SUMMARY

This summary is a brief overview of the key aspects of the proposed merger transaction and the related offering of Business First common stock to shareholders of AGFC. This summary identifies those aspects of the proposed transactions that we believe are most significant, but it may not contain all of the information that is important to you. We urge you to carefully read this entire document and the other documents we refer to in this document. These documents will give you a more complete description of the transactions we are proposing. For more information about Business First, see “Where You Can Find More Information” on page 225. We have included page references in this summary to direct you to other places in this proxy statement/prospectus where you can find a more complete description of the topics we have summarized.

The Companies (pages 112, 151)

BUSINESS FIRST BANCSHARES, INC.

Business First Bank Plaza

8440 Jefferson Highway, Suite 101

Baton Rouge, Louisiana 70809

(225) 248-7600

Business First Bancshares Inc., a Louisiana corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHC Act”). Business First’s mission is to be the financial institution of choice for Louisiana enterprises and their owners and employees. Through its wholly-owned subsidiary, Business First Bank, Business First offers a broad range of commercial and personal banking products and services.

Business First Bank is a Louisiana state non-member bank that is headquartered in Baton Rouge, Louisiana. Business First Bank serves the state of Louisiana with banking centers located in Baton Rouge, Lafayette, the New Orleans’ Northshore, Northwest Louisiana (Shreveport/Bossier) and Southwest Louisiana (Lake Charles). Business First Bank also has a Loan Production Office in the Houma/Thibodaux Bayou region of Louisiana. In each region, Business First Bank has experienced bankers led by a local president who are all involved in the community and industry.

As of September 30, 2014, on a consolidated basis, Business First had total assets of $696.7 million, total loans of $541.1 million, total deposits of $600.1 million and shareholders’ equity of $77.5 million. As of September 30, 2014, Business First Bank had total assets of $696.2 million, total loans of $541.1 million, total deposits of $602.1 million and shareholders’ equity of $74.7 million.

On July 24, 2014, Business First announced that it had entered into a definitive agreement to acquire AGFC and American Gateway Bank. The merger has been approved by the boards of directors of Business First and AGFC and is expected to close during the first quarter of 2015, although delays may occur. The merger is subject to certain conditions, including the approval by shareholders of AGFC and customary regulatory approvals.

AMERICAN GATEWAY FINANCIAL CORPORATION

320 North Alexander Avenue

Port Allen, Louisiana 70767

(225) 387-0011

American Gateway Financial Corporation, a Louisiana corporation, is a bank holding company registered under the BHC Act and the holding company for American Gateway Bank. Through its wholly-owned subsidiary, American Gateway Bank, AGFC currently operates from ten banking offices, which are all located in

 

the Baton Rouge, Louisiana Metropolitan Statistical Area (“MSA”). It has offices in Ascension Parish (Gonzales Branch), East Baton Rouge Parish (principal office and Florida Boulevard, Jefferson Highway, Perkins Road and Zachary Branches), Livingston Parish (Denham Springs Branch) and West Baton Rouge Parish (Brusly, Erwinville and Port Allen Branches).

As of September 30, 2014, on a consolidated basis, AGFC had total assets of $362.2 million, total loans of $168.6 million, total deposits of $259.1 million and shareholders’ equity of $44.1 million. As of September 30, 2014, American Gateway Bank had total assets of $362.2 million, total loans of $168.6 million, total deposits of $259.1 million and shareholders’ equity of $44.1 million.

The Merger (page 53)

The reorganization agreement is included with this proxy statement/prospectus as Appendix A . Please read the entire reorganization agreement. It is the legal document that governs the merger.

On July 23, 2014, AGFC entered into the reorganization agreement with Business First and its wholly-owned subsidiary B1B. The reorganization agreement provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First. Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). Business First and AGFC expect to complete the merger during the first quarter of 2015, although delays could occur.

The Merger Consideration (page 53)

If the reorganization agreement is approved and the merger is completed, each of the outstanding shares of AGFC common stock will be converted into the right to receive a combination of cash and shares of Business First common stock. Subject to certain adjustments, shareholders of AGFC will receive consideration (the “Aggregate Merger Consideration”) equal to: (i) an aggregate of $2,179,440 in cash (the “Aggregate Cash Consideration”), which represents $10.00 per share of AGFC’s outstanding common stock, and (ii) an aggregate number of shares of Business First common stock (the “Aggregate Stock Consideration”) equal to the following:

 

Aggregate Stock Consideration			=			Adjusted AGFC Tangible Equity Capital
						Adjusted Business First Tangible Equity Capital Per Share

The individual components of the above-described formula will be calculated as follows.

