABI is required to furnish
the Federal Reserve Board an annual report of its operations at the end of each
fiscal year and to furnish such additional information as the Federal Reserve
Board may require pursuant to the Bank Holding Company Act. The Federal Reserve
Board may also make examinations of ABI.
The Bank Holding Company Act requires, subject to certain exceptions, every
bank holding company to obtain the prior approval of the Federal Reserve Board:
71
o Before it may acquire direct or indirect ownership or control of any
voting shares of any bank if, after such acquisition, such bank
holding company will directly or indirectly own or control more than
5% of the voting shares of such bank;
o Before it or any of its subsidiaries, other than a bank, may acquire
all or substantially all of the assets of a bank; or
o Before it may merge or consolidate with any other bank holding
company.
In addition, the Bank Holding Company Act prohibits (with specific exceptions)
ABI from engaging in non-banking activities or from acquiring or retaining
direct or indirect control of any company engaged in non-banking activities. The
Federal Reserve Board by regulation or order may make exceptions for activities
determined to be so closely related to banking or managing or controlling banks
as to be a proper incident to such activities. In determining whether a
particular activity is permissible, the Federal Reserve Board considers whether
the performance of an activity can reasonably be expected to produce benefits to
the public, such as greater convenience, increased competition or gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. For example, making, acquiring or servicing loans, leasing
personal property, providing certain investment or financial advice, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions by the bank holding company and certain limited insurance
underwriting activities have all been determined by regulations of the Federal
Reserve Board to be permissible activities. The Bank Holding Company Act does
not place territorial limitations on permissible bank-related activities of bank
holding companies. However, despite prior approval, the Federal Reserve Board
has the power to order a holding company or its subsidiaries to terminate any
activity, or terminate its ownership or control of a subsidiary, when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that holding company.
ABI is also subject to the Arkansas Bank Holding Company Act of 1983 which
places certain restrictions on the acquisition of banks by bank holding
companies. Any acquisition by ABI of more than 25% of any class of the
outstanding capital stock of any bank located in Arkansas would require the
Arkansas Bank Commissioner's approval. Further, no bank holding company may
acquire any bank if after such acquisition the holding company would control,
directly or indirectly, banks having 25% of the total bank deposits (excluding
deposits from other banks and public funds) in the State of Arkansas. Under the
Arkansas Bank Holding Company Act, a bank holding company cannot own more than
one bank subsidiary if any of its bank subsidiaries has been chartered for less
than 5 years.
Alliance Bank. Alliance Bank is an Arkansas state chartered bank. As a
state bank, Alliance Bank is subject to supervision by the Arkansas State Bank
Department and has its deposits insured by the FDIC. Alliance Bank is regulated
and subject to periodic examination by these governmental authorities, each of
which imposes regulations related to reserves, investments, loans, issuance of
securities, establishment of branches and other aspects of operation.
Regulations of the Arkansas State Bank Department limit the ability of
Alliance Bank in certain circumstances to pay dividends to ABI without the prior
approval of such agency. The regulations of the Arkansas State Bank Department
currently limits the amount of dividends that Alliance Bank may pay ABI, without
prior regulatory approval, to 75% of the bank's net profits after taxes for the
current year plus 75% of its retained net profits after taxes for the
immediately preceding year.
Federal law substantially restricts transactions between financial
institutions and their affiliates, particularly their non-financial institution
affiliates. As a result, Alliance Bank is sharply limited in making extensions
of credit to ABI or any non-bank subsidiary, in investing in the stock or other
securities of ABI or any non-bank subsidiary, in buying the assets of, or
selling assets to, ABI, and/or in taking such stock or securities as collateral
for loans to any borrower. Moreover, transactions between Alliance Bank and ABI
(or any non-bank subsidiary) must generally be on terms and under circumstances
at least as favorable to Alliance Bank as those prevailing in comparable
transactions with independent third parties or, in the absence of comparable
transactions, on terms and under circumstances that in good faith would be
available to nonaffiliated companies.
72
The federal banking laws require all insured banks, including Alliance
Bank, to maintain reserves against their checking and transaction accounts
(primarily checking accounts, NOW and Super NOW checking accounts). Because
reserves must generally be maintained in cash or in non-interest bearing
accounts, the effect of the reserve requirements is to increase Alliance Bank's
cost of funds. Arkansas law requires state chartered banks to maintain such
reserves as are required by the applicable federal regulatory agency.
Alliance Bank is subject to Section 23A of the Federal Reserve Act, which
places limits on the amount of loans or extensions of credit to, investments in
or certain other transactions with affiliates, including ABI. In addition,
limits are placed on the amount of advances to third parties collateralized by
the securities or obligations of affiliates. Most of these loans and certain
other transactions must be secured in prescribed amounts. Alliance Bank is also
subject to Section 23B of the Federal Reserve Act, which prohibits an
institution from engaging in transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with non-affiliated companies. Alliance Bank is subject
to restrictions on extensions of credit to executive officers, directors,
certain principal stockholders, and their related interests. These extensions of
credit must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
third parties and must not involve more than the normal risk of repayment or
present other unfavorable features.
The Arkansas Constitution provides, in summary, that "consumer loans and
credit sales" have a maximum interest rate limitation of 17% per annum and that
all "general loans" have a maximum interest rate limitation of 5% over the
Federal Reserve Discount Rate in effect at the time the loan was made. The
Arkansas Supreme Court has determined that "consumer loans and credit sales" are
also "general loans" and are thus subject to an interest rate limitation equal
to the lesser of 5% over the Federal Reserve Discount Rate or 17% per annum. The
Arkansas Constitution also provides penalties for usurious "general loans" and
"consumer loans and credit sales," including forfeiture of all principal and
interest on consumer loans and credit sales made at a greater rate of interest
than 17% per annum. Additionally, "general loans" made at a usurious rate may
result in forfeiture of uncollected interest and a refund to the borrower of
twice the interest collected.
Arkansas usury laws have historically been preempted by federal law with
respect to first residential real estate loans and certain loans guaranteed by
the Small Business Administration. Furthermore, the Gramm-Leach-Bliley Financial
Modernization Act of 1999 preempted the application of the Arkansas
Constitution's usury limits to banks with their main offices in Arkansas, such
as Alliance Bank, effective November 12, 2000. In a recent case involving
undisputed facts, the Eighth Circuit Court of Appeals affirmed the District
Court's ruling that the preemptive provisions of the Gramm-Leach Bliley Act are
constitutional. Although the constitutionality of the preemption provision could
be raised again in the future, Alliance Bank currently may charge interest at
rates consistent with the federal preemption which may exceed the limitations
set forth in the Arkansas Constitution.
Effective January 1, 2000, Arkansas law allows Alliance Bank to engage in
branching activities on a statewide basis. Immediately prior to that date, the
state's branching laws prevented state and national banks from opening branches
in any county of the state other than their home county and the counties
contiguous to their home county.
Capital Adequacy Requirements. The Federal Reserve Board monitors the
capital adequacy of bank holding companies such as ABI, and the FDIC monitors
the capital adequacy of Alliance Bank. The federal bank regulators use a
combination of risk-based guidelines and leverage ratios to evaluate capital
adequacy.
Under the risk-based capital guidelines, bank regulators assign a risk
weight to each category of assets based generally on the perceived credit risk
of the asset class. The risk weights are then multiplied by the corresponding
asset balances to determine a "risk-weighted" asset base. The minimum ratio of
total risk-based capital to risk-weighted assets is 8.0%. At least half of the
risk-based capital must consist of Tier 1 capital, which is comprised of common
equity, retained earnings and certain types of preferred stock and excludes
goodwill and various intangible assets. The remainder, or Tier 2 capital, may
consist of a limited amount of subordinated debt, certain hybrid capital
instruments and other debt securities, preferred stock, and an allowance for
loan losses not to exceed 1.25% of risk-weighted assets. The sum of Tier 1
capital and Tier 2 capital is "total risk-based capital."
The leverage ratio is a company's Tier 1 capital divided by its adjusted
total assets. The leverage ratio requires a 3.0% Tier 1 capital to adjusted
average asset ratio for institutions with the highest regulatory rating of 1.
All other institutions must maintain a leverage ratio of 4.0% to 5.0%. For a
tabular summary of ABI's consolidated risk-weighted capital and leverage ratios,
see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION OF ALLIANCE BANCORPORATION, INC. --RISK BASED CAPITAL."
73
Enforcement Authority. The Federal Reserve Board has enforcement authority
over bank holding companies and non-banking subsidiaries to forestall activities
that represent unsafe or unsound practices or constitute violations of law. It
may exercise these powers by issuing cease-and-desist orders or through other
actions. The Federal Reserve Board may also assess civil penalties against
companies or individuals who violate the Bank Holding Company Act or related
regulations in amounts up to $1 million for each day's violation. The Federal
Reserve Board can also require a bank holding company to divest ownership or
control of a non-banking subsidiary or require such subsidiary to terminate its
non-banking activities. Certain violations may also result in criminal
penalties.
