<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1994
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
REGIONS FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 NORTH 20TH STREET
BIRMINGHAM, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
SAMUEL E. UPCHURCH, JR.
GENERAL COUNSEL AND CORPORATE SECRETARY
417 NORTH 20TH STREET
BIRMINGHAM, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III JOHN J. KELLEY III
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD KING & SPALDING
SOMERVILLE SUITE 350 191 PEACHTREE STREET, N.E.
417 NORTH 20TH STREET, SUITE 700 THIRTEENTH STREET, NW ATLANTA, GEORGIA 30303
1700 WASHINGTON, D.C. 20005 (404) 572-4600
BIRMINGHAM, AL 35203 (202) 508-3303
(205) 250-5000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
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. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE* FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock................. 2,520,825 shares $24.1770056 $60,946,000 $21,016.01
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Calculated in accordance with Rule 457(f).
---------------------
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 SECTION 8(A), SHALL
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
REGIONS FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------- ------------------------------------------
<S> <C>
1. Forepart of registration statement and outside front
cover page of prospectus.............................. Outside Front Cover of Proxy
Statement/Prospectus; Facing Page of
Registration Statement; Cross-Reference Sheet.
2. Inside front and outside back cover of prospectus..... Available Information; Documents
Incorporated by Reference; Table of
Contents.
3. Risk factors, ratio of earnings to fixed charges and
other information..................................... Summary; Comparative Market Prices and Dividends.
4. Terms of the transaction.............................. Summary; Description of the Transaction;
Effect of the Merger on Rights of
Stockholders; Description of Regions
Common Stock.
5. Pro forma financial information....................... Summary.
6. Material contacts with the company being acquired..... Summary; Description of the Transaction.
7. Additional information required for re-offering by
persons and parties deemed to be underwriters......... Not applicable.
8. Interest of named experts and counsel................. Opinions.
9. Disclosure of Commission position on indemnification
for Securities Act liabilities........................ Not Applicable (See Part II, Item 20).
10. Information with respect to S-3 registrants........... Documents Incorporated by Reference;
Summary; Business of Regions.
11. Incorporation of certain information by reference..... Documents Incorporated by Reference.
12. Information with respect to S-2 or S-3 registrants.... Not Applicable.
13. Incorporation of certain information by reference..... Not Applicable.
14. Information with respect to registrants other than S-2
or S-3 registrants.................................... Not Applicable.
15. Information with respect to S-3 companies............. Not Applicable.
16. Information with respect to S-2 or S-3 companies...... Not Applicable.
17. Information with respect to companies other than S-2
or S-3 companies...................................... Union Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business of Union; Voting Securities and Principal
Stockholders of Union; Index to Union Financial
Statements.
18. Information if proxies, consents, or authorizations
are to be solicited................................... Documents Incorporated by Reference; Summary;
The Special Meeting; Description of the Transaction;
Description of Regions Common Stock.
19. Information if proxies, consents, or authorizations
are not to be solicited or in an exchange offer....... Not Applicable.
</TABLE>
<PAGE> 3
[letterhead]
DEAR UNION BANK & TRUST COMPANY STOCKHOLDER:
NOVEMBER , 1994
You are cordially invited to attend the Special Meeting of Stockholders
(the "Special Meeting") of Union Bank & Trust Company ("Union") to be held at
Union's main office, 60 Commerce Street, Montgomery, Alabama 36104 on December
, 1994, at 10:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Amended and Restated Agreement and Plan of Reorganization
(the "Agreement") and a related Amended and Restated Plan of Merger (the "Plan
of Merger") which provide for the acquisition of Union by Regions Financial
Corporation ("Regions") pursuant to the merger (the "Merger") of Union with and
into a wholly owned, interim banking subsidiary of Regions ("Union Interim"). In
voting on this proposal, you also will vote on the appointment of a stockholder
representative committee and on the approval of an Escrow Trust Agreement (the
"Escrow Trust Agreement"), pursuant to which a portion of the consideration to
be issued in the Merger will be held in escrow pending the resolution of certain
environmental remediation issues. If the proposed Merger is consummated, each
outstanding share of Union common stock, with certain exceptions, will be
converted into and exchanged for (i) that fraction of a share of Regions common
stock equal to the quotient obtained by dividing (a) $16.02 by (b) the average
of the closing sales prices of Regions common stock during a specified period
preceding the effective time of the Merger (the "Average Closing Price") and
(ii) the right to receive on a deferred basis and in accordance with the terms
of the Escrow Trust Agreement that additional fraction of a share of Regions
common stock equal to the quotient obtained by dividing (a) $0.51 by (b) the
Average Closing Price.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed combination of Union with Regions and provides other specific
information concerning the Special Meeting. Please read these materials
carefully and consider thoughtfully the information set forth in them.
The affirmative vote of the holders of a majority of the shares of Union
common stock outstanding and entitled to vote at the Special Meeting (not just
the votes cast) is required for the approval of the Agreement, the Plan of
Merger, and the Escrow Trust Agreement (including the appointment of the
stockholder representative committee). Consequently, a failure to vote will have
the same effect as a vote against the proposed combination of Union with
Regions.
Stockholders of Union who perfect their dissenters' rights of appraisal
prior to the proposed Merger and comply with applicable law will be entitled to
receive the fair value of their shares of Union common stock in cash, as
provided by applicable law.
Enclosed are (i) the Notice of Special Meeting, (ii) the Proxy
Statement/Prospectus, and (iii) a proxy card for the Special Meeting. The Proxy
Statement/Prospectus describes in detail the Agreement, the Plan of Merger, and
the proposed Merger, including a description of the conditions to consummation
of the Merger and the effects of the Merger on the rights of Union stockholders.
It also describes the Escrow Trust Agreement, the appointment of the stockholder
representative committee, and financial and other information pertaining to
Regions and Union.
<PAGE> 4
THE BOARD OF DIRECTORS HAS APPROVED AND ADOPTED THE AGREEMENT, THE PLAN OF
MERGER, THE ESCROW TRUST AGREEMENT (INCLUDING THE APPOINTMENT OF THE STOCKHOLDER
REPRESENTATIVE COMMITTEE), AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date the enclosed proxy card and to return it promptly in
the enclosed envelope, whether or not you plan to attend the Special Meeting. If
you attend the Special Meeting, you may vote in person, even if you previously
returned your proxy card.
Sincerely,
Robert C. Baird, Jr.
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 5
UNION BANK & TRUST COMPANY
60 COMMERCE STREET, MONTGOMERY, ALABAMA 36104
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER , 1994
TO THE STOCKHOLDERS OF UNION BANK & TRUST COMPANY:
Notice is hereby given that a Special Meeting of Stockholders of Union Bank
& Trust Company ("Union") will be held at Union's main office, 60 Commerce
Street, Montgomery, Alabama 36104 on December , 1994, at 10:00 a.m., local
time, for the following purposes:
1. The Merger. To consider and vote on a proposal to approve the Amended
and Restated Agreement and Plan of Reorganization, dated as of July 8, 1994, as
amended and restated as of August 22, August 31, and September 27, 1994 (the
"Agreement"), by and between Union and Regions Financial Corporation
("Regions"), the related Amended and Restated Plan of Merger (the "Plan of
Merger"), to be entered into between Union and Union Interim (as defined below),
and the Escrow Trust Agreement, to be entered into by Regions, Trust Company
Bank, as escrow agent, and a committee of stockholder representatives appointed
and approved pursuant to the Escrow Trust Agreement, pursuant to which, among
other results (i) Union will merge (the "Merger") with and into a wholly owned,
interim banking subsidiary of Regions ("Union Interim") to be formed for
purposes of this transaction, which will succeed to the business and operations
of Union; (ii) each outstanding share of the common stock of Union ("Union
Common Stock")(excluding any shares held by Union, Regions, or their respective,
wholly owned subsidiaries, other than shares held in a fiduciary capacity or in
satisfaction of debts previously contracted, and excluding shares held by
stockholders who perfect their dissenters' rights of appraisal) will be
converted into and exchanged for (a) that fraction of a share of the common
stock of Regions ("Regions Common Stock") equal to the quotient obtained by
dividing (x) $16.02 by (y) the Average Closing Price (defined generally as the
average of the daily closing sales prices of Regions Common Stock on the Nasdaq
National Market for the ten consecutive full trading days ending at the close of
trading on the fifth trading day preceding the effective time of the Merger) and
(b) the right to receive on a deferred basis and in accordance with the terms of
the Escrow Trust Agreement that additional fraction of a share of Regions Common
Stock equal to the quotient obtained by dividing (x) $0.51 by (y) the Average
Closing Price; and (iii) each Union stockholder will receive cash in lieu of any
remaining fractional share interest, all as described more fully in the
accompanying Proxy Statement/Prospectus.
2. Other Business. To transact such other business as may properly come
before the Special Meeting, including adjourning the Special Meeting to permit,
if necessary, further solicitation of proxies.
Only stockholders of record at the close of business on November , 1994,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
The proposal to approve the Agreement, the Plan of Merger, the Escrow Trust
Agreement (including the appointment of the stockholder representative
committee), and consummation of the transactions contemplated thereby requires
the affirmative vote of the holders of a majority of the shares of Union Common
Stock outstanding and entitled to vote at the Special Meeting.
THE BOARD OF DIRECTORS OF UNION RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE AGREEMENT, THE PLAN OF MERGER, THE ESCROW TRUST
AGREEMENT (INCLUDING THE APPOINTMENT OF THE STOCKHOLDER REPRESENTATIVE
COMMITTEE), AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY.
<PAGE> 6
Stockholders of Union have the right to dissent from the Agreement and the
Plan of Merger and demand payment of the fair value of their shares of Union
Common Stock if the Merger is consummated. The right of any stockholder to
receive such payment is contingent upon strict compliance with the requirements
of the applicable provisions of Alabama law, which are attached as Appendix E to
the Proxy Statement/Prospectus and incorporated herein by reference.
By Order of the Board of Directors
Robert C. Baird, Jr.
Chairman of the Board, President and
Chief Executive Officer
Montgomery, Alabama
November , 1994
<PAGE> 7
<TABLE>
<S> <C>
UNION BANK & TRUST COMPANY REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD DECEMBER , 1994 (PAR VALUE $.625)
</TABLE>
This Prospectus of Regions Financial Corporation, a regional bank holding
company organized under the laws of the of the state of Delaware ("Regions"),
relates to the shares of its common stock, par value $.625 per share ("Regions
Common Stock"), which are issuable to the stockholders of Union Bank & Trust
Company ("Union") upon consummation of the proposed merger and related
transactions described herein (the "Merger") by which Union will merge with and
into a wholly owned, interim banking subsidiary of Regions ("Union Interim")
pursuant to the terms of the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 8, 1994, as amended and restated as of August
22, August 31, and September 27, 1994, by and between Regions and Union (the
"Agreement"), the related Amended and Restated Plan of Merger (the "Plan of
Merger"), to be entered into between Union and Union Interim (as defined below),
and the Escrow Trust Agreement (the "Escrow Trust Agreement"), to be entered
into by Regions, Trust Company Bank, as escrow agent (the "Escrow Agent"), and a
committee of stockholder representatives (each individually, a "Stockholder
Representative" and, collectively, the "Stockholder Representative Committee")
appointed and approved pursuant to the Escrow Trust Agreement. The Agreement,
the Plan of Merger, and the Escrow Trust Agreement are referred to collectively
as the "Agreements."
At the effective date of the Merger (the "Effective Date"), except as
described herein, among other results (i) Union will merge with and into a
wholly owned, interim banking subsidiary of Regions to be formed for purposes of
the Merger ("Union Interim"), which will succeed to the business and operations
of Union until combined with First Alabama Bank, Regions' principal banking
subsidiary in Alabama; (ii) each outstanding share of the $0.50 par value common
stock of Union ("Union Common Stock") (excluding shares held by Union, Regions,
or any of their respective, wholly owned subsidiaries, other than shares held in
a fiduciary capacity or in satisfaction of debts previously contracted, and
shares held by stockholders who perfect their dissenters' rights of appraisal)
will be converted into and exchanged for (a) that fraction of a share of Regions
Common Stock (the "Exchange Ratio") equal to the quotient obtained by dividing
(x) $16.02 by (y) the Average Closing Price (defined as the average of the daily
closing sales prices of Regions Common Stock on the Nasdaq National Market as
reported by The Wall Street Journal, or if not reported thereby, another
authoritative source chosen by Regions, for the ten consecutive full trading
days in which such shares are traded on the Nasdaq National Market, ending at
the close of trading on the fifth trading day preceding the Effective Date) and
(b) the right to receive on a deferred basis and in accordance with the terms of
the Escrow Trust Agreement (each, an "Escrow Stock Right" and, collectively, the
"Escrow Stock Rights") that additional fraction of a share of Regions Common
Stock (the "Escrow Stock Ratio") equal to the quotient obtained by dividing (x)
$0.51 by (y) the Average Closing Price; and (iii) each Union stockholder will
receive cash in lieu of any remaining fractional share interest. Copies of the
Agreements are attached to this Proxy Statement/Prospectus as Appendices A, B,
and C. For a further description of the terms of the Agreements, see
"Description of the Transaction."
This Prospectus also constitutes a Proxy Statement of Union and is being
furnished to the stockholders of Union in connection with the solicitation of
proxies by the Board of Directors of Union for use at its Special Meeting of
Stockholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on December , 1994, to consider and vote on the
Agreements and related matters. This Proxy Statement/Prospectus and the
accompanying proxy card are first being mailed to stockholders of Union on or
about November , 1994.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS NOVEMBER , 1994.
<PAGE> 8
AVAILABLE INFORMATION
Regions is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements, and other information can be obtained, at prescribed rates, from the
SEC by addressing written requests for such copies to the Public Reference
Section at the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments thereto,
the "Registration Statement") filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Proxy Statement/Prospectus does not include all of the information
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. For further information about
Regions and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at prescribed
rates, at the SEC's public reference facilities at the addresses set forth
above. Regions Common Stock is traded in the Nasdaq National Market. Reports,
proxy statements, and other information concerning Regions may be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
No person is authorized to give any information or to make any
representations other than those included in this Proxy Statement/Prospectus,
and if given or made, such information or representations must not be relied
upon as having been authorized by Regions or Union. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, the securities offered hereby in any jurisdiction to or from
any person to or from whom it is unlawful to make such an offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
securities made hereunder shall under any circumstances create an implication
that there has been no change in the affairs of Regions or Union since the date
hereof or that the information herein is correct as of any time subsequent to
the date hereof.
All information included or incorporated by reference in this Proxy
Statement/Prospectus with respect to Regions was supplied by Regions, and all
information included or incorporated by reference herein with respect to Union
was supplied by Union.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Regions pursuant
to the Exchange Act are hereby incorporated by reference herein:
1. Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993;
2. Regions' Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1994;
3. Regions' Current Reports on Form 8-K dated as of December 31, 1993,
and July 8, July 18, September 6, and September 8, 1994;
4 The description of Regions Common Stock under the heading "Item 1.
Capital Stock to be Registered" in the Registration Statement on Form 8-A
of Regions relating to Regions Common Stock and in any amendment or report
filed for the purpose of updating such description; and
5. Regions' Reports on Form 10-C dated as of December 31, 1993, and
May 2, 1994.
Regions' Annual Report on Form 10-K for the year ended December 31, 1993,
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Annual Report to Stockholders"), but does not
incorporate other portions of the Annual Report to Stockholders. Only those
portions of the Annual Report to Stockholders captioned "Financial Summary &
Review 1993," "Financial
2
<PAGE> 9
Statements and Notes," and "Historical Financial Summary" are incorporated
herein. Other portions of the Annual Report to Stockholders are NOT incorporated
herein and are not a part of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Those documents are available
upon request, without charge (except for the exhibits thereto), from Ronald C.
Jackson, Stockholder Assistance, Regions Financial Corporation, P.O. Box 1448,
Montgomery, Alabama 36102 (telephone (205) 832-8450). In order to ensure timely
delivery of the documents, any request should be made by December , 1994.
3
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................ 2
DOCUMENTS INCORPORATED BY REFERENCE.................................................. 2
SUMMARY.............................................................................. 7
The Parties........................................................................ 7
Special Meeting of Union Stockholders.............................................. 7
Record Date; Vote Required......................................................... 7
The Merger; Exchange Ratio and Escrow Stock Ratio.................................. 8
Dissenters' Rights................................................................. 8
Reasons for the Merger; Recommendation of Union's Board of Directors............... 8
Opinion of Union's Financial Advisor............................................... 9
Effective Date..................................................................... 9
Exchange of Stock Certificates..................................................... 9
Regulatory Approvals and Other Conditions.......................................... 9
Waiver, Amendment, and Termination of the Agreement................................ 10
Interests of Certain Persons in the Merger......................................... 10
Certain Federal Income Tax Consequences of the Merger.............................. 10
Certain Differences in Stockholders' Rights........................................ 10
Comparative Market Prices of Common Stock.......................................... 10
Comparative Per Share Data......................................................... 11
Selected Financial Data............................................................ 15
THE SPECIAL MEETING.................................................................. 17
General............................................................................ 17
Record Date; Vote Required......................................................... 17
DESCRIPTION OF THE TRANSACTION....................................................... 18
General............................................................................ 18
Exchange Ratio and Escrow Stock Ratio.............................................. 18
Escrow Trust Agreement............................................................. 19
Treatment of Union Options......................................................... 21
Background of and Reasons for the Merger........................................... 22
Effective Date of the Merger....................................................... 28
Distribution of Regions Stock Certificates and Payment for Fractional Shares....... 28
Conditions to Consummation of the Merger........................................... 29
Regulatory Approvals............................................................... 30
Waiver, Amendment, and Termination of the Agreement................................ 30
Conduct of Business Pending the Merger............................................. 31
Management Following the Merger.................................................... 33
Dissenters' Rights................................................................. 33
Certain Federal Income Tax Consequences of the Merger.............................. 34
Accounting Treatment............................................................... 36
Expenses and Fees.................................................................. 36
Resales of Regions Common Stock.................................................... 36
</TABLE>
4
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
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<S> <C>
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS....................................... 37
Antitakeover Provisions Generally.................................................. 37
Authorized Capital Stock........................................................... 37
Amendment of Certificate of Incorporation and Bylaws............................... 38
Classified Board of Directors and Absence of Cumulative Voting..................... 39
Removal of Directors............................................................... 39
Limitations on Director Liability.................................................. 39
Indemnification.................................................................... 40
Special Meetings of Stockholders................................................... 40
Actions by Stockholders Without a Meeting.......................................... 41
Stockholder Nominations and Proposals.............................................. 41
Business Combinations With Certain Persons......................................... 41
Mergers, Consolidations, and Sales of Assets Generally............................. 42
Dissenters' Rights of Appraisal.................................................... 42
Stockholders' Rights to Examine Books and Records.................................. 42
Dividends.......................................................................... 43
COMPARATIVE MARKET PRICES AND DIVIDENDS.............................................. 43
UNION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS......................................................................... 44
BUSINESS OF UNION.................................................................... 53
Business and Properties............................................................ 53
Recent Developments................................................................ 53
Competition........................................................................ 53
Legal Proceedings.................................................................. 53
Management......................................................................... 54
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF UNION................................ 57
BUSINESS OF REGIONS.................................................................. 58
General............................................................................ 58
Recent Developments................................................................ 58
SUMMARY PRO FORMA FINANCIAL DATA..................................................... 61
Selected Pro Forma Combined Data for Regions and Union............................. 61
Selected Pro Forma Combined Data for Regions, Union, and Recently Completed
Acquisitions.................................................................... 62
SUPERVISION AND REGULATION
General............................................................................ 63
Payment of Dividends............................................................... 66
Transaction With Affiliates........................................................ 66
Capital Adequacy................................................................... 66
Support of Subsidiary Institutions................................................. 67
Prompt Corrective Action........................................................... 68
Brokered Deposits.................................................................. 69
FDIC Insurance Assessments......................................................... 69
Safety and Soundness Standards..................................................... 70
Depositor Preference............................................................... 70
</TABLE>
5
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DESCRIPTION OF REGIONS COMMON STOCK.................................................. 71
STOCKHOLDER PROPOSALS................................................................ 71
EXPERTS.............................................................................. 71
OPINIONS............................................................................. 71
INDEX TO UNION FINANCIAL STATEMENTS.................................................. F-1
APPENDIX A -- Amended and Restated Agreement and Plan of Reorganization.............. A-1
APPENDIX B -- Amended and Restated Plan of Merger.................................... B-1
APPENDIX C -- Escrow Trust Agreement................................................. C-1
APPENDIX D -- Opinion of J.P. Morgan Securities, Inc. ............................... D-1
APPENDIX E -- Sections 10-2A-162 and 10-2A-163 of the Alabama Business Corporation
Act................................................................................ E-1
</TABLE>
6
<PAGE> 13
SUMMARY
The following is a summary of certain information relating to the Special
Meeting, the Merger, the Agreements, and the offering of shares of Regions
Common Stock to be issued upon consummation of the Merger. This summary does not
purport to be complete and is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Proxy
Statement/Prospectus. Stockholders are urged to read carefully the entire Proxy
Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "Regions" and "Union" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
Union. Union is an Alabama, state-chartered commercial bank with its
principal executive offices located in Montgomery, Alabama. Union provides a
range of retail banking services through ten offices in Montgomery, Alabama. At
June 30, 1994, Union had total consolidated assets of approximately $428.9
million, total consolidated deposits of approximately $324.1 million, and total
consolidated stockholders' equity of approximately $44.6 million. Union's
principal executive offices are located at 60 Commerce Street, Montgomery,
Alabama 36104, and its telephone number at such address is (205) 240-2265.
Regions. Regions is a regional bank holding company headquartered in
Birmingham, Alabama, which operated 247 banking offices located in Alabama,
Florida, Georgia, Louisiana, and Tennessee as of June 30, 1994. At that date,
Regions had total consolidated assets of approximately $10.8 billion, total
consolidated deposits of approximately $8.8 billion, and total consolidated
stockholders' equity of approximately $905 million. Regions is the third largest
bank holding company headquartered in Alabama in terms of assets, based on June
30, 1994 information. Regions operates eight state-chartered commercial bank
subsidiaries and one federal stock savings bank in Alabama, Florida, Georgia,
Louisiana, and Tennessee and four banking-related subsidiaries engaged in
mortgage banking, credit life insurance, leasing, and securities brokerage
activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
During the 1994 fiscal year, Regions has completed the acquisitions of five
financial institutions in Alabama, Louisiana, and Georgia and has entered into
definitive agreements to acquire in addition to Union two financial institutions
in Georgia and Louisiana, information with respect to which is included under
"Business of Regions -- Recent Developments" and "Summary Pro Forma Financial
Data" and in the documents incorporated by reference herein.
Regions was organized under the laws of the state of Delaware and commenced
operations in 1971 as a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Regions' principal executive
offices are located at 417 North 20th Street, Birmingham, Alabama 35203, and its
telephone number at such address is (205) 326-7100.
Additional information with respect to Regions and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of Regions."
SPECIAL MEETING OF UNION STOCKHOLDERS
The Special Meeting will be held at 10:00 a.m., local time, on December ,
1994, at Union's principal executive offices, 60 Commerce Street, Montgomery,
Alabama 36104, for the purpose of considering and voting on approval of the
Agreements and related matters. See "The Special Meeting."
RECORD DATE; VOTE REQUIRED
Only holders of record of Union Common Stock at the close of business on
November , 1994 (the "Record Date"), will be entitled to vote at the
Special Meeting. The affirmative vote of a majority of the shares of Union
Common Stock outstanding and entitled to vote at the Special Meeting will be
required to
7
<PAGE> 14
approve the Agreements. As of the Record Date, there were 3,874,000 shares of
Union Common Stock outstanding and entitled to be voted.
The directors and executive officers of Union and their affiliates
beneficially owned, as of the Record Date, 779,913 shares (or approximately
19.8% of the outstanding shares) of Union Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of the
Record Date, no shares of Union Common Stock. As of that date, neither Union nor
Regions held any shares of Union Common Stock other than in a fiduciary capacity
for others. See "The Special Meeting -- Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO AND ESCROW STOCK RATIO
The Agreement provides for the acquisition of Union by Regions pursuant to
the Merger of Union with and into Union Interim. At the Effective Date, each
share of Union Common Stock (excluding any shares held by Union, Regions, or
their respective, wholly owned subsidiaries, in each case other than shares held
in a fiduciary capacity or in satisfaction of debts previously contracted, and
excluding shares held by stockholders who perfect their dissenters' rights of
appraisal) issued and outstanding at the Effective Date will be converted into
(i) that fraction of a share of Regions Common Stock (the "Exchange Ratio")
equal to the quotient obtained by dividing (a) $16.02 by (b) the Average Closing
Price and (ii) the right to receive on a deferred basis and in accordance with
the terms of the Escrow Trust Agreement (each, an "Escrow Stock Right" and,
collectively, the "Escrow Stock Rights") that additional fraction of a share of
Regions Common Stock (the "Escrow Stock Ratio") equal to the quotient obtained
by dividing (a) $0.51 by (b) the Average Closing Price. See "Description of the
Transaction -- General" and "-- Exchange Ratio and Escrow Stock Ratio."
The additional fraction of a share of Regions Common Stock represented by
each Escrow Stock Right is the portion of the consideration to be issued in the
Merger that will be held in escrow in accordance with the terms of the Escrow
Trust Agreement pending the resolution of certain environmental remediation
issues. Based on the total number of shares of Union Common Stock outstanding or
subject to option, the Escrow Stock Rights in the aggregate represent
approximately $2 million in value of Regions Common Stock out of the
approximately $65 million in value of Regions Common Stock to be issued in the
Merger. The $2 million of Regions Common Stock to be held in escrow pursuant to
the Escrow Trust Agreement (as defined in more detail below, the "Escrow
Shares") may be used to reimburse Regions for certain environmental remediation
costs in excess of $500,000 which may be incurred by Regions, with any amount
remaining to be distributed to the former stockholders of Union upon termination
of the Escrow Trust Agreement. During the pendency of the Escrow Trust
Agreement, the former stockholders of Union will be entitled to receive cash
dividends paid with respect to the Escrow Shares and to provide the Escrow Agent
voting instructions with respect to voting the Escrow Shares. See "Description
of the Transaction -- Escrow Trust Agreement."
DISSENTERS' RIGHTS
Holders of Union Common Stock entitled to vote on the Agreements have the
right to dissent from the Agreement and the Plan of Merger and, upon
consummation of the Merger and the satisfaction of certain specified procedures
and conditions, to receive the fair value of such holders' shares of Union
Common Stock in cash in accordance with the applicable provisions of Sections
10-2A-162 and 10-2A-163 of the Alabama Business Corporation Act (the "Alabama
Act"). The procedures to be followed by dissenting stockholders are summarized
under "Description of the Transaction -- Dissenters' Rights," and Sections
10-2A-162 and 10-2A-163 of the Alabama Act are reproduced as Appendix E to this
Proxy Statement/Prospectus.
REASONS FOR THE MERGER; RECOMMENDATION OF UNION'S BOARD OF DIRECTORS
Union's Board of Directors has approved the Merger and the Agreements and
has determined that the Merger is fair to, and in the best interests of, Union
and its stockholders. Accordingly, Union's Board recommends that Union's
stockholders vote FOR approval of the Agreements. In approving the Merger and
the Agreements, Union's directors considered Union's financial condition, the
financial terms and the income tax consequences of the Merger, the likelihood of
the Merger being approved by regulatory authorities without
8
<PAGE> 15
undue conditions or delay, and a report and opinion from J.P. Morgan Securities,
Inc. ("J.P. Morgan") regarding the fairness, from a financial point of view, of
the Exchange Ratio to the stockholders of Union. See "Description of the
Transaction -- Background of and Reasons for the Merger."
OPINION OF UNION'S FINANCIAL ADVISOR
J.P. Morgan has rendered an opinion to Union that, based on and subject to
the procedures, matters, and limitations described in its opinion and such other
matters as it considers relevant, as of the date of its opinion, the Exchange
Ratio is fair, from a financial point of view, to the stockholders of Union. The
opinion of J.P. Morgan is attached as Appendix D to this Proxy
Statement/Prospectus. Union stockholders are urged to read the opinion in its
entirety for a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith. See "Description
of the Transaction -- Opinion of Union's Financial Advisor."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Articles of Merger are filed with the Alabama Secretary of State and become
effective. Unless otherwise agreed upon by Regions and Union, and subject to the
conditions to the obligations of the parties to effect the Merger, the parties
will use their reasonable efforts to cause the Effective Date to occur on the
last day of the month in which occurs the last to occur of (i) the effective
date (including the expiration of any applicable waiting period) of the last
federal or state regulatory approval required for the Merger and (ii) the date
on which the Agreements are approved by the requisite vote of Union
stockholders; or such later date within 30 days thereof as specified by Regions.
The parties expect that all conditions to consummation of the Merger will be
satisfied so that the Merger can be consummated by year-end 1994, although there
can be no assurance as to whether or when the Merger will occur. See
"Description of the Transaction -- Effective Date of the Merger," "--Conditions
to Consummation of the Merger," and "--Waiver, Amendment, and Termination of the
Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, Regions will cause First Alabama Bank
("First Alabama"), acting in its capacity as exchange agent for Regions (the
"Exchange Agent"), to mail to the former stockholders of Union a form letter of
transmittal, together with instructions for the exchange of such stockholders'
certificates representing shares of Union Common Stock for certificates
representing shares of Regions Common Stock. Union stockholders should NOT send
in their stock certificates until they receive the form letter of transmittal
and instructions. See "Description of the Transaction -- Distribution of Regions
Stock Certificates and Payment for Fractional Shares."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve"), the Federal Deposit Insurance
Corporation (the "FDIC"), and the Superintendent of Banks of the state of
Alabama (the "Alabama Superintendent"). An application has been filed with each
of these agencies for the requisite approvals, which have yet to issue their
approvals of the Merger. There can be no assurance that the approvals of the
Federal Reserve, the FDIC, and the Alabama Superintendent will be given, or as
to the timing or conditions of each such approval.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Union stockholders, receipt of an
opinion of counsel as to the tax-free nature of certain aspects of the Merger,
and certain other customary conditions. See "Description of the
Transaction -- Conditions to Consummation of the Merger."
9
<PAGE> 16
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual consent of the Boards of Directors of both
Union and Regions, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by March
31, 1995, unless the failure to consummate by such time is due to a breach of
the Agreement by the party seeking to terminate. If for any reason the Merger is
not consummated, Union will continue to operate as a state-chartered commercial
bank under its present management. See "Description of the Transaction --
Waiver, Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Union's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of Union generally.
Those interests relate to, among other things, provisions in the Agreement
regarding indemnification, severance agreements, treatment of outstanding
options and restricted stock grants relating to Union Common Stock, and
eligibility for certain Regions employee benefits. In addition, certain
executive officers of Union are parties to employment agreements with Union. See
"Description of the Transaction -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned upon the receipt by each party of
an opinion of counsel to the effect that the Merger and related transactions
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), that neither Union nor
Regions will recognize gain or loss as a consequence of the Merger, and that the
exchange in the Merger of Union Common Stock for Regions Common Stock will not
give rise to gain or loss to Union stockholders, except to the extent of any
cash received in lieu of fractional share interests. In addition, Union
stockholders may recognize gain or loss (i) as a result of a stockholder
perfecting such holder's dissenters' rights of appraisal and (ii) as a result of
the use of Escrow Shares held pursuant to the Escrow Trust Agreement to
reimburse Regions for those Environmental Remediation Costs (as defined in the
Escrow Trust Agreement) for which Regions is entitled to reimbursement pursuant
to the terms of the Escrow Trust Agreement. See "Description of the
Transaction -- Certain Federal Income Tax Consequences of the Merger."
DUE TO THE INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER, UNION
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER AND RELATED TRANSACTIONS ON THEM UNDER FEDERAL,
STATE, LOCAL, AND FOREIGN TAX LAWS.
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, Union stockholders, whose rights are governed by
Union's Articles of Incorporation and Bylaws and by the Alabama Act, will
automatically become Regions stockholders, and their rights as Regions
stockholders will be determined by Regions' Certificate of Incorporation and
Bylaws and by the Delaware General Corporation Law (the "Delaware GCL").
The rights of Regions stockholders differ from the rights of Union
stockholders in certain important respects, some of which constitute additional
antitakeover provisions provided for in Regions' governing documents. See
"Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. Union Common Stock is traded in the over-the-counter
market.