“Adjusted AGFC Tangible Equity Capital” means the difference between: (a) 1.12 times the AGFC Tangible Equity Capital (as defined below) and (b) $2,179,440, which represents the value of the Aggregate Cash Consideration.

“Adjusted Business First Tangible Equity Capital Per Share” means an amount equal to 1.175 times the quotient of (a) the Business First Tangible Equity Capital (as defined below), divided by (b) the number of issued and outstanding shares of Business First common stock.

“AGFC Tangible Equity Capital” and “Business First Tangible Equity Capital” means an amount equal the sum of the capital stock, surplus and undivided profits of the applicable company (on a consolidated basis in accordance with GAAP), and excluding any intangible assets and the effect of any unrealized gains or losses on

 

available-for-sale securities. For a full description of the calculation of AGFC Tangible Equity Capital and Business First Tangible Equity Capital, including all possible adjustments, see the section of this proxy statement/prospectus titled, “Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration,” beginning on page 53.

The reorganization agreement provides that Business First may terminate the agreement if the AGFC Tangible Equity Capital is less than approximately $39.6 million as of the date the merger consideration is calculated. AGFC has a similar right to terminate the reorganization agreement if the Business First Tangible Equity Capital is less than approximately $75.0 million as of the date the merger consideration is calculated. Either party may waive their right to terminate the agreement in the event that the other party’s Tangible Equity Capital is less than the above-described minimums.

The merger consideration will be calculated as of a date that is ten days prior to the closing of the merger. Under the terms of the reorganization agreement, the closing of the merger could take place as late as May 31, 2015, or later if Business First and AGFC agree to extend the time for consummation.

For illustration purposes only and disregarding certain adjustments described in more detailed elsewhere in this proxy statement/prospectus, if the merger had been completed as of January 31, 2015 and assuming AGFC Tangible Equity Capital and Business First Tangible Equity Capital of approximately $45.3 million and $80.1 million as of that date, shareholders of AGFC would have been entitled to receive approximately 11.8 shares of Business First common stock (plus cash in lieu of any fractional share) and $10.00 in cash in exchange for each share of AGFC common stock that they owned as of the effective time for the merger.

For illustration purposes only and disregarding certain adjustments detailed elsewhere in this proxy statement/prospectus, in the event that the Business First Tangible Equity Capital and the AGFC Tangible Equity Capital as of the merger consideration calculation date are equal to the minimum amounts permitted under the reorganization agreement of $75.0 million and $39.6 million, respectively, shareholders of AGFC would be entitled to receive approximately 11.67 shares of Business First common stock (plus cash in lieu of any fractional share) and $10.00 in cash in exchange for each share of AGFC common stock that they owned as of the effective time for the merger.

Upon completion of the merger, it is anticipated that the shareholders of AGFC and Business First will own approximately 30.8% and 69.2%, respectively, of the total issued and outstanding shares of the combined entity. As of June 30, 2014, the quarter end closest to the date that the reorganization agreement was signed, the imputed aggregate purchase for shares of AGFC common stock to be acquired by Business First in the proposed merger was approximately $45,488,597, or $208.72 per share.

The actual merger consideration is subject to adjustment and may be higher or lower than the consideration described in the example above. Specifically, the AGFC Tangible Equity Capital and the Business First Tangible Equity Capital will be adjusted for any extraordinary items related to the merger, including reductions for (a) the after-tax amount of all costs and expenses related to the merger, and (b) the after-tax amount of any fees and commissions payable to any broker, finder, financial advisor or investment banking firm in connection with the merger. The AGFC Tangible Equity Capital will be further reduced by 50% of the after-tax amount of certain identified costs and expenses to the extent that they are less than $764,000 and 100% of the after-tax amount of such costs and expenses to the extent that they exceed $764,000. For a more detailed description of these costs and the possible related adjustments to the merger consideration, please see the section of this proxy statement/prospectus titled, “Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration,” beginning on page 53. Because the per share merger consideration will be determined based upon the adjusted tangible shareholders’ equity of Business First and AGFC on the date that is ten days prior to the closing, the

 

amount of consideration you will receive will not be known at the time you vote on the reorganization agreement. Accordingly, you should read this proxy statement/prospectus carefully to understand the value of the consideration you will receive in the merger.