The FDIC possesses comparable authority under the Federal Deposit Insurance
Act, the Federal Deposit Insurance Corporation Improvement Act and other
statutes with respect to Alliance Bank. In addition, the FDIC can terminate
insurance of accounts, after notice and hearing, upon a finding that the insured
institution is or has engaged in any unsafe or unsound practice that has not
been corrected, is in an unsafe and unsound condition to continue operations, or
has violated any applicable law, regulation, rule, or order of, or condition
imposed by the appropriate supervisors.
The Federal Deposit Insurance Corporation Improvement Act required federal
banking agencies to broaden the scope of regulatory corrective action taken with
respect to depository institutions that do not meet minimum capital and related
requirements and to take such actions promptly in order to minimize losses to
the FDIC. In connection with this Act, federal banking agencies established
capital measures (including both a leverage measure and a risk-based capital
measure) and specified for each capital measure the levels at which depository
institutions will be considered well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized.
If an institution becomes classified as undercapitalized, the appropriate
federal banking agency will require the institution to submit an acceptable
capital restoration plan and can suspend or greatly limit the institution's
ability to effect numerous actions including capital distributions, acquisitions
of assets, the establishment of new branches and the entry into new lines of
business. As of December 31, 2002, Alliance Bank is classified as "well
capitalized" under these guidelines.
Other Regulation. ABI's status as a registered bank holding company under
the Bank Holding Company Act does not exempt it from certain federal and state
laws and regulations applicable to corporations generally, including, without
limitation, certain provisions of the federal securities laws. ABI is under the
jurisdiction of the Securities and Exchange Commission and of state securities
commissions for matters relating to the offer and sale of its securities.
Alliance Bank's loan operations are subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act,
governing disclosures of credit terms to consumer borrowers; the Home Mortgage
Disclosure Act of 1975, requiring financial institutions to provide information
to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves; the Equal Credit Opportunity Act, prohibiting
discrimination on the basis of race, creed or other prohibited factors in
extending credit; the Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies; the Fair Debt Collection
Act, governing the manner in which consumer debts may be collected by collection
agencies; the Fair Housing Act, prohibiting discriminatory practices relative to
real estate-related transactions, including the financing of housing; and the
rules and regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. The deposit operations of
Alliance Bank also are subject to the Right to Financial Privacy Act, which
imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of financial
records; the Electronic Funds Transfer Act, which governs automatic deposits to
and withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic banking
services; the Truth in Savings Act, requiring depository institutions to
disclose the terms of deposit accounts to consumers; and the Expedited Funds
Availability Act, requiring financial institutions to make deposited funds
available according to specified time schedules and to disclose funds
availability policies to consumers.
74
Employees
ABI is a bank holding company and primarily conducts its operations through
its subsidiary, Alliance Bank. ABI employs three executive officers. However,
these employees also conduct the business of Alliance Bank and therefore are
compensated as employees of Alliance Bank. As of September 30, 2003, Alliance
Bank had 42 full-time equivalent employees (including the three officers of
ABI), none of whom is represented by a collective bargaining agreement.
Certain Relationships and Related Transactions
Alliance Bank has had, in the ordinary course of business, banking
transactions with some of its officers and directors and with certain officers
and directors of ABI. All loan transactions with officers and directors of ABI,
its bank subsidiary, and their related and affiliated parties, have been in the
ordinary course of business, on substantially the same terms, including interest
rates and collateral as those prevailing for comparable transactions with other
loan customers of ABI, and have not included more than the normal risk of
collectibility associated with the ABI's other banking transactions or other
unfavorable features.
Legal Proceedings
ABI and Alliance Bank are involved in routine legal proceedings occurring
in the ordinary course of business that, in the aggregate, are not believed by
management of these companies to be material to the consolidated financial
condition and results of operation of ABI.
75
Principal Shareholders and Management
The following table sets forth certain information as of January 15, 2004
regarding those persons known by ABI to be beneficial owners of more than 5% of
the outstanding shares of ABI common stock, and the number and percentage of
outstanding shares of ABI common stock beneficially owned by each director and
executive officer of ABI and all directors and executive officers as a group.
Unless otherwise indicated, each person listed is the sole record holder of, and
exercises sole voting power over, the shares listed. Percentages are computed
based on 30,107 shares of ABI common stock eligible to vote at the ABI special
meeting.
Shares Percentage of
Beneficially Shares
Beneficial Owner Position Owned Outstanding
________________ ________ _____________ ______________
Directors and Executive Officers:
_________________________________
David Bartlett Director, President 1,793 5.96%
Stuart A. Fleischner Director 300 1.00%
Louis Kleinman [a] Director 800 2.66%
James B. Newman Director 200 **
John Selig [b] Director 570 1.89%
Sam Stathakis, Jr. Director 100 **
Sara Stough Director 552 1.83%
Ronnie Twyford Senior Vice President 86 **
Steven Trusty Senior Vice President 150 **
Directors and Executive Officers
as a Group 4,551 15.12%
____________________________
** Less than 1%
[a] Mr. Kleinman holds 160 shares in his IRA; his wife holds 160 in her IRA; 340
shares are held in a trust created by Mr. Kleinman , of which he is a trustee;
40 shares are held in a trust created by his wife of which he is a trustee and
100 shares are held in a trust created by his father of which he is a trustee.
[b] Mr. Selig holds 370 shares in his IRA and 200 shares jointly with his wife.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
ABI shareholders, whose rights are governed by ABI's articles of
incorporation, as amended, and bylaws, may become shareholders of SFNC upon
completion of the merger. As such, the rights of the former ABI shareholders
will thereafter be governed by SFNC's restated articles of incorporation and
bylaws.
While it is impractical to summarize all of the pertinent differences, set
forth below are the material differences between the rights of ABI shareholders
under ABI's governing documents and the rights of SFNC shareholders under SFNC's
governing documents.
Change of Control
SFNC. SFNC's Amended and Restated Articles of Incorporation and Bylaws
contain certain provisions that could delay, discourage or prevent an
attempted acquisition or change of control of SFNC.
o Article ELEVENTH contains a restriction upon the ability of a
stockholder owning more than 10% of the SFNC common stock to acquire
any additional shares except through a cash tender offer at a price
not less than the highest closing price of SFNC 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 SFNC for any acquisition of
SFNC 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 SFNC common stock.
o Article THIRTEENTH of the Articles of Incorporation of SFNC 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 SFNC will not be
the surviving corporation: 1) the impact on SFNC, its subsidiaries,
shareholders and employees and the communities served by SFNC, 2) the
timeliness of the proposed transaction considering the business
climate and strategic plans of SFNC, 3) the existence of any legal
defects or regulatory issues involved in the proposed transaction, 4)
the possibility of non-consummation of the transaction due to lack of
financing, regulatory issues or identified issues, 5) current market
price of SFNC common stock and its consolidated assets, 6) book value
of SFNC common stock, 7) the relationship of the offered price for
SFNC common stock to the Board's opinion of the current value of SFNC
in a negotiated transaction, 8) the relationship of the offered price
for SFNC common stock to the Board's opinion of the future value of
SFNC as an independent entity, and 9) such other criteria as the Board
may determine is appropriate.
o 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 SFNC common stock.
ABI. A majority of the shares of ABI common stock entitled to vote are
required to constitute a quorum at an annual meeting of shareholders and a
special shareholders meeting. Under ABI's governing documents, a majority of
such quorum is required to decide any question to come before a shareholders
meeting, except that a merger requires the affirmative vote of the holders of at
least a majority of the outstanding shares of ABI.
Board of Directors
SFNC. SFNC's Board of Directors is comprised of one class of directors,
elected annually. SFNC's shareholders elect directors at their annual meeting
or, if the annual meeting is not held, at a special meeting called for the
purpose of the election of directors. SFNC shareholders are not entitled to
cumulative voting in the election of directors. The Board of Directors may
consist of between five and 25 members, as determined from time to time by
SFNC's Board of Directors or shareholders, and on the date of this proxy
statement/prospectus consisted of eight members. The Board of Directors has the
power to increase the number of directors by two (if the number of directors set
at the most recent shareholders meeting was 15 or less) or four (if the number
of directors set at the most recent shareholders meeting was at least 16)
without any further action of the shareholders in accordance with SFNC's
Articles of Incorporation. Any vacancy on SFNC's Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors or, if the
directors remaining in office constitute fewer than a quorum of the Board of
Directors, by the affirmative vote of a majority of all of the directors
remaining in office.
77
ABI. ABI's Board of Directors consists of seven members, as set by its
bylaws. The Board is authorized to amend the bylaws and may change the number of
directors from time to time without any further action of the shareholders so
long as the increase or decrease in the number of directors does not exceed 30%
of the number of directors last approved by the shareholders. Any vacancy on
ABI's Board of Directors may be filled by majority vote of the shareholders or
the ABI directors then in office. Each ABI director is elected to serve a
one-year term. ABI's shareholders elect directors at their annual meeting or, if
the annual meeting is not held, at a special meeting called for the purpose of
the election of directors. The holders of ABI common stock are entitled to
cumulative voting in the election of directors. This right allows each
shareholder to cast a number of votes for directors equal to the number of
directors being elected multiplied by the number of shares of stock owned. This
number of votes may be cast for one candidate for director or may be spread
among any number of candidates.