The following table sets forth as of the indicated dates (i) the last sale
price of Regions Common Stock, (ii) the last bid price [(July 7) and the average
of the last bid and asked prices (November )] of Union Common Stock as quoted
in the over-the-counter market, (iii) the equivalent per share price (as
explained
10
<PAGE> 17
below) of Union Common Stock on the basis of the Exchange Ratio, and (iv) the
equivalent per share price of Union Common Stock on the basis of both the
Exchange Ratio and the Escrow Stock Ratio. The indicated dates represent,
respectively, the last trading day immediately preceding public announcement of
the proposed Merger and November , 1994, the latest practicable date prior to
the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT PER
EQUIVALENT PER SHARE PRICE
SHARE PRICE OF UNION
OF UNION COMMON STOCK
COMMON STOCK BASED ON EXCHANGE
REGIONS UNION BASED ON AND ESCROW
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK EXCHANGE RATIO STOCK RATIOS
- --------------------------------------- ------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
July 7, 1994........................... $36.25 $17.00 $16.02 $ 16.53
, 1994............................
</TABLE>
The equivalent per share price of Union Common Stock on the basis of the
Exchange Ratio at each specified date represents the last sale price of a share
of Regions Common Stock on such date multiplied by assumed Exchange Ratios of
0.4419 and , respectively (derived based on assumed Average Closing
Prices of $ 36.25 and $ , respectively). The equivalent per share price of
Union Common Stock on the basis of both the Exchange Ratio and the Escrow Stock
Ratio at each specified date represents the last sale price of a share of
Regions Common Stock on such date multiplied by assumed combined Exchange and
Escrow Stock Ratios of 0.4560 and , respectively (derived based on
assumed Average Closing Prices of $ 36.25 and $ , respectively).
Stockholders are advised to obtain current market quotations for Regions Common
Stock and Union Common Stock. No assurance can be given as to the market price
of Regions Common Stock at or after the Effective Date.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and Union, (ii) a pro forma combined basis per share of Regions Common
Stock, giving effect to the Merger, (iii) an equivalent pro forma basis per
share of Union Common Stock, giving effect to the Merger, (iv) a pro forma
combined basis per share of Regions Common Stock, giving effect to the Merger
and the Recently Completed Acquisitions (as defined under "Business of
Regions -- Recent Developments"), and (v) as appropriate, an equivalent pro
forma basis per share of Union Common Stock, giving effect to the Merger and the
Recently Completed Acquisitions. The Regions and Union pro forma combined
information and the Union pro forma Merger equivalent information give effect to
the Merger on a purchase accounting basis and assume an Exchange Ratio of 0.5006
of a share of Regions Common Stock for each share of Union Common Stock, based
on an Average Closing Price of $32.00. The pro forma combined information is
calculated on the basis of the Exchange Ratio only and does not take into
account the Escrow Stock Ratio, which does not have a material effect on the
data presented. See "Description of the Transaction -- Accounting Treatment."
The Regions, Union, and Recently Completed Acquisitions pro forma combined
information and the Union pro forma Merger and Recently Completed Acquisitions
equivalent information give effect to (i) the Merger as described in the
preceding sentence and (ii) the Recently Completed Acquisitions as described
under "Summary Pro Forma Financial Data -- Selected Pro Forma Combined Data for
Regions, Union, and Recently Completed Acquisitions." The pro forma data are
presented for informational purposes only and are not necessarily indicative of
the results of operations or combined financial position that would have
resulted had the Merger or the Recently Completed Acquisitions been consummated
at the dates or during the periods indicated, nor are they necessarily
indicative of future results of operations or combined financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
Union, including the respective notes thereto, and the pro forma financial
information included or incorporated by reference herein. See "Documents
Incorporated by
11
<PAGE> 18
Reference," " -- Selected Financial Data," "Business of Regions -- Recent
Developments," "Summary Pro Forma Financial Data," and "Index to Union Financial
Statements."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ ------
(UNAUDITED EXCEPT
(UNAUDITED) REGIONS AND UNION
HISTORICAL)
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE PER COMMON SHARE:
Regions historical................................ $ 1.65 $ 1.49 $ 3.01 $ 2.60 $ 2.16
Union historical.................................. 0.75 0.50 1.15 0.27 (1.97)
Regions and Union pro forma combined(1)........... 1.67 3.02
Union pro forma Merger equivalent(2).............. 0.84 1.51
Regions, Union, and Recently Completed
Acquisitions pro forma combined(3).............. 1.67 3.01
Union pro forma Merger and Recently Completed
Acquisitions equivalent(2)...................... 0.84 1.51
DIVIDENDS DECLARED PER COMMON SHARE:
Regions historical................................ $ 0.60 $ 0.52 $ 1.04 $ 0.91 $ 0.87
Union historical.................................. 0.20 0.08 0.20 0.16 0.28
Union pro forma Merger equivalent(4).............. 0.30 0.52
BOOK VALUE PER COMMON SHARE (PERIOD END):
Regions historical................................ $21.60 $18.48 $20.73 $17.62 $15.76
Union historical.................................. 11.52 10.72 11.23 9.92 9.87
Regions and Union pro forma combined(1)........... 21.60
Union pro forma Merger equivalent(2).............. 10.81
Regions, Union, and Recently Completed
Acquisitions pro forma combined(3).............. 21.58
Union pro forma Merger and Recently Completed
Acquisitions equivalent(2)...................... 10.80
</TABLE>
- ---------------
(1) Represents the pro forma combined information of Regions and Union as if the
Merger were consummated on January 1, 1993, and were accounted for as a
purchase.
(2) Represents pro forma combined information multiplied by an assumed Exchange
Ratio of 0.5006 of a share of Regions Common Stock for each share of Union
Common Stock, based on an assumed Average Closing Price of $32.00.
(3) Represents the pro forma combined information of Regions, Union, and the
Recently Completed Acquisitions as if the Merger were consummated at the
time and pursuant to the accounting basis described in note (1) and the
Recently Completed Acquisitions were consummated at the time and pursuant
to the accounting bases described under "Summary Pro Forma Financial
Data -- Selected Pro Forma Combined Data for Regions, Union, and Recently
Completed Acquisitions."
(4) Represents historical dividends declared per share by Regions multiplied by
an assumed Exchange Ratio of 0.5006 of a share of Regions Common Stock for
each share of Union Common Stock, based on an assumed Average Closing Price
of $32.00.
12
<PAGE> 19
(5) The foregoing combined and equivalent pro forma per share data assumes an
Exchange Ratio of 0.5006, which is based on an assumed Average Closing
Price of $32.00. The Union pro forma Merger equivalent data will change
based on different Exchange Ratios resulting from different Average Closing
Prices. For illustration purposes, certain combined and Union pro forma
Merger equivalent data is presented below based on an assumed Exchange
Ratio of 0.4450 resulting from an Average Closing Price of $36.00, and an
assumed Exchange Ratio of 0.5721, resulting from an Average Closing Price
of $28.00. This data is presented for illustration purposes only, and no
inference is intended or may be drawn concerning the actual Average Closing
Price which may occur or the resulting Exchange Ratio. For additional
information with respect to the calculation of the Average Closing Price
and the resulting Exchange Ratio, see "Description of the
Transaction -- Exchange Ratio and Escrow Stock Ratio."
<TABLE>
<CAPTION>
EXCHANGE RATIO
-----------------------------------------------------------
(0.4450) (0.5721)
--------------------------- ---------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1994 1993 1994 1993
---------- ------------ ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE:
Regions and Union pro forma combined....... $ 1.67 $ 3.02 $ 1.67 $ 3.02
Union pro forma Merger equivalent.......... 0.74 1.34 0.96 1.73
DIVIDENDS DECLARED PER COMMON SHARE:
Union pro forma Merger equivalent.......... 0.27 0.46 0.34 0.59
BOOK VALUE PER COMMON SHARE (PERIOD END):
Regions and Union pro forma combined....... 21.60 21.60
Union pro forma Merger equivalent.......... 9.61 12.36
</TABLE>
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial data for
Regions and Union. The data should be read in conjunction with the historical
financial statements, related notes, and other financial information concerning
Regions and Union incorporated by reference or included herein. See "Documents
Incorporated by Reference" and "Index to Union Financial Statements."
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----------- ---------- ----------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income........ $ 356,621 $ 273,590 $ 555,667 $ 536,747 $ 556,821 $ 519,753 $ 496,392
Total interest expense....... 152,323 104,771 213,614 224,068 292,017 297,613 292,687
Net interest income.......... 204,298 168,819 342,053 312,679 264,804 222,140 203,705
Provision for loan losses.... 9,179 13,300 21,533 27,072 24,005 24,208 15,800
Net interest income after
loan loss provision........ 195,119 155,519 320,520 285,607 240,799 197,932 187,905
Total noninterest income
excluding security gains
(losses)................... 72,466 63,155 131,949 119,130 101,964 94,730 71,976
Security gains (losses)...... 106 42 78 (53) (507) (982) 506
Total noninterest expense.... 164,036 135,096 287,026 264,659 230,340 195,611 176,707
Income tax expense........... 34,435 28,257 53,476 44,977 33,660 27,175 21,046
Net income................... $ 69,220 $ 55,363 $ 112,045 $ 95,048 $ 78,256 $ 68,894 $ 62,634
PER SHARE DATA:
Net income................... $ 1.65 $ 1.49 $ 3.01 $ 2.60 $ 2.16 $ 1.91 $ 1.72
Cash dividends............... 0.60 0.52 1.04 0.91 0.87 0.84 0.76
Book value................... 21.60 18.48 20.73 17.62 15.76 14.54 13.48
OTHER INFORMATION:
Average number of shares
outstanding................ 41,925 37,172 37,205 36,532 36,191 36,097 36,331
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----------- ---------- ----------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (PERIOD
END):
Total assets................. $10,822,808 $8,070,569 $10,476,348 $7,881,026 $6,745,053 $6,344,406 $5,549,612
Securities................... 2,428,865 1,610,389 2,368,445 1,670,170 1,575,725 1,489,200 1,133,087
Loans, net of unearned
income..................... 7,297,575 5,432,548 6,833,246 5,142,531 4,274,958 4,092,262 3,552,082
Total deposits............... 8,787,549 6,863,551 8,770,694 6,701,142 5,917,028 5,353,211 4,744,364
Long-term debt............... 437,488 141,819 462,862 136,990 18,782 19,707 45,343
Stockholders' equity......... 905,450 686,656 850,965 656,655 572,971 524,132 489,441
PERFORMANCE RATIOS:
Return on average
assets(1).................. 1.32% 1.44% 1.40% 1.34% 1.23% 1.23% 1.20%
Return on average
stockholders' equity(1).... 15.82 16.60 16.14 15.64 14.27 13.64 13.25
Net interest margin (1)...... 4.31 4.91 4.82 4.98 4.78 4.67 4.65
Efficiency(2)................ 58.16 56.96 59.24 59.87 60.77 59.22 60.68
Dividend payout.............. 36.36 34.90 34.55 35.00 40.28 43.98 44.19
ASSET QUALITY RATIOS:
Net charge-offs to average
loans, net of unearned
income(1).................. 0.10% 0.04% 0.19% 0.28% 0.35% 0.44% 0.42%
Problem assets to net loans
and other real estate(3)... 0.68 0.75 0.84 0.70 0.89 0.98 0.72
Nonperforming assets to net
loans and other real
estate(4).................. 0.76 0.81 1.03 0.81 1.01 1.12 0.94
Allowance for loan losses to
loans, net of unearned
income..................... 1.48 1.59 1.47 1.43 1.28 1.10 1.05
Allowance for loan losses to
nonperforming assets(4).... 196.00 194.60 143.05 175.92 126.32 98.18 110.71
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity
to average assets.......... 8.31% 8.65% 8.70% 8.59% 8.63% 9.03% 9.06%
Average loans to average
deposits................... 79.10 77.53 78.14 72.46 73.40 76.67 75.23
Tier 1 risk-based
capital(5)................. 11.82 11.63 11.13 11.68 11.85 11.31 n/a
Total risk-based
capital(5)................. 14.15 14.32 13.48 14.44 13.19 12.51 n/a
Tier 1 leverage(5)........... 8.08 8.30 10.11 8.44 8.40 7.65 8.36
</TABLE>
- ---------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses)
from security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total risk-based capital ratios are 4.0% and
8.0%, respectively. The minimum leverage ratio of Tier 1 capital to total
adjusted assets is 3.0% to 5.0%, depending on the risk profile of the
institution and other factors.
14
<PAGE> 21
Selected Historical Financial Data of Union
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income............. $ 12,321 $ 13,346 $ 26,060 $ 30,626 $ 36,324 $ 40,699 $ 41,826
Total interest expense............ 5,675 6,278 12,347 15,484 22,391 26,184 26,582
Net interest income............... 6,646 7,068 13,713 15,142 13,933 14,515 15,244
Provision for loan losses......... (1,797) 250 -- 5,112 14,313 3,818 668
Net interest income after loan
loss provision.................. 8,443 6,818 13,713 10,030 (380) 10,697 14,576
Total noninterest income excluding
security gains.................. 2,375 1,685 3,616 3,325 3,280 3,324 3,414
Security gains.................... 59 378 561 133 11 -- 293
Total noninterest expense......... 6,616 6,780 13,280 12,176 12,828 11,997 12,132
Income tax expense (benefit)...... 1,368 153 142 283 (2,362) 336 1,128
Cumulative effect of a change in
an accounting principle......... -- (1,500) (1,315) -- -- -- --
Net income (loss)................. $ 2,893 $ 3,448 $ 5,783 $ 1,029 $ (7,555) $ 1,688 $ 5,023
PER SHARE DATA:
Operating income (loss)........... $ 0.75 $ 0.50 $ 1.15 $ 0.27 $ (1.97) $ 0.44 $ 1.31
Net income (loss)................. 0.75 0.89 1.49 0.27 (1.97) 0.44 1.31
Cash dividends.................... 0.20 0.08 0.20 0.16 0.28 0.62 0.59
Book value........................ 11.52 10.72 11.23 9.92 9.87 12.11 12.30
OTHER INFORMATION:
Average number of shares
outstanding..................... 3,869 3,851 3,870 3,860 3,840 3,840 3,840
BALANCE SHEET DATA (PERIOD END):
Total assets...................... $428,926 $451,033 $453,879 $475,591 $473,704 $548,572 $530,147
Securities........................ 195,378 223,082 210,850 198,739 155,363 138,280 97,223
Loans, net of unearned income..... 165,071 139,947 156,850 148,305 170,596 220,332 230,978
Total deposits.................... 324,082 353,396 346,311 362,611 359,349 358,125 367,577
Stockholders' equity.............. 44,646 41,546 43,450 38,367 37,892 46,522 47,215
PERFORMANCE RATIOS:
Return on average assets(1)....... 1.29% 1.49% 1.29% 0.21% (1.57)% 0.35% 1.09%
Return on average stockholders'
equity(1)....................... 12.90 17.20 14.03 2.60 (16.53) 3.51 n/a
Net interest margin(1)............ 3.03 3.14 3.04 3.30 3.21 3.41 3.78
Efficiency(2)..................... 72.07 75.81 75.11 63.47 68.45 60.99 n/a
Dividend payout................... 26.75 8.98 17.30 60.06 n/a 141.05 45.11
ASSET QUALITY RATIOS:
Net charge-offs (recoveries) to
average loans, net of unearned
income(1)....................... (1.60)% 0.06% (0.28)% 2.60% 7.85% 1.17% 0.29%
Problem assets to net loans and
other real estate(3)............ 2.24 6.29 3.24 6.81 6.74 7.02 1.85
Nonperforming assets to net loans
and other real estate(4)........ 2.36 6.40 3.42 7.03 7.10 7.92 3.13
Allowance for loan losses to
loans, net of unearned income... 2.49 3.17 2.94 2.85 1.78 1.70 1.08
Allowance for loan losses to
nonperforming assets(4)......... 106.82 50.60 86.69 40.68 24.10 21.85 34.92
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets.................. 9.98% 8.67% 8.91% 8.24% 9.49% 10.02% n/a
Average loans to average
deposits........................ 46.18 39.23 39.63 42.43 53.81 61.90 n/a
Tier 1 risk-based capital(5)...... 24.38 23.08 24.95 21.00 17.79 n/a n/a
Total risk-based capital(5)....... 25.64 24.35 26.22 22.27 19.20 n/a n/a
Tier 1 leverage(5)................ 10.36 8.94 9.40 7.86 7.73 9.63 9.87
</TABLE>
15
<PAGE> 22
- ---------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses)
from security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total risk-based capital ratios are 4.0% and
8.0%, respectively. The minimum leverage ratio of Tier 1 capital to total
adjusted assets is 3.0% to 5.0%, depending on the risk profile of the
institution and other factors.
16
<PAGE> 23
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of Union
Common Stock in connection with the solicitation by the Union Board of Directors
of proxies for use at the Special Meeting, at which Union stockholders will be
asked to vote upon a proposal to approve the Agreements and related matters. The
Special Meeting will be held at 10:00 a.m., local time, on December , 1994, at
the main offices of Union, located at 60 Commerce Street, Montgomery, Alabama
36104.
Union stockholders are requested promptly to sign, date, and return the
accompanying proxy card to Union in the enclosed postage-paid, addressed
envelope. A stockholder's failure to return a properly executed proxy card or to
vote at the Special Meeting will have the same effect as a vote against the
Agreements.
Any Union stockholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
Union a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by Union before the vote of stockholders or in
open meeting prior to the taking of the stockholder vote at the Special Meeting.
Any notice of revocation should be sent to Union Bank & Trust Company, 60
Commerce Street, Montgomery, Alabama 36104, Attention: Robert E. Kelly,
Corporate Secretary. A proxy will not be revoked by death or intervening
incapacity of the stockholder executing the proxy unless, before the vote,
notice of such death or incapacity is filed with the Corporate Secretary. The
shares of Union Common Stock represented by properly executed proxy cards
received at or prior to the Special Meeting and not subsequently revoked will be
voted as directed in such proxy. IF INSTRUCTIONS ARE NOT GIVEN, SHARES
REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENTS AND
IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY
COME BEFORE THE SPECIAL MEETING. IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS
ARE GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE
SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN
SUFFICIENT VOTES TO APPROVE THE AGREEMENTS. As of the date of this Proxy
Statement/Prospectus, Union is unaware of any other matter to be presented at
the Special Meeting.
Solicitation of proxies will be made by mail, but also may be made by
telephone, telegram, or in person by the directors, officers, and employees of
Union, who will receive no additional compensation for such solicitation, but
may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
Union stockholders should NOT forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
Union's Board of Directors has established the close of business on
November , 1994, as the Record Date for determining the Union stockholders
entitled to notice of and to vote at the Special Meeting. Only Union
stockholders of record as of the Record Date will be outstanding and entitled to
vote at the Special Meeting. The affirmative vote of the holders of a majority
of the shares of Union Common Stock entitled to vote at the Special Meeting is
required in order to approve the Agreements. Therefore, an abstention or failure
to return a properly executed proxy card will have the same effect as a vote
against the Agreements, as will a broker's submitting a proxy card without
exercising discretionary voting authority with respect to the Agreements. As of
the Record Date, there were approximately record holders of
3,874,000 shares of Union Common Stock outstanding and entitled to vote at the
Special Meeting, with each share entitled to one vote. For information as to
persons known by Union to beneficially own more than 5.0% of the outstanding
shares of Union Common Stock as of the Record Date, see "Voting Securities and
Principal Stockholders of Union."
The presence, in person or by proxy, of a majority of the outstanding
shares of Union Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Special Meeting. For these purposes,
shares of Union Common Stock that are present, or represented by proxy, at the
Special Meeting
17
<PAGE> 24
will be counted for quorum purposes regardless of whether such shares are voted
in person or by proxy at the Special Meeting, or whether a broker with
discretionary authority exercises its discretionary voting authority with
respect to the Special Meeting. Once a quorum is established, approval of the
Agreements requires the affirmative vote of the holders of a majority of the
shares of Union Common Stock outstanding and entitled to vote at the Special
Meeting.
The directors and executive officers of Union and their affiliates
beneficially owned, as of the Record Date, 779,913 shares (or approximately
19.8% of the outstanding shares) of Union Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of the
Record Date, no shares of Union Common Stock. As of that date, no subsidiary of
either Union or Regions held any shares of Union Common Stock other than in a
fiduciary capacity for others.
DESCRIPTION OF THE TRANSACTION
The following material describes certain aspects of the proposed Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Agreement, the
Plan of Merger, and the Escrow Trust Agreement, which are attached as Appendices
A, B, and C, respectively, to this Proxy Statement/Prospectus and incorporated
herein by reference. All stockholders are urged to read the Appendices in their
entirety.
GENERAL
Upon consummation of the Merger, Regions will acquire Union pursuant to the
merger of Union with and into Union Interim, a wholly owned, interim banking
subsidiary of Regions, the separate existence of Union will cease, and Union
Interim will continue in operation serving Union's current markets as a state-
chartered commercial bank until such time as Union Interim is merged with and
into First Alabama Bank, a wholly owned banking subsidiary of Regions. Each
share of Union Common Stock will be converted into Regions Common Stock as
described below under " -- Exchange Ratio and Escrow Stock Ratio." Each share of
Union Interim Common Stock and Regions Common Stock outstanding immediately
prior to the Effective Date will remain outstanding and unchanged as a result of
the Merger.
EXCHANGE RATIO AND ESCROW STOCK RATIO
Each share of Union Common Stock (excluding any shares held by Union,
Regions, or their respective, wholly owned subsidiaries, in each case other than
shares held in a fiduciary capacity or in satisfaction of debts previously
contracted, and excluding shares held by stockholders who perfect their
dissenters' rights of appraisal) issued and outstanding at the Effective Date
will be converted into (i) that fraction of a share of Regions Common Stock
equal to the quotient obtained by dividing (a) $16.02 by (b) the Average Closing
Price and (ii) the right to receive on a deferred basis and in accordance with
the terms of the Escrow Trust Agreement that additional fraction of a share of
Regions Common Stock equal to the quotient obtained by dividing (a) $0.51 by (b)
the Average Closing Price.
The additional fraction of a share of Regions Common Stock represented by
each Escrow Stock Right is the portion of the consideration to be issued in the
Merger that will be held in escrow in accordance with the terms of the Escrow
Trust Agreement pending the resolution of certain environmental remediation
issues. Based on the total number of shares of Union Common Stock outstanding or
subject to option, the Escrow Stock Rights in the aggregate represent
approximately $2 million in value of Regions Common Stock out of the
approximately $65 million in value of Regions Common Stock to be issued in the
Merger. The Escrow Shares may be used to reimburse Regions for certain
environmental remediation costs in excess of $500,000 which may be incurred by
Regions, with any amount remaining to be distributed to the former stockholders
of Union upon termination of the Escrow Trust Agreement. During the pendency of
the Escrow Trust Agreement, the former stockholders of Union will be entitled to
receive cash dividends paid with respect to the Escrow Shares and to provide the
Escrow Agent voting instructions with respect to voting the Escrow Shares.
18
<PAGE> 25
The operation of the Exchange Ratio and the Escrow Stock Ratio is
illustrated by the following table, which shows the effect that various Average
Closing Prices would have on each such ratio and on the number of shares of
Regions Common Stock that would be issuable in the Merger on the basis of each
such ratio.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF ADDITIONAL
OF REGIONS COMMON SHARES OF REGIONS COMMON
AVERAGE CLOSING STOCK ISSUABLE ON ESCROW STOCK ISSUABLE ON
PRICE OF REGIONS EXCHANGE THE BASIS OF THE STOCK THE BASIS OF THE
COMMON STOCK RATIO EXCHANGE RATIO RATIO ESCROW STOCK RATIO
- ---------------- -------- ----------------- ------ ------------------------
<S> <C> <C> <C> <C>
$28.00 0.5721 2,249,497 0.0182 71,562
28.50 0.5621 2,210,177 0.0179 70,383
29.00 0.5524 2,172,037 0.0176 69,203
29.50 0.5431 2,135,469 0.0173 68,024
30.00 0.5340 2,099,688 0.0170 66,844
30.50 0.5252 2,065,086 0.0167 65,664
31.00 0.5168 2,032,058 0.0165 64,878
31.50 0.5086 1,999,815 0.0162 63,698
32.00 0.5006 1,968,359 0.0159 62,519
32.50 0.4929 1,938,083 0.0157 61,732
33.00 0.4855 1,908,986 0.0155 60,946
33.50 0.4782 1,880,282 0.0152 59,766
34.00 0.4712 1,852,758 0.0150 58,980
34.50 0.4643 1,825,628 0.0148 58,194
35.00 0.4577 1,799,676 0.0146 57,407
35.50 0.4513 1,774,512 0.0144 56,621
36.00 0.4450 1,749,740 0.0142 55,834
</TABLE>
This table is presented for illustration purposes only, and no inference is
intended or may be drawn concerning the actual Average Closing Price which may
occur or the resulting Exchange Ratio or Escrow Stock Ratio. Moreover, Union
stockholders should be aware that the actual market value of a share of Regions
Common Stock at the Effective Date and at the time certificates for those shares
are delivered following surrender and exchange of certificates for shares of
Union Common Stock may be more or less than the Average Closing Price. On
November , 1994, the last reported sale price of Regions Common Stock as
reported on the Nasdaq National Market was $ . An Average Closing Price
of this amount would yield an Exchange Ratio of and an Escrow Stock
Ratio of . Union stockholders are urged to obtain information on the
trading price of Regions Common Stock that is more recent than that provided in
this Proxy Statement/Prospectus. See "Comparative Market Prices and Dividends."
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares on the basis of the
Exchange Ratio, Regions will make a cash payment equal to the fractional
interest which a Union stockholder otherwise would receive multiplied by the
last sale price of Regions Common Stock on the Nasdaq National Market on the
last trading day prior to the Effective Date, in the case of shares exchanged
pursuant to the Merger, and the date of exercise, in the case of options. For
those fractional shares of Regions Common Stock issuable upon termination of the
Escrow Trust Agreement as described under "-- Escrow Trust Agreement," Regions
will make a cash payment based on, at Regions election, either (i) the value of
Regions Common Stock on the fifth full trading day immediately prior to
expiration of the Escrow Trust Agreement or (ii) the actual cash proceeds
available from the sale of fractional shares by the Escrow Agent.
ESCROW TRUST AGREEMENT
Prior to the Effective Date, Regions, the Escrow Agent, and the Stockholder
Representative Committee will enter into the Escrow Trust Agreement in order to
establish an escrow of a certain portion of the consideration to be issued in
the Merger to cover possible environmental remediation costs related to a
property in which Union has a security interest (the "site"). The environmental
remediation costs are defined
19
<PAGE> 26
in the Escrow Trust Agreement to mean, generally, the costs necessary to be
incurred in connection with obtaining the consent of the Alabama Department of
Environmental Management (the "ADEM") for the implementation of a remediation
plan with respect to any groundwater or soil contamination resulting from any
hazardous material at, under, or emanating from the site, together with costs
incurred in connection with certain third-party claims.
At the Effective Date, Regions will deposit with the Escrow Agent that
number of whole shares of Regions Common Stock (rounding up to the nearest whole
share) equal to the quotient obtained by dividing (i) the product of (a) $0.51
and (b) the total number of shares of Union Common Stock outstanding at the
Effective Date (other than those shares held by stockholders who perfect their
dissenters' rights of appraisal) by (ii) the Average Closing Price (the "Primary
Escrow Shares"). After the Effective Date, Regions will deposit with the Escrow
Agent that number of additional shares of Regions Common Stock necessary to take
account of (i) stock splits and stock dividends with respect to Regions Common
Stock and (ii) the exercise of Union Options (as defined under "--Treatment of
Union Options") and the failure of any dissenting stockholder to perfect, or the
effective withdrawal or loss of, such holder's dissenters' rights of appraisal
(together with the Primary Escrow Shares, the "Escrow Shares").
Subject to the terms of the Escrow Trust Agreement, Regions will pay any
environmental remediation costs relating to the site incurred up to $500,000,
and the Escrow Shares will be used, if necessary, to reimburse Regions for the
next $2 million of environmental remediation costs in excess of the initial
$500,000. Any environmental remediation costs above such $2 million of
reimbursable costs will be borne by Regions. Neither Regions nor Union can
accurately predict what the aggregate amount of environmental remediation costs
will be.
Once the aggregate environmental remediation costs have been determined and
agreed upon by the Stockholder Representative Committee and Regions, upon
expiration of the Escrow Trust Agreement the requisite number of Escrow Shares
will, at Regions' election, be delivered to and cancelled by Regions or sold in
the open market with the net proceeds being paid to Regions. For purposes of
determining the number of Escrow Shares that would be delivered to Regions to
satisfy the reimbursement obligation to Regions, such shares will be valued
based on the closing sale price of Regions Common Stock at the close of trading
on the fifth trading day preceding the expiration of the Escrow Trust Agreement
(the "Market Value"). If Regions elects to have Escrow Shares sold on the open
market, a sufficient number of Escrow Shares will be sold to generate proceeds
equal to the aggregate amount of environmental remediation costs for which
Regions is entitled to reimbursement.
To the extent that there are any Escrow Shares remaining after
reimbursement of Regions for the environmental remediation costs incurred, such
shares will be distributed to the former stockholders of Union in accordance
with their percentage interests, as defined in the Escrow Trust Agreement. In
the event that a former Union stockholder's percentage interest entitles such
stockholder to a fractional share of Regions Common Stock, such former
stockholder will receive in lieu of the issuance of a fractional share a cash
payment based on either, at Regions' election, (i) the value of Regions Common
Stock on the fifth full trading day immediately prior to the expiration of the
Escrow Trust Agreement or (ii) the actual cash proceeds available from the sale
of fractional shares by the Escrow Agent.
The Escrow Trust Agreement will remain in effect for one year after the
Effective Date, subject to one six-month extension at Regions' option in the
event the ADEM consent has not been received by such date or the ADEM consent
has been received, but contains possible additional remedial action based on
post-remediation testing, the cost of which has not been determined. In the
event (i) the ADEM consent is received for the remediation plan prior to the
lapse of the time periods described in the immediately preceding sentence and
does not include any contingent remediation conditions and (ii) a binding
agreement to perform all remediation or removal services contemplated by the
remediation plan approved by the ADEM is obtained from a third party agreed upon
by the Stockholder Representative Committee and Regions, the Escrow Trust
Agreement may be immediately terminated by either party and the Escrow Shares
remaining after reimbursing Regions for the environmental remediation costs
distributed to the former stockholders of Union prior to the expiration of such
time periods.
20
<PAGE> 27
In the event that, at the normal expiration of the term of the Escrow Trust
Agreement, the ADEM consent has been received and there are no further
environmental remediation costs for which Regions may be entitled to
reimbursement, the Escrow Agent will deliver to each former Union stockholder
that number of whole Escrow Shares remaining and cash for any fractional shares
to which the stockholder is entitled as described above. In the event, however,
that the term of the Escrow Trust Agreement expires and either (i) the consent
of the ADEM has been received, but there exist additional environmental
remediation costs for which Regions would be entitled to reimbursement if such
claims were resolved adversely to it, or (ii) the consent of the ADEM has not
been received, then in each such case the Escrow Agent will retain in escrow
that number of Escrow Shares which, based upon the Market Value of Regions
Common Stock, equals the amount of environmental remediation costs agreed upon
by the parties. In the event the consent of the ADEM has not been received at
the expiration of the term of the Escrow Trust Agreement, the amount of
environmental remediation costs will equal the cost estimate included in a
binding commitment from a third party (as agreed upon by the Stockholder
Representative Committee and Regions) to complete the remediation and removal
services contemplated by the remediation plan as then pending before the ADEM
(which remediation plan, as agreed upon by the Stockholder Representative
Committee and Regions, will provide for remediation that the parties reasonably
believe, based on the information then available, would be acceptable to the
ADEM), plus the amount of any other claim for which Regions would be entitled to
reimbursement if such claim were resolved adversely to it.
While the Escrow Shares are held in escrow, the stockholders of Union are
entitled to receive currently any and all cash dividends or other cash income
with respect to the Escrow Shares, subject to the requirement that such
stockholders surrender the certificates representing shares of Union Common
Stock to the Exchange Agent, and have the right to direct the voting of such
Escrow Shares. In the event of any stock split or stock dividend with respect to
Regions Common Stock that becomes effective during the term of the Escrow Trust
Agreement, the additional shares issued with respect to the Primary Escrow
Shares will be added to the Escrow Shares, and the terms of the Escrow Trust
Agreement will be adjusted accordingly to account for such additional shares.