For an explanation of how the merger consideration will be calculated, please see “ Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration, ” beginning on page 53.

Pro Forma Ownership Limitation in the Combined Company (page 54)

The terms of the reorganization agreement prevent any shareholder of AGFC, or any group of AGFC shareholders that would be deemed to be “acting in concert” under applicable Federal Reserve regulations, from owning more than 3.0% of the outstanding shares of the combined company on a pro forma basis as a result of the merger. Accordingly, the amount and type of consideration deliverable to any particular shareholder of AGFC in connection with the merger will be adjusted if that shareholder’s pro forma ownership of the combined company (either individually, or collectively with a group “acting in concert”) will exceed 3.0% ownership limitation. Specifically the number of shares of Business First common stock that would otherwise be deliverable such shareholder as merger consideration will be reduced so that the shareholder’s (or, if applicable, the group of shareholders’) pro forma ownership will be no more than 3.0%. The amount of cash consideration payable to those shareholders will be increased by an amount equivalent to the value of the reduction in their stock consideration. For more information about possible adjustment to the merger consideration, please see “ Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration ,” beginning on page 53.

Material U.S. Federal Income Tax Consequences (page 101)

The transaction contemplated by the reorganization agreement is intended to be treated as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, upon the exchange of your shares of AGFC common stock for the per share merger consideration, 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.

This tax treatment may not apply to all stockholders of AGFC. 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.

In connection with the filing with the SEC of the registration statement on Form S-4 of which this proxy statement/prospectus is a part, Fenimore, Kay, Harrison & Ford LLP has rendered its tax opinion to Business First and AGFC addressing the U.S. federal income tax consequences of the merger as described herein. A copy of that opinion is included as Exhibit 8.1 to the registration statement. Business First and AGFC will not be obligated to complete the merger unless they each receive an updated opinion from legal counsel, 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 Code. If such opinion is rendered, the U.S. federal income tax treatment of the merger should be as described above. The opinion of counsel, however, does not bind the Internal Revenue Service and does not preclude the IRS or the courts from adopting a contrary position.

Opinions of Financial Advisors of AGFC (page 64)

In connection with its consideration of the merger, the AGFC board of directors received written fairness opinions from AGFC’s financial advisors, Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”), and National Capital, LLC (“National Capital”). The fairness opinions, each dated as of July 23, 2014, conclude that subject to certain terms, conditions and qualifications, as of the date of the reorganization agreement, the merger consideration to be received by the shareholders of AGFC is fair, from a financial point of view, to such shareholders.

 

The full text of the written opinions of Sandler O’Neill and National Capital, which set forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by each of Sandler O’Neill and National Capital in connection with rendering their respective opinions, are attached to this document as Appendix B and are incorporated herein by reference. You should read the opinions and the description beginning on page 64 carefully and in their entirety. The respective opinions of Sandler O’Neill and National Capital are addressed to the AGFC board of directors, are directed only to the consideration to be paid to the holders of shares of AGFC common stock pursuant to the reorganization agreement and do not address any other matter. The opinions do not constitute a recommendation to any shareholder as to how such shareholder should vote with respect to the merger or any other matter .

Comparative Per Share Market Price Information (page 32)

There is no established public trading market for shares of Business First, which is inactively traded in private transactions. Since January 1, 2013 to the date of this proxy statement/prospectus there have been trades of approximately 222,520 shares of Business First common stock, which was the only class of stock issued and outstanding as of [ — ], 2014. The per share sales price for these trades has ranged from a low of $14.00 to a high of $17.25.

There is no established public trading market for shares of AGFC stock, which is inactively traded in private transactions. Since January 1, 2013, there have been trades of approximately 20,849 shares of AGFC common stock, which is the only class of stock issued and outstanding as of [ — ], 2015. The per share sales price for the trades of which AGFC is aware has ranged from a low of $135.00 to a high of $170.00.

The AGFC Special Shareholders’ Meeting (page 50)

The special meeting of shareholders of AGFC will be held on [ — ], 2015, at [ — ] [ — ].p., local time, at 320 N. Alexander Avenue, Port Allen, Louisiana 70767. At the special meeting, you will be asked:

 

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to consider and vote upon a proposal to approve the reorganization agreement and the transactions contemplated thereby, as described in this proxy statement/prospectus;

 

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to approve any motion to adjourn the special meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the reorganization agreement, (ii) to provide to AGFC shareholders any supplement or amendment to the proxy statement/prospectus or (iii) to disseminate any other information which is material to the AGFC shareholders voting at the special meeting; and

 

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to act on any other matters that may be properly submitted to a vote at the special meeting.