Removal of Directors
SFNC. SFNC's governing documents do not contain any special provisions on
the removal of directors. The Arkansas Business Corporation Act of 1987 allows a
director to be removed at any time with or without cause by a special
shareholder's meeting called expressly for that purpose.
ABI. ABI's governing documents provide that a director may be removed at
any time with or without cause by a special shareholder's meeting called
expressly for that purpose.
Authorized Capital Stock
Authorized Shares Par Value per Share
_________________ ___________________
ABI 100,000 $10.00
SFNC 30,000,000 $1.00
Rights of Shareholders to Call Special Meetings
SFNC. SFNC's governing documents provide that a special meeting of SFNC's
shareholders may be called by the Chairman of the Board, the President, or the
Board of Directors, or by the request of holders of not less than ten percent
(10%) of all the votes entitled to be cast on any issue proposed to be
considered at such special meeting.
ABI. ABI's bylaws provide that a special meeting of the ABI shareholders
may be called at any time by the President, the ABI Board of Directors, or any
group of shareholders owning in the aggregate not less than ten percent (10%) of
the shares of ABI common stock entitled to vote on any action to be presented at
such meeting.
78
REGISTRATION STATEMENT
SFNC has filed with the SEC a registration statement on Form S-4 to
register the SFNC common shares to be issued to ABI shareholders in the merger.
The registration statement, including the attached exhibits and schedules,
contains additional relevant information about SFNC and ABI. This proxy
statement/prospectus is part of that registration statement. The rules and
regulations of the SEC allow SFNC to omit certain information included in the
registration statement from this proxy statement/prospectus. This registration
statement may be inspected and copied at the SEC's public reference facilities
described below.
WHERE YOU CAN FIND MORE INFORMATION
SFNC files annual, quarterly and current reports, proxy statements and
other information with the SEC under the Securities Exchange Act. You may read
and copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Woolworth Center Citicorp Center
Room 1024 233 Broadway 500 West Madison Street
Washington, D.C. 20549 New York, New York 10279 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
at prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like SFNC, which
file electronically with the SEC. The address of that site is www.sec.gov.
The SEC allows SFNC to "incorporate by reference" information into this
proxy statement/prospectus from documents it has previously filed with the SEC.
This means that SFNC can disclose important information to you by referring you
to another document filed separately with the SEC. These documents contain
important information about SFNC and its financial condition, operations and
business. The information incorporated by reference is considered to be a part
of this proxy statement/prospectus, except for any information that is
superseded by other information contained directly in this proxy
statement/prospectus or in documents filed by SFNC with the SEC after the date
of this proxy statement/prospectus. Information incorporated from another
document is considered to have been disclosed to you whether or not you chose to
read the document.
This proxy statement/prospectus incorporates by reference the following
documents with respect to SFNC:
o SFNC's Annual Report on Form 10-K for the year ended December 31,
2002;
o SFNC's Quarterly Reports on Form 10-Q for the periods ended March 31,
2003, June 30, 2003 and September 30, 2003;
o The description of the SFNC'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 filed for the purpose of updating
such description
SFNC incorporates by reference additional documents that SFNC may file with
the SEC between the date of this proxy statement/prospectus and the completion
of the merger. These documents include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
SFNC has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to SFNC and its bank subsidiaries.
ABI has supplied all information contained in this proxy
statement/prospectus relating to ABI and its bank subsidiary, Alliance Bank of
Hot Springs.
79
You can obtain copies of the documents incorporated by reference in this
proxy statement/prospectus with respect to SFNC without charge, excluding any
exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this proxy statement/prospectus, by requesting them
in writing or by telephone from SFNC at the following:
Mr. John L. Rush,
Corporate Secretary
Simmons First National Corporation
P. O. Box 7009
Pine Bluff, Arkansas 71611
If you would like to request documents from SFNC, please do so by March 11,
2004 to receive them before the special meeting. Copies are also available free
of charge through the Investor Relations section of SFNC's internet website at
www.simmonsfirst.com. You can also obtain copies of these documents from the SEC
through the SEC's Internet worldwide website or at the SEC's address described
in this section above.
You should rely only on the information contained in or incorporated by
reference in this proxy statement/prospectus in considering how to vote your
shares. Neither SFNC nor ABI has authorized anyone to provide you with
information that is different from the information in this document. This proxy
statement/prospectus is dated February 11, 2004. You should not assume that the
information contained in this document is accurate as of any date other than
that date. Neither the mailing of this proxy statement/prospectus nor the
issuance of SFNC common stock in the merger shall create any implication to the
contrary.
LEGAL MATTERS
Quattlebaum, Grooms Tull & Burrow PLLC, Little Rock, Arkansas, counsel to
SFNC, will pass upon certain legal matters concerning the merger and the
validity of the shares of SFNC common stock to be issued in the merger.
EXPERTS
The consolidated financial statements of Simmons First National Corporation
incorporated by reference in SFNC's Annual Report (Form 10-K) for the year ended
December 31, 2002, have been audited by BKD, LLP, independent auditors, as set
forth in their report thereon or incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
80
ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), is made as of the 8th day
of October, 2003, by and between Simmons First National Corporation, an Arkansas
corporation ("SFNC") and Alliance Bancorporation, Inc., an Arkansas corporation
("ABI").
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 financial 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 14,103,472 were outstanding as of June 30, 2003. No shares of the other
classes of SFNC's authorized capital stock are outstanding.
Section 1.02 ABI. ABI 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 Hot Springs, Arkansas. ABI is registered
as a bank holding company with the FRB under the BHC Act. As of the date hereof,
ABI has 100,000 authorized shares of common stock, par value $10.00 per share
("ABI Stock"), of which 28,414 shares were outstanding as of June 30, 2003. The
parties anticipate that the number of shares of ABI Stock outstanding at closing
will equal 30,107, the sum of the number of shares outstanding on June 30, 2003
(28,414) plus the number of ABI Option Shares (1,693). The number of shares
outstanding shall be certified by ABI at the Closing and such certified number
of shares outstanding shall be used for all purposes of this Agreement and the
transactions contemplated hereunder. No other class of capital stock being
authorized.
Section 1.03 Alliance Bank. Alliance Bank has been duly incorporated and is
a validly existing banking association in good standing under the laws of the
State of Arkansas, with its principal executive offices located in Hot Springs,
Arkansas. As of the date hereof, Alliance Bank has 100,000 authorized shares of
common stock, par value $10.00 per share, of which 18,663 shares are outstanding
as of June 30, 2003, no other class of capital stock being authorized. All of
the outstanding shares of stock of Alliance Bank are owned by ABI.
Section 1.04 Compensatory Stock Options. (a) SFNC has reserved 875,000
shares of SFNC Stock ("SFNC Option Shares") for issuance pursuant to the terms
of the stock option grants under the stock option plans of SFNC ("SFNC Option
Plans"), of which options for 721,500 shares have been granted to various
executive officers of SFNC and its subsidiaries and are currently outstanding.
(b) ABI has reserved 1,866 shares of ABI Stock ("ABI Option Shares") for
issuance upon the exercise of stock option grants pursuant to the terms of the
Alliance Bank of Hot Springs Employee Incentive Stock Option Plan ("ABI Option
Plan"), of which options for 1,693 shares have been granted to various executive
officers of ABI and its subsidiaries and are currently outstanding. No
additional options will be granted under ABI Option Plan.
Section 1.05 Rights; Voting Debt. Except for (i) the SFNC Option Plans,
(ii) ABI Option Plans, and (iii) the transactions contemplated under this
Agreement, neither SFNC nor ABI 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 ABI 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").
A-1
Section 1.06 Materiality. Unless the context otherwise requires, any
reference in this Agreement to materiality with respect to either party shall,
as to ABI, be deemed to be with respect to ABI and its wholly owned subsidiary,
Alliance Bank, 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 1.07 Merger. The Board of Directors of SFNC and the Board of
Directors of ABI have each determined that it is desirable and in the best
interests of the corporations and their respective shareholders that ABI merge
with and into SFNC ("Merger") on the terms and subject to the conditions set
forth in this Agreement.
In consideration of their mutual promises and obligations hereunder, and
intending to be legally bound hereby, SFNC and ABI 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, ABI
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 ABI; and SFNC shall be responsible for all of the liabilities and
obligations of ABI 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 ABI.
Section 2.02 Conversion of Securities. At the Effective Time, by virtue of
the Merger:
(a) Subject to the other provisions of this Section 2.02, each share of ABI
Stock issued and outstanding immediately prior to the Effective Time (excluding
any Dissenting Shares, as defined in Section 2.05) shall be converted into (1)
the right to receive 18.1021 shares of SFNC Stock ("Default Per Share Stock
Allocation") and $379.978 in cash, without interest ("Default Per Share Cash
Allocation"), (2) the right to receive in cash a sum equal to $379.978 plus the
product of 18.1021 times the SFNC Average Stock Price, as defined in 2.02(g),
without interest ("Optional Per Share Cash Amount"), (3) the right to receive a
number of shares of SFNC Stock equal to the Optional Per Share Cash Amount
divided by the SFNC Average Stock Price, as defined below, ("Exchange Ratio") or
(4) the right to receive a combination of shares of SFNC Stock and cash as
elected, subject to Section 2.02(d), Section 2.02(e) or Section 2.02(f)
provided, however, that, in any event, if between the date of this Agreement and
the Effective Time the outstanding shares of SFNC Stock or ABI Stock shall have
been changed into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Default Per Share Stock Allocation and
the Default Per Share Cash Allocation shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. No adjustment of the Default Per Share
Stock Allocation or the Default Per Share Cash Allocation shall occur by reason
of issuance of any SFNC Option Shares under the SFNC Option Plans. All
outstanding ABI Option Shares shall be exercised prior to the Effective Time.