During the term of the Escrow Trust Agreement, the Escrow Stock Rights will not
be transferable otherwise than by operation of law or represented by any form of
certificate or instrument.
The Stockholder Representative Committee will have full power and authority
to represent the former Union stockholders with respect to all matters arising
under the Escrow Trust Agreement, and all action taken by the Stockholder
Representative Committee under the Escrow Trust Agreement will be binding upon
the former Union stockholders. , , and
are proposed as Stockholder Representatives, and Trust Company Bank has
agreed to serve as the Escrow Agent. If a dispute arises concerning whether a
particular cost is payable from the Escrow Shares in accordance with the terms
of the Escrow Trust Agreement which cannot be resolved by the Stockholder
Representative Committee and Regions, such dispute will be submitted to
arbitration on an informal basis as provided in the Escrow Trust Agreement.
Stockholder approval of the Agreements at the Special Meeting will be
deemed to include approval of the terms of the Escrow Trust Agreement and the
appointment of the Stockholder Representative Committee and the Escrow Agent.
The foregoing is a summary of certain of the material terms of the Escrow
Trust Agreement, which is attached as Appendix C to this Proxy
Statement/Prospectus and is incorporated herein by reference.
TREATMENT OF UNION OPTIONS
At the Effective Date, all rights with respect to Union Common Stock
pursuant to stock options (the "Union Options") granted by Union under the 1991
Union Bank & Trust Company Long Term Incentive Compensation Plan (the "Union
Stock Plan"), which are outstanding at the Effective Date will be converted into
options to acquire Regions Common Stock and, to the extent any Union Option
assumed by Regions is exercised prior to the termination of the Escrow Trust
Agreement, into Escrow Stock Rights upon such exercise. Regions will assume each
Union Option in accordance with the terms of the Union Stock Plan and the stock
option agreement by which it is evidenced. From and after the Effective Date,
(i) each Union
21
<PAGE> 28
Option assumed by Regions may be exercised solely for shares of Regions Common
Stock and, prior to the termination of the Escrow Trust Agreement, for Escrow
Stock Rights; (ii) the number of shares of Regions Common Stock subject to such
Union Option will be equal to the number of shares of Union Common Stock subject
to such Union Option immediately prior to the Effective Date multiplied by the
Exchange Ratio; (iii) the number of shares of Regions Common Stock represented
by the Escrow Stock Rights subject to such Union Option, if exercised prior to
the termination of the Escrow Trust Agreement, will be equal to the number of
shares of Union Common Stock subject to such option immediately prior to the
Effective Date multiplied by the Escrow Stock Ratio; (iv) the per share exercise
price under each such Union Option will be adjusted by dividing the per share
exercise price under each such Union Option by the Exchange Ratio and rounding
down to the nearest cent; and (v) the aggregate exercise price for all shares of
Regions Common Stock issuable pursuant to the exercise of the option and
pursuant to the Escrow Stock Rights will equal the product of the number of
shares of Regions Common Stock subject to such Union Option as calculated in
(ii) above and the per share exercise price under such Union Option as
calculated in (iv) above; provided, that in the event the Union Option assumed
by Regions is exercised after the termination of the Escrow Trust Agreement and
the expiration of the Escrow Stock Rights, such option will be exercisable for
that number of shares of Regions Common Stock as calculated in (ii) above, plus
that number of shares of Regions Common Stock represented by the then expired
Escrow Stock Rights as calculated in (iii) above that would have been issuable
upon termination of the Escrow Trust Agreement if such option had been exercised
prior to the termination of the Escrow Trust Agreement, as adjusted (if
necessary), from the date of termination of the Escrow Trust Agreement to the
date of exercise.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Since its founding in 1901, Union has operated
as an independent, community-based bank. This has proven to be a generally sound
business strategy. During the last several years, the commercial banking and
financial services industries have experienced significant change. These
developments include an accelerated trend towards consolidation and geographic
expansion by regional bank holding companies, specialization of products and
services offered by banking institutions, increased competition from financial
institutions which are not subject to bank regulatory oversight, and increasing
regulatory compliance requirements for banking institutions.
Aware of this dynamic environment, the Board, in early 1993, appointed a
strategic planning committee to study the future course of Union which would
provide for the best interests of its stockholders under current conditions. The
committee held various meetings and consulted with legal, financial, and
accounting advisors; principal stockholders; and other interested parties. Upon
completion of its study, the committee concluded that, under existing
circumstances, the best course for Union would be to investigate the sale of
Union and so recommended to the Board. At a Board meeting held on January 19,
1994, after a lengthy discussion among the directors, the Union Board
unanimously voted to undertake the process to investigate the possible sale of
Union. The Union Board also approved the engagement of J.P. Morgan to act as
financial advisor to Union and King & Spalding to act as special legal advisor
to Union in connection with the process.
22
<PAGE> 29
After discussions with J.P. Morgan, the Union Board authorized J.P. Morgan
to prepare a memorandum describing the business of Union and a list of potential
acquirors of Union. At a Board meeting on March 8, 1994, after approval of the
memorandum and a list of eight potential acquirors, the Board authorized J.P.
Morgan to solicit these financial institutions as to their interest in acquiring
Union. As a result of these inquiries, in April 1994 seven financial
institutions, one of which was Regions, indicated to J.P. Morgan an interest in
acquiring Union.
After appropriate due diligence inquiries by four potential acquirors, on
May 26, 1994, J.P. Morgan received firm indications of interest, outlining
proposed terms of an acquisition of Union, from two of such potential acquirors,
one of which was Regions. Subsequently, two additional financial institutions
performed due diligence, one of which delivered a firm bid to J.P. Morgan.
Thereafter, several meeting and telephone conferences occurred between J.P.
Morgan and representatives of the potential acquirors, including Regions,
regarding the principal terms of the proposed transactions. At a special meeting
held on June 20, 1994, the Board of Directors of Union consulted with J.P.
Morgan regarding the three outstanding bids. J.P. Morgan presented a detailed
analysis comparing the three potential acquirors in terms of liquidity, dividend
yield, historical performance, estimated future performance, and other factors
relevant to the value of consideration to be received by Union stockholders in
the proposed transactions. After J.P. Morgan completed its presentation, the
Union Board authorized its officers and representatives to negotiate a
definitive merger agreement with Regions.
Between June 20 and July 7, 1994, the Union Board met six times to discuss
the status of negotiations with Regions. On July 7, 1994, representatives of
Regions met with the Union Board to discuss the proposed transactions. After
review of the definitive merger agreement with counsel, and a presentation by
J.P. Morgan as to the fairness of the proposed transactions to Union
stockholders, the Union Board approved the Agreement and authorized the
executive officers of Union to do all necessary things to effect the transaction
with Regions. The Agreement was initially executed by the parties on July 8,
1994.
During the course of negotiations on the definitive merger agreement,
Regions expressed concern regarding possible environmental remediation at a site
for which Union might be responsible. The Agreement, as executed originally on
July 8, 1994, contained a provision allowing Regions to terminate the Agreement
within 46 days if it determined after an examination of the site, in its
discretion, that environmental remediation costs would be reasonably likely to
exceed $200,000. Thereafter, Union, in conjunction with its outside
environmental engineers and Regions, conducted an examination of the site to
determine the extent of any contamination. After completing the examination,
Union and Regions discussed the findings and the likelihood and magnitude of any
required remediation. To facilitate these discussions, the 46-day termination
period was extended to August 31, 1994, and then to September 22, 1994, as
reflected in two amendments and restatements of the Agreement. On September 27,
1994, the Union Board approved the final amendment and restatement of the
Agreement. Union and Regions, unable to agree on the environmental issues,
executed the final Agreement, whereby $2 million in value of Regions Common
Stock would be held in escrow to cover any possible environmental remediation
costs associated with the site in excess of $500,000. On November , 1994, the
Board of Directors of Union called the Special Meeting to present the Merger and
the Agreements, and related matters, to the stockholders of Union and by
unanimous vote of all directors present recommended that the stockholders
approve the Agreements and all related matters.
Union's Reasons for the Merger. In approving the Merger and the
Agreements, and related matters, the directors of Union considered a number of
factors. Without assigning any relative or specific weights to the factors, the
Union Board of Directors considered the following material factors:
(a) the information presented to the directors by the management of
Union concerning the business, operations, earnings, asset quality, and
financial condition of Union, including compliance with regulatory capital
requirements on an historical and prospective basis;
(b) the financial terms of the Merger and related matters, including
the relationship of the value of Regions Common Stock issuable in the
Merger to the market value, tangible book value, and earnings per share of
Union Common Stock;
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(c) the nonfinancial terms of the Merger, including the treatment of
the Merger and related matters as a tax-free exchange of Union Common Stock
for Regions Common Stock for federal income tax purposes;
(d) the likelihood of the Merger being approved by applicable
regulatory authorities without undue conditions or delay;
(e) the report of J.P. Morgan, Union's financial advisor, reviewing a
comparison of Union to selected peer banks, premiums paid in other merger
transactions, and other analyses of the Merger performed by J.P. Morgan;
(f) the opinion rendered by J.P. Morgan to the effect that the
Exchange Ratio is fair, from a financial point of view, to the stockholders
of Union; and
(g) in general, the fairness of the Merger to Union and its
stockholders.
The terms of the Merger and the Agreements were the result of arm's-length
negotiations between representatives of Union and representatives of Regions.
Based upon the consideration of the foregoing factors, the Board of Directors of
Union approved the Merger and the Agreements, and related matters, as being in
the best interests of Union and its stockholders.
UNION'S BOARD OF DIRECTORS RECOMMENDS THAT UNION STOCKHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENTS.
Regions' Reasons for the Merger. In approving the Merger and the
Agreements, and related matters, the Board of Directors of Regions considered a
number of factors. Without assigning any relative or specific weights to the
factors, the Regions Board of Directors considered the following material
factors:
(a) a review, based in part on a presentation by Regions management,
of (i) the business, operations, earnings, and financial condition,
including the capital levels and asset quality, of Union on an historical,
prospective, and pro forma basis and in comparison to other financial
institutions in the area; (ii) the demographic, economic, and financial
characteristics of the markets in which Union operates, including existing
competition, the history of the market areas with respect to financial
institutions and the average demand for credit on an historical and
prospective basis; and (iii) the results of Regions' due diligence review
of Union; and
(b) a variety of factors affecting and relating to the overall
strategic focus of Regions, including Regions' desire to expand into
certain markets in the southeastern United States.
OPINION OF UNION'S FINANCIAL ADVISOR
J.P. Morgan acted as financial advisor to Union in connection with the
Merger, and has advised the Union Board and has delivered its written opinion to
the Union Board that, as of July 11, 1994, the consideration to be received by
the Union common stockholders in the Merger is fair, from a financial point of
view, to such stockholders. No limitations were imposed by the Union Board upon
J.P. Morgan with respect to the investigations made or procedures followed by
J.P. Morgan in rendering its opinion.
The full text of the opinion of J.P. Morgan dated July 11, 1994 (the "J.P.
Morgan Opinion"), which sets forth assumptions made, matters considered and
limits on the review undertaken, is attached hereto as Appendix D to this Proxy
Statement/Prospectus. Union stockholders are urged to read the J.P. Morgan
Opinion in its entirety. The J.P. Morgan Opinion, which is addressed to the
Union Board, is directed only to the consideration to be received by the Union
common stockholders in the Merger and does not constitute a recommendation to
any Union stockholder as to how such stockholder should vote at the Special
Meeting or as to any other matter. The summary of the J.P. Morgan Opinion set
forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion.
In arriving at its opinion, J.P. Morgan reviewed among other things: (1)
the Agreement, (2) financial and other publicly available information with
respect to Union and Regions, including among other things (i) with respect to
Union, audited financial statements for the five years ending December 31, 1993,
unaudited
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financial results for the three months ending March 31, 1994, and FFIEC Reports
of Condition and Income for the three-month period ending March 31, 1994, and
(ii) with respect to Regions, Annual Reports on Form 10-K for each of the five
years ending December 31, 1993, Quarterly Reports on Form 10-Q for the quarter
ending March 31, 1994 and proxy statements for each of the five years ending
1994.
In addition, in connection with its opinion, J.P. Morgan reviewed the
financial and other terms of certain other acquisitions involving banks and bank
holding companies. J.P. Morgan also compared certain financial and stock market
information for Union and Regions with similar information for certain other
companies deemed to be comparable to the Merger the securities of which are
publicly traded and performed such other studies and analyses as J.P. Morgan
deemed necessary or appropriate.
J.P. Morgan also held discussions with certain members of the senior
management of Union and Regions regarding the Merger and certain aspects of the
past and current business operations, financial condition and future prospects
of their respective companies.
In connection with its opinion, J.P. Morgan relied without independent
verification upon the accuracy and completeness of all of the financial and
other information provided to it by Union and Regions or otherwise reviewed by
it. J.P. Morgan did not act as an expert in considering the loan portfolios of
Union or Regions or the allowances for loan losses with respect thereto. J.P.
Morgan also did not make any independent evaluation or appraisal of any other
assets or liabilities of Union or Regions or any of their subsidiaries.
In relying on the financial analyses, forecasts and other information
provided to it, J.P. Morgan assumed that such analyses, forecasts and
information were reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of Union and Regions to
which such analyses or forecasts related. J.P. Morgan also assumed that the
Merger would have the tax consequences described in the Agreement, and that the
other transactions contemplated by the Agreement would be consummated as
described in the Agreement. J.P. Morgan relied as to all legal matters relevant
to its opinion upon the advice of counsel.
J.P. Morgan based its analyses upon assumptions it considered reasonable,
including assumptions with respect to industry performance, general business and
economic conditions and other matters. As noted above, J.P. Morgan did not
independently verify any information supplied by Union, Regions, or any other
party, and assumed that financial projections had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of Union or Regions, as the case may be, as to expected future
financial results and conditions of Union or Regions, as the case may be. The
analyses performed by J.P. Morgan are not necessarily indicative of actual
values or actual future results that might be achieved, all of which may be
significantly more or less favorable than suggested by such analyses. Moreover,
J.P. Morgan's analyses are not and do not purport to be appraisals or otherwise
reflective of the prices at which businesses actually could be sold. Subsequent
developments may affect the J.P. Morgan Opinion, and J.P. Morgan does not have
any obligation to update, revise, or reaffirm further the J.P. Morgan Opinion.
In connection with rendering its opinion and preparing its various written
and oral presentations to the Union Board, J.P. Morgan performed a variety of
generally accepted valuation methods. Set forth herein is a brief summary of the
valuation methods employed by J.P. Morgan in connection with its opinion
delivered on July 11, 1994. The summary set for the herein does not purport to
be a complete description of the analyses or data presented by J.P. Morgan. The
preparation of a fairness opinion is a complex process and is not susceptible to
partial analysis or summary description. Accordingly, notwithstanding the
separate factors summarized below, J.P. Morgan believes that its analyses must
be considered as a whole and that selecting portions of its analyses or certain
of the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the process underlying its analyses and
opinion.
J.P. Morgan did not express any opinion regarding the price at which the
Regions Common Stock will trade if and when issued or at any time in the future.
The J.P. Morgan Opinion was provided solely for the benefit of the Board of
Directors of Union and is not on behalf of and is not intended to confer rights
or remedies upon any stockholder of Union or any other person other than the
Board of Directors of Union.
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J.P. Morgan was retained by Union to act as financial advisor in connection
with the Merger and to render its opinion pursuant to an engagement letter dated
April 15, 1994 (the "Engagement Letter"). Pursuant to the Engagement Letter,
Union(i) has paid J.P. Morgan $150,000 and (ii) has agreed to pay J.P. Morgan a
fee equal to . The actual amount of such fees may be lower or
higher, depending on the closing price of Regions Common Stock. Union has also
agreed to reimburse J.P. Morgan for its reasonable out-of-pocket expenses and to
indemnify it against certain liabilities, including liabilities under the
federal securities laws.
J.P. Morgan is an internationally recognized investment banking firm and,
as part of its investment banking business, is regularly engaged in a full range
of investment banking activities, including mergers and acquisitions and the
underwriting and placement of debt and equity securities.
Union has been advised that, in the ordinary course of their business, J.P.
Morgan and its affiliates may actively trade the debt and equity securities of
Regions, for their own accounts or for the accounts of customers, and
accordingly, J.P. Morgan and its affiliates may at any time hold a long or short
position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Indemnification and Advancement of Expenses. The Agreement provides that
Regions will, or will cause Union Interim or any successor or assign to,
indemnify, defend, and hold harmless the present and former directors, officers,
employees, and agents of Union or any of its subsidiaries against all
liabilities and expenses arising out of actions or omissions occurring at or
prior to the Effective Date to the full extent permitted under Alabama law and
by the Articles of Incorporation or Bylaws of Union or any of its subsidiaries,
as the case may be, in effect on the date of the Agreement. In addition, the
Agreement provides that, for a period of one year after the Effective Date,
Regions will use its reasonable efforts to maintain in effect Union's existing
directors' and officers' liability insurance policy (or comparable policy) with
respect to claims arising from facts or events which occurred prior to the
Effective Date and covering persons who are currently covered by such insurance.
Employee Benefits. The Agreement also provides that, after the Effective
Date, Regions will provide generally to officers and employees of Union and any
of its subsidiaries who, at or after the Effective Date, become officers or
employees of Regions or its subsidiaries, employee benefits under employee
benefit plans (other than stock option or other plans involving the potential
issuance of Regions Common Stock, except as set forth in the Agreement or with
respect to the Union Options to be assumed pursuant to the Agreement) on terms
and conditions that, when taken as a whole, are substantially similar to those
currently provided by Regions and its subsidiaries to their similarly situated
officers and employees. For purposes of participation and vesting (but not
benefit accrual) under such employee benefit plans, service with Union prior to
the Effective Date will be treated as service with Regions or its subsidiaries.
The Agreement further provides that Regions will cause Union and any of its
subsidiaries to honor all employment, severance, consulting, and other
compensation contracts disclosed to Regions between Union or any of its
subsidiaries and any current or former director, officer, or employee and all
provisions for vested amounts earned or accrued through the Effective Date under
Union's benefit plans.
Union Employment Agreements. Certain executive officers of Union are
parties to employment or severance agreements with Union. Robert C. Baird, Jr.,
the Chairman of the Board, President, and Chief Executive Officer of Union is a
party to an employment agreement dated August 23, 1991. The agreement provides
for certain payments to Mr. Baird if his employment is terminated within five
years of a "change in control," which the Merger, by action of the Union Board
of Directors, will constitute, (i) by Union for reasons other than for "cause"
(as defined therein) or other than as a consequence of Mr. Baird's death,
permanent disability, or attainment of normal retirement as provided under
Union's retirement plan; or (ii) by Mr. Baird after (a) a diminution of his
duties, (b) a reduction of his annual salary, (c) his transfer to a new
location, or (d) a good faith determination by Mr. Baird that he is no longer
able effectively to discharge his duties and responsibilities due to such change
in control. After any such termination, Mr. Baird will receive cash in an amount
equal to three years' base salary (as defined in the agreement) (approximately
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$[ ]), will realize immediate vesting of all sums or awards previously
granted to Mr. Baird under Union employee benefit plans (or, if such accelerated
vesting would cause any "qualified" plan under the Code to become non-qualified,
Mr. Baird will receive cash payments substantially equal to those he would have
received had such vesting occurred), will continue to receive life insurance,
medical insurance, and accident and disability insurance through his normal
retirement age and will receive certain other fringe benefits. In addition, the
agreement will be amended prior to the Effective Date to provide that, upon any
such termination of Mr. Baird's employment, Mr. Baird will receive cash in an
amount equal to the present value of the accrued benefit, if any, that Mr. Baird
forfeits under Union's defined benefit pension plan as a result of such
termination. Such employment agreement will be binding upon Regions and Union
Interim after consummation of the Merger.
Each of Richard C. Solomon, Bruce B. McLay, James G. Hawthorne, Jr., and
James W. Davis, executive officers of Union, is a party to a severance agreement
with Union dated December 14, 1993. Each such agreement will be amended prior to
the Effective Date and will provide for payments to such officer upon a
termination of such officer's employment within two years of a "change in
control," which the Merger, by action of the Union Board of Directors, will
constitute, (i) by Union for any reason other than such officer's death,
permanent disability, or attainment of normal retirement age, as provided under
Union's Retirement Plan, or (ii) by such officer after (a) a diminution in such
officer's duties, (b) a reduction of such officer's annual salary, (c) such
officer's transfer to a new location, or (d) a good faith determination by such
officer that he is no longer able effectively to discharge his duties and
responsibilities as a result of such change of control. After any such
termination, such officer will receive cash in an amount equal to two-years'
base salary, approximately $250,000, $170,000, $230,000, and $190,000 for
Messrs. Solomon, McLay, Hawthorne, and Davis, respectively. In addition, each of
Messrs. McLay and Davis is entitled, upon any such termination of his
employment, to receive cash in an amount equal to the present value of any
accrued benefit which such officer would forfeit under the Union defined benefit
pension plan as a result of such termination. Finally, Eugene C. Crane, Senior
Vice President of Union, will enter into a severance agreement pursuant to
which, in the event his employment is terminated under any of the circumstances
described above, he will receive cash in an amount equal to the present value of
any accrued benefit which he would forfeit under the Union defined benefit
pension plan as a result of such termination. In addition, all amounts payable
to these officers, as well as Mr. Baird, under their respective severance
agreements in respect of benefits forfeited under the Union defined benefit
pension plan are "grossed up" to account for such officer's federal and state
tax liability attaching to such payments. Such severance agreements will be
binding upon Regions and Union Interim after consummation of the Merger.
Regions Stock Ownership. As of the Record Date, the directors and
executive officers of Union owned an aggregate of 31,273 shares of Regions
Common Stock.
Restricted Stock Awards. As of the date of this Proxy
Statement/Prospectus, certain executive officers of Union are holders of
restricted stock granted under the Union Stock Plan. Under the terms of the
Agreement, the shares of Union Common Stock represented by these awards will be
converted into shares of Regions Common Stock, and pursuant to the terms of the
restricted stock awards, all restrictions or limitations on transfer with
respect to such shares of restricted stock will lapse upon consummation of the
Merger. The executive officers (one of whom also serves as a director) of Union
who hold restricted stock (and the respective numbers of shares of restricted
stock) are Robert C. Baird, Jr. (10,000 shares), Richard C. Solomon (3,000
shares), James G. Hawthorne, Jr. (3,000 shares), Bruce B. McLay (2,500 shares),
and Eugene C. Crane (2,500 shares).
Union Options. At the Effective Date, all rights with respect to Union
Options granted under the Union Stock Plan which are outstanding at the
Effective Date will be converted into options to acquire Regions Common Stock
and Escrow Stock Rights. As of the date of this Proxy Statement/Prospectus, the
executive officers (two of whom also serve as directors) of Union who hold
outstanding Union Options (and the respective numbers of shares of Union Common
Stock purchasable pursuant to the exercise thereof and the related exercise
prices thereof) are Robert C. Baird, Jr. (20,000 shares at an exercise price of
$10.00 per share), Robert E. Kelly (8,000 shares at an exercise price of $10.00
per share), Richard C. Solomon (7,500 shares at an exercise price of $10.00 per
share), James G. Hawthorne, Jr. (7,500 shares at an exercise price of
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$10.00 per share), James W. Davis (5,000 shares at an exercise price of $10.00
per share), Bruce B. McLay (5,000 shares at an exercise price of $10.00 per
share), and Eugene C. Crane (5,000 shares at an exercise price of $10.00 per
share), all of which options are currently exercisable.
Management Incentive Plan. Under Union's management incentive plan,
certain executive officers are eligible to receive cash bonuses based on
year-end financial performance criteria. Such bonuses are typically paid in the
first quarter of each year. Because the Merger is expected to be consummated in
the fourth quarter of 1994, such cash bonuses for 1994 will be based on
projected year-end financial results and will be paid to eligible Union
executive officers prior to the consummation of the Merger.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that Articles
of Merger relating to the Merger are filed with the Alabama Secretary of State
and become effective. Unless otherwise agreed upon by Regions and Union, and
subject to the conditions to the obligations of the parties to effect the
Merger, the parties will use their reasonable efforts to cause the Effective
Date to occur on the last business day of the month in which the last of the
following events occurs: (i) the effective date (including the expiration of any
applicable waiting period) of the last federal or state regulatory approval
required for the Merger and (ii) the date on which the Agreements are approved
by the requisite vote of Union stockholders; or such later date within 30 days
thereof as specified by Regions.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and Union anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated by year-end 1994. However, delays in the consummation of the Merger
could occur.
The Board of Directors of either Regions or Union generally may terminate
the Agreement if the Merger is not consummated by March 31, 1995, unless the
failure to consummate by that date is the result of a breach of the Agreement by
the party seeking termination. See " -- Conditions to Consummation of the
Merger" and " -- Waiver, Amendment, and Termination of the Agreement."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Date, Regions will cause First Alabama, acting
in its capacity as Exchange Agent, to mail to the former stockholders of Union a
form letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of Union Common Stock for
certificates representing shares of Regions Common Stock.
UNION STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of certificates for Union Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of Union Common Stock surrendering such items a
certificate or certificates representing the number of shares of Regions Common
Stock to which such holder is entitled based on the Exchange Ratio, if any, and
a check for the amount to be paid in lieu of any fractional share (without
interest). Any shares of Regions Common Stock to which such holder is entitled
based on the Escrow Stock Ratio will be deposited with the Escrow Agent as
described under "-- Escrow Trust Agreement." After the Effective Date, to the
extent permitted by law, Union stockholders of record as of the Effective Date
will be entitled to vote at any meeting of Regions stockholders the number of
whole shares of Regions Common Stock (including providing voting instructions to
the Escrow Agent with respect to those whole shares subject to the Escrow Stock
Rights) into which their respective shares of Union Common Stock have been
converted, regardless of whether such stockholders have surrendered their Union
Common Stock certificates. Whenever a dividend or other distribution is declared
by Regions on the Regions Common Stock, the record date for which is at or after
the Effective Date, the declaration will include dividends or other
distributions on all shares of Regions Common Stock issuable pursuant to the
Agreement
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(including those whole shares subject to the Escrow Stock Rights), but no
dividend or other distribution payable after the Effective Date with respect to
Regions Common Stock (including those whole shares subject to the Escrow Stock
Rights) will be paid to the holder of any unsurrendered Union Common Stock
certificate until the holder duly surrenders such certificate. Upon surrender of
such Union Common Stock certificate, however, both the Regions Common Stock
certificate, together with all such undelivered dividends or other distributions
(without interest) and any undelivered cash payments to be paid in lieu of
fractional shares (without interest), will be delivered and paid with respect to
each share represented by such certificate.
Upon expiration of the Escrow Trust Agreement, to the extent that there are
any Escrow Shares remaining after reimbursing Regions for the environmental
remediation costs incurred, such shares will be distributed to the former
stockholders of Union in accordance with their percentage interest, as defined
in the Escrow Trust Agreement. At the time of such distribution, Regions will
provide the former Union stockholders information relating to the environmental
remediation costs incurred and required to be reimbursed to Regions and the
calculation of each such holder's percentage interest and the value paid with
respect to any fractional share.
After the Effective Date, there will be no transfers of shares of Union
Common Stock on Union's stock transfer books. If certificates representing
shares of Union Common Stock are presented for transfer after the Effective
Date, they will be canceled and exchanged for the shares of Regions Common Stock
and a check for the amount due in lieu of fractional shares, if any, deliverable
in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) the approvals from the Federal Reserve, the FDIC, and the Alabama
Superintendent, none of which is conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or
the disposition of any assets, including branch offices or deposit
liabilities) which in the reasonable judgment of the Board of Directors of
Regions would so materially adversely impact the economic or business
benefits of the transactions contemplated by the Agreements so as to render
inadvisable the consummation of the Merger, and expiration of any
applicable waiting period;
(b) the receipt by Union of a final "satisfactory" or higher rating
with respect to the examination being conducted as of the date of the
Agreement by the Federal Reserve with respect to Union's compliance with
the Community Reinvestment Act of 1977 (the "CRA") and related fair lending
laws or, in the event Union fails to receive a final "satisfactory" or
higher rating, the determination by Regions in its sole discretion and on
such basis that it deems appropriate (which may include written
confirmation from the appropriate regulatory party) that such rating does
not, after the Effective Date, materially adversely impact in any manner
the regulatory authorities' view of Regions' compliance with the CRA and
related fair lending laws or Regions' ability to receive appropriate
consents from the regulatory authorities for other matters contemplated by
Regions requiring regulatory approval;
(c) the approval of the Agreements by the required vote of the holders
of Union Common Stock represented at the Special Meeting;
(d) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(e) the receipt by each party of a satisfactory opinion of Alston &
Bird that the Merger qualifies for federal income tax treatment as a
reorganization under Section 368(a) of the Code, that the exchange of Union
Common Stock for Regions Common Stock will not give rise to recognition of
gain or loss to Union stockholders (except to the extent of any cash
received or any Escrow Shares used to reimburse environmental remediation
costs under the Escrow Trust Agreement), and that neither Union nor Regions
will recognize gain or loss as a consequence of the Merger;
(f) the approval for listing on the Nasdaq National Market of the
shares of Regions Common Stock to be issued in the Merger; and
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(g) the appointment of the Stockholder Representative Committee and
the execution of the Escrow Trust Agreement by the parties thereto.
In connection with entering into the Agreement, Regions advised Union that,
in the event any regulatory authority (including the Federal Reserve, the FDIC,
and the United States Department of Justice) conditioned or restricted its
consent to the Merger by requiring divestiture of deposit liabilities in excess
of $50 million, such condition or restriction would be deemed in the reasonable
judgment of the Board of Directors of Regions to so materially adversely impact
the economic or business benefits of the transactions contemplated by the
Agreement so as to render inadvisable the consummation of the Merger and would
permit Regions to refuse to consummate the Merger on the basis set forth in
subparagraph (a) above, provided that Regions has used its reasonable efforts
(excluding threatening or commencing any litigation) to cause such condition or
restriction to be removed or modified, as appropriate.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by Regions and Union of certificates executed by their
respective chief executive officers and chief financial officers as to
compliance with the Agreement and (ii) as of the Effective Date, the accuracy of
certain representations and warranties and the compliance in all material
respects with the agreements and covenants of each party.
REGULATORY APPROVALS
The Merger will not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have been
submitted to the appropriate regulatory agencies.
Regions and Union are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The relevant statutes
prohibit the Federal Reserve from approving the Merger (i) if it would result in
a monopoly or be in furtherance of any combination or conspiracy to monopolize
or attempt to monopolize the business of banking in any part of the United
States or (ii) if its effect in any section of the country may be to lessen
substantially competition or to tend to create a monopoly, or if it would be a
restraint of trade in any other manner, unless the Federal Reserve finds that
any anticompetitive effects are outweighed clearly by the public interest and
the probable effect of the transaction in meeting the convenience and needs of
the communities to be served. Under the BHC Act, the Merger generally may not be
consummated until the 30th day following the date of Federal Reserve approval,
during which time the United States Department of Justice may challenge the
transaction on antitrust grounds. The commencement of any antitrust action would
stay the effectiveness of the Federal Reserve's approval, unless a court
specifically orders otherwise.
The Merger also is subject to the approval of the FDIC and the Alabama
Superintendent. In their evaluations, the FDIC and the Alabama Superintendent
will take into account considerations similar to those applied by the Federal
Reserve.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Regions and
Union approved by their respective Boards of Directors; provided, however, that
after approval by
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the Union stockholders, no amendment that, pursuant to the Alabama Act, requires
further approval by such stockholders may be made without the further approval
of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by Union
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final,
nonappealable denial of any required regulatory approval;
(b) by the Board of Directors of either party, if the stockholders of
Union fail to vote their approval of the Agreements at the Special Meeting
after the Agreements are presented and voted upon;
(c) by mutual agreement of the Boards of Directors of Regions and
Union;
(d) by the Board of Directors of either party, in the event of a
breach of any provision of the Agreement which meets certain standards
specified therein;
(e) by the Board of Directors of either party if the Merger is not
consummated by March 31, 1995, but only if the failure to consummate the
Merger by such date has not been caused by the terminating party's breach
of the Agreement;
(f) by the Board of Directors of either party in the event (i) of the
acquisition, by any person or group of persons, of beneficial ownership of
50% or more of the outstanding shares of Union Common Stock or (ii) Union
enters into a definitive agreement providing for a third party to acquire
50% or more of the outstanding Union Common Stock or of Union's
consolidated assets;
(g) by the Board of Directors of Union in the event (i) of the
acquisition, by any person or group of persons, of beneficial ownership of
50% or more of the outstanding shares of Regions Common Stock or (ii)
Regions enters into a definitive agreement providing for a third party to
acquire 50% or more of the outstanding Regions Common Stock or of Regions'
consolidated assets; or
(h) by the Board of Directors of Regions in the event any consent,
authorization, waiver, or similar affirmation of any regulatory agency or
other governmental authority required for consummation of the Merger and
the other transactions contemplated by the Agreements, or in the event any
regulatory agency or other governmental authority, as a condition to
approval or consummation of the Merger without institution of litigation or
other proceeding, requires that Regions or Union divest any assets
(including any branch offices) or deposit liabilities which, in the
reasonable judgment of the Board of Directors of Regions, would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Agreements so as to render inadvisable the
consummation of the Merger, as further discussed under "-- Conditions to
Consummation of the Merger."