Record Date Set at [ — ], 2015; Vote Required to Complete the Merger (page 50)

You may vote at the special meeting of AGFC shareholders if you owned AGFC common stock as of 5:00 p.m. on [ — ], 2015. You may cast one vote for each share of AGFC common stock you owned at that time. As of [ — ], 2015, there were 217,944 shares of AGFC common stock issued and outstanding.

Approval of the reorganization agreement by AGFC shareholders requires the affirmative vote of the holders of at least a majority of the shares of AGFC common stock that are entitled to be cast at the special meeting. Approval of the Adjournment Proposal requires the affirmative vote of the holders of at least a majority of the shares of AGFC common stock that are cast at the special meeting.

 

You may vote your shares of AGFC common stock by attending the special meeting and voting in person or by completing and mailing the enclosed proxy card. If you are the record holder of your shares, you can revoke your proxy at any time before the vote is taken at the special meeting by sending a written notice revoking the proxy or a later-dated proxy to the secretary of AGFC, or by voting in person at the special meeting.

AGFC’s Reasons for the Merger and Recommendations of AGFC’s Board (page 61)

Based on the reasons discussed below, the board of directors of AGFC believes that the merger is fair to you and in your best interests, and unanimously recommends that you vote FOR the proposal to approve the reorganization agreement. For a discussion of the circumstances surrounding the merger, see page 56.

In approving the reorganization agreement, AGFC’s board of directors consulted with its financial advisor, Sandler O’Neill, regarding the financial aspects of the merger and it engaged both Sandler O’Neill and National Capital (as an independent valuation firm) to provide opinions regarding the fairness of the merger consideration, from a financial point of view, to the holders of shares of AGFC common stock. The Board of Directors of AGFC also consulted with its outside legal counsel as to its legal duties and the terms of the reorganization agreement. In arriving at its decision to approve the reorganization agreement, AGFC’s board of directors considered a number of factors, including the following:

 

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AGFC’s board of directors’ belief that the methodology for determining the amount of merger consideration that would be received by AGFC shareholders pursuant to the merger was fair and when determined in accordance with the terms of the reorganization agreement would represent a fair price for the shares of common stock of AGFC;

 

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AGFC’s board of directors’ understanding of AGFC’s business, historical, current and projected financial performance, competitive and operating environment, operations, prospects and management strengths, along with current trends in the industry in which AGFC operates, including the current competitive and regulatory environment, as well as the execution risks of continuing with AGFC’s current strategy in light of the foregoing;

 

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each of Sandler O’Neill’s and National Capital’s opinions, dated as of July 23, 2014, that, as of such date (the date on which AGFC’s board of directors approved the reorganization agreement), and based upon and subject to the factors, procedures, qualifications, limitations and assumptions set forth in those opinions, the total aggregate consideration to be received by the holders of AGFC common stock pursuant to the merger was fair from a financial point of view to such holders;

 

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that shareholders of AGFC will receive part of the merger consideration in shares of Business First common stock, which will be registered with the SEC in connection with the merger, contrasted with the fact that there are currently restrictions upon the transfer of AGFC common stock;

 

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the treatment of the merger as a “reorganization” within the meaning of Section 368(a) of the Code with the result that the portion of AGFC common stock exchanged for Business First common stock is generally tax-free and the portion of the AGFC common stock exchanged for cash is generally taxable either as a dividend or capital gain, depending on each AGFC shareholder’s individual circumstances;

 

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the financial analyses, information and perspectives provided to the AGFC board of directors by AGFC’s management and AGFC’s financial advisors;

 

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the fact that completion of the merger requires the approval of AGFC’s shareholders;

 

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the results that AGFC could expect to obtain if it continued to operate independently, and the likely benefits to AGFC shareholders of that course of action, as compared with the value of the merger consideration offered by Business First;

 

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the ability of Business First to pay the aggregate merger consideration without a financing contingency and without the need to obtain financing to close the transaction;

 

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the ability of Business First to receive the requisite regulatory approvals in a timely manner;

 

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the terms and conditions of the reorganization agreement, including the parties’ respective representations, warranties, covenants and other agreements and conditions to closing, including a provision that permits AGFC’s board of directors, in the exercise of its fiduciary duties, under certain conditions, to furnish information to a third party that has submitted an unsolicited proposal to acquire AGFC;