All shares of ABI 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
certificates previously evidencing shares of ABI Stock, outstanding immediately
prior to the Effective Time, shall cease to have any rights with respect to such
shares of ABI Stock except as otherwise provided herein or by law. Such
certificates previously evidencing shares of ABI Stock shall be exchanged for
(1) certificates evidencing whole shares of SFNC Stock issued in consideration
therefor, (2) cash, or a combination of SFNC Stock and cash, in each case in
accordance with the election and allocation procedures of this Section 2.02 and
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
2.03.
A-2
(b) The number of shares of ABI Stock to be converted into the right to
receive cash, in the aggregate amount of $11,440,000.00 (subject to reduction in
the amount of $379.978 for each Dissenting Share, as defined in Section 2.05)
("Net Cash Consideration"), pursuant to the Merger shall equal 14,752 or 49% of
the ABI Stock outstanding immediately prior to the Effective Time, subject to
reduction for Dissenting Shares. The number of shares of ABI Stock to be
converted into the right to receive 545,000 shares of SFNC Stock (subject to
reduction in the amount of 18.1021 shares for each Dissenting Share) ("Net Stock
Consideration") in the Merger shall equal 15,355, or 51% of the ABI stock
outstanding immediately prior to the Effective Time, subject to reduction for
Dissenting Shares.
(c) At the Effective Time, each record holder of shares of ABI Stock will
be entitled to receive for each share of ABI Stock owned, the Default Per Share
Stock Allocation, 18.1021 shares of SFNC Stock and the Default Per Share Cash
Allocation, $379.978 in cash, without interest ("Default Election"), without any
further action by such holder. Alternatively, subject to the allocation and
election procedures set forth in this Section 2.02, immediately prior to the
Effective Time each record holder of shares of ABI Stock will be entitled to
make an optional election: (1) to receive cash ("Optional Cash Election"), for
all of such shares, (2) to receive SFNC Stock ("Optional Stock Election") for
all of such shares, or (3) to make an Optional Stock Election for a specified
percentage of such shares (other than 51%) and to make an Optional Cash Election
for the balance of such shares. All such elections shall be made on a form
designed for that purpose ("Form of Election"). Any record holder which does not
make a timely optional election shall be deemed to have made a Default Election.
Holders of record of shares of ABI Stock who hold such shares as nominees,
trustees or in other representative capacities ("Representative") may submit
multiple Forms of Election, provided that such Representative certifies that
each such Form of Election covers the shares of ABI Stock held by the
Representative for a particular beneficial owner. Notwithstanding the number of
shares for which Optional Cash Elections and Optional Stock Elections are made,
the aggregate amount of cash to be paid as consideration pursuant to the Merger
shall be $11,440,000 (plus cash paid in lieu of fractional shares) and the
aggregate number of shares of SFNC Stock issued shall equal 545,000 (reduced by
fractional shares redeemed for cash).
(d) If the number of shares covered by Optional Cash Elections ("Optional
Cash Election Shares") multiplied by the Optional Per Share Cash Amount
("Optional Cash Election Amount") exceeds the sum of the Net Cash Consideration
reduced by the product of the Default Per Share Cash Allocation multiplied by
the number shares for which a Default Election is made or deemed to be made
("Net Available Cash Consideration"), the Optional Cash Election Shares shall be
converted into the right to receive cash and SFNC Stock in the following manner:
Each of the Optional Cash Election Shares shall be converted into the right
to receive (i) cash in an amount equal to the quotient of the Net Available
Cash Consideration divided by the Optional Cash Election Shares, and (ii)
shares of SFNC Stock, equal to the quotient of (x) the difference between
the Optional Cash Election Amount and the Net Available Cash Consideration
divided by (y) the product the Optional Cash Election Shares multiplied by
the SFNC Average Stock Price.
(e) If the number of shares covered by Optional Stock Elections ("Optional
Stock Election Shares") multiplied by the Exchange Ratio ("Optional Stock
Election Amount") exceeds the sum of the Net Stock Consideration reduced by the
product of the Default Per Share Stock Allocation multiplied by the number
shares for which a Default Election is made or deemed to be made ("Net Available
Stock Consideration"), the Optional Stock Election Shares shall be converted
into the right to receive SFNC Stock and cash in the following manner:
Each of the Optional Stock Election Shares shall be converted into the
right to receive (i) a number of shares of SFNC Stock, equal to the
quotient of the Net Available Stock Consideration divided by the Optional
Stock Election Shares, and (ii) cash in an amount, a equal to the product
of (x) the difference between the Optional Stock Election Amount and the
Net Available Stock Consideration and (y) a fraction, the numerator of
which equals the SFNC Average Stock Price and the denominator of which
equals the Optional Stock Election Shares.
A-3
(f) In the event that Section 2.02(d) above is not applicable, all Optional
Cash Election Shares shall be converted into the right to receive cash. In the
event that Section 2.02(e) above is not applicable, all Optional Stock Election
Shares shall be converted into the right to receive shares of SFNC Stock.
(g) The "SFNC Average Stock Price "shall be the average (arithmetic mean)
of the closing price per share of SFNC Stock reported by the NASD during the
period of ten (10) trading days on which one or more trades actually occurs,
ending immediately prior to the fifth trading day preceding the Effective Date.
(h) Optional elections shall be made by holders of ABI Stock by mailing to
ABI or the Transfer Agent, as defined in Section 2.03(a) below, the Form of
Election delivered to the ABI shareholders with the Prospectus/Proxy Statement
for the Merger. To be effective, a Form of Election must be properly completed,
signed and submitted by the shareholder (or by an appropriate trust company in
the United States or a member of a registered national securities exchange or
the National Association of Securities Dealers, Inc. ("NASD") to ABI or the
Transfer Agent not later than seven (7) days following the date of the ABI
shareholders meeting at which the Merger is approved ("Election Deadline"). Upon
receipt of any Form of Election by ABI, it shall immediately forward same to the
Transfer Agent. SFNC will have the discretion, which it may delegate in whole or
in part to the Transfer Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked, and to disregard immaterial
defects in Forms of Election. The decision of SFNC, or the Transfer Agent, in
such matters shall be conclusive and binding. Neither SFNC nor the Transfer
Agent will be under any obligation to notify any person of any defect in a Form
of Election submitted to the Transfer Agent. The Transfer Agent shall also make
all computations contemplated by this Section 2.02 and all such computations
shall be conclusive and binding on the holders of ABI Stock.
(i) For the purposes hereof, a holder of ABI Stock who does not submit a
Form of Election which is received by the Transfer Agent prior to the Election
Deadline shall be deemed to have made a Default Election. If SFNC or the
Transfer Agent shall determine that any purported Optional Cash Election or
Optional Stock Election was not properly made, such purported election shall be
deemed to be of no force and effect and the shareholder making such purported
election shall for purposes hereof, be deemed to have made a Default Election.
(j) SFNC and ABI shall mail the Form of Election with the Prospectus/Proxy
Statement to all holders of ABI Stock on or after the record date for the ABI
shareholders meeting and make the Form of Election available to all persons who
become holders of ABI Stock subsequent to such day and no later than the close
of business on the business day prior to the Election Deadline. All elections
may be revoked until the Election Deadline.
(k) Each share of ABI Stock held in the treasury of ABI and each share of
ABI Stock owned by any direct or indirect wholly owned subsidiary of ABI
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
Section 2.03 Exchange of Certificates. (a) Promptly after consummation of
the Merger, SFNC shall deposit, or shall cause to be deposited, with Simmons
First Trust Company, N.A. ("Transfer Agent"), for the benefit of the holders of
shares of ABI Stock, for exchange in accordance with this Article II, through
the Transfer Agent, (i) certificates evidencing such 545,000 shares of SFNC
Stock, (ii) cash in the amount of $11,440,000.00 and (iii) cash in the amount of
$5,000.00 ("Fractional Share Fund"). 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 ABI
Stock (other than Dissenting Shares) ("Certificates"), (1) a letter of
A-4
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, cash or a combination thereof. 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 ABI Stock formerly evidenced by such Certificate in
accordance with Section 2.02, (B) cash in an amount which such holder has the
right to receive in respect of the shares of ABI Stock formerly evidenced by
such Certificate in accordance with Section 2.02, (C) cash in lieu of fractional
shares of SFNC Stock to which such holder is entitled pursuant to Section 2.02,
and (D) 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), (C) and (D) 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 ABI Stock which
is not registered in the transfer records of ABI, 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 ABI 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
delivered and paid to the holder of the certificates (1) certificates evidencing
whole shares of SFNC Stock issued in exchange therefor, (2) the cash portion of
the Merger Consideration payable to such holder, including 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 (3) 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 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 ABI Stock.