If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. Further, termination will not relieve the parties from the
consequences of any uncured willful and knowing breach of the Agreement giving
rise to such termination.
CONDUCT OF BUSINESS PENDING THE MERGER
Union generally has agreed, unless the prior consent of Regions is
obtained, and except as otherwise contemplated by the Agreement, to operate its
business only in the ordinary course, preserve intact its business organizations
and assets, and maintain its rights and franchises. Regions has agreed to
continue to conduct its business in a manner designed in its reasonable judgment
to enhance the long-term value of Regions Common Stock, enhance the business
prospects of Regions and its subsidiaries, and to the extent consistent
therewith, preserve intact the core businesses and goodwill of Regions. Regions
also has agreed not to amend its Certificate of Incorporation or Bylaws in any
manner which is adverse to and discriminates against holders of Union Common
Stock. Each of Union and Regions has agreed not to take any action that would
affect, adversely and materially, the ability of either party to perform its
covenants and agreements under the Agreement or to obtain any consent or
approval required for the consummation of the transactions
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contemplated by the Agreements. In addition, the Agreement contains certain
other restrictions applicable to the conduct of the business of Union prior to
consummation of the Merger, as described below.
Union has agreed not to take certain actions relating to the operation of
its business pending consummation of the Merger without the prior approval of
Regions. Those actions generally include, without limitation: (i) amending its
Articles of Incorporation or Bylaws; (ii) incurring, or permitting any of its
subsidiaries to incur, any additional debt or other obligation for borrowed
money in excess of an aggregate of $100,000 (except in the ordinary course of
business consistent with past practices); (iii) acquiring or exchanging any
shares of its capital stock or any securities convertible into such shares, or
paying any distribution in respect of its capital stock; provided, that Union
may, but will not be obligated to, declare and pay regular quarterly cash
dividends on the shares of Union Common Stock at a rate not in excess of $.10
per share with usual and regular record and payment dates in accordance with
past practice as previously disclosed to Regions; and provided, further, that
any dividend declared or payable on the shares of Union Common Stock for the
quarter during which the Effective Date occurs will, unless otherwise agreed
upon in writing by Regions and Union, be declared only if the record date for
payment of the quarterly dividend to holders of Regions Common Stock for the
quarter in which the Effective Date occurs is prior to the Effective Date and in
such case such Union quarterly dividend will be paid at rate not in excess of
$.10 per share of Union Common Stock, unless at the time of payment of such
dividend all conditions precedent to consummation of the Merger have been
satisfied such that the Effective Date could have occurred at a time and date
prior to the record date for payment of the quarterly dividend to holders of
Regions Common Stock for the quarter in which the Effective Date occurs, but is
delayed to accommodate Regions to a date subsequent to such record date, in
which case the dividend to be paid by Union on the shares of Union Common Stock
for the quarter in which the Effective Date occurs may be paid at a rate not in
excess of the amount equal to the product of the Exchange Ratio and the per
share dividend amount declared by Regions on Regions Common Stock for the
quarter during which the Effective Date occurs, or if no dividend has been
declared by Regions for such quarter, the per share dividend amount declared by
Regions on the Regions Common Stock for the quarter immediately preceding the
quarter during which the Effective Date occurs; (iv) issuing, selling, or
otherwise disposing of any additional shares of Union capital stock or of the
capital stock of any Union subsidiary, any rights to acquire any such stock, or
any security convertible into such stock (except as set forth in the Agreement);
(v) adjusting or reclassifying any capital stock; (vi) acquiring direct or
indirect control over any other entity; (vii) granting any increase in
compensation or benefits to employees or officers of Union or any of its
subsidiaries (a) having a salary as of the date of the Agreement in excess of
$65,000 (except as required by law) or (b) having a salary as of the date of the
Agreement of less than $65,000 (except as required by law or in the ordinary
course of business of Union consistent with past practice as disclosed to
Regions), paying any bonus (except as disclosed to Regions or in accordance with
any existing program or plan), entering into or amending any severance
agreements with officers (except as disclosed to Regions), or granting any
increase in compensation or other benefits to directors of Union or any of its
subsidiaries; (viii) entering into or amending any employment contract between
Union or any of its subsidiaries and any person that it does not have the
unconditional right to terminate (except as disclosed to Regions and except for
any amendment required by law); (ix) adopting any new employee benefit plan or
program of Union or any of its subsidiaries or materially changing any existing
plan or program of Union or any of its subsidiaries (except as disclosed to
Regions and except for any change required by law or advisable to maintain the
tax qualified status of any such plan); (x) making any significant change in any
tax or accounting methods or systems of internal accounting controls (except in
conformity to changes in tax laws or generally accepted accounting principles
("GAAP")); (xi) commencing or settling any litigation for an amount in excess of
$50,000 (except in accordance with past practice); or (xii) modifying or
terminating any material contract.
In addition, Union has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. Union also has agreed not
to negotiate with respect to any such proposal, provide nonpublic information to
any party making such a proposal, or enter into any agreement with respect to
any such proposal, except when the failure to engage in the foregoing would be
inconsistent with the Board's fiduciary duties to Union's stockholders under
applicable law. In addition, Union has agreed to use reasonable efforts to cause
its advisors and other representatives not to engage in any of the foregoing
activities.
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MANAGEMENT FOLLOWING THE MERGER
Consummation of the Merger will not alter the present officers and
directors of Regions. Information concerning the management of Regions is
included in the documents incorporated herein by reference. See "Documents
Incorporated by Reference."
DISSENTERS' RIGHTS
General. Each stockholder who objects to the Merger shall be entitled to
the rights and remedies of dissenting stockholders provided in Sections
10-2A-162 and 10-2A-163 of the Alabama Act, a copy of which is included as
Appendix E to this Proxy Statement/Prospectus.
Statutory Requirements. The following is a summary of the steps to be
taken by a Union stockholder who is interested in perfecting such holder's
dissenters' rights and should be read in conjunction with the full text of
Sections 10-2A-162 and 10-2A-163 of the Alabama Act. Each of the steps
enumerated below must be taken in strict compliance with the applicable
provisions of the statute in order for holders of Union Common Stock to perfect
their dissenters' rights.
In accordance with the Alabama Act and subject to the requisite stockholder
approval of the Agreements, Union stockholders may dissent from the terms of the
Agreement and the Plan of Merger as to all or less than all shares of Union
Common Stock held by them. Any such stockholder may exercise such holder's
rights to dissent: (i) by giving written notice of such holder's objection to
the Agreement and the Plan of Merger at or prior to the Special Meeting to
Robert E. Kelly, Corporate Secretary, Union Bank & Trust Company, 60 Commerce
Street, Montgomery, Alabama 36104; (ii) by not voting to approve the Agreements;
and (iii) by submitting written demand for payment of the fair value of such
holder's shares to Union Bank & Trust Company, 60 Commerce Street, Montgomery,
Alabama 36104, Attention: Corporate Secretary, within ten days after the Plan of
Merger is voted upon.
Union stockholders who (i) attend the Special Meeting in person, but
abstain from voting, (ii) fail to return their proxy cards to Union, or (iii)
return their proxy cards to Union unsigned, improperly signed or completed,
unmarked, or marked "abstain" will be deemed not to have voted against the
Agreements.
Any Union stockholder who does not timely and completely comply with
Section 10-2A-163 of the Alabama Act will be bound by the terms of the
Agreements and will be entitled only to receive Regions Common Stock as provided
in the Agreement.
Any Union stockholder who properly perfects such holder's rights as a
dissenter, upon consummation of the Merger and proper surrender to Regions of
the certificate(s) representing such shares, will be entitled to receive the
fair value of such shares as of the day prior to the date the vote approving the
Agreements is taken, excluding any appreciation or depreciation in anticipation
of the Merger. A stockholder who properly makes such demand thereafter has only
rights as a dissenter and may not vote such shares or exercise any rights of a
stockholder. A perfected demand for payment by dissenting stockholders may not
be withdrawn except with Regions' consent, or upon the occurrence of certain
events specified in Section 10-2A-163(b) of the Alabama Act.
Within ten days after the Effective Date, Regions will give written notice
to each Union stockholder who has perfected such holder's dissenters' rights and
make a written offer to pay each such stockholder a specified price deemed by
Regions to be the fair value of such shares on the day before the vote approving
the Agreements was taken, excluding any appreciation or depreciation in
anticipation of the Merger. If, within 30 days of the Effective Date, Regions
and any dissenting stockholder agree as to the fair value of such shares,
Regions will pay such fair value within 90 days of the Effective Date upon
proper surrender of the certificate(s) representing such shares.
If Regions and any dissenting stockholder do not agree as to the fair value
of such shares, then Regions, not later than 30 days after written demand from
any dissenting stockholder given within 60 days after the Effective Date, may
file a petition in any court of competent jurisdiction in the county in Alabama
where Regions' registered office is located, requesting that the fair value of
such shares be found and determined. If
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Regions fails to institute any such action, any dissenting stockholder may do so
in the name of Regions. A copy of the petition will be served on each dissenting
stockholder who is an Alabama resident and will be served by registered or
certified mail and by publication on nonresident dissenting stockholders. All
dissenting stockholders, wherever residing, will be made parties to the
proceeding and will be entitled to a judgment against Regions for the fair value
of their shares as of the day immediately preceding the day the vote on the
Agreements was taken, excluding any appreciation or depreciation in anticipation
of the Merger.
The judgment shall be payable only upon proper surrender to Regions of the
certificates representing such dissenting stockholder's Union Common Stock. Upon
payment of the judgment, the dissenting stockholder will cease to have any
interest in such Union Common Stock. The judgment will include interest from the
date the Agreements were voted upon to the date of payment at a rate determined
by the court to be fair and equitable in the circumstances.
The costs and expenses of any such proceeding will be determined by the
court and will be assessed against Regions. All or any part of such costs and
expenses, however, may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting stockholders who are parties to
the proceeding and to whom Regions will have made an offer to pay for the
shares, if the court finds that such stockholders' failure to accept such offer
was arbitrary, vexatious, or not in good faith. Such expenses will include
reasonable compensation for, and reasonable expenses of, the appraisers and
reasonable attorneys' fees. These expenses will exclude the fees and expenses of
experts employed by any party; provided, however, that if the fair value of the
shares as determined materially exceeds the amount which Regions offered to pay
therefor, or if no offer was made, the court in its discretion may award to any
stockholder who is a party to the proceeding, such sum as the court may
determine to be reasonable compensation to any expert or experts employed by the
stockholder in the proceeding.
The foregoing does not purport to be a complete statement of the
proceedings to be followed by Union stockholders desiring to exercise
dissenters' rights of appraisal, and because exercise of such rights requires
strict adherence to the statutory provisions referred to above, each Union
stockholder who may desire to exercise such rights should adhere to the
provisions of such laws and consult with such holder's legal, financial, and tax
advisors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX LAWS
NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, CORPORATIONS, AND HOLDERS
OF UNION OPTIONS, AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES
OF THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. STOCKHOLDERS,
THEREFORE, 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 APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX
LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Alston & Bird, special
counsel to Regions, has rendered an opinion to Regions, as the sole stockholder
of Union Interim, and Union concerning certain federal income tax consequences
of the proposed Merger under federal income tax law. It is such firm's opinion
that:
(a) The Merger, together with the merger of Union Interim with and
into First Alabama (the "First Alabama Merger"), if the First Alabama
Merger is consummated, will qualify as a reorganization within the meaning
of Section 368(a). Union, Regions, and, if the First Alabama Merger is
consummated, First Alabama will each be "a party to a reorganization"
within the meaning of Section 368(b).
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(b) Union will recognize no gain or loss upon the transfer of
substantially all of its assets pursuant to the Merger.
(c) Regions, Interim, and First Alabama will recognize no gain or loss
upon the receipt of substantially all of the assets of Union pursuant to
the Merger and the First Alabama Merger.
(d) Except as discussed below, no gain or loss will be recognized by a
Union stockholder upon the exchange of the stockholder's Union Common Stock
for shares of Regions Common Stock (including the shares held as Escrow
Shares).
(e) The basis of Regions Common Stock to be received by a Union
stockholder (including the shares held as Escrow Shares and any fractional
share interests) will, in each instance, be the same as the basis of the
Union Common Stock surrendered in exchange therefor.
(f) The holding period of Regions Common Stock received by Union
stockholders will, in each instance, include the period during which Union
Common Stock surrendered in exchange therefor was held, provided that such
Union Common Stock was held as a capital asset on the date of the exchange.
(g) The payment of cash to Union stockholders in lieu of fractional
shares of Regions Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the
exchange and then were redeemed by Regions. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the shares redeemed as provided in Section 302(a) of the Code.
Any gain or loss recognized upon such exchange will be capital gain or
loss, provided the fractional share would constitute a capital asset in the
hands of the exchanging stockholder.
(h) Where solely cash is received by a Union stockholder in exchange
for such holder's Union Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such holder's Union Common Stock, subject to the provisions
and limitations of Section 302 of the Code.
(i) In the event that the Merger is consummated, but the First Alabama
Merger is not consummated, then the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code, and, except as discussed
herein, no gain or loss will be recognized by a Union stockholder upon the
exchange of the stockholder's Union Common Stock for shares of Regions
Common Stock (including the shares held as Escrow Shares).
In the event that the Escrow Shares held pursuant to the Escrow Trust
Agreement are used to pay Regions for those Environmental Remediation Costs for
which Regions is entitled to reimbursement pursuant to the terms of the Escrow
Trust Agreement, the stockholders of Union will be required to recognize gain or
loss equal to the difference between the fair market value at the time of the
reimbursement of the Escrow Shares returned to Regions (or sold to reimburse
Regions) under the Escrow Trust Agreement and the adjusted basis of such shares.
While each stockholder should consult its own tax advisor with respect to its
particular circumstances, it is the position of the Internal Revenue Service set
forth in Revenue Ruling 78-376 that the return of Escrow Shares to Regions under
the Escrow Trust Agreement will not result in a deductible loss to the
stockholders and that the basis in each stockholder's remaining shares received
in the Merger will be increased by an amount equal to the fair market value of
the returned shares.
When Escrow Shares not used to pay Environmental Remediation Costs are
released from escrow, any payment of cash to a Union stockholder in lieu of a
fractional share of Regions Common Stock will be treated as if the fractional
share had been distributed to the Union stockholder and then redeemed by
Regions. The cash payment will be treated as having been received in exchange
for the fractional share redeemed as provided in Section 302(a) of the Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX
CONSEQUENCES OF THE MERGER. UNION STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE MERGER TO THEM
INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
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ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "purchase" as
that term is used pursuant to GAAP, for accounting and financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities of
Union as of the Effective Date will be recorded at their estimated respective
fair values and added to those of Regions. Financial statements of Regions
issued as of the Effective Date will reflect such values and will not be
restated retroactively to reflect the historical financial position or results
of operations of Union.
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreements, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that (i)
Regions will bear and pay the filing fees and printing costs in connection with
this Proxy Statement/Prospectus and (ii) in the event Regions terminates the
Agreement on the basis described in subparagraph (h) under "-- Waiver,
Amendment, and Termination of the Agreement," then, concurrently with
termination of the Agreement, Regions will pay to Union an amount not to exceed
$200,000 for the direct costs and expenses incurred by Union in negotiating and
carrying out the transactions contemplated by the Agreements. Notwithstanding
the foregoing, if, after the date of the Agreement and within twelve months
following (i) certain instances of termination of the Agreement as specified
therein or (ii) a failure to consummate the Merger by reason of any failure of
Union to satisfy certain conditions as specified in the Agreement, any third
party is involved in the acquisition of 25% or more of the assets or voting
stock of Union or any of its subsidiaries, or enters into any agreement to do
any of the foregoing, such third party will pay to Regions an amount in cash
equal to the sum of (a) an amount not to exceed $500,000 for the direct costs
and expenses incurred by Regions in negotiating and carrying out the
transactions contemplated by the Agreements and (b) $1,500,000 for the indirect
costs and expenses incurred by Regions in connection with the transactions
contemplated by the Agreements.
RESALES OF REGIONS COMMON STOCK
Regions Common Stock to be issued to Union stockholders in the Merger has
been registered under the Securities Act, but that registration does not cover
resales of those shares by persons who control, are controlled by, or are under
common control with Union (such persons are referred to hereinafter as
"affiliates" and generally include executive officers, directors, and 10%
stockholders) at the time of the Special Meeting. Affiliates may not sell shares
of Regions Common Stock acquired in connection with the Merger, except pursuant
to an effective registration statement under the Securities Act or in compliance
with Rule 145 promulgated thereunder or another applicable exemption from the
Securities Act registration requirements.
Each person whom Union reasonably believes to be an affiliate of Union has
delivered to Regions a written agreement providing that such person generally
will not sell, pledge, transfer, or otherwise dispose of any Regions Common
Stock to be received by such person upon consummation of the Merger, except in
compliance with the Securities Act and the rules and regulations of the SEC
promulgated thereunder.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Union Common Stock will be exchanging
shares of an Alabama corporation governed by the Alabama Act, the Alabama
Banking Code, and Union's Articles of Incorporation (the "Articles") and Bylaws,
for shares of Regions, a Delaware corporation governed by the Delaware GCL and
Regions' Certificate of Incorporation (the "Certificate") and Bylaws. Certain
significant differences exist between the rights of Union stockholders and those
of Regions stockholders. The differences deemed material by Union and Regions
are summarized below. In particular, Regions' Certificate and Bylaws contain
several provisions that may be deemed to have an antitakeover effect in that
they could impede or prevent an acquisition of Regions unless the potential
acquirer has obtained the approval of Regions' Board of Directors. The following
discussion is necessarily general; it is not intended to be a complete statement
of all differences affecting the rights of stockholders and their respective
entities, and it is qualified in its entirety by reference to the Alabama Act,
the Alabama Banking Code, and the Delaware GCL as well as to Union's Articles
and Bylaws and Regions' Certificate and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of Regions' Certificate and Bylaws described below under the
headings "Authorized Capital Stock," "Amendment of Certificate of Incorporation
and Bylaws," "Classified Board of Directors and Absence of Cumulative Voting,"
"Removal of Directors," "Limitations on Director Liability," "Special Meetings
of Stockholders," "Actions by Stockholders Without a Meeting," "Stockholder
Nominations and Proposals," and "Mergers, Consolidations, and Sales of Assets
Generally," and the provisions of the Delaware GCL described under the heading
"Business Combinations With Certain Persons," are referred to herein as the
"Protective Provisions." In general, one purpose of the Protective Provisions is
to assist Regions' Board of Directors in playing a role in connection with
attempts to acquire control of Regions, so that the Board can further and
protect the interests of Regions and its stockholders as appropriate under the
circumstances, including, if the Board determines that a sale of control is in
their best interests, by enhancing the Board's ability to maximize the value to
be received by the stockholders upon such a sale.
Although Regions' management believes the Protective Provisions are,
therefore, beneficial to Regions' stockholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Regions' stockholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Regions may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believe such replacement is in the best
interests of Regions. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 120,000,000
shares of Regions Common Stock, of which 43,510,939 shares were issued,
including 1,590,579 treasury shares, at June 30, 1994. Regions' Board of
Directors may cause additional shares of Regions Common Stock to be issued (up
to the amount authorized in the Certificate) without further action by Regions'
stockholders, unless such action is required in a particular case by applicable
laws or regulations or by any stock exchange upon which Regions' capital stock
may be listed.
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The authority to issue additional shares of Regions Common Stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Regions. In
addition, the sale of a substantial number of shares of Regions Common Stock to
persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
Common Stock (or the right to receive Regions Common Stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions.
Union. Union's authorized capital stock consists of 3,965,000 shares of
Union Common Stock, of which 3,874,000 shares were issued and outstanding as of
June 30, 1994, and 91,000 shares were reserved for issuance pursuant to the
Union Stock Plan as of that date. No shares were held by Union as treasury
shares as of that date.
Pursuant to the Alabama Act, Union's Board of Directors may cause
additional shares of Union Common Stock to be issued (up to the amount
authorized in the Articles) without further action by Union's stockholders.
Under the Alabama Act, a holder of voting stock generally has preemptive rights
to purchase a proportionate number of newly issued shares unless the articles of
incorporation deny the stockholder such right. Union's Articles deny preemptive
rights only insofar as they relate to fractional shares or shares related to the
Union Stock Plan.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Regions. The Delaware GCL generally provides that the approval of a
corporation's board of directors and the affirmative vote of a majority of (i)
all shares entitled to vote thereon and (ii) the shares of each class of stock
entitled to vote thereon as a class, is required to amend a corporation's
certificate of incorporation, unless the certificate specifies a greater voting
requirement. The Certificate states that its provisions regarding authorized
capital stock, election, classification, and removal of directors, the approval
required for certain business combinations, meetings of stockholders, and
amendment of the Certificate and Bylaws may be amended or repealed only by the
affirmative vote of the holders of at least 75% of the outstanding shares of
Regions voting stock, voting together as a single class.
The Certificate also provides that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws. Any action taken by the stockholders with
respect to adopting, amending, or repealing any Bylaws may be taken only upon
the affirmative vote of the holders of at least 75% of the voting power of
Regions' voting stock.
Union. Like the Delaware GCL, the Alabama Act generally provides that the
approval of a corporation's board of directors and the affirmative vote of a
majority of (i) all shares entitled to vote thereon and (ii) the shares of each
class of stock entitled to vote thereon as a class, is required to amend a
corporation's articles of incorporation. Under the Alabama Act as amended
effective January 1, 1995 (the "New Alabama Act"), the stockholder vote required
to amend the articles of incorporation depends on whether the proposed amendment
triggers dissenters' rights. If the proposed amendment does not trigger
dissenters' rights, stockholder approval is obtained if the votes cast in favor
of the amendment exceed the votes cast against the amendment. If the proposed
amendment triggers dissenters' rights -- by altering or abolishing a
preferential right of a stockholder's shares, for example -- the required vote
is the majority of the votes entitled to be cast by any voting group that would
be entitled to dissenters' rights if the amendment were approved.
As to bylaws, the Alabama Act generally provides that a board of directors
has the power to alter, amend, or repeal the bylaws or adopt new bylaws unless
such power is reserved to the stockholders by the articles of incorporation.
Union's Articles do not reserve such power to the stockholders, but they do
provide that bylaws adopted by the Board of Directors may be altered or annulled
at any time by the vote of a majority in value of the stock. The Alabama Act
provides that a board of directors may not alter, amend, or repeal any bylaw
establishing what constitutes a quorum at stockholders' meetings, and Union's
Bylaws further provide that the
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<PAGE> 45
Board may not alter, amend, or repeal any bylaws establishing the number of
directors or the time or place of stockholders' meetings. Under the New Alabama
Act, stockholders clearly have concurrent power to amend or repeal bylaws
without such power reserved in the articles of incorporation. The New Alabama
Act also provides that the directors may not adopt, amend, or repeal any bylaw
relating to the number of shares necessary to constitute a quorum at a
stockholders' meeting, and the same restrictions apply to provisions that relate
to the vote required for stockholder action.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Certificate provides that Regions' Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office.
The effect of Regions' having a classified Board of Directors is that only
approximately one-third of the members of the Board is elected each year, which
effectively requires two annual meetings for Regions' stockholders to change a
majority of the members of the Board.
Pursuant to the Certificate, each stockholder generally is entitled to one
vote for each share of Regions stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total number of
such holder's shares multiplied by the number of directors to be elected. The
stockholder has the right to cast all of such holder's votes in favor of one
candidate or to distribute such holder's votes in any manner among any number of
candidates. Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of Regions Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining Regions Common Stock effectively may not be able to
elect any person to the Board of Directors. The absence of cumulative voting
thus could make it more difficult for a stockholder who acquires less than a
majority of the shares of Regions Common Stock to obtain representation on
Regions' Board of Directors.
Union. Union's Bylaws provide that Union's Board of Directors shall have
at least ten members but no more than 17 members. There were 15 directors
constituting the Board as of the date of this Proxy Statement/Prospectus. Like
Regions, Union's Articles provide that the directors are divided into three
classes roughly equal in size, with each director serving until the third annual
meeting following such director's election. The Bylaws provide that a director
must retire at the annual meeting following attainment of age 70. The Alabama
Act provides that cumulative voting is prohibited unless provided for in a
corporation's articles of incorporation, and Union's Articles do not provide for
cumulative voting.
REMOVAL OF DIRECTORS
Regions. Under the Certificate, any director or the entire Board of
Directors may be removed only for cause and only by the affirmative vote of the
holders of 75% of Regions' voting stock.
Union. The Alabama Act provides that any director or the entire board of
directors may be removed, with or without cause, at a meeting of stockholders
called expressly for that purpose, by a vote of the holders of the majority of
shares then entitled to vote at an election of directors. Neither the Articles
nor the Bylaws of Union negate such right of stockholders. Under the New Alabama
Act, the holders of at least 10% of the outstanding shares of any class may
bring a judicial proceeding to remove a director for extreme cause.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful
39
<PAGE> 46
dividends and the making of certain unlawful stock purchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of his duties, if the action is among those as to
which liability is limited. This provision may reduce the likelihood of
stockholder derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefitted
Regions and its stockholders. The SEC has taken the position that similar
provisions added to other corporations' certificates of incorporation would not
protect those corporations' directors from liability for violations of the
federal securities laws.
Union. No limitation on directors' liability to a corporation or its
stockholders for breach of fiduciary duty as a director is provided for in the
Alabama Act or in Union's Articles or Bylaws. Under the New Alabama Act, a
plaintiff cannot recover damages on account of a transaction involving a
director conflict of interest if certain procedural safeguards are followed when
the transaction is approved by the board of directors.
INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its
officers, directors, employees, and agents to the full extent permitted by the
Delaware GCL. Under Section 145 of the Delaware GCL as currently in effect,
other than in actions brought by or in the right of Regions, such
indemnification would apply if it were determined in the specific case that the
proposed indemnitee acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of Regions and, with
respect to any criminal proceeding, if such person had no reasonable cause to
believe that the conduct was unlawful. In actions brought by or in the right of
Regions, such indemnification probably would be limited to reasonable expenses
(including attorneys' fees) and would apply if it were determined in the
specific case that the proposed indemnitee acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
Regions, except that no indemnification may be made with respect to any matter
as to which such person is adjudged liable to Regions, unless, and only to the
extent that, the court determines upon application that, in view of all the
circumstances of the case, the proposed indemnitee is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper. To the extent
that any director, officer, employee, or agent of Regions has been successful on
the merits or otherwise in defense of any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, such person must be
indemnified against reasonable expenses incurred by him in connection therewith.
Union. The indemnification of directors, officers, employees, and agents
allowed under the Alabama Act and provided for in the Articles is virtually
identical to the indemnification provisions applicable to Regions' directors,
officers, employees, and agents. Under the New Alabama Act, a corporation is not
required to indemnify agents or employees who are not officers to the same
extent it is required to indemnify directors and officers.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that such meetings may be
called at any time, but only by the chief executive officer, the secretary, or
the Board of Directors of Regions. Regions stockholders do not have the right to
call a special meeting or to require that Regions' Board of Directors call such
a meeting. This provision, combined with other provisions of the Certificate and
the restriction on the removal of directors, would prevent a substantial
stockholder from compelling stockholder consideration of any proposal (such as a
proposal for a business combination) over the opposition of Regions' Board of
Directors by calling a special meeting of stockholders at which such stockholder
could replace the entire Board with nominees who were in favor of such proposal.
Union. Under the Alabama Act, a special meeting of stockholders may be
called by the board of directors, by the holders of at least 10% of the shares
entitled to vote at the meeting, or by such persons
40
<PAGE> 47
authorized in the articles of incorporation or bylaws. In addition, Union's
Bylaws provide that the Chairman of the Board must call a special meeting upon
written request by the owners of one-third of Union's capital stock. Under the
New Alabama Act, the holders of at least 10% of the shares entitled to vote at
the special meeting must first give management the opportunity to call the
meeting. If management does not do so within a stated time, the stockholders can
themselves call the meeting and can invoke judicial help in doing so.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Certificate provides that any action required or permitted to
be taken by Regions stockholders must be effected at a duly called meeting of
stockholders and may not be effected by any written consent by the stockholders.
These provisions would prevent stockholders from taking action, including action
on a business combination, except at an annual or special meeting called by the
Board of Directors, even if a majority of the stockholders were in favor of such
action.
Union. The Alabama Act provides that any action required or permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
consent in writing is signed by all the stockholders entitled to vote on the
matter.
STOCKHOLDER NOMINATIONS AND PROPOSALS
Regions. Regions' Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Board of Directors must be made
by delivering written notice of such nomination (the "Nomination Notice") to the
secretary of Regions not less than 14 days nor more than 50 days before any
meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given to
stockholders, the Nomination Notice must be delivered to the Secretary of
Regions not later than the seventh day following the day on which notice of the
meeting was mailed to stockholders. The Nomination Notice must set forth certain
background information about the persons to be nominated, including information
concerning (i) the name, age, business, and, if known, residential address of
each nominee, (ii) the principal occupation or employment of each such nominee,
and (iii) the number of shares of Regions capital stock beneficially owned by
each such nominee. The Board of Directors is not required to nominate in the
annual proxy statement any person so proposed; however, compliance with this
procedure would permit a stockholder to nominate the individual at the
stockholders' meeting, and any stockholder may vote such holder's shares in
person or by proxy for any individual such holder desires.
Union. No procedures for stockholder nominations and proposals is set
forth in the Alabama Act or in Union's Articles or Bylaws.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware GCL ("Section 203") places certain
restrictions on "business combinations" (as defined in Section 203, generally
including mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested stockholder"
(as defined in Section 203, generally the beneficial owner of 15% or more of the
corporation's outstanding voting stock). Section 203 generally applies to
Delaware corporations, such as Regions, that have a class of voting stock listed
on a national securities exchange, authorized for quotation on an interdealer
quotation system of a registered national securities association, or held of
record by more than 2,000 stockholders, unless the corporation expressly elects
in its certificate of incorporation or bylaws not to be governed by Section 203.
Regions has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination by
Regions or a subsidiary with an interested stockholder within three years after
the person or entity becomes an interested stockholder, unless (i) prior to the
time when the person or entity becomes an interested stockholder, Regions' Board
of Directors approved either the business combination or the transaction
pursuant to which such person or entity became an interested stockholder, (ii)
upon consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder held at least 85% of the
outstanding Regions voting stock (excluding shares held by persons who are both
officers and directors and shares held by certain employee benefit plans),
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<PAGE> 48
or (iii) once the person or entity becomes an interested stockholder, the
business combination is approved by Regions' Board of Directors and by the
holders of at least two-thirds of the outstanding Regions voting stock,
excluding shares owned by the interested stockholder.
Union. The Alabama Act imposes no restrictions on business combinations
with interested stockholders.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Certificate generally requires the affirmative vote of the
holders of at least 75% of the outstanding voting stock of Regions to effect (i)
any merger or consolidation with or into any other corporation, or (ii) any sale
or lease of any substantial part of the assets of Regions to any party that
beneficially owns 5.0% or more of the outstanding shares of Regions voting
stock, unless the transaction was approved by Regions' Board of Directors before
the other party became a 5.0% beneficial owner or is approved by 75% or more of
the full Board after the party becomes such a 5.0% beneficial owner.
Union. Under the Alabama Banking Code, a state bank may merge or
consolidate with, or transfer its assets and liabilities to, another state bank
if (i) at each bank's stockholders meeting, the majority of the stock of the
bank is represented at the meeting and votes in favor of the merger,
consolidation, or transfer, and (ii) the Alabama Superintendent determines that
the transaction is in the best interests of the affected institutions.
Under the Alabama Banking Code, a state bank may merge into or consolidate
with a national bank with the consent of the holders of a majority in amount of
the state bank's stock, obtained at a meeting of the stockholders called for
such purpose.