 

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that merging with a larger bank holding company would provide the combined corporation the opportunity to realize economies of scale, increase efficiencies of operations and enhance the development of new products and services, potentially benefiting AGFC’s shareholders that would receive Business First common stock in the merger;

 

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the agreement of Business First to continue to provide indemnification for AGFC’s directors and officers following the closing of the merger;

 

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that some of AGFC’s directors and executive officers have other financial interests in the merger in addition to their interests as AGFC shareholders, including financial interests that are the result of compensation arrangements with AGFC and the manner in which such interests would be affected by the merger;

 

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the requirement that AGFC conduct its business in the ordinary course and the other restrictions on the conduct of AGFC’s business before completion of the merger, which may delay or prevent AGFC from undertaking business opportunities that may arise before completion of the merger; and

 

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that under the reorganization agreement AGFC could not solicit competing proposals for the acquisition of AGFC.

The above-listed considerations are not intended to be exhaustive but include the material factors considered by AGFC’s board of directors in approving the merger and the reorganization agreement. In reaching its determination, AGFC’s board of directors did not assign any relative or specific weight to different factors and individual directors may have given different weight to different factors. Based upon the reasons stated above, AGFC’s board of directors believes that the merger is in the best interests of AGFC and its shareholders, and, therefore, recommends that you vote FOR the proposal to approve the reorganization agreement.

The board of directors of AGFG also recommends that you vote FOR the Adjournment Proposal.

Members of AGFC’s Management are Expected to Vote Their Shares For Approval of the Reorganization Agreement (page 219; Exhibit A to Appendix A)

The directors and executive officers of AGFC and American Gateway Bank, who together own 9,585 shares, or approximately 4.4% of the outstanding AGFC Common Stock as of [ — ], 2015, have entered into a voting agreement pursuant to which they have agreed, among other things, that they will vote the shares of AGFC common stock they control in favor of approval of the reorganization agreement and the merger transactions.

Effective Time of the Merger

The merger will become effective at the date and time specified in the related certificates of merger issued by the Louisiana Secretary of State. If AGFC shareholders approve the reorganization agreement at the special meeting, and if all necessary government approvals are obtained and the other conditions to the parties’ obligations to effect the merger are met or waived by the party entitled to do so, we anticipate that the merger will be completed during the first quarter of 2015, although delays could occur.

 

We cannot assure you that the necessary shareholder and governmental approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied.

Exchange of AGFC Stock Certificates (page 90)

As soon as practicable after the effective time of the merger, you will receive a letter and instructions from Business First Bank. The letter will contain instructions and procedures for surrendering your stock certificates representing shares of AGFC common stock in exchange for cash and stock certificates representing shares of Business First common stock that you will be entitled to receive as consideration for the merger. You must carefully review and complete these materials and return them as instructed along with your stock certificates for AGFC common stock. Please do not send AGFC or Business First any stock certificates until you receive these instructions.

Conditions to Completion of the Merger (page 95)

The completion of the merger depends on a number of conditions being satisfied. These include, among others:

 

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approval of the reorganization agreement by the shareholders of AGFC;

 

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receipt of all required governmental approvals of the merger in a manner that does not impose any restrictions on Business First’s operations which, in Business First’s reasonable judgment would adversely impact the benefits of the merger to Business First or would be so burdensome as to render inadvisable the consummation of the merger;

 

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receipt of the opinion of counsel to Business First to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code;

 

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registration of the shares of Business First common stock to be issued to shareholders of AGFC with the SEC;

 

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accuracy of each party’s representations and warranties contained in the reorganization agreement as of the closing date of the merger;

 

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performance or compliance in all material respects by each party with its respective covenants and obligations required by the reorganization agreement;

 

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receipt of all required consents, approvals, waivers and other assurances from non-governmental third parties;

 

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holders of no more than 5% of the issued and outstanding AGFC stock having demanded or being entitled to receive payment of the appraised fair value of their shares as dissenting shareholders;

 

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termination or cancellation of certain of AGFC’s existing phantom stock award agreements;

 

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AGFC having tangible shareholders’ equity, determined as required by the reorganization agreement, of at least $39,571,000 as of a date that is ten days prior the closing of the merger; and

 

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Business First having tangible shareholders’ equity, determined as required by the reorganization agreement, of at least $74,970,000 as of the date that is ten days prior to the closing of the merger.