(e) Any portion of the Fractional Share Fund which remains undistributed to
the holders of ABI Stock on the date six months following the Effective Time
shall be delivered to SFNC, upon demand, and any holders of ABI 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 ABI Stock for any
Merger Consideration, whether shares of SFNC Stock, cash or dividends or
distributions with respect to SFNC Stock, 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 ABI
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 ABI Stock in respect of which
such deduction and withholding was made by SFNC.
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Section 2.04 Stock Transfer Books. At the Effective Time, the stock
transfer books of ABI shall be closed and there shall be no further registration
of transfers of shares of ABI Stock thereafter on the records of ABI. 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 ABI 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 10 of the
Arkansas Business Corporation Act (A.C.A. 4-27-1301 et seq.) shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the fair value of such
shares of ABI Stock held by them in accordance with the 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 judicial determination of the value of the shares of ABI 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 ABI Stock, upon surrender, in the
manner provided in Section 2.03, of the certificate or certificates that
formerly evidenced such shares of ABI Stock.
Section 2.06 Lost ABI Stock Certificates. In the event any Certificate for
ABI 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. Other than the options described in
Section 1.04(b) above granted pursuant to the ABI Option Plan, there are no
options or rights granted by ABI to purchase shares of ABI Stock, which are
outstanding and unexercised and there are no outstanding securities issued by
ABI, or any other party, convertible into ABI Stock.
ARTICLE III
ACTIONS PENDING MERGER
Section 3.01 Required Actions Pending Merger. ABI 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, ABI will and will cause each of its subsidiaries to:
(a) upon the direction of SFNC, give all required notices, make all
necessary amendments and cause its Board of Directors to adopt a resolution
merging the Alliance Bank 401(k) Plan with and into the Simmons First National
Corporation 401(k) Plan contingent upon the consummation of the Merger to be
effective on or immediately following the Effective Date, and upon terms which
at least maintain and protect the accrued rights and participation of all ABI
employees as of 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 or
under the plan, other than liabilities which arise from its actions related to
the merger of the plans;
(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 ABI'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;
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(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; and
(f) give SFNC notice of all meetings of the board of directors of the board
of directors of ABI 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 ABI's legal counsel advises the ABI 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.
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, ABI shall not do, and ABI
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 ABI 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 ABI's capital stock (other than shares of ABI
stock issued upon exercise of options previously granted under the ABI Option
Plan) or the capital stock of any subsidiary, or any options (including options
under the ABI Option Plans), 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, 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 or existing plans;
(d) except as directed by SFNC consistent with the terms of 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) except in the ordinary course of business, acquire any assets or
business or take any other action, that considered as a whole is material to ABI
on a consolidated basis;
(g) acquire any investment securities (other than U.S. Treasury Securities,
Arkansas municipal securities, or U.S. Agency securities which are traditional
fixed rate debt securities);
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(h) except in their fiduciary capacities, purchase any shares of SFNC
Stock;
(i) except as contemplated by Section 5.01(l), change any method of
accounting in effect at December 31, 2002, 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, 2002, except as may be required by law or generally accepted
accounting principles;
(j) knowingly take any action which would or is reasonably likely to (1)
adversely affect the ability of either of SFNC or ABI to obtain any necessary
approvals of governmental authorities required for the transactions contemplated
hereby; (2) adversely affect ABI'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;
(k) unless and except in accordance with Alliances Bank's loan policies, as
in effect on the date hereof, make any single new loan or series of loans, to
one borrower or a related group of borrowers in an aggregate amount greater than
$150,000.00;
(l) sell or dispose of any real estate or other assets having a value in
excess of $75,000.00, other than properties acquired in foreclosure or otherwise
in the ordinary collection of indebtedness to ABI or its subsidiaries; or
(m) directly or indirectly agree to take any of the foregoing actions.
Section 3.03 Conduct of ABI to Date. Except as contemplated by this
Agreement or as disclosed in ABI's Disclosure Letter (as hereafter defined)
delivered to SFNC contemporaneously with the execution and delivery of this
Agreement, from and after December 31, 2002 through the date of this Agreement:
(a) ABI and Alliance Bank have carried on their respective businesses in
the ordinary and usual course consistent with past practices,
(b) neither ABI nor Alliance Bank have issued or sold any capital stock
(other than stock issued upon the exercise of options issued under the ABI
Option Plan) or issued or sold any corporate debt securities which would be
classified as long term debt on the balance sheet of ABI or Alliance Bank,
(c) ABI has not declared, set aside, or paid any cash or stock dividend or
distribution in respect of its capital stock,
(d) neither ABI nor Alliance Bank 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 ABI nor Alliance Bank 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 ABI nor Alliance Bank has, since December 31, 2002, 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 ABI nor Alliance Bank 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,
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(h) neither ABI nor Alliance Bank 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) except as disclosed to SFNC in the Disclosure Letter, neither ABI nor
Alliance Bank 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 ABI or any of its subsidiaries,
(j) neither ABI nor Alliance Bank has entered into any transaction,
contract, or commitment outside the ordinary course of its business,
(k) neither ABI nor Alliance Bank 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 ABI or any of its subsidiaries, and
(m) ABI and Alliance Bank 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 by ABI or
SFNC, as appropriate in their respective Disclosure Letters (the "Disclosure
Letter") to be delivered to each other contemporaneously with the execution and
delivery of this Agreement, SFNC, for itself and and its subsidiaries, to the
extent applicable to such subsidiaries, represent and warrant to ABI, and, ABI,
for itself and Alliance Bank, to the extent applicable to Alliance Bank,
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 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) 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.
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(e) The Board of Directors of each SFNC and ABI have, by all appropriate
action, approved this Agreement and the Merger. Subject, in the case of ABI, 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 ABI
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, 2002, nor any other
document filed subsequent to December 31, 2002 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 2000, 2001 and 2002, (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 ABI, its audited financial statements for the fiscal
year ended December 31, 2002 ("ABI Audited Financial Statements"), including the
related notes and schedules, fairly present 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 ABI Audited
Financial Statements, including any related notes and schedules, fairly present
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. In the case of Alliance Bank, its Statements of
Condition filed with the state and federal bank agencies during 2002 and 2003
were prepared in material compliance with the instructions therefor and are not
known by ABI management to contain any material errors or misstatements. In the
case of ABI and its subsidiaries, the unaudited monthly financial reports
prepared subsequent to June 30, 2003 fairly present the results of operations
and the financial conditions of the entity or entities to which it relates,
except that the financial reports do not contain any and all footnotes required
by Generally Accepted Accounting Principles and are subject to normal year-end
adjustments that are not material in amount or effect. It has no material
obligations or liabilities, contingent or otherwise, not disclosed in the ABI
Audited Financial Statements or any subsequent unaudited monthly financial
interim of Alliance Bank or ABI, and its consolidated allowance for loan and
lease losses, as shown on its most recent balance sheet or statement of
condition was adequate in the judgment of ABI's management, 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 Alliance Bank.
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(i) Since December 31, 2002, in the case of SFNC and ABI, there has been no
material adverse change in the financial condition of either SFNC and its
subsidiaries, taken as a whole, or ABI 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 ABI nor Alliance Bank 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.
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(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 ABI substantially
all of the buildings and equipment in regular use by ABI 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 retention of DD&F Consulting Group, Inc. by ABI, neither
ABI 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 ABI in the Merger ("Registration Statement"),
or (2) the proxy statement to be distributed in connection with ABI'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.
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(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. 9601, et seq., the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901, et seq., the Clean Air Act, as
amended, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. 1251, et seq., the Toxic Substances Control Act, as amended,
15 U.S.C. 9601, et seq., the Emergency Planning and Community Right to Know Act,
42 U.S.C. 11001, et seq., the Safe Drinking Water Act, 42 U.S.C. 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 ABI 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) ABI 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.
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(x) In the case of SFNC, its present intention is to continue to operate
Alliance Bank as a separate bank under the name "Simmons First Bank of Hot
Springs". However, SFNC may, if it so determines to be in its best business
interest at such time, cause the bank to combine or merge with another financial
institution or otherwise modify the status of the bank as a separate entity.
Section 4.02 Representations and Warranties of ABI. Except as disclosed in
writing in the Disclosure Letter, ABI, for itself and Alliance Bank, to the
extent applicable to Alliance Bank, to the best of their knowledge, represent
and warrant to SFNC, that none of ABI's executive management, consisting of
David Bartlett, President and Chief Executive Officer, Ronnie Twyford, Senior
Vice President and Steve Trusty, Senior Vice President, 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 ABI or any of its subsidiaries, with respect to loans to borrowers
which are payable to ABI 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 ABI or Alliance Bank:
(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 the loan file or a
loan officer worksheet, loan summary report or similar interoffice loan
documentation is in fact the collateral held by ABI or Alliance Bank to secure
each loan;
(d) ABI 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) ABI 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 ABI or its subsidiaries in the
collateral held for each loan is properly perfected in the priority described as
being held by ABI 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) ABI 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 ABI 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; and
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(i) With respect to any loans in which ABI 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.