DISSENTERS' RIGHTS OF APPRAISAL
Regions. The rights of appraisal of dissenting stockholders of Regions are
governed by the Delaware GCL. Pursuant thereto, except as described below, any
stockholder has the right to dissent from any merger of which Regions could be a
constituent corporation. No appraisal rights are available, however, for (i) the
shares of any class or series of stock that is either listed on a national
securities exchange, quoted on the Nasdaq National Market, or held of record by
more than 2,000 stockholders or (ii) any shares of stock of the constituent
corporation surviving a merger if the merger did not require the approval of the
surviving corporation's stockholders, unless, in either case, the holders of
such stock are required by an agreement of merger or consolidation to accept for
that stock something other than: (a) shares of stock of the corporation
surviving or resulting from the merger or consolidation; (b) shares of stock of
any other corporation that will be listed at the effective date of the merger on
a national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 stockholders; (c) cash in lieu of fractional shares of
stock described in clause (a) or (b) immediately above; or (d) any combination
of the shares of stock and cash in lieu of fractional shares described in
clauses (a) through (c) immediately above. Because Regions Common Stock is
quoted on the Nasdaq National Market and is held of record by more than 2,000
stockholders, unless the exception described immediately above applies, holders
of Regions Common Stock do not have dissenters' rights of appraisal.
Union. The rights of appraisal of dissenting stockholders under the
Alabama Act, while generally similar to those afforded under the Delaware GCL,
differ in certain details. For a full description of the rights of dissenting
stockholders under the Alabama Act, see "Description of the
Transaction -- Dissenters' Rights."
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware GCL provides that a stockholder may inspect books
and records upon written demand under oath stating the purpose of the
inspection, if such purpose is reasonably related to such person's interest as a
stockholder.
Union. Pursuant to the Alabama Act, any person who has been a stockholder
for at least six months, or any person who is a 5.0% stockholder, may examine
corporate books and records for any proper purpose. Such
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<PAGE> 49
records do not include banking records of persons not affiliated with the bank
(unless a court order is obtained) or records relating to regulatory supervision
of a bank. The New Alabama Act affords additional stockholder inspection rights;
any stockholder can examine certain enumerated corporate records such as
articles and bylaws, records of stockholder action, and annual reports.
DIVIDENDS
Regions. The Delaware GCL provides that, subject to any restrictions in
the corporation's certificate of incorporation, dividends may be declared from
the corporation's surplus, or, if there is no surplus, from its net profits for
the fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary depository institutions. There are various statutory limitations on
the ability of Regions' subsidiary depository institutions to pay dividends to
Regions. See "Supervision and Regulation -- Payment of Dividends."
Union. Pursuant to the Alabama Act, the board of directors may from time
to time declare dividends in cash, property, or its own shares, including
treasury shares, unless the corporation is insolvent or the declaration or
payment of the dividend would be contrary to any restrictions contained in the
articles of incorporation. However, in general, dividends payable in cash or
property may be payable only out of unreserved and unrestricted earned surplus.
Under the New Alabama Act, share dividends may be issued without consideration,
and dividends in cash or property may be paid as long as the corporation would
not thereafter be insolvent from either an equitable or balance sheet point of
view. As a member of the Federal Reserve System, Union is also subject to
limitations on its ability to pay dividends imposed by the Federal Reserve.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." Union Common Stock is traded in the over-the-counter market. The
following table sets forth, for the indicated periods, the high and low closing
sales prices for Regions Common Stock as reported on the Nasdaq National Market,
the high and low bid and asked prices for Union Common Stock as quoted in the
over-the-counter market, and the cash dividends declared per share of Regions
Common Stock and Union Common Stock for the indicated periods. The stock prices
and historical dividends for Regions have been adjusted to reflect a 10% stock
dividend paid by Regions on April 1, 1993.
<TABLE>
<CAPTION>
UNION
----------------------------------------------
REGIONS PRICE RANGE
---------------------------- ---------------------------------
CASH CASH
PRICE RANGE DIVIDENDS BID ASKED DIVIDENDS
--------------- DECLARED --------------- --------------- DECLARED
HIGH LOW PER SHARE HIGH LOW HIGH LOW PER SHARE
------ ------ ---------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992
First Quarter........................ $28.13 $23.75 $.2275 $10.00 $10.00 $12.00 $12.00 $.04
Second Quarter....................... 30.00 25.13 .2275 11.00 10.00 13.00 12.00 .04
Third Quarter........................ 30.75 27.50 .2275 11.00 11.00 13.00 13.00 .04
Fourth Quarter....................... 33.88 28.38 .2275 12.00 11.00 13.50 13.00 .04
1993
First Quarter........................ 38.38 31.25 .26 12.00 11.50 13.50 13.50 .04
Second Quarter....................... 38.25 30.25 .26 13.00 11.50 14.00 13.50 .04
Third Quarter........................ 35.25 31.25 .26 13.00 13.00 14.00 14.00 .06
Fourth Quarter....................... 35.00 29.63 .26 13.00 12.25 14.00 14.00 .06
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
UNION
----------------------------------------------
REGIONS PRICE RANGE
---------------------------- ---------------------------------
CASH CASH
PRICE RANGE DIVIDENDS BID ASKED DIVIDENDS
--------------- DECLARED --------------- --------------- DECLARED
HIGH LOW PER SHARE HIGH LOW HIGH LOW PER SHARE
------ ------ ---------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
First Quarter........................ $33.50 $30.13 $ .30 $12.50 $12.50 $14.00 $14.00 $.10
Second Quarter....................... 36.13 30.50 .30 14.50 12.50 15.50 14.00 .10
Third Quarter........................ 36.75 34.63 .30 17.00 14.00 17.00 15.00 .10
Fourth Quarter (through
November ).......................
</TABLE>
On , 1994, the last reported sale price of Regions Common
Stock as reported on the Nasdaq National Market, and the average of the last
price of Union Common Stock as quoted in the over-the-counter
market, were $ and $ , respectively. On July 7, 1994, the last
business day prior to public announcement of the proposed Merger, the last
reported sale price of Regions Common Stock, as reported on the Nasdaq National
Market, and the last bid price of Union Common Stock were $36.25 and $17.00,
respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971. Although
Regions currently intends to continue to pay quarterly cash dividends on the
Regions Common Stock, there can be no assurance that Regions' dividend policy
will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly First Alabama Bank. Regions'
subsidiary depository institutions are subject to certain legal restrictions on
the amount of dividends they are permitted to pay. See "Supervision and
Regulation--Payment of Dividends."
The holders of Union Common Stock are entitled to receive dividends when,
as, and if declared by the Board of Directors of Union out of funds legally
available therefor. Should the Merger not be consummated, Union expects to
continue to pay regular quarterly cash dividends on the Union Common Stock.
UNION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to assist in
understanding Union's results of operations and changes in financial position.
This discussion should be read in conjunction with the information included
under "Selected Financial Data -- Selected Historical Financial Data of Union"
and "Business of Union" and Union's consolidated financial statements, including
notes thereto, included elsewhere in this Proxy Statement/Prospectus. The
discussion of the components of net income is stated as a percentage of average
assets and follows the format of the Statements of Income with appropriate
comments relative to the Statements of Condition. The percentage of average
assets is calculated by dividing dollar amounts, all of which are stated in
thousands, by average assets which were $462,646 for 1993; $480,609 for 1992;
$481,625 for 1991; $479,351 in 1990; and $460,466 in 1989. References to
unadjusted income figures indicate no adjustment to the reported figures has
been made for tax benefits from tax-exempt income. References to tax equivalent
income indicate the reported figures have been adjusted upward to reflect the
tax benefit derived from certain loans and investments, the majority of which
are state and local government and industrial revenue authority obligations. The
tax equivalent income calculation is based on a 20% federal income tax rate and
has given effect to the disallowance of interest expense related to certain tax
free assets.
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<PAGE> 51
Year Ended December 31, 1993, Compared to Years Ended December 31, 1992, and
1991
OVERVIEW
Union reported net earnings of $5,783,000 for 1993. This includes
$1,315,000 related to the cumulative effect of changes in accounting principles
with the January 1, 1993 adoption of Statement of Financial Accounting Standards
("SFAS") No. 109 "Accounting for Income Taxes" and No. 106 "Employers Accounting
for Postretirement Benefits Other than Pensions." Notes to Financial Statements
Nos. 9 and 10 explain these entries in more detail. This compares to net income
of $1,029,000 for 1992 and a net loss of $7,555,000 for 1991. The net income per
share was $1.49 for 1993 compared to $0.27 for 1992 and a net loss of $1.97 for
1991. Net operating income per share adjusted to exclude the cumulative effect
was $1.15 in 1993. Union made a provision for loan loss totaling $250,000 during
the first six months of 1993, but reversed this provision during the fourth
quarter of 1993. This decision was based on the improved levels of asset
quality, higher levels of recoveries, lower levels of charge-offs and the
adequacy of the allowance for loan loss. Union's 1992 earnings included a charge
for loan loss allowance totaling $5,112,000 which was a significant decrease
from the 1991 charge of $14,313,000. Management has continued its diligent
efforts to identify and account for potential loan losses. As a part of this
effort, Union has increased the estimated loss formulas for certain internal
classifications of loans. The increases were based upon historical trends and
changing economic conditions.
INTEREST INCOME
The unadjusted interest income declined $4,566,000 or 14.91% to 5.63% of
average assets in 1993. This compares to 6.37% of average assets for 1992 and
7.54% for 1991. There were three major factors that contributed to the decline:
(i) the continued low market rates during 1993; (ii) lower loan volumes
resulting from reduced loan demand attributable to the current economic
environment; and (iii) the higher level of investment securities yielding lower
rates than the loans that paid down.
Average total loans net of unearned income have declined from $193,975,000
in 1991 and $151,687,000 in 1992 to $142,716,000 in 1993. Tax equivalent loan
income has declined from $18,951,000 in 1991 to $13,181,000 in 1992 to
$11,217,000 in 1993. Tax equivalent loan yields have declined from 9.77% in 1991
to 8.69% in 1992 to 7.86% in 1993. While a significant reduction in loans has
occurred due to charge-offs during this three-year period as reported in the
Notes to Financial Statements, continued soft loan demand and continued low
rates also have been factors. Union experienced an increase in loan demand
during the fourth quarter of 1993 mostly in the commercial real estate and
adjustable rate mortgage areas. With the level of demand for loans, Union was
required to utilize alternative investment sources. Most of the excess funds
were reinvested in high quality, relatively short-term government securities.
While a better alternative investment than federal funds, investment securities
produce much lower yields than loans. Average total investment securities have
grown from $144,022,000 in 1991 to $180,123,000 in 1992 to $218,383,000 in 1993.
Tax equivalent yields on investment securities was 8.46% in 1991, 7.65% in 1992,
and 5.93% in 1993. The reduction in yield is mostly attributable to the
maturities, calls, or paydowns of higher yielding investment securities and the
reinvestment at lower rates.
INTEREST EXPENSE
Interest expense has experienced a steady decline since 1991 from
$22,391,000 to $15,484,000 in 1992 to $12,347,000 in 1993. This reduction is
attributable to the decline in interest rates and the decline in average
outstandings in interest-bearing liabilities. While no appreciable decline in
rates occurred in 1993 from the 1992 levels, repricing of certificates as they
renewed resulted in reduced interest expense. Average total interest-bearing
liabilities have fluctuated from $367,302,000 in 1991 to $368,747,000 in 1992 to
$349,167,000 in 1993. Average total deposits have remained relatively stable at
$360,510,000 for 1991, $357,530,000 for 1992, and $360,083,000 for 1993.
Management, through the Asset/Liability Committee, has monitored closely the
changes in market rates and responded accordingly to control the levels of
interest expense. Another factor that has helped Union control its cost of funds
is the level of non-interest-bearing deposits.
45
<PAGE> 52
Average non-interest-bearing demand deposits as a percentage of total average
deposits was 19.22% for 1993. This is compared to 19.26% in 1992 and 18.20% in
1991.
NET INTEREST INCOME
Net interest income, the primary source of Union's earnings, is the income
derived from earning assets (primarily loans and investment securities) less
interest expense. Union's management has continued to focus on improving the
quality of earning assets during 1993 as well as managing the yields on earning
assets, the related cost of funds, and the changes in the types of earning
assets and interest-bearing liabilities. During 1993, rates have continued to be
the lowest in several decades. Management has monitored actively each component
of the margin to ensure that the net interest income made its maximum
contribution to the net income of Union. The unadjusted net interest income for
1991 was $13,933,000 or 2.89% of average assets. This increased by $1,209,000 or
8.68% to $15,142,000 or 3.15% of average assets for 1992, but declined 9.44% to
$13,713,000 or 2.96% of average assets for 1993. This decline in net interest
income partially was due to the liability sensitive position of Union in 1992
during a declining rate environment and management's ability to reprice
interest-bearing deposits on a more timely basis than the asset products. During
1993, rates remained low, and as assets repriced or matured, the net interest
income was affected negatively.
46
<PAGE> 53
YIELD ANALYSIS
YIELDS ON AVERAGE EARNING ASSETS AND RATES ON AVERAGE INTEREST-BEARING
LIABILITIES
(DOLLARS IN THOUSANDS TAX EQUIVALENT)
<TABLE>
<CAPTION>
1993/1992
1993 1992 CHANGE DUE TO
----------------------------- ----------------------------- -----------------------------
AVERAGE REVENUE YIELD/ AVERAGE REVENUE YIELD/ RATE/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE RATE VOLUME VOLUME
-------- ------- ------ -------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans net of unearned
income.................... $142,716 $11,217 7.86% $151,687 $13,181 8.69% (1,259) (780) 74
Less allowance for loan
losses.................... 4,432 3,254
-------- --------
Net Loans................. 138,284 148,433
Investment securities
Taxable securities.......... 216,768 12,811 5.91 174,715 13,361 7.65 (3,035) 3,216 (731)
Nontaxable securities....... 1,615 132 8.17 5,408 416 7.69 26 (292) (18)
-------- ------- -------- -------
Total investment
securities.............. 218,383 12,943 5.93 180,123 13,777 7.65 (3,102) 2,926 (659)
Federal funds sold and
securities purchased under
agreements to
resell...................... 65,201 2,001 3.07 112,491 3,932 3.50 (480) (1,653) 202
-------- ------- -------- -------
Total earning assets...... 421,868 26,161 6.20 441,047 30,890 7.00 (3,540) (1,343) 154
------- -------
Cash and other assets......... 40,778 39,562
-------- --------
Average assets................ $462,646 $480,609
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW accounts & money market
accounts.................... $ 97,545 2,547 2.61 $ 94,604 3,189 3.37 (719) 99 (22)
Savings deposits.............. 29,062 786 2.70 27,471 919 3.35 (176) 53 (10)
Time deposits................. 164,279 7,316 4.45 166,606 8,691 5.22 (1,271) (121) 18
Federal funds purchased &
other borrowed funds........ 58,281 1,698 2.91 80,066 2,685 3.35 (352) (731) 96
-------- ------- -------- -------
Total interest-bearing
liabilities............. 349,167 12,347 3.54 368,747 15,484 4.20 (2,545) (822) 130
------- -------
Incremental spread.......... 2.66 2.80
Non-interest-bearing demand
deposits.................. 69,197 68,849
Other liabilities........... 3,052 3,395
Stockholders' equity........ 41,230 39,618
-------- --------
Gross interest margin (tax
equivalent basis)......... 13,814 15,406
Total liabilities and
stockholders'
equity...................... $462,646 $480,609
======== ========
Gross interest margin/spread
(TE)...................... 3.24 3.47
Taxable Equivalent Adjustment:
Loans..................... 85 197
Investment securities..... 16 67
------- -------
Total Tax Equivalent
Adjustments:.............. 101 264
------- -------
Gross interest income....... $13,713 2.96% $15,142 3.15%
======== ========
</TABLE>
The change due to rate is computed by multiplying the change in rate
between the two years times the previous year's volume. The resulting amount
represents the change in revenue/expense due to the change in interest rates
assuming the volume remained constant.
47
<PAGE> 54
The change due to volume is computed by multiplying the change in volume
between the two years times the previous year's interest rate. The resulting
amount represents the change in revenue/expense due to the change in volume
assuming the interest rate remained constant.
The change due to rate/volume is computed by multiplying the change in rate
between the two years times the change in volume between the two years. The
resulting amount represents the blended effect of changes in rate and volume.
COMPOSITION OF EARNING ASSETS
<TABLE>
<CAPTION>
PERCENT
DECEMBER 31, INCREASE (DECREASE)
---------------------------------------------------- -----------------------
1993 1992 1991 1990 1989 1993/1992 1992/1991
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
LOANS:
Commercial, financial
and agricultural...... $ 43,512 $ 30,630 $ 31,087 $ 48,139 $ 59,450 42.06% (1.47)%
Real estate
construction.......... 2,861 3,015 2,537 2,745 7,494 (5.11) 18.84
Real estate mortgage.... 93,597 95,024 109,813 135,354 125,605 (1.50) (13.47)
Installment............. 16,912 19,728 27,295 34,329 38,852 (14.27) (27.72)
-------- -------- -------- -------- --------
156,882 148,397 170,732 220,567 231,401 5.72 (13.08)
Less unearned income.... (32) (92) (136) (235) (423) (65.22) (32.35)
Allowance for loan
losses................ (4,618) (4,225) (3,000) (3,750) (2,500) 9.30 40.83
-------- -------- -------- -------- --------
Net loans............... 152,232 144,080 167,596 216,582 228,478 5.66 (14.03)
-------- -------- -------- -------- --------
INVESTMENTS:
U.S. Treasury
securities............ 150,922 79,425 11,354 9,010 2,000 90.02 599.53
Obligations of other
U.S. Government
agencies and
corporations.......... 48,621 113,987 132,506 112,760 75,851 (57.35) (13.98)
Obligations of states
and political
subdivisions.......... 10,821 4,825 9,755 14,761 17,618 124.27 (50.54)
Other securities........ 486 502 1,748 1,749 1,754 (3.19) (71.28)
-------- -------- -------- -------- --------
210,850 198,739 155,363 138,280 97,223 6.09 27.92
-------- -------- -------- -------- --------
OTHER:
Federal funds sold...... 52,275 94,025 103,825 101,300 125,000 (44.40) (9.44)
Securities purchased
under resale
agreement............. -- -- -- 45,000 35,000 -- --
-------- -------- -------- -------- --------
52,275 94,025 103,825 146,300 160,000 (44.40) (9.44)
-------- -------- -------- -------- --------
TOTAL EARNING
ASSETS:............... $415,357 $436,844 $426,784 $501,162 $485,701 (4.92)% 2.36%
======== ======== ======== ======== ========
</TABLE>
PROVISION FOR LOAN LOSSES
During 1993, management continued its intensive efforts to reduce the level
of nonperforming assets, especially in other real estate. Other real estate has
declined from $7,812,000 in 1991 to $3,618,000 in 1992 During 1993, Union had
additions to other real estate of $4,469,000 and reductions of $4,628,000 to end
the year with a total of $3,459,000. The number of parcels of foreclosed
property have declined from 32 as of December 31, 1991, to seven as of year-end
1993. The current economic environment, especially its effect on the real estate
market, has created significant challenges for many banks, but management is
encouraged at the prospects of reducing the levels of other real estate
significantly during 1994.
48
<PAGE> 55
Union made a provision for loan losses of $250,000 during the first and
second quarters of 1993. This entry was reversed during the fourth quarter of
1993. This decision was based on: the improved levels of asset quality; higher
levels of recoveries and lower levels of charge-offs than had been anticipated;
and the adequacy of the allowance for loan loss even using a very conservative
formula for calculating required reserves. In 1992, the provision for loan
losses totaled $5,112,000 or 1.06% of average assets. This compares to
$14,313,000 or 2.97% of average assets for 1991. During 1992, management elected
to adopt a more conservative formula for calculating the required allowance for
loan loss reserve. The formula was adopted based upon an evaluation of
historical and economic trends and in anticipation of regulatory changes
relative to required loan loss reserve levels. Management feels this more
conservative approach is the best method for ensuring future improved asset
quality and earnings for Union. The allowance for loan loss at December 31,
1993, was $4,618,000 or 2.94% of total loans. This compares to $4,225,000 or
2.85% for 1992 and $3,000,000 or 1.78% for 1991. Loans 90 days past due and
nonaccruals at December 31, 1993, were $1,868,000 compared to $6,748,000 for
1992 and $4,474,000 for 1991. The decline in nonaccruals is mostly attributable
to commercial real estate loans that have moved into the other real estate
category of which most have subsequently been sold. Nonaccrual loans and 90 day
past due loans to allowance for loan loss was .40(x) for 1993 compared to
1.60(x) for 1992 and 1.49(x) for 1991.
NONINTEREST INCOME
Total noninterest income increased 20.79% or $719,000 to a total of
$4,177,000 or 0.90% of average assets. This compares to $3,458,000 or 0.72% of
average assets for 1992 and $3,291,000 or 0.68% of average assets in 1991. The
major changes from 1992 to 1993 were: (i) an increase in gains on sale of
investment securities ($428,000) attributable mostly to the sale of securities
in the first quarter, 1993 and securities that were called during the year; (ii)
an increase in trust fee income ($238,000); (iii) an increase in nonsufficient
funds fees ($63,000); (iv) an increase in service charges ($57,000); and (v) an
increase in miscellaneous noninterest income ($89,000). This increase was
partially offset by a reduction in gains and income on other real estate of
$170,000.
NONINTEREST EXPENSE
Total noninterest expense for year-end December 31, 1993, was $13,280,000
or 2.87% of average assets compared to $12,176,000 or 2.53% for 1992 and
$12,828,000 or 2.66% for 1991. This 9.07% or $1,104,000 increase is attributable
to increases in: (i) other employee benefits ($395,000); (ii) bankcard expense
($114,000) attributable mostly to the premium paid on the purchase of the
portfolio; (iii) FDIC expense ($106,000); (iv) depreciation expense ($85,000),
stationery and supplies ($93,000), telephone ($32,000), travel ($18,000), and
data processing expense ($74,000) related mostly to the data processing
conversion which occurred in July 1993; (v) advertising expense ($87,000); (vi)
accounting expense ($36,000); (vii) legal expense ($22,000); (viii) postage
($27,000); (ix) meals and entertainment expense ($27,000); and (x) and other
noninterest expense ($81,000). These increases were partially offset by
reductions in: (a) Federal Reserve charges ($64,000); (b) occupancy taxes and
insurance ($26,000); and (c) insurance ($18,000).
INCOME TAXES
Union adopted SFAS No. 109 "Accounting for Income Taxes" effective January
1, 1993. Under SFAS No. 109, the method of accounting for income taxes changed
from the deferred method to the asset and liability method. The adoption of this
new standard resulted in income in the amount of $1,769,524 which was reported
as the cumulative effect of a change in an accounting principle in 1993.
Income tax expense was $142,000 in 1993 or an effective tax rate of 3.10%.
This rate was favorably impacted by the utilization of alternative tax credits
earned in 1993 and the current year reversal of tax valuation allowance as
allowed by SFAS No. 109. This compares to $283,000 and a 21.60% effective tax
rate for 1992 and a tax benefit of $2,362,000 and a 23.80% effective tax rate
for 1991.
49
<PAGE> 56
Tax-exempt income, net of the disallowance of interest expense deductions
related to carrying tax-exempt assets acquired after 1982, continued to decline
in 1993 as a percentage of income before income taxes because Union replaced the
proceeds of maturing tax-exempt securities with taxable investments. Note 10 to
the financial statements provides additional information about the provision for
income taxes.
ASSET/LIABILITY MANAGEMENT AND LIQUIDITY
Union's Asset/Liability Committee monitors the relationship of
rate-sensitive assets to rate-sensitive liabilities in order to minimize
earnings risk and maintain stability in the gross interest margin resulting from
changes in the level of interest rates. While the balance sheet is managed to
achieve maximum stockholder returns, this is done within the constraints of
maintaining a high level of credit quality, conservative interest rate risk
disciplines and prudent levels of leverage and liquidity. Management continues
to monitor closely the liquidity of the balance sheet. On a daily basis,
liquidity is managed through federal funds transactions. Union historically has
been a net seller of federal funds, and management believes that ample
protection against unanticipated large cash requirements is provided by the
investment portfolio and purchases of federal funds from downstream
correspondent banks.
CAPITAL RESOURCES AND DIVIDENDS
At December 31, 1993, common stockholders' equity totaled $43,450,000 or
9.57% of total assets compared to $38,367,000 or 8.07% for 1992 and $37,892,000
or 8.00% for 1991. The tier 1 leverage capital ratio was 9.40% for 1993 compared
to 7.86% for 1992 and 7.73% for 1991.
Also at December 31, 1993, Union's ratio of Tier 1 Capital (as defined
below under "Supervision and Regulation -- Capital Adequacy") to risk-weighted
assets was 24.95%, and its ratio of Total Capital (as defined below under
"Supervision and Regulation -- Capital Adequacy") to risk-weighted assets was
26.22%. This compares to 21.00% and 22.27% respectively for 1992 and 17.79% and
19.20% for 1991. Tier 1 Capital primarily consists of common stockholders'
equity, less certain disallowed intangible assets. Total Capital adds the
allowance for loan losses, within permitted limits, to Tier 1 Capital. For
risk-based capital calculations, various levels of risk are assigned to
different asset categories and off-balance-sheet items.
Normal capital expenditures in 1993 for renovation and equipment were
provided through internal financing. Capital is expected to be adequate to fund
such capital expenditures for renovation and equipment for 1994 and future
expansion.
Dividends declared for 1993 were $0.20 per common share compared to $0.16
per common share for 1992 and $0.28 for 1991. The payment of dividends is
limited, without prior regulatory approval, to Union's net profits for the
current year combined with its retained net profits for the two preceding years.
Second Quarter 1994 Compared to Second Quarter 1993
Net income for the second quarter 1994 increased $735,000 compared to the
same period in 1993. Earnings per share were $0.429 compared to $0.240 for the
1993 second quarter. The increase in net income is primarily attributable to:
(i) a decrease in the provision for loan losses of $1,152,000; (ii) an increase
in noninterest income of $543,000; and (iii) a $344,000 reduction in interest
expense. This was partially offset by: (a) a $341,000 decrease in interest
income; (b) a $139,000 increase in noninterest expense; and (c) a $823,000
increase in applicable income taxes.
Average assets declined 4.91% or $22,808,000 from $464,633,000 to
$441,825,000. This decline is primarily attributable to (i) a $18,111,000
reduction in certificates of deposits, (ii) a $7,274,000 reduction in open time
accounts, (iii) a $6,611,000 reduction in purchased funds, and (iv) a $1,760,000
reduction in demand deposits. This reduction was partially offset by $6,007,000
increase in interest-bearing demand deposits, a $991,000 increase in savings
deposits, and a $3,995,000 increase in average equity.
Average equity increased 9.61% from $41,159,000 to $45,114,000 comparing
the second quarter of 1993 and 1994. The return on average assets was 1.51% for
the second quarter of 1994 compared to .80% for the
50
<PAGE> 57
second quarter of 1993. Interest income was 5.60% of average assets for the
second quarter of 1994 compared to 5.62% for 1993. Interest and fees on loans
increased by $418,000 from 2.35% of average assets to 2.85%. This increase is
mostly attributable to a $23,148,000 increase in average total loans
outstanding. Interest income from investment securities declined $535,000. This
decline is attributable to maturities, calls, paydowns on mortgage-backed
securities, and the reinvestment of funds in loans. Second quarter average
investment securities decreased from $216,696,000 to $205,685,000 comparing 1993
to 1994. Income from federal funds sold and securities purchased under agreement
to resell declined $224,000 from .47% to .30% of average assets. Second quarter
average federal funds sold declined from $73,399,000 to $33,016,000 due to the
increased level of loan demand and the reduction in deposits and purchased
funds. Average earning assets as a percentage of average assets declined from
92.88% to 91.28% for the same period.
Total interest expense declined $344,000 or 10.92% from 2.71% of average
assets to 2.54%. This decline is mostly attributable to the decline in
interest-bearing liabilities.
The net decline in interest income and interest expense resulted in a net
interest income increase of .08% or $3,000. Net interest income as a percentage
of average assets increased from 2.91% in the second quarter of 1993 to 3.06%
for second quarter 1994. The provision for loan losses decreased $1,152,000 from
the second quarter of 1993 level of $100,000. Recoveries for the second quarter
of 1994 were $1,116,000 with charges-offs totaling $64,000. Management's
assessment of the adequacy of the allowance for loan loss level at $4,118,000
allowed Union to credit the provision for loan loss expense account $1,052,000,
an amount equal to the net recoveries. Allowance for loan losses to loans net of
unearned income was 2.49% for June 30, 1994, compared to $4,434,000 or 3.17% for
June 30, 1993. Net interest income after provision for loan losses increased
$1,155,000 from the second quarter of 1993.
Noninterest income increased by $543,000 from .73% of average assets to
1.26%. This increase was partially attributable to an increase in other
noninterest income of $358,000 from $188,000 in 1993 compared to $546,000 in
1994. Included in other noninterest income was $337,000 related to interest
earned in prior accounting periods for a loan previously charged down on Union's
books and paid off during the second quarter. Trust fee income increased by
$107,000 from .25% of average assets to .36%.
Noninterest expense increased $139,000 from 2.84% of average assets to
3.12%. Total salaries and benefits expense increased from 1.53% of average
assets in the second quarter of 1993 to 1.65% in the second quarter of 1994.
Other noninterest expense increased $78,000 from .98% of average assets to
1.10%. This increase is attributable to: (i) a $43,000 increase in accounting
expense; (ii) a $37,000 increase in consultant fees; (iii) a $51,000 increase in
rents and services; (iv) a $23,000 increase in miscellaneous losses; (v) a
$19,000 increase in other noninterest expense; (vi) a $15,000 increase in
subscriptions and dues; and (vii) a $11,000 increase in legal expenses. This was
partially offset by: (a) a $65,000 decrease in advertising expense; (b) a
$29,000 decrease in FDIC insurance; (c) a $18,000 decrease in data processing
expense; and (d) a $12,000 decrease in stationery and supplies expense.
Six Months Ended June 30, 1994, Compared to Six Months Ended June 30, 1993
Net income for the six month period ending June 30 was $2,893,000 in 1994
compared to $3,448,000 in 1993. Included in 1993 earnings was $1,500,000, net of
related income taxes, arising from the cumulative effect of changes in
accounting principles. These changes were the result of Union's adopting the
provisions of SFAS No. 109 "Accounting for Postretirement Benefits Other Than
Pensions," effective January 1, 1993. SFAS No. 109 produced a benefit to
earnings of approximately $1,720,000, net of taxes, and SFAS No. 106 resulted in
a charge to earnings of $219,000, net of taxes. The increase in net operating
income before the cumulative effect of changes in accounting principles was
$945,000 comparing 1994 to 1993. Earnings per share were $.75 compared to $.89
for 1993. The increase in net operating income is primarily attributable to: (i)
a $451,000 increase in other noninterest income; (ii) a $119,000 increase in
trust fee income; (iii) a $120,000 increase in service charges on deposits; (iv)
a $2,047,000 decrease in provision for loan losses; and (v) a $166,000 decrease
in noninterest expense. This was partially offset by: (a) a $319,000 decrease in
investment security gains; (b) a $1,215,000 increase in applicable income taxes;
and (c) a $423,000 decrease in the net interest margin.
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<PAGE> 58
Average assets for the six month period ending June 30 decreased from
$462,339,000 in 1993 to $449,213,000 in 1994. Return on average assets decreased
from 1.49% to 1.29%, including the cumulative effect for the same period in
1993. Return on average assets, excluding the cumulative effect, would be .84%
for 1993.
Interest income declined $1,025,000 to 5.49% of average assets. This
reduction is primarily attributable to a $1,185,000 reduction in interest on
investment securities and a $387,000 reduction in interest on federal funds and
repos sold. This was partially offset by a $547,000 increase in interest and
fees on loans. Interest expense declined $602,000 from 2.72% to 2.53% of average
assets. The provision for loan losses declined $2,047,000 resulting in a
$1,624,000 gain in the net interest income after provision from 2.95% to 3.76%
of average assets.
Noninterest income increased 17.96% from .89% of average assets to 1.08% or
$371,000. This increase is attributable to: (i) a $119,000 increase in trust fee
income; (ii) a $120,000 increase in service charges; and (iii) a $451,000
increase in other noninterest income. This was partially offset by a $319,000
reduction in investment security gains.