Additionally, the parties’ decision to enter into the reorganization agreement was conditioned upon the execution of the following agreements, all of which have been executed:

 

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non-competition agreements by each director of AGFC and American Gateway Bank, which will become effective upon consummation of the merger transactions; and

 

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release agreements by each director and executive officer of AGFC and American Gateway Bank, to be effective upon consummation of the merger, releasing AGFC and American Gateway Bank from any claims of such director or officer, subject to certain limited exceptions.

Any condition to the completion of the merger may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition. A party to the reorganization agreement could choose to complete the merger even though a condition has not been satisfied, as long as permitted by law. We cannot be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Regulatory Approvals Required (page 105)

We cannot complete the merger unless it is approved by the Board of Governors of the Federal Reserve System (“Federal Reserve”), or such approval is waived by the Federal Reserve. In addition, the merger of American Gateway Bank with Business First Bank requires the approval of the Federal Deposit Insurance Corporation (“FDIC”) and the Louisiana Office of Financial Institutions (“Louisiana OFI”). We expect to obtain all necessary regulatory approvals, although we cannot be certain if or when we will obtain them. On November 18, 2014, Business First Bank and American Gateway Bank filed applications with the FDIC and the Louisiana OFI to obtain approval of the bank merger.

Amendments or Waiver (page 99)

Business First and AGFC may agree in writing to amend the reorganization agreement and each party may waive its right to require the other party to adhere to any term or condition of the reorganization agreement. The merger consideration to be received by the shareholders of AGFC pursuant to the terms of the reorganization agreement may not be decreased as a result of any amendment to the reorganization agreement after the reorganization agreement has been approved by the AGFC shareholders without further approval by the AGFC shareholders. You should be aware, however, that the actual merger consideration will be calculated based upon the adjusted tangible shareholders’ equity of Business First and AGFC on the date that is ten days prior to the closing of the merger. Consequently, the exact amount of consideration to be received by AGFC’s shareholders will not be known at the time that AGFC’s shareholders vote upon the merger proposal at the special shareholders’ meeting. The actual amount of consideration to be received by AGFC’s shareholders may be less than the amount that they would have received if the merger consideration were calculated as of the date of the special shareholders’ meeting.

Termination of the Reorganization Agreement (page 99)

Business First and AGFC can mutually agree at any time to terminate the reorganization agreement without completing the merger. In addition, either Business First or AGFC may decide, without the consent of the other, to terminate the reorganization agreement if:

 

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the merger has not been completed by May 1, 2015 (or such later date as Business First and AGFC may agree) unless the failure to complete the merger by that time is due to a breach of a representation or warranty or failure to comply with an obligation in the reorganization agreement by the party that seeks to terminate the reorganization agreement;

 

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the merger of AGFC into Business First or the merger of American Gateway Bank into Business First Bank is not approved by the appropriate regulatory authorities, or if Business First or AGFC reasonably determine that there is a substantial likelihood that any such approval will not be obtained or will be obtained only upon conditions that make it inadvisable to proceed with the merger;

 

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the other party materially breaches its representations and warranties or any covenant or agreement contained in the reorganization agreement and such breach has not been cured within 30 days after the terminating party gives written notice of such failure to the breaching party; or

 

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AGFC shareholders fail to approve the reorganization agreement.

AGFC may also terminate the reorganization agreement, without the consent of Business First, if the board of directors of AGFC receives an unsolicited, bona fide alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement and that the failure to accept such proposal would be reasonably likely to cause the board of directors to violate its fiduciary duties under applicable law. However, Business First has the right to adjust the terms and conditions of the reorganization agreement so that the superior proposal no longer constitutes a superior proposal.

Business First may also terminate the reorganization agreement if AGFC has breached its non-solicitation obligations contained in the reorganization agreement in a manner adverse to Business First, the board of AGFC resolves to accept a competing acquisition proposal or the board of AGFC changes its recommendation regarding the merger.

Termination Fee (page 99)

Upon termination of the reorganization agreement for certain specified reasons, AGFC will be obligated to pay to Business First a termination fee in the amount of $1.4 million and/or all of Business First’s expenses in connection with the proposed merger transactions in an amount not to exceed $250,000.