ARTICLE V
COVENANTS
Section 5.01 Covenants. SFNC hereby covenants with and to ABI, and ABI
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 ABI, 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 as a Board by a
majority vote 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. ABI 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 ABI, 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, 2002, 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) or pursuant to that certain Confidentiality Agreement, dated
July11, 2003, between ABI and SFNC, shall affect or be deemed to modify any
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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, ABI 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, to the Arkansas State Bank
Department ("ASBD") 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 and contingent on the consummation of the
Merger, ABI shall, consistent with generally accepted accounting principles,
cause Alliance Bank 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 have been satisfied and no such accrual or other
adjustment made by ABI pursuant to the provisions of this subsection (l) shall
constitute an acknowledgment by ABI 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 Alliance Bank, to offer to all persons who were employees of ABI or
Alliance Bank, as reflected in the payroll records of such institutions, (except
certain senior executive officers which have requested to be excluded from
certain retirement plans) immediately prior to the Effective Date and who become
employees of SFNC or any of its subsidiaries, including those who remain as
employees of Alliance Bank immediately following the Effective Date (except
certain senior executive officers which have requested to be excluded from
certain benefit plans), 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 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 ABI 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; and
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(n) In the event the transactions contemplated by this Agreement are not
consummated, SFNC agrees that for a period of eighteen (18) months from and
after September 12, 2003, it will not, directly or indirectly, either personally
or by or through its agent, on behalf of itself or on behalf of any other
entity, association or individual, hire, solicit or seek to hire any employee of
ABI or any Subsidiary of ABI or any individual who was an employee of ABI or
such Subsidiary on September 12, 2003, or in any other manner attempt, directly
or indirectly, to persuade any such employee to discontinue his or her status of
employment with ABI or its Subsidiary; provided that the foregoing restriction
shall not apply to any person who seeks employment from SFNC after his or her
employment with ABI has been terminated, whether voluntarily or involuntarily.
For the purposes of this subsection, the term "Subsidiary" shall mean any other
entity whose shares of stock or other securities having a majority of the
general voting power in electing the Board of Directors or equivalent governing
body of such entity are, at the time as of which any determination is being
made, owned by ABI, either directly or indirectly through one or more other
entities constituting Subsidiaries.
(o) In the case of SFNC, it will evaluate with ABI management, the staffing
needs of Alliance Bank after the Effective Date. If any positions at Alliance
Bank are eliminated, SFNC will give the affected employees an opportunity to
transfer to other available positions at Alliance Bank or other SFNC affiliates.
Any such displaced employee which cannot be otherwise accommodated with
continued employment will be eligible for the existing SFNC severance program.
(p) Alliance Bank has entered into Executive Deferred Compensation
Agreements, Executive Agreements under an Executive Supplemental Retirement Plan
and Life Insurance Endorsement Method Split Dollar Plan Agreements with David
Bartlett, Ronnie Twyford and Steve Trusty, each dated September 25, 2001. Unless
such agreements are terminated prior to the Effective Date, SFNC will
acknowledge the existence of such agreements, will consent to Alliance Bank
continuing such agreements for the aforesaid officers and will agree to not
permit Alliance Bank to take any action adversely affecting such agreements,
without the consent of the officer so affected.
ARTICLE VI
CONDITIONS TO CONSUMMATION
Section 6.01 Mutual Conditions. The respective obligations of SFNC and ABI
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 ABI 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 ASBD and the expiration of
any statutory waiting periods without adverse action being taken;
(c) Procurement of all other regulatory consents and approvals, including,
without limitation, any required consents or approvals from the Federal Deposit
Insurance Corporation or United States Treasury, Office of the Comptroller of
the Currency 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 ABI would
not have entered into this Agreement had such conditions or requirements been
known at the date hereof;
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(d) The satisfaction of all other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Agreement;
(e) 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;
(f) 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
(g) 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.
(h) Quattlebaum, Grooms, Tull & Burrow PLLC shall have delivered its
opinion to SFNC and ABI, dated as of the Effective Date, 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 SFNC and ABI will each
be a party to that reorganization. In rendering such opinion, counsel may
require and rely upon representations and covenants contained in certificates of
officers of SFNC, ABI and others. SFNC and ABI will cooperate with each other
and counsel in executing and delivering to counsel customary representations
letters in connection with such opinion.
(i) ABI 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 ABI 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 ABI 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.
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 ABI's
counsel in the form and to the effect customarily received in transactions of
this type;
(b) Each of the representations, warranties and covenants herein of ABI
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 ABI, dated the Effective Date, to such effect;
(c) Phase I environmental audits of all real property owned by ABI 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;
(d) SFNC shall have received all state securities laws and Blue Sky permits
and other authorizations necessary to consummate the transactions contemplated
hereby;
(e) No litigation or proceeding is pending which (1) has been brought
against SFNC or ABI 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 ABI or SFNC;
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Section 6.03 Additional Conditions for ABI. The obligation of ABI to effect
the Merger shall be subject to the satisfaction prior to the Effective Time of
the following additional conditions:
(a) ABI 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 ABI 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 ABI 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 ABI is likely to have a
Material Adverse Effect on ABI or SFNC;
Section 6.04 Effect of Required Adjustments. Any effect on ABI as a result
of action taken by ABI pursuant to Sections 3.01(a), 3.01(b) and 5.01(l) shall
be disregarded for purposes of determining the truth or correctness of any
representation or warranty of ABI and for purposes of determining whether any
conditions are satisfied.
ARTICLE VII
TERMINATION
Section 7.01 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Date, whether before or after the
approval by the stockholders of ABI:
(a) By the mutual consent of SFNC and ABI, by action of their respective
boards of directors;
(b) By SFNC or ABI, 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 ABI 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 ABI, 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 April 30, 2004, 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 or ABI, in the event Quattlebaum, Grooms, Tull & Burrow PLLC
notifies the parties that it will be unable to give the opinion described in
Section 6.01(h).
Section 7.02 Effect of Termination. In the event of the termination of this
Agreement by either SFNC or ABI, 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 herein.
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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), 5.01(n), 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 benefitted 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 ABI, Section 2.02
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. Whether or not the merger is consummated, all costs
and expenses incurred in connection with this Agreement and the merger and the
other transactions contemplated by this Agreement shall be paid by the party
incurring such expense except to the extent specifically stated otherwise in
this Agreement.
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:
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If to ABI and
Alliance Bank, to: ALLIANCE BANCORPORATION, INC.
Attn: David Bartlett
P. O. Box 22000
Hot Springs, Arkansas 71903
Telecopy: (501) 318-1015
With Copies to: Michael S. McCrary, P.A.
The Farrar Firm
First National Bank Building, Third Floor
135 Section Line Road, Box 5
Hot Springs National Park, Arkansas 71913
Telecopy: (501) 525-3933
and
McAfee & Taft A professional Corporation
Attn: C. Bruce Crum
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, OK 73102
Telecopy: (405) 235-0439
If to SFNC, to: SIMMONS FIRST NATIONAL CORPORATION
J. Thomas May, Chairman & CEO
P. O. Box 7009
Pine Bluff, Arkansas 71611-7009
Telecopy: (870) 850-2605
With a Copy to: QUATTLEBAUM, GROOMS, TULL & BURROW PLLC
ATTN: Patrick A. Burrow
111 Center St., Suite 1900
Little Rock, Arkansas 72201
Telecopy: (501) 379-1701
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 and that certain
Confidentiality Agreement dated July 11, 2003 between ABI and SFNC 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.
Section 9.11 No Interference with Legal or Fiduciary Duty. Nothing herein
is intended to prohibit, restrict, or interfere with, any action by any
director, officer, or employee that is reasonably believed by such person to be
required by law or fiduciary duty, and no person shall have liability under this
agreement for any action taken in good faith belief that it is required by law
or fiduciary duty.
ARTICLE X
EXPENSES, INDEMNIFICATION, INSURANCE
Section 10.01 Indemnification. In the event the Merger is consummated, SFNC
shall indemnify and hold harmless each present and former director and officer
of ABI and of Alliance Bank against any cost or expenses (including reasonable
attorney's fees), judgments, fines, losses, claims, damages or liabilities
A-21
incurred in connection with any claim, action, suit, proceeding, or
investigation arising out of or pertaining to matters related to this Agreement
and/or to the merger. SFNC shall advance expenses as incurred provided the
person to whom expenses are advanced provides a satisfactory undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification.
Section 10.02 D&O Insurance. Directors and officers liability insurance for
acts and omissions occurring prior to the Effective Date will be continued
through existing policies or provided by SFNC through its blanket policy in an
amount not less than the coverage provided by ABI prior to the consummation of
the Merger. Coverage for acts and omissions occurring after the Effective Date,
will be provided to directors and officers of Alliance Bank on the same basis as
provided to the other subsidiary banks of SFNC.
[Signatures appear on the following page]
A-22
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
ALLIANCE BANCORPORATION, INC.
By /s/ David Bartlett
____________________________________
David Bartlett, President and
Chief Executive Officer
A-23
ANNEX B
_______
ARKANSAS BUSINESS CORPORATION ACT OF 1987
SUBCHAPTER 13
DISSENTERS' RIGHTS
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 ss. 4-27-1302 and who exercises that right when and in
the manner required by ss.ss. 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 ss. 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
ss. 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;
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(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 ss. 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 the 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.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
4-27-1320. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under ss.