Noninterest expense decreased $166,000 or 2.44% from 2.93% of average
assets to 2.95%. This decrease was primarily attributable to decreases in
advertising expense ($83,000), FDIC expense ($71,000), legal ($28,000),
stationery and supplies expense ($20,000), and other noninterest expense
($114,000). This was partially offset by an increase in accounting expenses of
$55,000 and an increase in rents and services of $69,000.
CAPITAL RESOURCES AND LIQUIDITY
Union continues to have a strong Leverage Ratio (as defined below under
"Supervision and Regulation -- Capital Adequacy"). The Leverage Ratio for the
second quarter of 1994 was 10.36% compared to 8.94% for June 30, 1993. Second
quarter dividends were at $.10 per share for 1994 while total stockholders'
equity increased from $41,546,000 to $44,646,000 from the second quarter of 1993
to the second quarter of 1994. Management is committed to protecting the strong
capital position of Union to ensure its continued soundness.
Normal capital expenditures for the second quarter of 1994 which related to
renovation and purchases of equipment were provided through internal financing.
Capital is adequate to fund such capital expenditures for renovation and
equipment for the remainder of 1994.
Union's Asset/Liability Committee monitors the relationship of
rate-sensitive assets to rate-sensitive liabilities in order to minimize
earnings risk and maintain stability in the gross interest margin resulting from
changes in the level of interest rates. Management continues to monitor the
liquidity of the balance sheet very closely. On a daily basis, management
believes that ample protection against unanticipated large cash requirements is
provided by the investment portfolio and purchases of federal funds from
downstream correspondent banks.
52
<PAGE> 59
BUSINESS OF UNION
BUSINESS AND PROPERTIES
Union is an Alabama state-chartered commercial bank with its principal
executive offices located in Montgomery, Alabama. Union provides a range of
banking and fiduciary services to individuals and businesses through ten offices
in Montgomery, Alabama. Union also provides correspondent banking services to
approximately 75 banking institutions in Alabama and adjoining states. As of
September 30, 1994, Union had 183 full-time equivalent employees. At June 30,
1994, Union had total consolidated assets of approximately $428.9 million, total
consolidated deposits of approximately $324.1 million, and total consolidated
stockholders' equity of approximately $44.6 million.
Union was organized in 1901. Union is a member of the Federal Reserve
System, and its deposits are insured by the FDIC. Union is regulated and
examined by the Federal Reserve and the Alabama State Banking Department.
The executive offices, operations, and main office of Union are located in
a 15-story building located at 60 Commerce Street in downtown Montgomery,
Alabama. This 129,832 square foot building is owned by Union, which occupies
69,998 square feet. The remaining 59,834 square feet is rental space. The
remaining nine locations of Union are located in owned or leased buildings and
on leased land in Montgomery, Alabama. Please refer to the financial statements
included elsewhere in this Proxy Statement/Prospectus for information on
carrying value of Union premises, equipment, and leasehold improvements and
other real estate and operating lease commitments.
RECENT DEVELOPMENTS
For the third quarter ended September 30, 1994, Union had net income of
$1.1 million or $0.29 per share, representing a 2.6% decrease in net income over
the same period of 1993. For the nine months ended September 30, 1994, Union had
net income of $4.0 million, or $1.03 per share, representing a 12.7% decrease in
net income from the first nine months of 1993. The annualized return on average
total assets for the first nine months of 1994 was 1.2%, and the annualized
return on stockholders' equity was 11.9%. At September 30, 1994, Union had total
consolidated assets of approximately $419 million, total consolidated deposits
of approximately $315 million, and total consolidated stockholders' equity of
approximately $45 million.
COMPETITION
As the only community bank in Montgomery, Alabama, Union presently competes
with seven bank holding companies. Competition is intense with these holding
companies, as well as with other banks and with savings institutions, credit
unions, and a variety of nonbanking institutions which offer alternative
services.
LEGAL PROCEEDINGS
Union is from time to time a party to certain legal proceedings arising in
the ordinary course of its business. However, Union is not a party to any
litigation which, in the judgment of management, would have a material adverse
effect on its operations or financial condition if adversely determined.
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<PAGE> 60
MANAGEMENT
The following tables present information about the directors, the chief
executive officer of Union, and the two other most highly compensated officers
whose salary and bonus exceeded $100,000 in 1993. Information with respect to
beneficial ownership of stock has been furnished by the respective directors and
executive officers.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP AT SEPTEMBER 30, 1994
------------------------------------------------------------------
PERCENT OF
NAME AGE TOTAL DIRECTLY INDIRECTLY OPTIONS CLASS
- -------------------------------------------- ----------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Baird, Jr. 44 32,943(1) 12,243 700 20,000 *
Chairman of the Board,
President and Chief Executive Officer,
Director
Sanders M. Benkwith, M.D. 47 2,404(2) 1,900 504 -- *
Director
Robert F. Henry, Jr. 60 44,716(3) 5,136 39,580 -- 1.15%
Director
James G. Hawthorne, Jr. 50 11,907(4) 4,407 -- 7,500 *
Executive Vice President
Robert S. Hill III 52 17,520(5) 16,500 1,020 -- *
Director
T. Bowen Hill III 65 42,020(6) 40,000 2,020 -- 1.09
Director
Jim T. Inscoe 54 8,257(7) 1,488 6,769 -- *
Director
Watkins C. Johnston, Jr. 53 7,100(8) 7,100 -- -- *
Director
Robert E. Kelly 65 52,803(9) 5,330 39,473 8,000 1.36
First Executive Vice President
Director
Algie H. Neill 75 80,122(10)(11) 62,018 18,104 -- 2.07
Director
W. L. Pinchback, Jr., M.D. 46 1,300(8) 1,300 -- -- *
Director
Samuel L. Schloss 68 22,250(12) 17,034 5,216 -- *
Director
Richard C. Solomon 63 12,640(13) 5,140 -- 7,500 *
Executive Vice President
Robbins Taylor 69 78,104(14) 15,858 62,246 -- 2.02
Director
William G. Thames 58 317,262(15) 203,859 113,403 -- 8.20
Director
John M. Trotman 67 15,910(16) 15,910 -- -- *
Director
Leslie B. Watson, Jr. 52 7,974(17) 2,000 5,974 -- *
Director
All Directors and Executive Officers 779,913(18) 426,895 295,018 58,000 19.8
as a Group (22 Persons)
</TABLE>
- ---------------
* Does not exceed one percent
(1) Includes options to purchase 20,000 shares. Also includes 700 shares held
by Mr. Baird's wife as custodian for their children, as to which beneficial
ownership is disclaimed.
(2) Includes 504 shares held by Dr. Benkwith's wife as custodian for their
child.
(3) Includes 39,580 shares held by trusts of which Mr. Henry is beneficiary,
but as to which he has neither voting nor investment power.
(4) Includes options to purchase 7,500 shares and 1,107 shares held jointly
with Mr. Hawthorne's wife.
54
<PAGE> 61
(5) Includes 1,020 shares owned by Mr. Hill's wife as custodian for their
children. Also see note 1 to the immediately following table.
(6) Includes 2,020 shares owned by Mr. Hill's wife.
(7) Includes 6,769 shares owned by Mr. Inscoe as custodian for children.
(8) The named owner has sole voting power and investment power.
(9) Includes options to purchase 8,000 shares. Also includes 39,473 shares held
by trusts under which Mr. Kelly has shared voting power and no investment
power, as to which beneficial ownership is disclaimed.
(10) Includes 1,568 shares owned by Mrs. Neill's daughter and 16,536 shares held
by a trust under which Mrs. Neill has sole voting power and shared
investment power. Also see note 1 to the immediately following table and
note 11 below.
(11) Does not include 949,560 shares of stock reported as being owned by Francis
Hill Kohn, R. S. Hill, Jr., and Francis Hill Kohn, Jr., Trustees under the
Will of Walton H. Hill, Deceased. Also see note 1 to the immediately
following table.
(12) Includes 3,296 shares owned by Mr. Schloss' wife and 1,920 shares held by a
trust under which he has shared voting power and shared investment power.
(13) Includes options to purchase 7,500 shares and 2,140 shares held jointly
with Mr. Solomon's wife.
(14) Includes 1,392 shares owned by Mr. Taylor's wife; 5,050 shares owned by a
corporation under his control; 144 shares owned by children; and 55,660
shares owned by a trust under which he has voting power and shared
investment power.
(15) Includes 113,403 shares owned by partnerships under Mr. Thames' control.
(16) Includes 996 shares held jointly with Mr. Trotman's sister.
(17) Includes 1,000 shares held jointly with, and 1,920 shares owned solely by,
Mr. Watson's wife, and 4,054 shares owned by a trust under which Mr. Watson
has sole voting power and sole investment power.
(18) Includes options to purchase 58,000 shares. Of the remaining total amount,
550,828 shares are held by the beneficial owner with sole voting power and
investment power; 7,263 shares are held with shared voting power and
investment power; 72,196 shares are held with sole voting power and shared
investment power; and 39,473 shares are held with shared voting power and
no investment power.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING LAST FIVE YEARS DIRECTOR TERM
NAME AND OFFICES WITH UNION SINCE EXPIRES
- --------------------------- ------------------------------------------------- -------- -------
<S> <C> <C> <C>
DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1997
Robert C. Baird, Jr. Chairman of the Board of Directors, President and 1991 1997
Chief Executive Officer of the Bank. Prior to
April 1991, Executive Officer of AmSouth Bank.
Robert S. Hill III(1) Attorney at Law; Partner in Hill and Hill, 1993 1997
Attorneys, Montgomery, Alabama.
Watkins C. Johnston, Jr. President, Sav Tyme Systems, Inc., Montgomery, 1992 1997
Alabama, manufacturing.
W. L. Pinchback, Jr., M.D. Orthopedic Surgeon; President Advanced Orthopedic 1992 1997
Surgical Specialist, P.C. (formerly Professional
Orthopedic Consultants), Montgomery, Alabama
medical care provider.
Robbins Taylor(2) Chairman of the Board and Chief Executive Officer 1966 1997
of Standard-Taylor Industries, Inc. (formerly
Standard Roofing Co., Inc.), Montgomery, Alabama,
general roofing contractors. Chairman of the
Board of Directors of Union from 1978 to 1992.
DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1995
T. Bowen Hill III Attorney at Law; Stockholder in Hill, Hill, 1983 1995
Carter, Franco, Cole and Black, P.C., Montgomery,
Alabama.
Robert E. Kelly First Executive Vice President of Union. 1979 1995
</TABLE>
55
<PAGE> 62
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING LAST FIVE YEARS DIRECTOR TERM
NAME AND OFFICES WITH UNION SINCE EXPIRES
- --------------------------- ------------------------------------------------- -------- -------
<S> <C> <C> <C>
Algie H. Neill Homemaker, Montgomery, Alabama. 1982 1995
John M. Trotman President, Trotman Land & Cattle Co., Montgomery, 1974 1995
Alabama, all phases of the cattle industry.
DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 1996
Sanders M. Benkwith, M.D. Ophthalmologist; President, Montgomery Eye 1992 1996
Physicians, P.C., Montgomery, Alabama, medical
and surgical treatment of eye diseases.
Robert F. Henry, Jr. President, Robert F. Henry Tile Co., Inc., and 1981 1996
President, Montgomery Building Materials Co.,
Inc., Montgomery, Alabama, floor covering and
building materials.
Jim T. Inscoe Sole Proprietor, Jim Inscoe Agency, Montgomery, 1979 1996
Alabama, real estate.
Samuel L. Schloss Consultant. Prior to July 1, 1994, Chairman of 1974 1996
Schloss and Kahn, Inc., Montgomery, Alabama,
institutional grocers.
William G. Thames President, Pelzer Homes, Inc. Montgomery, 1976 1996
Alabama, building contractor; President, Pelzer
Construction & Development Company, Inc.,
Montgomery, Alabama, general partner and manager
of apartment projects.
Leslie B. Watson, Jr. President and Chief Executive Officer, Tom Jones, 1993 1996
Inc. and President, Capitol Service Stations,
Inc., Montgomery, Alabama, wholesale petroleum
marketer and retail gasoline and convenience
store marketer
</TABLE>
- ---------------
(1) Son of Mr. R. S. Hill, Jr., who retired as a director effective April 13,
1993.
(2) Mr. Taylor is a director of Energen Corporation, a company with a class of
securities registered under the Exchange Act.
56
<PAGE> 63
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF UNION
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of Union Common Stock, as of the date of
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------------------------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Francis Hill Kohn, R. S. Hill, Jr., and Francis
Hill Kohn, Jr., as Trustees under the Will of
Walton H. Hill, Deceased
3536 Springhill Road
Birmingham, Alabama 35223 949,560(1) 24.54%
Common Stock William G. Thames
3394 Augusta Place
Montgomery, Alabama 36111 317,262(2) 8.20
Common Stock Union Bank & Trust Company, as fiduciary for
various trusts and estates 261,096(3) 6.73
</TABLE>
- ---------------
(1) R. S. Hill, Jr. is one of three Trustees, but not a beneficiary, of this
Trust. Mr. Hill, who retired as a director in 1993, is the father of Robert
S. Hill III, who is a director. Algie H. Neill, a director of Union, has a
beneficial interest in this Trust. Union is informed that the Trustees,
beneficiaries, and contingent beneficiaries of this Trust own, of record or
beneficially, 217,651 additional shares of Union Common Stock not reported
above. As to each person who is a director, such ownership is shown herein
under "Business of Union -- Management."
(2) Mr. Thames is a director of Union. See "Business of Union -- Management."
(3) The Union Trust Department, in its various fiduciary capacities for numerous
beneficiaries, including as to some shares, certain beneficiaries listed in
note 1 above, holds this stock of record in its name as fiduciary, in the
name of its nominee, UBAT & Co., or otherwise. The Union Trust Department
has full investment power with respect to 105,141 shares and shared
investment authority with respect to 155,955 shares.
57
<PAGE> 64
BUSINESS OF REGIONS
GENERAL
Regions is a regional bank holding company headquartered in Birmingham,
Alabama which operated 247 banking offices in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of June 30, 1994. At that date, Regions had total
consolidated assets of approximately $10.8 billion, total consolidated deposits
of approximately $8.8 billion, and total consolidated stockholders' equity of
approximately $905 million. Regions operates eight state-chartered commercial
bank subsidiaries and one federal stock savings bank (collectively, the
"Subsidiary Institutions") in Alabama, Florida, Georgia, Louisiana, and
Tennessee and four banking-related subsidiaries engaged in mortgage banking,
credit life insurance, leasing, and securities brokerage activities with offices
in various Southeastern states. Through its subsidiaries, Regions offers a broad
range of banking and banking-related services.
In Alabama, Regions operates through First Alabama Bank, which at June 30,
1994, had total consolidated assets of approximately $8.2 billion, total
consolidated deposits of approximately $6.8 billion, and total consolidated
stockholders' equity of approximately $667 million. First Alabama Bank operates
172 banking offices throughout Alabama.
In Florida, Regions operates through Regions Bank of Florida, which at June
30, 1994, had total consolidated assets of approximately $499 million, total
consolidated deposits of approximately $447 million, and total consolidated
stockholders' equity of approximately $49 million. Regions Bank of Florida
operates 27 banking offices in the panhandle region of Florida.
In Georgia, Regions operates through (i) Regions Bank of Georgia and (ii)
First Rome Bank, which at June 30, 1994, had total combined assets of
approximately $234 million, total combined deposits of approximately $214
million, and total combined stockholders' equity of approximately $19 million.
Regions Bank of Georgia operates three banking offices in Columbus, Georgia, and
First Rome Bank operates two banking offices in Rome, Georgia.
In Louisiana, Regions operates through (i) Secor Bank, Federal Savings Bank
("Secor"), a federal savings bank which Regions acquired on December 31, 1993,
(ii) Guaranty Bank and Trust Company ("Guaranty"), which Regions acquired on May
31, 1994, (iii) Bank of New Roads ("New Roads"), which Regions acquired on
August 31, 1994, and (iv) First American Bank & Trust of Louisiana ("First
American"), which Regions acquired on November 10, 1994. At June 30, 1994,
Secor, Guaranty, New Roads, and First American had total combined assets of
approximately $2.0 billion, total combined deposits of approximately $1.5
billion, and total combined stockholders' equity of approximately $192 million.
Secor, Guaranty, New Roads, and First American operate 38 banking offices in
Louisiana.
In Tennessee, Regions operates through Regions Bank of Tennessee, which at
June 30, 1994, had total consolidated assets of approximately $451 million,
total consolidated deposits of approximately $391 million, and total
consolidated stockholders' equity of approximately $38 million. Regions Bank of
Tennessee operates 24 banking offices in middle Tennessee.
Regions was organized under the laws of the state of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. On May 2, 1994,
the name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation.
Regions continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business combinations
involving cash, debt, or equity securities can be expected. Any future business
combination or series of business combinations that Regions might undertake may
be material, in terms of assets acquired or liabilities assumed, to Regions'
financial condition. Recent business combinations in the banking industry have
typically involved the payment of a premium over book and market values. This
practice could result in dilution of book value and net income per share for the
acquirer.
58
<PAGE> 65
Additional information about Regions and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Available Information" and "Documents Incorporated by Reference."
RECENT DEVELOPMENTS
Third Quarter 1994 Operating Results. For the third quarter ended
September 30, 1994, Regions had net income of $37,427,000 or $.88 per share,
representing a 14% increase on a per share basis in net income over the same
period of 1993. For the nine months ended September 30, 1994, Regions had net
income of $108,637,000 or $2.52 per share, representing a 12% increase on a per
share basis in net income over the first nine months of 1993. The annualized
return on average total assets for the first nine months of 1994 was 1.31%, and
the annualized return on average stockholders' equity was 15.99%. At September
30, 1994, Regions had total consolidated assets of approximately $11.7 billion,
total consolidated deposits of approximately $9.3 billion, and total
consolidated stockholders' equity of approximately $902 million.
Recently Completed Acquisitions. During the first six months of 1994,
Regions (i) acquired Guaranty, located in Baton Rouge, Louisiana, contributing
approximately $187 million in assets, $136 million in loans, and $173 million in
deposits to Regions' consolidated balance sheet and (ii) consummated certain
transactions with the Resolution Trust Corporation (the "RTC"), as a result of
which Regions Bank of Florida acquired four branch offices in Panama City,
Florida, and First Alabama Bank acquired one branch office in each of Atmore and
Brewton, Alabama, with combined deposits in the six offices of approximately $50
million. For additional information with respect to these transactions, see
Regions' Quarterly Report on Form 10-Q for the quarter ended June 30, 1994,
incorporated herein by reference.
Since June 30, 1994, Regions has completed the acquisition of the following
institutions:
<TABLE>
<CAPTION>
CONSIDERATION
-----------------------------
APPROXIMATE
------------------ ACCOUNTING
INSTITUTION ASSET SIZE VALUE TYPE TREATMENT
- -------------------------------------------------- ---------- ----- ------ ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
First Fayette Bancshares, Inc. ("Fayette")
and its subsidiary, First Bank of Fayette,
located in Fayette, Alabama..................... $ 78 $ 17 Cash Purchase
and
Notes
BNR Bancshares, Inc. ("BNR") and its
subsidiary, Bank of New Roads, located
in New Roads, Louisiana......................... 139 26 Regions Pooling of
Common Interests
Stock
First Community Bancshares, Inc. ("First
Community") and its subsidiary, First
Rome Bank, located in Rome, Georgia............. 129 24 Regions Pooling of
Common Interests
Stock
American Bancshares, Inc. ("ABI") and its
subsidiary, First American Bank & Trust of
Louisiana, located in Monroe, Louisiana......... 313 61 Regions Purchase
---- -- Common
Stock
Totals.................................. $659 $128
========= =====
</TABLE>
Also since June 30, 1994, Regions consummated certain additional
transactions with the RTC, as a result of which Secor acquired one branch office
in Houma, Louisiana, and Guaranty acquired two branch offices in
59
<PAGE> 66
Baton Rouge, Louisiana, with combined deposits in the three offices of
approximately $39 million. (Such RTC transactions and the acquisitions of
Fayette, BNR, First Community, and ABI are referred to as the "Recently
Completed Acquisitions.")
If the Recently Completed Acquisitions and the Merger had been consummated
on June 30, 1994, based on June 30, 1994 pro forma financial information,
Regions' total consolidated assets would have increased by approximately $1.2
billion to approximately $12.0 billion; its total consolidated deposits would
have increased by approximately $951 million to approximately $9.7 billion; and
its total consolidated stockholders' equity would have increased by
approximately $29 million to approximately $934 million. See "Documents
Incorporated by Reference" and "Summary Pro Forma Financial Data" and the
related pro forma financial information in Regions' Current Report on Form 8-K
dated September 6, 1994.
In connection with the acquisitions of ABI and Union, Regions has announced
that it may purchase, in the open market, an equivalent number of some or all of
the shares of Regions Common Stock to be issued in such transactions. As a
result of the ABI and Union transactions, Regions anticipates that it may
purchase in the open market as much as approximately $126 million of Regions
Common Stock. The timing and amount of such possible purchases will be
determined based on the Regions Common Stock price, capital needs and other
factors. As of October 6, 1994, Regions had purchased, in the open market,
approximately $60.8 million of Regions Common Stock pursuant to this repurchase
program.
Other Pending Acquisitions. As of the date of this Proxy
Statement/Prospectus, Regions has pending two acquisitions in addition to the
acquisition of Union (referred to as the "Other Pending Acquisitions") in the
states of Georgia and Louisiana, certain aspects of which transactions are set
forth below:
<TABLE>
<CAPTION>
CONSIDERATION
-------------------------------
APPROXIMATE ANTICIPATED
------------------ ACCOUNTING
INSTITUTION ASSET SIZE VALUE TYPE TREATMENT
---------------------------------------------- ---------- ----- ---------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Fidelity Federal Savings Bank, located in
Dalton, Georgia............................. $287 $32 Regions Pooling of
Common Interests
Stock
First Commercial Bancshares, Inc. and its
subsidiary, First National Bank of St.
Bernard Parrish, located in Chalmette,
Louisiana................................... 113 20 Regions Purchase
Common
Stock
and Cash
---------- -----
$400 $52
======= ====
</TABLE>
Consummation of the Other Pending Acquisitions is subject to the approval
of certain regulatory agencies and of the stockholders of the institutions to be
acquired and to the effectiveness of the registration statements filed or to be
filed with the SEC. Moreover, the closing of each transaction is subject to
various contractual conditions precedent. No assurance can be given that the
conditions precedent to consummating the Other Pending Acquisitions will be
satisfied in a manner that will result in the consummation of all of the Other
Pending Acquisitions.
Giving effect to the Other Pending Acquisitions would not have a material
effect on the pro forma financial information presented or incorporated by
reference in this Proxy Statement/Prospectus.
Issuance of Subordinated Notes. On July 21, 1994, Regions issued $25
million of subordinated indebtedness designated 7.65% Subordinated Notes Due
2001 (the "7.65% Notes") and on September 15, 1994, Regions issued $100 million
of subordinated indebtedness designated 7 3/4% Subordinated Notes Due 2024 (the
"7 3/4% Notes"). The 7.65% Notes and the 7 3/4% Notes are subordinate to all
senior indebtedness (as defined in the controlling indenture) of Regions, and
payment of the principal of such notes may be accelerated only in the case of
certain events involving bankruptcy, insolvency proceedings, or reorganization
of Regions. The net proceeds from the issuance of the 7.65% Notes have been used
for general corporate purposes, including the repurchase of an equivalent number
of shares of Regions Common Stock in the open market issued in connection with
the acquisition of ABI as described above under "-- Recent
60
<PAGE> 67
Developments -- Recently Completed Acquisitions." The net proceeds from the
issuance of the 7 3/4% Notes have been, and will continue to be, used for
general corporate purposes.
SUMMARY PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect, as
appropriate, to the acquisition of Union and the Recently Completed Acquisitions
as of the dates and for the periods indicated and pursuant to the accounting
bases described below. The unaudited pro forma financial data are presented for
informational purposes only and are not necessarily indicative of the combined
financial position or results of operation which actually would have occurred if
the transactions had been consummated at the date and for the periods indicated
or which may be obtained in the future. The information should be read in
conjunction with the unaudited pro forma financial information included in
Regions' Current Report on Form 8-K dated September 6, 1994. The pro forma
financial data does not give effect to the Other Pending Acquisitions as they
would not have a material effect on such data. For additional information
relating to specific transactions within the scope of the Recently Completed
Acquisitions, see "Business of Regions -- Recent Developments."
SELECTED PRO FORMA COMBINED DATA FOR REGIONS AND UNION
The following unaudited pro forma combined data give effect to the
acquisition of Union as of the date or at the beginning of the periods
indicated, assuming such acquisition is treated as a purchase.
<TABLE>
<CAPTION>
AS OF
JUNE 30,
1994
-------------
(IN THOUSANDS
EXCEPT PER
SHARE DATA)
<S> <C>
BALANCE SHEET DATA:
Total assets................................................................ $11,272,026
Securities.................................................................. 2,622,725
Loans, net of unearned income............................................... 7,462,646
Total deposits.............................................................. 9,111,632
Other borrowed money........................................................ 520,908
Stockholders' equity........................................................ 905,450
Book value per common share................................................. 21.60
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER
JUNE 30, 31,
1994 1993
---------- -----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Total interest income................................................ $368,940 $ 581,723
Total interest expense............................................... 160,548 231,059
---------- -----------
Net interest income.................................................. 208,392 350,664
Provision for loan losses............................................ 7,382 21,533
---------- -----------
Net interest income after loan loss provision........................ 201,010 329,131
Total noninterest income............................................. 75,006 136,203
Total noninterest expense............................................ 171,067 301,136
Income tax expense................................................... 34,900 51,812
---------- -----------
Income before cumulative effect of change in accounting principle.... $ 70,049 $ 112,386
======== =========
Income before cumulative effect of change in accounting principle per
share............................................................. $ 1.67 $ 3.02
Average common shares outstanding.................................... 41,925 37,205
</TABLE>
61
<PAGE> 68
SELECTED PRO FORMA COMBINED DATA FOR REGIONS, UNION, AND RECENTLY COMPLETED
ACQUISITIONS
The following unaudited pro forma combined data as of June 30, 1994, and
for the six months ended June 30, 1994, and the year ended December 31, 1993,
give effect to (i) the acquisitions of BNR and First Community by Regions,
assuming such acquisitions are accounted for as poolings of interests, and (ii)
the acquisitions of Fayette, ABI, and Union by Regions, assuming such
acquisitions are treated as purchases for accounting purposes, as if all such
transactions had been consummated on June 30, 1994, in the case of the data
included under "Balance Sheet Data," and on January 1, 1993, in the case of the
data included under "Income Statement Data."
<TABLE>
<CAPTION>
AS OF
JUNE 30,
1994
-----------
(IN
THOUSANDS
EXCEPT PER
SHARE DATA)
<S> <C>
BALANCE SHEET DATA:
Total assets................................................................ $12,011,049
Securities.................................................................. 2,811,761
Loans, net of unearned income............................................... 7,831,664
Total deposits.............................................................. 9,738,626
Other borrowed money........................................................ 599,175
Stockholders' equity........................................................ 934,464
Book value per common share................................................. 21.58
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER
JUNE 30, 31,
1994 1993
---------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Total interest income................................................ $391,581 $ 626,848
Total interest expense............................................... 171,180 251,862
---------- -----------
Net interest income.................................................. 220,401 374,986
Provision for loan losses............................................ 8,115 23,242
---------- -----------
Net interest income after loan loss provision........................ 212,286 351,744
Total noninterest income............................................. 79,408 142,675
Total noninterest expense............................................ 183,191 324,458
Income tax expense................................................... 36,281 53,949
---------- -----------
Income before cumulative effect of change in accounting principle.... $ 72,222 $ 116,012
======== =========
Income before cumulative effect of change in accounting principle per
share............................................................. $ 1.67 $ 3.01
Average common shares outstanding.................................... 43,312 38,592
</TABLE>
62
<PAGE> 69
SUPERVISION AND REGULATION
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Regions.
GENERAL
Regions is a bank holding company, registered with the Federal Reserve
under the BHC Act. As such, Regions and its subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of the bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the CRA, both of which are discussed below.
The BHC Act prohibits the Federal Reserve from approving a bank holding
company's application to acquire a bank or bank holding company located outside
the state in which the deposits of its banking subsidiaries were greatest on the
date the company became a bank holding company (Alabama, in the case of
Regions), unless such acquisition is specifically authorized by statute of the
state in which the bank or bank holding company to be acquired is located.
Alabama has adopted reciprocal interstate banking legislation permitting
Alabama-based bank holding companies to acquire banks and bank holding companies
in other states and allowing bank holding companies located in Arkansas, the
District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland,
Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia, and
West Virginia to acquire Alabama banks and bank holding companies. Under the
provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking Act"), which was signed into law by President
Clinton on September 29, 1994, the existing restrictions on interstate
acquisitions of banks by bank holding companies, including the regional
interstate banking legislation adopted by the state of Alabama, will be repealed
one year following enactment such that Regions and any other bank holding
company located in Alabama would be able to acquire a bank located in any other
state, and a bank holding company located outside Alabama could acquire any
Alabama-based bank, in either case subject to certain deposit percentage and
other restrictions. The Interstate Banking Act also generally provides that,
after June 1, 1997, national and state-chartered banks may branch interstate
through acquisitions of banks in other states. By adopting legislation prior to
that date, a state has the ability either to "opt in" and accelerate the date
after which interstate branching is permissible or "opt out" and prohibit
interstate branching altogether. Assuming no state action prior to June 1, 1997,
Regions would be able to consolidate all of its subsidiary banks into a single
bank with interstate branches following that date.
The BHC Act generally prohibits Regions from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of
63
<PAGE> 70
such an activity reasonably can 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, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, 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, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHC Act does not place
territorial limitations on permissible nonbanking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order a
holding company or its subsidiaries to terminate any activity or to terminate
its ownership or control of any 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 bank holding company.
Each of the Subsidiary Institutions is a member of the FDIC, and as such,
their deposits are insured by the FDIC to the extent provided by law. Each
Subsidiary Institution is also subject to numerous state and federal statutes
and regulations that affect its business, activities, and operations, and each
is supervised and examined by one or more state or federal bank regulatory
agencies.
Because each of Regions' subsidiary banks is a state-chartered bank that is
not a member of the Federal Reserve System, such banks are subject to
supervision and examination by the FDIC. Regions' subsidiary savings bank is a
federally chartered savings bank that is a member of the Federal Home Loan Bank
System and is subject to supervision and examination by the Office of Thrift
Supervision (the "OTS") and to the back-up supervisory authority of the FDIC.
Such agencies regularly examine the operations of the Subsidiary Institutions
and are given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. Such agencies also
have the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of law.
The Subsidiary Institutions are subject to the provisions of the CRA. Under
the terms of the CRA, the appropriate federal bank regulatory agency is
required, in connection with its examination of a Subsidiary Institution, to
assess such institution's record in assessing and meeting the credit needs of
the community served by that institution, including low-and moderate-income
neighborhoods. The regulatory agency's assessment of the institution's record is
made available to the public. Further, such assessment is required of any
institution which has applied to (i) charter a national bank, (ii) obtain
deposit insurance coverage for a newly chartered institution, (iii) establish a
new branch office that will accept deposits, (iv) relocate an office, or (v)
merge or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding company
applying for approval to acquire a bank or other bank holding company, the
Federal Reserve will assess the records of each Subsidiary Institution of the
applicant bank holding company, and such records may be the basis for denying
the application.
In December 1993, the federal banking agencies proposed to revise their CRA
regulations in order to provide clearer guidance to depository institutions on
the nature and extent of their CRA obligations and the methods by which those
obligations would be assessed and enforced. In response to widespread criticisms
of the December 1993 proposal, the agencies on September 26, 1994, issued a
revised proposal. Under the new proposal, the current process-based CRA
assessment factors would be replaced with a new evaluation system that would
rate institutions based on their actual performance in meeting community credit
needs. The evaluation system used to judge an institution's CRA performance will
consist of three tests: a lending test; an investment test; and a service test.
Each of these tests would be applied by the institution's federal regulator in
an assessment context that would take into account such factors as: (i)
demographic data about the community; (ii) the institution's capacity and
constraints; (iii) the institution's product offerings and business strategy;
and (iv) data on the prior performance of the institution and similarly situated
lenders.