If the reorganization agreement is terminated by:

 

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Business First because AGFC materially breaches the non-solicitation obligations set forth in the reorganization agreement in a manner adverse to Business First;

 

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Business First because AGFC’s board of directors resolves to accept another acquisition proposal;

 

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Business First because AGFC’s board of directors withdraws, amends or modifies, in any manner adverse to Business First, its recommendation or approval of the reorganization agreement or the merger transactions; or

 

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AGFC because AGFC’s board of directors receives an unsolicited, bona fide alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement taking into account any adjustments made by Business First to the merger consideration,

then, unless Business First is in material breach of any covenant or obligation under the reorganization agreement, AGFC will be required to pay Business First a termination fee of $1.4 million plus up to $250,000 for Business First’s expenses related to the merger.

If either Business First or AGFC terminates the reorganization agreement:

 

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after May 1, 2015, and if at the time of termination, the registration statement of which this proxy statement/prospectus is a part has been declared effective for at least 25 business days prior to such termination and AGFC has failed to call, give notice of, convene and hold the AGFC special meeting by such date; or

 

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without regard to timing, if AGFC’s shareholders do not approve the reorganization agreement and an acquisition proposal exists at the time of termination,

 

then, unless Business First is in material breach of any covenant or obligation under the reorganization agreement, AGFC will be required to pay Business First up to $250,000 for its expenses related to the merger.

If either Business First or AGFC terminates the reorganization agreement, and within 12 months of such termination AGFC enters into an acquisition agreement with a third party:

 

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after May 1, 2015, and if at the time of termination, AGFC’s shareholders have not approved the reorganization agreement; or

 

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without regard to timing, if AGFC’s shareholders do not approve the reorganization agreement and an acquisition proposal exists at the time of termination,

then, unless Business First is in material breach of any covenant or obligation under the reorganization agreement, AGFC will be required to pay Business First a termination fee of $1.4 million plus up to $250,000 for Business First’s expenses related to the merger.

Some of the Directors and Officers of AGFC Have Financial Interests in the Merger that are Different from Your Interests (page 97)

Some of the directors and officers of AGFC have interests in the merger that are different from, or are in addition to, their interests as shareholders of AGFC. These interests include:

 

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Termination of Existing Employment and Change-in-Control Agreements . The following officers of AGFC have entered into employment and/or change-in-control agreements with AGFC: Don Ayres, Ricky Sparks, Terre Bidwell and Craig Livingston. The terms of the reorganization agreement require AGFC to accrue the full amount of any payments due to the above-listed officers as a result of the merger or the termination of their employment under their respective employment and/or change-in-control agreements. As soon as practicable after the closing date and termination of employment, Business First will pay to the above-listed officers of AGFC the amounts that have been accrued by AGFC. It is expected that AGFC will accrue, and Business First will pay, an amount equal to $275,000 to Don Ayres under the terms of his employment agreement following consummation of the proposed merger. The other officers of AGFC listed above are expected to continue their employment with Business First following completion of the merger. Accordingly, no payments are expected to be made to those individuals as a result of the merger under their current employment or change-in-control agreements.

 

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Termination of Phantom Stock Agreements . As part of its incentive compensation program, AGFC has granted phantom stock awards to two of its executive officers: Ricky Sparks and Terre Bidwell. The terms of the reorganization agreement require AGFC to terminate all of its currently outstanding phantom stock award agreements prior to closing and to accrue or pay prior to the closing the full amount of all payments that must be made to the holders of all phantom stock awards in connection such termination. As a result of the merger, therefore, the above-listed officers of AGFC will receive payments from AGFC (or from Business First if such payments are accrued by AGFC and not paid prior to closing) in connection with the termination of their phantom stock awards. The award to each of the two participants is 81.67 phantom shares. Each of the two participants will receive the same value for one-half of his/her phantom shares (40.83 shares) as the shareholders of AGFC will receive for their shares in the merger. This value will be paid in cash. For the other one-half of the participant’s phantom shares, each of the two participants will receive a cash payment equal to the product of one-half of the phantom shares (40.83) times the book value per share of AGFC as of December 31, 2014, $8,363.

 

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Insurance . Under the terms of the reorganization agreement, AGFC has agreed to purchase for a period of not less than three years after the effective time for the merger, past acts and extended reporting period insurance coverage for no less than the four-year period immediately preceding the merger under its (i) current directors and officers insurance (or comparable coverage), (ii) employment practices liability insurance, (iii) current financial institutions bond (or comparable coverage) and (iv) bankers professional liability, mortgage errors and omissions and fiduciary liability insurance for each of the directors and officers of AGFC and American Gateway Bank who are currently covered under comparable policies held by AGFC or American Gateway Bank.