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 ss. 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 ss. 4-27-1322.
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4-27-1321. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under ss.
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 ss.
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 ss. 4-27-1321.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate 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 subsection (a) the notice 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 ss. 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
ss. 4-27-1322(b)(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 ss. 4-27-1326.
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(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 ss. 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 ss. 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
underss.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 ss. 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 ss. 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 ss. 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 ss. 4-27-1325), or reject the corporation's
offer under ss. 4-27-1327 and demand payment of the fair value of his shares and
interest due, if:
B-4
(1) the dissenter believes that the amount paid under ss. 4-27-1325 or
offered under ss. 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 ss. 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.
JUDICIAL APPRAISAL OF SHARES
4-27-1330. Court action.
(a) If a demand for payment under ss. 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 ss. 4-27-1327.
4-27-1331. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under ss. 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 ss. 4-27-1328.
B-5
(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 ss.ss. 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.
B-6
ANNEX C
FAIRNESS OPINION
Merger Among
SIMMONS FIRST
NATIONAL CORPORATION
AND
ALLIANCE BANCORPORATION, INC.
Report Dated
December 3, 2003
December 3, 2003
Board of Directors
Alliance Bancorporation, Inc.
Hot Springs, Arkansas
RE: Fairness Opinion Relative to Pending Agreement and Plan of Merger of
Alliance Bancorporation, Inc., Hot Springs, Arkansas, with Simmons
First National Corporation, Pine Bluff, Arkansas.
____________________________________________________________________
Directors:
The Board of Directors of Alliance Bancorporation, Inc. ("Alliance" or the
"Company") retained Southard Financial, in its capacity as a financial valuation
and consulting firm, to render its opinion of the fairness, from a financial
viewpoint, of the acquisition of Alliance by Simmons First National Corporation
("SFNC"). Southard Financial and its principals have no past, present, or future
contemplated financial, equity, or other interest in either Alliance or SFNC.
This opinion is issued based upon financial data as of October 31, 2003 for
Alliance and September 30, 2003 for SFNC.
Southard Financial is a financial valuation consulting firm specializing in the
valuation of closely-held companies and financial institutions. Since its
founding in 1987, Southard Financial has provided over 2,000 valuation opinions
for clients in 43 states. Further, Southard Financial provides valuation
services for approximately 130 financial institutions annually. Southard
Financial is independent of the parties to the merger.
Approach to Assignment
The key consideration in this fairness opinion is the adequacy of the total
price paid by SFNC. Under the terms of the merger, Alliance will receive 545,000
shares of SFNC and $11,440,000 in cash. The total consideration, based on a
value of $26.00 per share for SFNC common shares, is $25,610,00. Alliance
shareholders may elect to the default allocation of SNFC shares (18.1021 shares)
and $379.978 in cash for each share. Alternatively, they can elect for a higher
cash allocation or a higher stock allocation. The final amount received by
shareholders who elect some allocation other than the default allocation will be
determined based upon the overall preferences of Alliance shareholders. The
approach to this assignment was to consider the following factors:
- A review of the financial performance and position of Alliance and the
value of its common stock;
- A review of the financial performance and position of SFNC and the value of
its common stock;
- A review of recent bank merger transactions;
- A review of the current and historical market prices of banks and bank
holding companies in Arkansas and surrounding states;
- A review of the investment characteristics of the common stock of Alliance
and SFNC;
- A review of the Agreement and Plan of Merger between SFNC and Alliance;
- An evaluation of the impact of the merger on the expected return to the
current shareholders of Alliance; and,
- An evaluation of other factors as was considered necessary to render this
opinion.
C-1
It is Southard Financial's understanding that the merger and resulting exchange
of the stock of Alliance for the outstanding common stock of SFNC constitutes a
non-taxable exchange for federal income tax purposes. The exchange of Alliance
stock for cash may have tax consequences. Because the form of consideration to
be received by shareholders of Alliance may include a combination of cash and
common stock of SFNC, the transaction may have tax consequences for all
shareholders of Alliance.
DUE DILIGENCE REVIEW PROCESS
Review of Alliance Bancorporation, Inc.
Southard Financial reviewed the following information pertaining to Alliance:
1. Consolidated Report of Condition and Income ("Call Report") of Alliance
Bank of Hot Springs for the period ended September 30, 2003.
2. Uniform Bank Performance Report ("UBPR") of Alliance Bank of Hot Springs
for the periods ended December 31, 1998-2002, and June 30, 2003.
3. Alliance Bank of Hot Springs, Strategic Plan 2003.
4. Parent Company Only Financial Statements (FR Y-9SP) of Alliance
Bancorporation, Inc. for the periods ended December 31, 1999-2002 and June
30, 2003.
5. Audited consolidated financial statements of Alliance Bancorporation, Inc.
for the periods ended December 31, 1998-2002.
6. Internal financial statements of Alliance Bank of Hot Springs, for the
period ended October 30, 2003.
7. Additional pertinent information deemed necessary to render this opinion.
Southard Financial visited with the management of Alliance Bancorporation, Inc.
in Hot Springs, Arkansas. Discussions included questions regarding the current
and historical financial position and performance of Alliance, its outlook for
the future, and other pertinent factors.
Review of Simmons First National Corporation
Southard Financial reviewed the following information pertaining to SFNC:
1. Form 10-Q, Simmons First National Corporation for the quarters ended March
31, 2003, June 30, 2003, and September 30, 2003.
2. Form 10-K, Simmons First National Corporation, for the fiscal year ended
December 31, 2002.
3. Annual Report to Shareholders, Simmons First National Corporation,
1999-2002.
4. Bank Holding Company Performance Report of Simmons First National
Corporation for the periods ended December 31, 1998-2002 and June 30, 2003.
5. Various analysts' reports.
6. Additional pertinent information deemed necessary to render this opinion.
Southard Financial visited with the management of Simmons First National
Corporation in Hot Springs, Arkansas. Discussions included questions regarding
the current and historical financial position and performance of SFNC, its
outlook for the future, and other pertinent factors.
C-2
Merger Documentation
Southard Financial reviewed the Agreement and Plan of Merger (the "Agreement")
dated October 8, 2003. Appropriate aspects of this Agreement were discussed with
the management of Alliance and SFNC.
Limitations of Analysis
Although discussions with management and supporting documentation give Southard
Financial comfort that its due diligence efforts were appropriate, Southard
Financial has not conducted a physical examination of all Alliance's properties
or facilities and has not obtained or been provided with any formal evaluation
of such properties and facilities. Southard Financial has reviewed the financial
information and other internal data provided, as well as other publicly
available information, and while unable to verify the accuracy and completeness
of such data and information, Southard Financial has judged the reasonableness
thereof and made certain judgments thereto. The opinion is necessarily based
upon market, economic and other considerations as they exist on, and can be
evaluated as of the date of this letter.
Further, Southard Financial is not expressing any opinion as to the actual value
of the common stock of SFNC when issued to Alliance's shareholders pursuant to
the merger, or the price at which shares of SFNC will trade subsequent to the
merger.
MAJOR CONSIDERATIONS
Numerous factors were considered in the overall review of the proposed merger.
The review process included considerations regarding Alliance, SFNC, and the
proposed merger. The major considerations are as follows:
Alliance Bancorporation, Inc.
- Historical earnings and dividend payments;
- Outlook for future performance, earnings, and dividends;
- Economic conditions and outlook in Alliance's market;
- The competitive environment in Alliance's market;
- Comparisons with peer banks and bank holding companies;
- Potential risks in the loan and securities portfolios;
- Recent minority stock transactions in Alliance's common stock; and,
- Other such factors as were deemed appropriate in rendering this opinion.
Simmons First National Corporation
- Historical earnings and dividend payments;
- Outlook for future performance, earnings, and dividends;
- Economic conditions and outlook in SFNC's market;
- The competitive environment in SFNC's market;
- Comparisons with peer banks and bank holding companies;
- Potential risks in the loan and securities portfolios;
- Recent minority stock transactions in SFNC's common stock; and,
- Other such factors as were deemed appropriate in rendering this opinion.
C-3
Common Factors
- Historical and current bank merger pricing; and,
- Current market prices for minority blocks of common stocks of banks and
bank holding companies in Arkansas and surrounding states.
The Proposed Merger
- The terms of the Agreement and Plan of Merger and the specific pricing of
the merger;
- Adequacy of the consideration paid to the shareholders of Alliance;
- The assumption that the merger will be treated as a tax-free exchange with
respect to the SFNC shares received;
- The impact on SFNC's capital and liquidity positions;
- The historical dividend payments of SFNC and the likely impact on the
dividend income of the current shareholders of Alliance (equivalency of
cash dividends);
- Pro-forma combined income statements for SFNC post merger and the expected
returns to Alliance shareholders;
- The market for minority blocks of SFNC common stock; and,
- Other such factors as deemed appropriate.