The proposed lending test -- the most important of the three tests for all
institutions other than wholesale and limited purpose (e.g., credit card)
banks -- would evaluate an institution's lending activities as measured by its
home mortgage loans, small business and farm loans, community development loans,
and, at the option
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of the institution, its consumer loans. The institution's regulator would weigh
each of these lending categories to reflect their relative importance to the
institution's overall business and, in the case of community development loans,
the characteristics and needs of the institution's service area and the
opportunities available for this type of lending. Assessment criteria for the
lending test would include: (i) geographic distribution of the institution's
lending; (ii) distribution of the institution's home mortgage and consumer loans
among different economic segments of the community; (iii) the number and amount
of small business and small farm loans made by the institution; (iv) the number
and amount of community development loans outstanding; and (v) the institution's
use of innovative or flexible lending practices to meet the needs of low-to
moderate-income individuals and neighborhoods. At the election of an
institution, or if particular circumstances so warrant, the banking agencies
will take into account in making their assessments lending by the institution's
affiliates as well as community development loans made by lending consortia and
other lenders in which the institution has invested. As part of the proposal,
all financial institutions would be required to report data on their small
business and small farm loans as well as their home mortgage loans, which are
currently required to be reported under the Home Mortgage Disclosure Act.
The focus of the investment test would be the degree to which the
institution is helping to meet the needs of its service area through qualified
investments that (i) benefit low-to moderate-income individuals and small
businesses or farms, (ii) address affordable housing needs, or (iii) involve
donations of branch offices to minority or women's depository institutions.
Assessment of an institution's performance under the investment test would be
based upon the dollar amount of the institution's qualified investments, its use
of innovative or complex techniques to support community development
initiatives, and its responsiveness to credit and community development needs.
The service test would evaluate an institution's systems for delivering retail
banking services, taking into account such factors as (i) the geographic
distribution of the institution's branch offices and automated teller machines
("ATMs"), (ii) the institution's record of opening and closing branch offices
and ATMs, (iii) the availability of alternative product delivery systems such as
home banking and loan production offices in low-to moderate-income areas. The
federal regulators would also consider an institution's community development
services as part of the service test. A separate community development test
would be applied to wholesale or limited purpose financial institutions.
Smaller institutions (those having total assets of less than $250 million)
would be evaluated under more streamlined criteria. In addition, a financial
institution would have the option of having its CRA performance evaluated based
on a strategic plan of up to five years in length that it had developed in
cooperation with local community groups. In order to be rated under a strategic
plan, the institution would be required to obtain the prior approval of its
federal regulator.
The joint agency CRA proposal provides that an institution evaluated under
a given test would receive one of five ratings for that test: outstanding; high
satisfactory; low satisfactory; needs to improve; or substantial noncompliance.
An institution would then receive a certain number of points for its rating on
each test, and the points would be combined to produce an overall composite
rating of either outstanding, satisfactory, needs to improve, or substantial
noncompliance. Under the agencies' proposed rating guidelines, an institution's
rating on the lending test would count for at least 50% of its overall rating,
and no institution can receive an overall rating of "satisfactory" unless it
receives a rating of at least "low satisfactory" on its lending test. The
proposed guidelines also provide that if an institution received no better than
a "needs to improve" rating on its previous two CRA exams, a "needs to improve"
rating on the third exam would be downgraded to "substantial noncompliance." In
any situation, evidence of discriminatory or other illegal credit practices
would adversely effect an institution's overall rating.
Under the proposal, an institution's CRA rating would continue to be taken
into account by its regulator in considering various types of applications. In
addition, an institution receiving a rating of "substantial noncompliance" would
be subject to civil money penalties or a cease and desist order under Section 8
of the Federal Deposit Insurance Act (the "FDIA").
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PAYMENT OF DIVIDENDS
Regions is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow of Regions, including cash flow
to pay dividends to its stockholders, is dividends from the Subsidiary
Institutions. There are statutory and regulatory limitations on the payment of
dividends by the Subsidiary Institutions to Regions as well as by Regions to its
stockholders.
As state nonmember banks, the subsidiary banks are subject to the
respective laws and regulations of the states of Alabama, Florida, Georgia,
Louisiana, and Tennessee and to the regulations of the FDIC as to the payment of
dividends. The subsidiary savings bank is subject to the regulations of the OTS
as to payment of dividends.
If, in the opinion of the federal regulatory agencies, an institution under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the institution, could
include the payment of dividends), such authority may require, after notice and
hearing, that such institution cease and desist from such practice. The Federal
Reserve, the FDIC, and the OTS have indicated that paying dividends that deplete
an institution's capital base to an inadequate level would be an unsafe and
unsound banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), an insured institution may not pay any
dividend if payment would cause it to become undercapitalized or if it already
is undercapitalized. See "--Prompt Corrective Action." Moreover, the Federal
Reserve and the FDIC have issued policy statements which provide that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings.
At June 30, 1994, under dividend restrictions imposed under federal and
state laws, the Subsidiary Institutions, without obtaining governmental
approvals, could declare aggregate dividends to Regions of approximately $237
million.
The payment of dividends by Regions and the Subsidiary Institutions may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
TRANSACTIONS WITH AFFILIATES
There are various restrictions on the extent to which Regions and its
nonbank subsidiaries can borrow or otherwise obtain credit from the Subsidiary
Institutions. Each Subsidiary Institution (and its subsidiaries) is limited in
engaging in borrowing and other "covered transactions" with nonbank or
non-savings-bank affiliates to the following amounts: (i) in the case of any
such affiliate, the aggregate amount of covered transactions of the Subsidiary
Institution and its subsidiaries may not exceed 10% of the capital stock and
surplus of such Subsidiary Institution; and (ii) in the case of all affiliates,
the aggregate amount of covered transactions of the Subsidiary Institution and
its subsidiaries may not exceed 20% of the capital stock and surplus of such
Subsidiary Institution. "Covered transactions" are defined by statute to include
a loan or extension of credit as well as a purchase of securities issued by an
affiliate, a purchase of assets (unless otherwise exempted by the Federal
Reserve), the acceptance of securities issued by the affiliate as collateral for
a loan and the issuance of a guarantee, and the issuance of a guarantee,
acceptance, or letter of credit on behalf of an affiliate. Covered transactions
are also subject to certain collateralization requirements. Further, a bank
holding company and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease, or sale
of property or furnishing of services.
CAPITAL ADEQUACY
Regions and the Subsidiary Institutions are required to comply with the
capital adequacy standards established by the Federal Reserve in the case of
Regions, the FDIC in the case of the subsidiary banks, and the OTS in the case
of the subsidiary savings bank. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal Reserve: a
risk-based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be considered in compliance.
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The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.
The minimum guideline for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters of credit) is 8.0%. At least half of Total Capital must be composed of
common stock, minority interests in the equity accounts of consolidated
subsidiaries, noncumulative perpetual preferred stock, and a limited amount of
cumulative perpetual preferred stock, less goodwill and certain other intangible
assets ("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves. At June 30, 1994,
Regions' consolidated Tier 1 Capital and Total Capital ratios were 11.82% and
14.15%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3.0% plus an additional cushion of 100 to 200 basis
points. Regions' Leverage Ratio at June 30, 1994, was 8.08%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of Regions' subsidiary banks is subject to risk-based and leverage
capital requirements adopted by the FDIC, which are substantially similar to
those adopted by the Federal Reserve, and Regions' subsidiary savings bank is
subject to tangible, risk-based, and core capital requirements adopted by the
OTS. Each of the Subsidiary Institutions was in compliance with applicable
minimum capital requirements as of December 31, 1993. Neither Regions nor any of
the Subsidiary Institutions has been advised by any federal banking agency of
any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the FDIC
and to certain restrictions on its business. See "-- Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC, and the OTS have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
which would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions is expected to act as a source of
financial strength to, and to commit resources to support, each of the
Subsidiary Institutions. This support may be required at times when, absent such
Federal Reserve policy, Regions may not be inclined to provide it. In addition,
any capital loans by a bank holding company to any of the Subsidiary
Institutions are subordinate in right of payment to deposits and to certain
other indebtedness of such Subsidiary Institution. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a Subsidiary
Institution will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
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Under the FDIA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver, and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance. The FDIC's claim for damages is superior
to claims of stockholders of the insured depository institution or its holding
company but is subordinate to claims of depositors, secured creditors, and
holders of subordinated debt (other than affiliates) of the commonly controlled
insured depository institution. The Subsidiary Institutions are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of the Subsidiary Institutions would likely result in assertion
of the cross-guarantee provisions, the assessment of such estimated losses
against Regions' other Subsidiary Institutions, and a potential loss of Regions'
investment in such other Subsidiary Institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized") and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the final agency rule implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital ratio of 10% or greater,
a Tier 1 Capital ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be "well capitalized." An institution with a
Total Capital ratio of 8.0% or greater, a Tier 1 Capital ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be "adequately
capitalized." A depository institution that has a Total Capital ratio of less
than 8.0%, a Tier 1 Capital ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be "undercapitalized." A depository institution that
has a Total Capital ratio of less than 6.0%, a Tier 1 Capital ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be "significantly
undercapitalized," and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be in
a capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets and the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to
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or may take with respect to a significantly undercapitalized institution as
described below if it determines "that those actions are necessary to carry out
the purpose" of FDICIA.
For those institutions that are (i) significantly undercapitalized or (ii)
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
nonbank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer without
regulatory approval.
At June 30, 1994, all of the Subsidiary Institutions had the requisite
capital levels to qualify as well capitalized.
BROKERED DEPOSITS
The FDIC has adopted regulations governing the receipt of brokered
deposits. Under the regulations, a depository institution cannot accept, roll
over, or renew brokered deposits unless (i) it is well capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDIC. A depository
institution that cannot receive brokered deposits also cannot offer
"pass-through" insurance on certain employee benefit accounts. Whether or not it
has obtained such a waiver, an adequately capitalized depository institution may
not pay an interest rate on any deposits in excess of 75 basis points over
certain prevailing market rates specified by regulation. There are no such
restrictions on a depository institution that is well capitalized. Because all
of the Subsidiary Institutions had at June 30, 1994, the requisite capital
levels to qualify as well capitalized, Regions believes the brokered deposits
regulation will have no material effect on the funding or liquidity of any of
the Subsidiary Institutions.
FDIC INSURANCE ASSESSMENTS
In July 1993, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaces a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, as well as the
prior
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transitional system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for 1994, as they had during
1993, will range from .23% of deposits for an institution in the highest
category (i.e., "well capitalized" and "healthy") to .31% of deposits for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern").
The FDIC is authorized to raise insurance premiums in certain
circumstances. The current assessment rates for the Bank Insurance Fund and the
Savings Association Insurance Fund are designed to increase the reserve ratios
(i.e., the ratios of reserves to insured deposits) for both funds to a
designated ratio (i.e., 1.25%) within a specified period of time. Once the
designated ratio is reached, the FDIC is to set future assessment rates at such
levels that will maintain a fund's reserve ratio at the designated level. The
attainment by either fund of its designated reserve ratio could cause a
reduction in assessment rates for that fund.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
In November 1993, federal banking agencies issued for comment proposed
safety and soundness standards relating to internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation, fees, and benefits. With
respect to internal controls, information systems, and internal audit systems,
the standards describe the functions that adequate internal controls and
information systems must be able to perform, including (i) monitoring adherence
to prescribed policies, (ii) effective risk management, (iii) timely and
accurate financial, operational, and regulatory reporting, (iv) safeguarding and
managing assets, and (v) compliance with applicable laws and regulations. The
standards also include requirements that (a) those performing internal audits be
qualified and independent, (b) internal controls and information systems be
tested and reviewed, (c) corrective actions be adequately documented, and (d)
results of an audit be made available for review of management actions.
As in the case of internal controls and information systems, the proposal
establishes general principles and standards, rather than specific requirements,
that must be followed in other areas. For example, loan documentation and credit
underwriting practices must be such that they enable the institution to make an
informed lending decision and assess credit risk on an ongoing basis. Similarly,
an institution must manage interest rate risk "in a manner that is appropriate
to the size of [the institution] and the complexity of its assets and
liabilities" and must conduct any asset growth in accordance with a plan that
has taken a variety of factors such as deposit volatility, capital, and interest
rate risk into account. The proposal also prohibits "excessive compensation,"
which is defined as amounts paid that are unreasonable or disproportionate to
the services performed by an officer, employee, director, or principal
stockholder in light of all circumstances. In order to help alert institutions
and their regulators to deteriorating financial conditions, the proposed rule
also would impose a maximum ratio of classified assets to total capital of 1.0
and, in the case of an institution that had incurred a net loss over the last
four quarters, would require that institution to have sufficient capital to
absorb a similar loss over the next four quarters and still remain in compliance
with its minimum capital requirements.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such an institution in the "liquidation or other
resolution" of such an institution by any receiver.
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DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 120,000,000 shares of Regions Common Stock,
of which 43,510,939 shares were issued, including 1,590,579 treasury shares, at
June 30, 1994. No other class of stock is authorized.
Holders of Regions Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefore. Dividend payments are subject to certain limitations imposed in
Regions' debt instruments. Under the most restrictive of such limitations, $724
million was available for payment of dividends as of December 31, 1993. However,
the ability of Regions to pay dividends is further affected by the ability of
the Subsidiary Institutions to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At June 30, 1994, under such
requirements and guidelines, the Subsidiary Institutions, without obtaining
governmental approvals, could declare aggregate dividends to Regions of
approximately $237 million. See "Supervision and Regulation -- Payment of
Dividends."
For a further description of Regions Common Stock, see "Effect of the
Merger on Rights of Stockholders."
STOCKHOLDER PROPOSALS
Regions expects to hold its next annual meeting of stockholders after the
Merger during April 1995. Under SEC rules, proposals of Regions stockholders
intended to be presented at that meeting must be received by Regions at its
principal executive offices no later than November 16, 1994, for consideration
by Regions for possible inclusion in such proxy materials.
If the Merger is not consummated, stockholder proposals of Union
stockholders intended to be presented at the next annual meeting of stockholders
of Union must be received by Union at its principal executive offices no later
than November 17, 1994, for consideration by Union for possible inclusion in
such proxy materials.
EXPERTS
The consolidated financial statements of Union as of December 31, 1993, and
1992, and for each of the three years in the period ended December 31, 1993,
included in this Proxy Statement/Prospectus have been audited by Wilson, Price,
Baranco & Billingsley, P.C., independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm and
on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Regions, incorporated by reference
in this Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, for the periods indicated in their report thereon which is
included in the Annual Report to Stockholders which is incorporated by reference
in its Annual Report on Form 10-K for the year ended December 31, 1993. The
financial statements audited by Ernst & Young LLP have been incorporated herein
by reference in reliance on their report given on their authority as experts in
accounting and auditing.
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville, Birmingham,
Alabama. Henry E. Simpson, partner in the law firm of Lange, Simpson, Robinson &
Somerville, is a member of the Board of Directors of Regions. As of September
15, 1994, attorneys in the law firm of Lange, Simpson, Robinson & Somerville
owned an aggregate of 119,695 shares of Regions Common Stock.
Certain tax consequences of the Merger have been passed upon by Alston &
Bird, Atlanta, Georgia.
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INDEX TO UNION FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITORS' REPORT......................................................... F-2
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993,
1992 AND 1991:
Consolidated Statements of Condition............................................... F-3
Consolidated Statements of Income.................................................. F-4
Consolidated Statements of Changes in Shareholders' Equity......................... F-5
Consolidated Statements of Cash Flows.............................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993:
(Unaudited)
Consolidated Statements of Condition (Unaudited)................................... F-20
Consolidated Statements of Income (Unaudited)...................................... F-21
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)............. F-22
Consolidated Statements of Cash Flows (Unaudited).................................. F-23
Notes to Consolidated Interim Statements (Unaudited)............................... F-24
</TABLE>
F-1
<PAGE> 79
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Union Bank & Trust Company
We have audited the accompanying consolidated statements of condition of
Union Bank & Trust Company and Subsidiary as of December 31, 1993 and 1992, and
the related statements of income, changes in shareholders' equity and cash flows
for the years ended December 31, 1993, 1992, and 1991. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Union Bank &
Trust Company and Subsidiary as of December 31, 1993 and 1992, and the results
of its operations and its cash flows for the years ended December 31, 1993, 1992
and 1991 in conformity with generally accepted accounting principles.
As discussed in Notes 9 and 10, the Bank changed its methods of accounting
for postretirement benefits and income taxes.
Montgomery, Alabama
January 31, 1994
F-2
<PAGE> 80
UNION BANK & TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks................................................ $ 17,633 $ 22,927
Federal funds sold..................................................... 52,275 94,025
Investment securities (market value of $213,445 and $203,192).......... 210,850 198,739
Loans.................................................................. 156,850 148,305
Allowance for loan losses.............................................. (4,618) (4,225)
-------- --------
Net loans.............................................................. 152,232 144,080
Premises and equipment, net............................................ 7,657 7,018
Accrued interest receivable and other assets........................... 13,232 8,802
-------- --------
Total assets................................................. $453,879 $475,591
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing.................................................. $ 61,325 $ 74,493
Interest-bearing..................................................... 284,986 288,118
-------- --------
Total deposits............................................... 346,311 362,611
Federal funds purchased and securities sold under agreements to
repurchase........................................................... 60,447 71,565
Other liabilities...................................................... 3,671 3,048
-------- --------
Total Liabilities............................................ 410,429 437,224
-------- --------
Commitments and Contingencies
Shareholders' Equity
Common stock, Par value $.50:
Authorized -- 3,965,000 shares
Issued and outstanding -- 3,869,500 shares........................ 1,935 1,935
Capital surplus...................................................... 14,123 14,123
Retained earnings.................................................... 27,553 22,543
Unearned restricted stock............................................ (161) (234)
-------- --------
Total shareholders' equity................................... 43,450 38,367
-------- --------
Total liabilities and shareholders' equity................... $453,879 $475,591
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 81
UNION BANK & TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
(EXCEPT PER SHARE DATA)
INTEREST INCOME
Interest and fees on loans.............................. $11,132 $12,984 $18,461
Interest on investment securities:
Taxable.............................................. 12,811 13,361 11,044
Nontaxable........................................... 116 349 938
Interest on federal funds sold and securities purchased
under resale agreements.............................. 2,001 3,932 5,881
------- ------- -------
Total interest income........................... 26,060 30,626 36,324
------- ------- -------
INTEREST EXPENSE
Interest on deposits.................................... 10,649 12,799 18,433
Interest on short-term borrowings....................... 1,698 2,685 3,958
------- ------- -------
Total interest expense.......................... 12,347 15,484 22,391
------- ------- -------
NET INTEREST INCOME....................................... 13,713 15,142 13,933
Provision for loan losses............................... -0- 5,112 14,313
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES....... 13,713 10,030 (380)
------- ------- -------
NONINTEREST INCOME
Trust Department income................................. 1,429 1,191 1,190
Service charges on deposit accounts..................... 1,561 1,437 1,594
Investment securities gains............................. 561 133 11
Other................................................... 626 697 496
------- ------- -------
Total noninterest income........................ 4,177 3,458 3,291
------- ------- -------
NONINTEREST EXPENSE
Salaries and employee benefits.......................... 7,014 6,670 6,588
Net occupancy expense................................... 760 762 740
Equipment expense....................................... 825 769 871
Other................................................... 4,681 3,975 4,629
------- ------- -------
Total noninterest expense....................... 13,280 12,176 12,828
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES......................... 4,610 1,312 (9,917)
Applicable income taxes (benefit).................... 142 283 (2,362)
------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLES................................... $ 4,468 $ 1,029 $(7,555)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES
Accounting for income taxes............................. $ 1,769 $ -0- $ -0-
Accounting for postretirement benefits.................. (454) -0- -0-
------- ------- -------
NET INCOME (LOSS)......................................... $ 5,783 $ 1,029 $(7,555)
======= ======= =======
INCOME (LOSS) PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES......................... $ 1.15 $ .27 $ (1.97)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES PER
COMMON SHARE............................................ .34 -0- -0-
------- ------- -------
NET INCOME (LOSS) PER COMMON SHARE........................ $ 1.49 $ .27 $ (1.97)
======= ======= =======
AVERAGE COMMON SHARES OUTSTANDING......................... 3,870 3,860 3,840
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 82
UNION BANK & TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year.................................... $ 1,935 $ 1,920 $ 1,920
Restricted stock issued...................................... -0- 15 -0-
------- ------- -------
Balance at end of year.......................................... $ 1,935 $ 1,935 $ 1,920
======= ======= =======
CAPITAL SURPLUS
Balance at beginning of year.................................... $14,123 $13,840 $13,840
Restricted stock issued...................................... -0- 283 -0-
------- ------- -------
Balance at end of year.......................................... $14,123 $14,123 $13,840
======= ======= =======
RETAINED EARNINGS
Balance at beginning of year.................................... $22,543 $22,132 $30,762
Net income (loss) for the year............................... 5,783 1,029 (7,555)
Cash dividends declared of $.20 per share in 1993, $.16 per
share in 1992, $.28 per share in 1991....................... (773) (618) (1,075)
------- ------- -------
Balance at end of year.......................................... $27,553 $22,543 $22,132
======= ======= =======
UNEARNED RESTRICTED STOCK
Balance at beginning of year.................................... $ (234) $ -0- $ -0-
Restricted stock issued...................................... -0- (298) -0-
Amortization of unearned restricted stock.................... 73 64 -0-
------- ------- -------
Balance at end of year.......................................... $ (161) $ (234) $ -0-
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 83
UNION BANK & TRUST COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1993 1992 1991
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 5,783 $ 1,029 $ (7,555)
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses................................ -0- 5,112 14,313
Depreciation............................................. 796 710 764
Amortization of other assets............................. 73 64 -0-
Amortization of premiums and discounts on investment
securities -- net...................................... 860 343 107
Investment securities gains -- net....................... (561) (133) (11)
(Increase) decrease in accrued interest receivable and
other assets........................................... (4,487) 1,504 (645)
Increase (decrease) in accrued expenses and other
liabilities............................................ 288 (693) (57)
Increase (decrease) in income tax payable................ 238 23 (132)
Loss (gain) on sale of repossessed assets................ 1 (386) 494
Other.................................................... (21) (52) 58
--------- -------- --------
Net cash provided by operating activities.............. 2,970 7,521 7,336
--------- -------- --------
INVESTING ACTIVITIES
Proceeds from sale and maturities of investments............ 96,048 39,605 30,841
Proceeds from sale of other real estate and other assets.... 2,938 4,575 689
Cash paid for new investments............................... (108,459) (83,191) (47,565)
Net (increase) decrease in loans............................ (10,990) 18,247 29,113
Net purchases of premises and equipment..................... (1,437) (573) (709)
--------- -------- --------
Net cash (used by) provided by investing activities.... (21,900) (21,337) 12,369
--------- -------- --------
FINANCING ACTIVITIES
Net (decrease) in short-term borrowings..................... (11,117) (1,188) (66,916)
Net (decrease) in certificates of deposit and other......... (8,492) (11,524) (7,437)
Net (decrease) increase in demand deposit, money market and
savings accounts......................................... (7,809) 14,786 8,662
Cash dividends paid......................................... (697) (617) (1,536)
--------- -------- --------
Net cash (used by) provided by financing activities.... (28,115) 1,457 (67,227)
--------- -------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS....................... (47,045) (12,359) (47,522)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR..................................................... 116,953 129,311 176,833
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR...................... $ 69,908 $116,952 $129,311
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 84
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Union Bank & Trust Company and its
subsidiary conform to generally accepted accounting principles and to general
practice within the banking industry. The following is a summary of the most
significant of these policies.
BASIS OF PRESENTATION
The consolidated financial statements of Union Bank & Trust Company include
the accounts of the Bank and its wholly-owned subsidiary which owns certain real
estate. All significant intercompany balances and transactions have been
eliminated.
Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.
INVESTMENT SECURITIES
Investment securities are those securities which the Bank has the ability
and intent to hold to maturity. These securities are stated at cost adjusted for
amortization of premiums and accretion of discounts computed using the interest
method. The specific identification method is used to compute gain or loss on
the disposition of any investment security.
LOANS
Loans are stated at the principal amount outstanding, net of unearned
income and the allowance for loan losses. Interest on loans is primarily
computed using the interest method based on the principal amount outstanding.
Accrual of interest is discontinued when management considers the collectibility
of interest or principal to be in doubt, or when a loan becomes ninety days past
due, unless the obligation is both well secured and in the process of
collection. When a loan is placed on nonaccrual status, interest income accrued
for the current year is reversed, and interest accrued for prior years is
charged to the allowance for loan losses. Nonrefundable loan fees and certain
direct loan origination costs are deferred, and the net amount is amortized on
the interest method as an adjustment of the yield on the related loan.
ALLOWANCE FOR LOAN LOSSES
The balance in the allowance account is maintained at a level management
believes will be adequate to absorb potential losses in the loan portfolio.
Management determines the adequacy of the allowance based on reviews of
individual loans, recent loss experience, current and expected economic
conditions, collateral values of property securing loans, changes in the quality
and size of the portfolio and other pertinent factors. The allowance for loan
losses is established through a provision for losses charged to expense. Loans
deemed uncollectible are charged against the allowance account and recoveries
are credited to the allowance account.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of buildings and equipment is computed principally on
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the terms of the leases or the
estimated useful lives of the improvements, whichever is shorter.
F-7
<PAGE> 85
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER REAL ESTATE
Other real estate includes foreclosed properties. These properties are
included in other assets at the lower of the recorded investment in the loan or
the estimated net realizable value of the collateral.
PENSION COSTS
The Bank has a noncontributory pension plan that covers substantially all
full-time employees. Pension costs, based on actuarial computations of current
and future benefits for employees, are charged to operating expense in
accordance with Statement of Financial Accounting Standards (SFAS) No. 87.
INCOME TAXES
The Bank accounts for certain income and expense items in different time
periods for financial reporting purposes and income tax purposes. Deferred taxes
are provided on such timing differences.
In the first quarter of 1993, Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes" was adopted by the Bank. This
statement required the Bank to change its method of computing income taxes for
financial reporting purposes from the deferred to the liability method. The
adoption of the new standard is reported in the current year statement of income
as a cumulative effect of a change in accounting principle.
STATEMENTS OF CASH FLOWS
Cash equivalents include cash and due from banks, federal funds sold and
securities purchased under resale agreements.
Total interest payments made on deposits and borrowings were $12,625,194,
$16,211,957 and $22,872,540 during 1993, 1992 and 1991. Net income tax payments
(refunds) were $980,829, $(1,398,612) and $390,762 during each year.
POSTRETIREMENT BENEFITS
In the first quarter of 1993, Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" was adopted by the Bank. This statement allows the accumulated
postretirement benefit be provided as an expense in the year of adoption or to
be amortized over future periods. The Bank elected to provide for the expense in
the current year income statement as a cumulative effect of a change in
accounting principle.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
shares outstanding during the periods.
2. CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank based on a percentage of certain deposits. The average amount of
those reserves for the year ended December 31, 1993 was approximately
$3,677,000.
F-8
<PAGE> 86
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENT SECURITIES
The carrying amount, gross unrealized gains and losses, and the estimated
market value of securities are as follows:
<TABLE>
<CAPTION>
ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
AMOUNT GAINS LOSSES VALUE
-------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
U.S. Treasury securities............................ $150,922 $1,868 $ 36 $ 152,754
U.S. Government agencies and corporation
securities....................................... 17,549 406 -0- 17,955
State and municipal securities...................... 10,821 63 -0- 10,884
Mortgage-backed securities.......................... 31,072 393 99 31,366
Other securities.................................... 486 -0- -0- 486
-------- ---------- ---------- ---------
$210,850 $2,730 $135 $ 213,445
======== ======== ======== ========
DECEMBER 31, 1992
U.S. Treasury securities............................ $ 79,425 $ 939 $ 34 $ 80,330
U.S. Government agencies and corporation
securities....................................... 41,723 1,519 -0- 43,242
State and municipal securities...................... 4,825 91 11 4,905
Mortgage-backed securities.......................... 72,264 1,958 8 74,214
Other securities.................................... 502 -0- -0- 502
-------- ---------- ---------- ---------
$198,739 $4,507 $ 53 $ 203,193
======== ======== ======== ========
</TABLE>
Gross realized gains and gross realized losses on sales and calls of
securities were:
<TABLE>
<CAPTION>
1993 1992
---- ----
(IN THOUSANDS)
<S> <C> <C>
Gross realized gains:
U.S. Treasury securities.................................................. $248 $-0-
U.S. Government agencies and corporation securities....................... 294 -0-
State and municipal securities............................................ 18 133
Mortgage-backed securities................................................ 156 -0-
---- ----
$716 $133
==== ====
Gross realized losses:
State and municipal securities............................................ $ 5 $-0-
Mortgage-backed securities................................................ 150 -0-
---- ----
$155 $-0-
==== ====
</TABLE>
F-9
<PAGE> 87
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The carrying amount and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING MARKET
AMOUNT VALUE
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less........................................ $ 46,041 $ 46,533
Due after one through five years............................... 132,261 134,067
Due after five through ten years............................... 1,476 1,479
Mortgage-backed securities..................................... 31,072 31,366
-------- ---------
$210,850 $ 213,445
======== ========
</TABLE>
Investment securities with a carrying amount of $81,480,093 and
$107,760,136 at December 31, 1993 and 1992, respectively, were pledged as
collateral for public funds, trust deposits, and short-term borrowings.
4. LOANS
Loans are shown net of allowance for loan losses and unearned interest and
are categorized as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commercial, financial and agricultural......................... $ 43,512 $ 30,630
Real estate -- construction.................................... 2,861 3,015
Real estate -- mortgage........................................ 93,597 95,024
Consumer installment........................................... 16,912 19,728
Unearned income................................................ (32) (92)
-------- --------
Total loans.......................................... 156,850 148,305
Allowance for loan losses...................................... (4,618) (4,225)
-------- --------
Net loans............................................ $152,232 $144,080
======== ========
</TABLE>
Most of the Bank's lending activity is to customers located within the
geographical area of Montgomery, Alabama. The Bank's loan portfolio is generally
well-diversified, consisting of loans to several industries and numerous
individuals. Decisions involving collateral associated with these loans vary
depending on the creditworthiness of each customer and the type of loan.
Generally, collateral consists of mortgages on real property, inventory,
accounts receivable, certificates of deposit and securities.
The Bank has had, and expects to have in the future, banking transactions
with directors, officers, principal shareholders and their associates. These
loans were made in the ordinary course of business at normal credit terms,
including interest rates and collateral, and did not represent more than a
normal credit risk. Total loans outstanding to these persons at December 31,
1993 and 1992 were $9,952,162 and $9,582,716. During 1993, additional loans to
these persons were increased by $4,046,157 and reductions were $3,676,711.
Loans on which the accrual of interest has been discontinued or
restructured amounted to $1,540,375 and $5,216,298 at December 31, 1993 and
1992. The amount of interest income that would have been recorded during 1993
and 1992 if these loans had been accruing interest at their originally
contracted rates would have been approximately $165,429 and $471,409. The amount
of interest income actually recorded during 1993 and 1992 on these loans was
$7,150 and $114,119.
Loans totaling $96,241,000 are made at fixed rates of interest.
F-10
<PAGE> 88
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year............................ $4,225 $3,000 $ 3,750
Provision charged to operations....................... -0- 5,112 14,313
Recoveries of charged-off loans....................... 1,698 836 291
Loans charged off..................................... (1,305) (4,723) (15,354)
------ ------ -------
Balance at end of year.................................. $4,618 $4,225 $ 3,000
====== ====== =======
</TABLE>
6. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 1,006 $ 1,006
Bank premises.................................................... 9,793 9,488
Furniture and equipment.......................................... 5,727 5,109
Leasehold improvements........................................... 1,050 767
------- -------
17,576 16,370
Less accumulated depreciation and amortization................... 9,919 9,352
------- -------
$ 7,657 $ 7,018
======= =======
</TABLE>
Depreciation expense included in the statements of income was $795,785,
$710,431 and $764,452 for the years ended December 31, 1993, 1992 and 1991.
7. FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Detailed below is a summary of the liabilities in this caption:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Federal funds purchased.......................................... $27,280 $21,320
Securities sold under repurchase agreements...................... 33,167 50,245
------- -------
$60,447 $71,565
======= =======
</TABLE>
Securities sold under repurchase agreements were secured by investment
securities with a book value of $35,549,156 in 1993 and $49,946,603 in 1992.