 

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Indemnification . Subject to certain limitations and to the extent not prohibited by applicable law, Business First has agreed that all indemnification rights in favor of any director or officer of AGFC or American Gateway Bank that existed as of the effective time of the merger pursuant to AGFC’s or American Gateway Bank’s articles of incorporation, bylaws and other similar documents will continue indefinitely. Business First and Business First Bank, as surviving entities in the proposed merger transactions, will assume the above-described indemnification obligations for the benefit of AGFC’s and American Gateway Bank’s directors and officers.

 

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Stay Pay Bonuses. The parties have agreed that certain officers of AGFC, including, among others, Terre Bidwell, Craig Livingston and Ricky Sparks, will be entitled to receive “stay-pay” bonuses if they remain employed by Business First Bank for a specified period of time following consummation of the merger. The aggregate amount of all “stay-pay” bonuses to be paid to all employees of AGFC will not exceed $100,000. The parties have agreed that each of Business First and AGFC will be responsible for 50.0% of the aggregate amount of these bonuses. The amount attributable to AGFC will be deducted from the AGFC Tangible Equity Capital at the closing of the merger.

There are no arrangements or understandings pursuant to which any member of the board of directors or management of AGFC or American Gateway Bank is to be appointed to the board of directors of Business First or Business First Bank in connection with the proposed merger. Subsequent to the execution of the merger agreement, Business First has engaged in discussions with Mr. Don Ayres, the current President and Chief Executive Officer of AGFC, regarding an arrangement pursuant to which Business First would engage Mr. Ayres to provide consulting services for a period of one year following consummation of the merger in exchange for a monthly consulting fee of $7,500. Although the parties have not entered into any binding obligation regarding the consulting arrangement, it is currently anticipated that Mr. Ayres will be engaged as a consultant for Business First following completion of the merger.

As of January 31, 2015, directors and executive officers of AGFC beneficially owned 9,585 shares, or approximately 4.40% of AGFC’s outstanding common stock. Disregarding certain adjustments described in more detail elsewhere in this proxy statement/prospectus and any cash that may be payable to shareholders in lieu of fractional shares, if the merger had been completed as of January 31, 2015, directors and executive officers of AGFC would have received an aggregate amount of cash equal to $95,850 and an aggregate number of shares of Business First common stock equal to 113,103 in exchange for shares of AGFC common stock beneficially owned by them. Given the same assumptions, the aggregate consideration to be received by directors and executive officers of AGFC would represent approximately 4.40% of the total stock consideration and 4.40% of the total cash consideration payable to all shareholders of AGFC in connection with the proposed merger.

Comparison of Rights of Shareholders of Business First and AGFC (page 216)

At the effective time of the merger, AGFC shareholders who receive shares of Business First stock will thereby become Business First shareholders. AGFC and Business First are both Louisiana corporations and the rights of their shareholders are governed by Louisiana law. The rights of AGFC’s shareholders are also governed by its articles of incorporation and bylaws. Upon completion of the merger, the rights of AGFC’s shareholders

 

will still be governed by Louisiana law, but they will no longer be governed by the articles of incorporation and bylaws of AGFC. Instead, those rights will be governed by Business First’s articles of incorporation and bylaws. Business First’s articles of incorporation and bylaws will remain the same unless later altered, amended or repealed. For a more detailed discussion regarding the comparative rights of shareholders of Business First and AGFC, please see “ Comparison of Rights of Shareholders of AGFC and Business First, ” beginning on page 216.

AGFC Shareholders May Exercise Appraisal Rights in Connection with the Merger (page 105)

Louisiana law permits AGFC shareholders to exercise appraisal rights in connection with the merger and to receive the fair value of their shares of AGFC common stock in cash. To exercise appraisal rights, a AGFC shareholder must follow certain procedures, including filing certain notices with AGFC and not voting his or her shares in favor of the reorganization agreement. The shares of AGFC common stock held by a shareholder who has exercised appraisal rights will not be exchanged for stock consideration or cash consideration in the merger and such shareholder’s only right will be to receive the fair value of his or her shares of AGFC common stock in cash. A copy of the Louisiana statute describing these appraisal rights and the procedures for exercising them is attached as Appendix C to this proxy statement/prospectus. AGFC shareholders who perfect their appraisal rights and receive cash in exchange for their shares of AGFC common stock may recognize gain or loss for U.S. federal income tax purposes.