OVERVIEW OF FAIRNESS ANALYSIS
In connection with rendering its opinion, Southard Financial performed a variety
of financial analyses. Southard Financial believes that its analyses must be
considered as a whole and that considering only selected factors could create an
incomplete view of the analyses and the process underlying the opinion. The
preparation of a fairness opinion is a complex process involving subjective
judgment and is not susceptible to partial analyses. In its analyses, Southard
Financial made numerous assumptions, many of which are beyond the control of
Alliance and SFNC. Any estimates contained in the analyses prepared by Southard
Financial are not necessarily indicative of future results or values, which may
vary significantly from such estimates. Estimates of value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may actually be sold. None of the analyses performed by
Southard Financial was assigned greater significance than any other.
C-4
FAIRNESS OPINION
Based upon the analyses of the foregoing and such matters as were considered
relevant, it is the opinion of Southard Financial that the terms of the offer
for the acquisition of Alliance Bancorporation, Inc. by Simmons First National
Corporation pursuant to the Agreement and Plan of Merger are fair, from a
financial viewpoint, to the shareholders of Alliance Bancorporation, Inc.
This opinion is solely for the use and benefit of the Board of Directors, and
(except for inclusion in proxy materials to be sent to shareholders of Alliance
and in necessary regulatory applications) any summary of or reference to the
opinion or any other reference to Southard Financial by Alliance in connection
with the merger will be subject to Southard Financial's prior review and written
approval, which shall not be unreasonably withheld. The opinion will not be
included in summarized form, or referred to in any manner in materials
distributed to the public or potential investors of Alliance without Southard
Financial's prior written consent, which shall not be unreasonably withheld.
In accordance with recognized professional ethics, Southard Financial's
professional fees for this service are not contingent upon the opinion expressed
herein. Thank you for this opportunity to be of service to Alliance
Bancorporation, Inc.
Sincerely yours,
SOUTHARD FINANCIAL
C-5
QUALIFICATIONS OF SOUTHARD FINANCIAL
BACKGROUND o Founded in 1987.
o Principals have combined business valuation
experience of over thirty years.
o Clients served throughout the United States.
o Broad industry experience.
o Services provided for public and closely-held companies.
o Annual valuation services provided for over 100 ESOPs, making
Southard Financial one of the largest ESOP appraisers in the
United States.
PROFESSIONAL
CREDENTIALS o David A. Harris is a senior member of the American Society
of Appraisers (ASA).
o Both principals of Southard Financial are Chartered Financial
Analysts (CFA).
o Both principals are former officers of the West Tennessee
Chapter of the ASA.
EDUCATIONAL
CREDENTIALS o Douglas K. Southard holds Doctor of Business Administration
and Master of Business Administration degrees from Indiana
University, with concentrations in finance, economics, and
quantitative analysis.
o David A. Harris holds the Master of Business Administration
degree from Memphis State University, with a concentration in
finance and business investments.
BUSINESS
ETHICS o Southard Financial and its principals adhere to the ethical
standards of the Institute of Chartered Financial Analysts
and the American Society of Appraisers.
o All reports conform to the Uniform Standards of Professional
Appraisal Practice.
o Southard Financial is committed to providing unbiased opinions
to be used for decision making.
o Fees for valuation services are not contingent upon the
conclusion of value or the completion of a transaction.
C-6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article Sixteenth of SFNC's Amended and Restated Articles of Incorporation
provides that SFNC's directors will not be personally liable to SFNC or any of
its shareholders for monetary damages resulting from breaches of their fiduciary
duty as directors to the fullest extent permitted by the Arkansas Business
Corporation Act of 1987, as amended. The 1987 Act permits the limitation of
liability for monetary damages of directors for breaches of fiduciary duty,
except (a) for any breach of the director's duty of loyalty to SFNC or its
shareholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Arkansas Code
Annotated ss.4-27-833, as the same exists or hereafter may be amended, (d) for
any transaction from which the director derived an improper personal benefit, or
(e) for any action, omission, transaction, or breach of a director's duty
creating any third party liability to any person or entity other than SFNC or
stockholder.
Section 4-27-850 of the Arkansas Business Corporation Act empowers Arkansas
corporations to indemnify any former or current director or officer against
expenses, judgments, fines and amounts paid in settlements actually and
reasonably incurred by him in connection with any action, suit or proceeding, if
such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal proceeding had no reasonable cause to believe his
conduct was unlawful, except that no indemnification shall be made in connection
with any action by or in the right of the corporation if such person is adjudged
to be liable for negligence or misconduct in the performance of his duty to the
corporation, unless the court determines that despite that adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses actually and reasonably incurred by him.
Article Twelfth of SFNC's Amended and Restated Articles of Incorporation
provides that SFNC shall, to the full extent permitted by the Arkansas Business
Corporation Act, indemnify all persons whom it may indemnify pursuant thereto.
The effect of the indemnification provisions contained in SFNC's Amended
and Restated Articles of Incorporation is to require SFNC to indemnify its
directors and officers under circumstances where such indemnification would
otherwise be discretionary.
SFNC's Amended and Restated Articles of Incorporation specify that the
indemnification rights granted thereunder are enforceable contract rights which
are not exclusive of any other indemnification rights that the director or
officer may have under any by-law, vote of shareholders or disinterested
directors or otherwise. As permitted under the Arkansas Business Corporation
Act, SFNC's Amended and Restated Articles of Incorporation also authorize the
purchase of directors' and officers' insurance for the benefit of its past and
present directors and officers, irrespective of whether SFNC has the power to
indemnify such persons under Arkansas law. SFNC currently maintains insurance as
authorized by these provisions.
SFNC's Amended and Restated Articles of Incorporation also provide that
expenses incurred by a director or officer in defending a civil or criminal
lawsuit or proceeding arising out of actions taken in his official capacity, or
in certain other capacities, will be paid by SFNC in advance of the final
disposition of the matter upon the approval of the Board or the shareholders and
upon receipt of an undertaking from the director or officer to repay the sum
advanced if it is ultimately determined that he is not entitled to be
indemnified by SFNC pursuant to applicable provisions of Arkansas law.
The indemnification provisions are not intended to deny or otherwise limit
third party or derivative suits against SFNC or its directors or officers.
However, to the extent a director or officer were entitled to indemnification,
the financial burden of a third party suit would be borne by SFNC, and SFNC
would not benefit from derivative recoveries since the amount of such recoveries
would be repaid to the director or officer pursuant to the agreements.
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Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger by and between Simmons First
National Corporation and Alliance Bancorporation, Inc.
(included as Annex A to the Proxy Statement/Prospectus
included in Part I of this Registration Statement).
5.1* Opinion of Quattlebaum, Grooms, Tull & Burrow PLLC regarding
the legality of the securities being registered.
8.1* Opinion of Quattlebaum, Grooms, Tull & Burrow PLLC regarding
certain tax aspects of the merger.
23.1 Consent of Quattlebaum, Grooms, Tull & Burrow PLLC, included
as part of its opinion filed as Exhibit 5.1 and incorporated
herein by reference.
23.2* Consent of BKD, LLP, independent auditors.
24.1* Powers of Attorney of Directors. (Included following
signature page of this registration statement).
99.1* Form of Proxy Card for Alliance Bancorporation, Inc.
99.2* Form of Election Form
99.3* Form of Letter of Transmittal
* Filed herewith.
Item 22. Undertakings.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
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(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
(C) The undersigned Registrant hereby undertakes:
(1) 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.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
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, 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.
(D) 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.
(E) The undersigned Registrant hereby 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 S-4, 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 the documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
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(F) 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Pine Bluff, State of
Arkansas, on February 10, 2004.
SIMMONS FIRST NATIONAL CORPORATION
(Registrant)
By: /s/ J. Thomas May
____________________________________
J. Thomas May
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
_________ _____ ____
/s/ J. Thomas May Chairman of the Board, President and February 10, 2004
________________________ Chief Executive Officer
(J. Thomas May)
Chief Financial Officer February 10, 2004
/s/ Barry L. Crow (Principal Financial Officer and
________________________ Accounting Officer)
(Barry L. Crow) Director February 10, 2004
/s/ Willima E. Clark
________________________ Accounting Officer)
(William E. Clark) Director February 10, 2004
/s/ Lara F. Hutt, III
________________________ Accounting Officer)
(Lara F. Hutt, III) Director February 10, 2004
/s/ George A Makris, Jr.
________________________ Accounting Officer)
(George A. Makris, Jr.) Director February 10, 2004
/s/ David R. Perdue
________________________ Accounting Officer)
(David R. Perdue) Director February 10, 2004
/s/ Harry L. Ryburn
________________________ Accounting Officer)
(Harry L. Ryburn) Director February 10, 2004
/s/ Henry F, Trotter
________________________ Accounting Officer)
(Henry F. Trotter) Director February 10, 2004
/s/ Steve A. Cosse
________________________ Accounting Officer)
(Steven A. Cosse)
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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
545,000 shares of the Company's Class A Common Stock, $1.00 par value per share,
to be issued upon consummation of a merger with Alliance Bancorporation, 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
/s/ William E. Clark Director
William E. Clark
/s/ Steven A. Cosse Director
Steven A. Cosse
/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
/s/ Harry L. Ryburn Director
Harry L. Ryburn
/s/ Henry F. Trotter Director
Henry F. Trotter
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