F-11
<PAGE> 89
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Certain information concerning federal funds purchased and securities sold
under repurchase agreements is set out below:
<TABLE>
<CAPTION>
1993 1992
---------------------- ----------------------
SECURITIES SECURITIES
FEDERAL SOLD UNDER FEDERAL SOLD UNDER
FUNDS REPURCHASE FUNDS REPURCHASE
PURCHASED AGREEMENTS PURCHASED AGREEMENTS
--------- ---------- --------- ----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Weighted average interest rate at balance sheet
date................................................ 2.89% 2.89% 2.72% 2.70%
Maximum amount of borrowings at month-end during the
year................................................ $31,505 $ 73,979 $39,645 $ 86,853
Average amount outstanding (based on average daily
balances)........................................... $24,472 $ 33,519 $27,317 $ 52,749
Weighted average interest rate (based on average daily
rates).............................................. 2.93% 2.91% 3.35% 3.36%
</TABLE>
8. DEPOSITS
Detailed below is a summary of interest-bearing deposits:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest-bearing checking accounts..................................... $ 47,869 $ 46,371
Savings accounts....................................................... 29,279 28,425
Money market accounts.................................................. 48,820 50,866
Certificates of deposit ($100,000 or more)............................. 34,234 35,923
Time deposits ($100,000 or more)....................................... 12,450 7,450
Other interest-bearing deposits........................................ 112,334 119,083
-------- --------
Totals....................................................... $284,986 $288,118
======== ========
</TABLE>
Interest-bearing deposits include certificates of deposit in amounts of
$100,000 or more with maturities as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Three months or less..................................................... $13,516 $16,407
Three through twelve months.............................................. 13,930 9,794
Over twelve months....................................................... 6,788 9,722
------- -------
$34,234 $35,923
======= =======
</TABLE>
9. EMPLOYEE BENEFITS
DEFINED BENEFIT PLAN
The Bank has a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and a percent of the
employee's average compensation as defined in the plan. The Bank's funding
policy is to contribute annually no less than the minimum amount required by
ERISA and no more than the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in the
future.
During 1992, the Bank amended the retirement plan by changing the formula
used to calculate benefits and lowering the number of years for early retirement
as well as eliminating certain distribution options.
F-12
<PAGE> 90
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the plan's funded status and the amount of
prepaid cost recognized on the Bank's statements of condition:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
(IN THOUSANDS)
Actuarial present value of accumulated benefit obligation, including vested
benefits of $1,601,745 and $2,371,688.................................... $2,338 $2,488
====== ======
Plan assets at fair value, primarily listed stocks and U.S. bonds.......... $3,346 $3,739
Actuarial present value of projected benefit obligation for service
rendered to date......................................................... 3,391 3,253
------ ------
(Deficit) excess of plan assets compared to projected benefit obligation... (45) 486
Unrecognized prior service cost arising from plan amendments -- being
amortized over 11 years.................................................. 530 585
Unrecognized net gain from prior periods -- being amortized over 11
years.................................................................... 323 (10)
Unrecognized net obligation -- being amortized over 11 years............... (124) (145)
------ ------
Prepaid pension cost (included in other assets)............................ $ 684 $ 916
====== ======
</TABLE>
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost -- benefits earned during the period.................... $ 232 $ 238 $ 214
Interest cost on projected benefit obligation........................ 228 143 132
Actual return on plan assets......................................... (116) (229) (444)
Other components..................................................... (112) (67) 131
----- ----- -----
Net periodic pension cost.................................. $ 232 $ 85 $ 33
===== ===== =====
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation and the expected long-term
rate of return on assets was 7% for each year presented. The rate of
compensation increase used to measure the projected benefit obligation was 5%
for each year presented.
LONG-TERM INCENTIVE COMPENSATION PLAN
In 1992, the shareholders of the bank approved the Union Bank & Trust
Company Long-Term Incentive Compensation Plan. The plan provides for the
granting of up to 125,000 shares of common stock for stock options or restricted
stock awards.
The stock options are exercisable at a price equal to 100% of the fair
market value of the stock on the date of grant. The options may generally be
exercised one year from the grant date with the option period determined by the
Compensation Committee of the Board of Directors. No option may be exercised
more than 10 years after its grant date. A summary of activity relating to stock
options is as follows:
<TABLE>
<CAPTION>
1993 1992
------------------------- -------------------------
SHARES SHARES
UNDER OPTION PRICE UNDER OPTION PRICE
OPTION PER SHARE OPTION PER SHARE
------- --------------- ------- ---------------
<S> <C> <C> <C> <C>
Outstanding January 1........................ 70,500 $10.00 - $11.00 -0-
Options granted............................ -0- 70,500 $10.00 - $11.00
Options exercised.......................... -0- -0-
Options forfeited.......................... 5,000 -0-
------- --------------- ------- ---------------
Outstanding December 31...................... 65,500 $10.00 - $11.00 70,500 $10.00 - $11.00
====== ============== ====== ==============
</TABLE>
F-13
<PAGE> 91
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1992, Union Bank awarded 29,500 shares of restricted stock to key
employees with the restriction that they must remain employed with the Bank for
a specified time period, generally five years, at the same or higher level
position. During this period, the grantee is eligible to receive dividends and
exercise voting rights on the restricted shares. Compensation expense for
restricted stock awards was $73,017 for 1993 and $63,800 for 1992.
EMPLOYEE SAVINGS PLAN
The Bank maintains an employee savings plan that qualifies under Section
401(k) of the Internal Revenue Code. All full-time employees with one year of
service and an attained age of 21 are eligible to defer up to 10% of their
salaries into the plan subject to certain limitations. For 1993, 1992 and 1991,
the Bank made a discretionary matching contribution of 50% of the employee's
contribution up to 6% of salary. An employee is fully vested in the Bank's
contribution immediately. The Bank recognized a matching contribution expense of
$87,963, $91,647 and $14,901 in 1993, 1992 and 1991, respectively.
POSTRETIREMENT BENEFITS
In the first quarter of 1993, the Bank implemented the provisions of
Statement of Financial Accounting Standards (SFAS) No. 106 with regard to
accounting for postretirement benefits. The Bank elected to provide as expense
in 1993 the amount of $717,272 which represented the entire accumulated
postretirement benefit obligation as of January 1, 1993. This amount was
reflected, net of the related tax benefit of $263,012, as the cumulative effect
of a change in accounting principle.
The Bank has a health retirement plan covering certain employees who have
retired or will retire and a life insurance plan for certain employees who
retired before December 31, 1993. Retirees are eligible for health benefits if,
as of January 1, 1992, they (1) were currently retired, or (2) were age 55 with
at least 10 years of service, or (3) the sum of their age and years of service
equaled at least 85. Retiree life insurance benefits provide for life insurance
coverage by the Bank based on job class. The Bank has no commitment to increase
monetary benefits of either plan. Both plans are unfunded.
The following table sets forth the plans' status reconciled with the amount
shown in the company's statement of financial position at December 31, 1993:
<TABLE>
<CAPTION>
LIFE
MEDICAL INSURANCE TOTAL
------- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................... $(255) $(400) $(655)
Fully eligible active plan participants............................ (108) -0- (108)
Other active plan participants..................................... -0- -0- -0-
------- --------- -----
Total................................................................ (363) (400) (763)
Plan assets at fair value............................................ -0- -0- -0-
------- --------- -----
Accumulated postretirement benefit obligation in excess of plan
assets............................................................. (363) (400) (763)
Unrecognized net loss (gain) from past experience different from that
assumed and from changes in assumptions............................ 20 30 50
------- --------- -----
Accrued postretirement benefit cost.................................. $(343) $(370) $(713)
====== ======= =====
</TABLE>
F-14
<PAGE> 92
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic postretirement benefit cost for 1993 included the following
components:
<TABLE>
<CAPTION>
LIFE
MEDICAL INSURANCE TOTAL
------- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits attributed to service during the period.... $ -0- $ -0- $ -0-
Interest cost on accumulated postretirement benefit obligation... 23 26 49
------- --------- -----
Net periodic postretirement benefit cost......................... $ 23 $ 26 $ 49
====== ======= =====
</TABLE>
For measurement purposes, a 12 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1993; the rate was
assumed to decrease gradually to 7 percent at 2003. The health care cost trend
rate assumption does not have a significant effect on the amounts reported if
increased by 1%.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7 percent.
10. INCOME TAXES
The Bank changed its method of accounting for income taxes by adopting the
provision of Statement of Financial Accounting Standards (SFAS) No. 109,
effective January 1, 1993. The adoption of Statement of Financial Accounting
Standards (SFAS) No. 109 required a change from the deferred method to the
liability method of accounting for income taxes. Accordingly, deferred income
taxes for 1993 have been provided on the temporary differences between the
financial reporting and income tax basis of the Bank's assets and liabilities by
applying statutory tax rates to the cumulative basis differences. Prior years'
financial statements were not required to be restated.
The provision for income taxes in the statements of income is summarized
below. Included in these amounts are income taxes related to security
transactions of $205,567, $31,803 and $2,602 for 1993, 1992, and 1991.
<TABLE>
<CAPTION>
LIABLITY METHOD DEFERRED METHOD
---------------- ------------------
1993 1992 1991
---------------- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................... $ 1,098 $ 15 $(1,436)
State........................................ 230 (13) (360)
---------------- ---- -------
Total current........................ 1,328 2 (1,796)
---------------- ---- -------
Deferred:
Federal...................................... (1,354) 200 (445)
State........................................ 168 81 (121)
---------------- ---- -------
Total deferred....................... (1,186) 281 (566)
---------------- ---- -------
Total provision................................ $ 142 $283 $(2,362)
============ ==== =======
</TABLE>
F-15
<PAGE> 93
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The significant differences between income tax expense and the amount
computed by applying the statutory federal income tax rate of 34% in 1993 and
20% in 1992 and 1991 (because the alternative tax exceeded the regular tax) to
income before income taxes were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected tax at statutory federal income tax rate..... $1,567 $262 $(1,983)
Increases (decreases) in tax resulting from:
State income taxes, net of federal tax benefit...... 197 54 (288)
Tax-exempt income................................... (226) (65) (140)
Current year reversals of SFAS No. 109 valuation
allowances....................................... (478) -0- -0-
Alternative minimum tax credits..................... (973) -0- -0-
Other, net.......................................... 55 32 49
------ ---- -------
Total provision............................. $ 142 $283 $(2,362)
====== ==== =======
</TABLE>
During 1993, the net change in valuation allowances for deferred tax assets
was credited to tax expense in the amount of $478,511.
The components of deferred income tax expense (benefit) which result from
timing differences in the recognition of income and expenses for tax and
financial reporting purposes are not required to be reported under SFAS 109 but
are presented for prior years as follows:
<TABLE>
<CAPTION>
1992 1991
---- -----
(IN THOUSANDS)
<S> <C> <C>
Depreciation................................................... $(18) $ (59)
Pension plan cost.............................................. (20) (8)
Provision for loan losses...................................... 300 (466)
Deferred loan fees and costs................................... 16 18
Alternative minimum tax credits................................ -0- -0-
Other.......................................................... 3 (51)
---- -----
Total deferred....................................... $281 $(566)
==== =====
</TABLE>
The components of the net deferred asset reflected in the statement of
condition at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Alternative minimum tax credit carryforward -- net of state tax...... $2,356
Provision for loan losses............................................ 1,693
Other................................................................ 452
-------
Total deferred tax assets.................................... 4,501
Deferred tax liabilities:
Fixed assets -- net.................................................. (111)
Loan costs -- net.................................................... (118)
Pension plan......................................................... (251)
-------
Total deferred tax liabilities............................... (480)
-------
Net deferred tax assets.............................................. $4,021
===========
</TABLE>
State income taxes were less than three percent of the total net deferred
tax asset and are included in that total. For income tax purposes, the Bank has
an alternative minimum tax credit carryforward of $2,527,534.
F-16
<PAGE> 94
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. OTHER NONINTEREST EXPENSE
Other noninterest expense consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Data processing...................................... $ 395 $ 321 $ 309
FDIC................................................. 896 790 724
Stationery and supplies.............................. 339 246 289
Other................................................ 3,051 2,618 3,307
------ ------ ------
$4,681 $3,975 $4,629
====== ====== ======
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Bank has entered into various noncancelable leases for certain bank
premises, equipment and software. The total rental expense for all leases for
the years ended December 31, 1993, 1992, and 1991 was $220,317, $210,847 and
$194,594.
Future minimum rental payments required under noncancelable leases that
have initial or remaining terms in excess of one year are as follows:
<TABLE>
<CAPTION>
EQUIPMENT
PREMISES AND SOFTWARE
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
1994..................................................... $120 $ 95
1995..................................................... 114 95
1996..................................................... 80 95
1997..................................................... 53 95
1998..................................................... 53 87
1999-2003................................................ 240 -0-
2004-2008................................................ 60 -0-
Thereafter............................................... 72 -0-
-------- ------
$792 $467
====== =========
</TABLE>
Certain leases expire during the periods shown above and will either be
renewed under available renewable options or renegotiated.
LITIGATION
Various legal proceedings are pending against the Bank. Based on legal
counsel's opinion, management believes that any resulting aggregate liability
will not be material.
13. REGULATORY MATTERS
Banking regulations limit the amount of dividends that may be paid to the
retained net profits of the current year and preceding two years. Due to these
regulations, the Bank would not have been able to declare a dividend at December
31, 1993 without prior regulatory approval.
F-17
<PAGE> 95
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. The Bank uses the same credit policies in making commitments
and standby letters of credit as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby letters of credit and financial guarantees are conditional
commitments issued by the Bank to guarantee the customer's performance to a
third party. These instruments generally have a fixed expiration date and
require payment of a fee.
Generally, no collateral is required for commitments to extend credit,
standby letters of credit or financial guarantees other than that required by
the customer's existing credit facility.
These financial instruments are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Standby letters of credit and financial guarantees............. $ 719 $ 1,513
Commitments to extend credit................................... $60,065 $53,345
</TABLE>
15. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
fair value:
Cash and due from banks -- The carrying amount of cash and due from
banks is considered a reasonable estimate of fair value.
Federal funds sold -- The carrying amount of federal funds sold is
considered a reasonable estimate of fair value because of their short-term
nature.
Investment securities -- Estimated fair values of investment
securities are based upon quoted market prices. If quoted market prices are
not available, estimated fair values are based on quoted market prices of
similar instruments.
Loans -- The fair value of loans was estimated by discounting future
cash flows using current rates at which similar loans would be made to
borrowers with similar credit ratings for the same remaining maturities.
Risk-free rates are selected and adjusted after considering loan
maturities, frequency of rate repricing, credit quality, anticipated
prepayments, and operating expense allocable to servicing loans.
Deposits -- The fair value of demand deposits, savings accounts and
money market accounts is the amount payable on demand at the reporting
date. Fair values for time deposits (primarily certificates of deposit) are
estimated using discounted cash flow analysis, using rates currently
offered for deposits of similar remaining maturities.
Federal funds purchased and securities sold under agreements to
repurchase -- The carrying amount of federal funds purchased and securities
sold under repurchase agreements is considered a reasonable estimate of
fair value.
F-18
<PAGE> 96
UNION BANK & TRUST COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Commitments to extend credit, standby letters of credit and financial
guarantees -- As of December 31, 1993 and 1992, the fair value of these
items was not significant.
The estimated fair values of the Bank's financial instruments are as
follows:
<TABLE>
<CAPTION>
1993 1992
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets
Cash and due from banks..................... $ 17,633 $ 17,633 $ 22,927 $ 22,927
Federal funds sold.......................... 52,275 52,275 94,025 94,025
Investment securities....................... 210,850 213,445 198,739 203,192
Net loans................................... 152,232 154,455 144,080 143,948
Financial liabilities:
Deposits.................................... 346,311 347,462 362,611 362,993
Federal funds purchased and securities sold
under agreements to repurchase........... 60,447 60,447 71,565 71,565
</TABLE>
F-19
<PAGE> 97
UNION BANK & TRUST COMPANY
STATEMENT OF CONDITION
JUNE 30, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks........................................................ $ 20,943
Federal funds sold & securities purchased under resale agreements.............. 33,775
--------------
Cash and Cash Equivalents...................................................... $ 54,718
Investment Securities:
Investment securities held to maturity......................................... 93,881
Investment securities available for sale....................................... 101,497
--------------
Total Investment Securities.................................................... 195,378
Allowance for unrealized gains (losses) AFS securities......................... (1,518)
--------------
Net Investment Securities...................................................... 193,860
Loans.......................................................................... 165,110
Less:
Unearned Income................................................................ (39)
Allowance for losses on loans.................................................. (4,118)
--------------
Net Loans...................................................................... 160,953
Premises and equipment, net.................................................... 7,341
Other assets................................................................... 12,054
--------------
TOTAL ASSETS................................................................... $428,926
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing............................................................ $ 60,115
Interest bearing............................................................... 263,968
--------------
Total deposits................................................................. 324,083
Federal funds purchased and securities sold under repurchase agreements........ 56,636
Other liabilities.............................................................. 3,561
--------------
TOTAL LIABILITIES.............................................................. 384,280
--------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, par value $.50; 3,965,000 shares authorized, 3,874,000 issued and
outstanding.................................................................. 1,937
Capital surplus................................................................ 14,060
Retained earnings.............................................................. 29,671
AFS Net Unrealized Gain (Loss)................................................. (1,022)
--------------
TOTAL SHAREHOLDERS' EQUITY..................................................... 44,646
--------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................................... $428,926
===========
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
F-20
<PAGE> 98
UNION BANK & TRUST COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................ $ 3,150 $ 2,733 $ 6,129 $ 5,582
Interest on investment securities:
Taxable................................................. 2,696 3,208 5,460 6,594
Nontaxable.............................................. 10 33 20 71
Interest on federal funds sold and securities purchased
under resale agreements................................. 326 550 712 1,099
------- ------- ------- -------
Total interest income........................... $ 6,182 $ 6,524 $12,321 $13,346
------- ------- ------- -------
INTEREST EXPENSE:
Interest on deposits...................................... $ 2,333 $ 2,723 $ 4,811 $ 5,448
Interest on federal funds purchased & securities sold
under repurchase agreement.............................. 469 423 865 830
------- ------- ------- -------
Total interest expense.......................... $ 2,802 $ 3,146 $ 5,676 $ 6,278
------- ------- ------- -------
NET INTEREST INCOME....................................... $ 3,380 $ 3,378 $ 6,645 $ 7,068
Provision for loan losses................................. (1,052) 100 (1,798) 250
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES......................................... $ 4,432 $ 3,278 $ 8,443 $ 6,818
------- ------- ------- -------
NONINTEREST INCOME:
Trust income.............................................. $ 400 $ 294 $ 708 $ 589
Service fees.............................................. 437 368 861 741
Investment securities gains............................... 9 (1) 59 378
Other..................................................... 546 188 806 355
------- ------- ------- -------
Total noninterest income........................ $ 1,392 $ 849 $ 2,434 $ 2,063
------- ------- ------- -------
NONINTEREST EXPENSE:
Salaries and employee benefits............................ $ 1,824 $ 1,772 $ 3,590 $ 3,644
Occupancy expense, net.................................... 410 400 807 779
Other..................................................... 1,210 1,133 2,219 2,358
------- ------- ------- -------
Total noninterest expense....................... $ 3,444 $ 3,305 $ 6,616 $ 6,781
------- ------- ------- -------
INCOME BEFORE INCOME TAXES................................ $ 2,380 $ 822 $ 4,261 $ 2,100
Income taxes.............................................. 717 (106) 1,368 152
------- ------- ------- -------
NET INCOME BEFORE ADJUSTMENTS............................. $ 1,663 $ 928 $ 2,893 $ 1,948
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLES,
NET..................................................... $ -0- $ -0- $ -0- $ 1,500
------- ------- ------- -------
NET INCOME................................................ $ 1,663 $ 928 $ 2,893 $ 3,448
======= ======= ======= =======
NET INCOME PER COMMON SHARE:
NET INCOME BEFORE ADJUSTMENTS........................... $ 0.429 $ 0.240 $ 0.747 $ 0.503
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLES,
NET.................................................. $ 0.000 $ 0.000 $ 0.000 $ 0.388
------- ------- ------- -------
NET INCOME................................................ $ 0.429 $ 0.240 $ 0.747 $ 0.891
======= ======= ======= =======
CASH DIVIDENDS PER COMMON SHARE........................... $ 0.100 $ 0.040 $ 0.200 $ 0.080
======= ======= ======= =======
AVERAGE NUMBER OF SHARES OUTSTANDING DURING EACH PERIOD,
PRIMARY & FULLY DILUTED................................. 3,869 3,870 3,869 3,851
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
F-21
<PAGE> 99
UNION BANK & TRUST COMPANY
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
COMMON STOCK:
Balance at beginning of year....................................................... $ 1,935
Changes:
Forfeiture of RSA shares......................................................... (2)
ISOs Exercised................................................................... 4
-------
Balance at end of period........................................................... $ 1,937
=======
CAPITAL SURPLUS:
Balance at beginning of year....................................................... $13,962
Changes:
Amortization of unearned restricted stock........................................ 30
Forfeiture of RSA shares......................................................... (11)
ISOs Exercised................................................................... 79
-------
Balance at end of period........................................................... $14,060
=======
RETAINED EARNINGS:
Balance at beginning of year....................................................... $27,553
Net income for the period........................................................ 2,893
Cash dividend declared of $.20 per share for the period.......................... (774)
AFS net unrealized Gain (Loss)................................................... (1,022)
-------
Balance at end of period........................................................... $28,650
=======
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
F-22
<PAGE> 100
UNION BANK & TRUST COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIODS
ENDED JUNE 30,
-----------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income........................................................... $ 2,893 $ 3,448
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.......................................... (1,797) 250
Depreciation....................................................... 444 371
Amortization of premiums and discounts on investment securities.... 483 426
Investment securities gain -- net.................................. (59) (378)
Decrease (increase) in accrued interest receivable and other
assets.......................................................... 158 (1,892)
Increase in accrued expenses and other liabilities................. 63 413
Increase in income tax payable..................................... 338 63
Net (gains) losses on repossessed assets........................... (10) 22
Other.............................................................. (8) 19
-------- --------
Net cash provided by operating activities..................... $ 2,505 $ 2,742
-------- --------
INVESTING ACTIVITIES
Proceeds from sale and maturities of investments..................... $ 35,101 $ 51,881
Proceeds from sale of other real estate and other assets............. 1,110 36
Cash paid for new investments........................................ (20,053) (76,272)
Net (increase) decrease in loans..................................... (6,994) 8,327
Net purchases of premises and equipment.............................. (128) (660)
-------- --------
Net cash provided by (used by) investing activities........... $ 9,036 $(16,688)
-------- --------
FINANCING ACTIVITIES
Net decrease in short-term borrowings................................ $ (3,811) $(19,012)
Net (decrease) increase in certificates of deposit and other......... (26,042) 1,969
Net increase (decrease) in demand deposits, money market and
savings accounts................................................... 3,814 (11,184)
Cash dividends paid.................................................. (774) (310)
Proceeds from exercise of stock options.............................. 82 -0-
-------- --------
Net cash used by financing activities......................... $(26,731) $(28,537)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS................................ $(15,190) $(42,483)
CASH AND CASH EQUIVALENTS JANUARY 1, 1994 AND 1993................... 69,908 116,952
-------- --------
CASH AND CASH EQUIVALENTS JUNE 30, 1994 AND 1993..................... $ 54,718 $ 74,469
======== ========
</TABLE>
See Accompanying Notes to Unaudited Financial Statements.
F-23
<PAGE> 101
UNION BANK & TRUST COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1. PRINCIPLES OF ACCOUNTING
The accounting and reporting policies of Union Bank & Trust Company conform
to generally accepted accounting principles and to general practice within the
banking industry. Substantially all income and expenses are reported utilizing
the accrual method of accounting. The statement of condition as of June 30, 1994
and the related statements of income for the three and six-month periods ended
June 30, 1994 and 1993, and statements of cash flows for the six month periods
ended June 30, 1994 and 1993, and the statement of changes in shareholders'
equity for the six-month period ended June 30, 1994, are unaudited. In the
opinion of management, all adjustments necessary for fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year. These condensed financial statements do not contain all
the disclosures contained in the audited financial statements for the year ended
December 31, 1993, and accordingly, these financial statements should be read in
conjunction with the annual financial statements.
Where appropriate, the financial statements include the accounts of the
Company and its subsidiary. All significant inter-company transactions and
balances have been eliminated.
Certain prior period amounts have been restated to conform to current
period presentations.
NOTE 2. LOANS
Loans at June 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Commercial, Financial and Agricultural................................. $ 42,757
Real Estate:
Construction......................................................... 4,427
Mortgage............................................................. 101,449
Consumer Installment................................................... 16,477
--------------
Total loans.................................................. 165,110
Unearned income........................................................ (39)
Allowance for loan losses.............................................. (4,118)
--------------
Net loans.................................................... $160,953
===========
</TABLE>
NOTE 3. ALLOWANCE FOR LOSSES ON LOANS
The following schedule summarizes the changes in the allowance for losses
on loans for the six months ended June 30, 1994:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Beginning Balance...................................................... $ 4,618
Provision charged to expense......................................... (1,797)
Recoveries of charged off loans...................................... 1,390
Loans charged off.................................................... (93)
--------------
Ending Balance......................................................... $ 4,118
===========
</TABLE>
F-24
<PAGE> 102
UNION BANK & TRUST COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. INVESTMENT SECURITIES
Effective January 1, 1994, the Bank adopted Statement of Financial Account
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities." As of January 1, 1994, the net unrealized gain in the available for
sale category was $1,339,905. There were no sales of available for sale
securities during the second quarter. During the first quarter, 1994, the
proceeds from sales of available for sale securities were $10,176,688 with an
amortized cost basis of $9,984,844 with gross unrealized gains of $85,468. The
net change in unrealized holding gains and losses for the available for sale
category for the first quarter, 1994 was ($1,609,121) as of market date March
31, 1994 and ($1,163,371) as of market date June 30, 1994.
Carrying amounts and estimated market values of investment securities are
summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 1994
--------------------
ESTIMATED
AMORTIZED MARKET UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES
--------- ------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury Securities............................... $ 82,436 $80,209 $-0- $2,227
U.S. Government Agencies and Corporation Securities.... 1,151 1,164 13 -0-
State and Municipal Securities......................... 9,807 9,411 21 417
Mortgage-backed Securities............................. -0- -0- -0- -0-
Foreign Governments.................................... 10 10 -0- -0-
Other Securities....................................... 477 477 -0- -0-
--------- ------- ---------- ----------
Total........................................ $ 93,881 $91,271 $ 34 $2,644
======== ======= ======== ========
AVAILABLE FOR SALE:
U.S. Treasury Securities............................... $ 63,082 $62,799 $ 32 $ 315
U.S. Government Agencies and Corporation Securities.... 4,996 5,078 82 -0-
State and Municipal Securities......................... -0- -0- -0- -0-
Mortgage-backed Securities............................. 33,419 32,102 22 1,339
Other Securities....................................... -0- -0- -0- -0-
--------- ------- ---------- ----------
Total........................................ $ 101,497 $99,979 $136 $1,654
======== ======= ======== ========
</TABLE>
The net unrealized loss for the Available for Sale Investment Securities as
of June 30, 1994, was $1,518,054 with an after tax reduction to Shareholders'
Equity of $1,021,871.
F-25
<PAGE> 103
UNION BANK & TRUST COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1993, the Bank adopted the provisions of the
Statements of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes" and No. 106 "Employers Accounting for Postretirement Benefits
Other Than Pensions." The adoption of Statements of Financial Accounting
Standards (SFAS) No. 109 produced a benefit to earnings and the adoption of
Statements of Financial Accounting Standards (SFAS) No. 106 produced a charge to
earnings. Set out below is a summary of the effect on income of the adoption of
these two standards for the three months ended March 31, 1993.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C> <C>
1. SFAS No. 109 -- Gross Benefit................................................ $1,825
Less related tax expense -- net.............................................. (106)
-------
Net Benefit.................................................................. $1,719
2. SFAS No. 106 --
Gross charge................................................................. ($ 346)
Less related tax benefit..................................................... 127
-------
Net Charge................................................................... (219)
-------
Net Benefit from Cumulative Effect of Changes in Accounting Principles....... $1,500
===========
</TABLE>
F-26
<PAGE> 104
APPENDIX A
FINAL AGREEMENT
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
UNION BANK & TRUST COMPANY
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF JULY 8, 1994
AND AMENDED AND RESTATED AS OF AUGUST 22 AND 31 AND SEPTEMBER 27, 1994
A-1
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties............................................................................... A-5
Preamble.............................................................................. A-5
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER......................................... A-5
1.1 Merger....................................................................... A-5
1.2 Time and Place of Closing.................................................... A-5
1.3 Effective Time............................................................... A-6
ARTICLE 2 -- TERMS OF MERGER.......................................................... A-6
2.1 Business of Surviving Bank................................................... A-6
2.2 Assumption of Rights......................................................... A-6
2.3 Assumption of Liabilities.................................................... A-6
2.4 Certificate of Incorporation................................................. A-6
2.5 Bylaws....................................................................... A-6
2.6 Directors and Officers....................................................... A-6
ARTICLE 3 -- MANNER OF CONVERTING SHARES.............................................. A-7
3.1 Conversion of Shares......................................................... A-7
3.2 Anti-Dilution Provisions..................................................... A-7
3.3 Shares Held by Union or Regions.............................................. A-7
3.4 Dissenting Shareholders...................................................... A-7
3.5 Fractional Shares............................................................ A-8
3.6 Conversion of Stock Options; Restricted Stock................................ A-8
ARTICLE 4 -- EXCHANGE OF SHARES AND ESTABLISHMENT OF
ESCROW TRUST........................................................................ A-9
4.1 Exchange Procedures.......................................................... A-9
4.2 Rights of Former Union Shareholders.......................................... A-10
4.3 Establishment of Escrow Trust................................................ A-10
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF UNION.................................. A-11
5.1 Organization, Standing, and Power............................................ A-11
5.2 Authority; No Breach by Agreement............................................ A-11
5.3 Capital Stock................................................................ A-12
5.4 Union Subsidiaries........................................................... A-12
5.5 Financial Statements......................................................... A-12
5.6 Absence of Undisclosed Liabilities........................................... A-12
5.7 Absence of Certain Changes or Events......................................... A-13
5.8 Tax Matters.................................................................. A-13
5.9 Environmental Matters........................................................ A-13
5.10 Compliance With Laws......................................................... A-14
5.11 Employee Benefit Plans....................................................... A-14
5.12 Material Contracts........................................................... A-16
5.13 Legal Proceedings............................................................ A-16
5.14 Statements True and Correct.................................................. A-16
5.15 Tax and Regulatory Matters................................................... A-17
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS................................ A-17
6.1 Organization, Standing, and Power............................................ A-17
6.2 Authority; No Breach by Agreement............................................ A-17
6.3 Capital Stock................................................................ A-18
6.4 Financial Statements......................................................... A-18
6.5 Absence of Undisclosed Liabilities........................................... A-18
6.6 Absence of Certain Changes or Events......................................... A-18
</TABLE>
A-2
<PAGE> 106
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.7 Compliance With Laws......................................................... A-18
6.8 Legal Proceedings............................................................ A-19
6.9 Statements True and Correct.................................................. A-19
6.10 Tax and Regulatory Matters................................................... A-19
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION................................. A-20
7.1 Affirmative Covenants of Union............................................... A-20
7.2 Negative Covenants of Union.................................................. A-20
7.3 Covenants of Regions......................................................... A-22
7.4 Adverse Changes in Condition................................................. A-22
7.5 Reports...................................................................... A-22
ARTICLE 8 -- ADDITIONAL AGREEMENTS.................................................... A-23
8.1 Registration Statement; Proxy Statement; Shareholder Approval................ A-23
8.2 Exchange Listing............................................................. A-23
8.3 Applications................................................................. A-23
8.4 Filings With State Offices................................................... A-23
8.5 Agreement as to Efforts to Consummate........................................ A-23
8.6 Investigation and Confidentiality............................................ A-24
8.7 Press Releases............................................................... A-24
8.8 Certain Actions.............................................................. A-24
8.9 Tax Treatment................................................................ A-24
8.10 Agreements of Affiliates..................................................... A-24
8.11 Employee Benefits and Contracts.............................................. A-25
8.12 Indemnification.............................................................. A-25
8.13 Advisory Directors........................................................... A-26
8.14 Union Interim Organization................................................... A-26
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........................ A-26
9.1 Conditions to Obligations of Each Party...................................... A-26
9.2 Conditions to Obligations of Regions......................................... A-27
9.3 Conditions to Obligations of Union........................................... A-28
ARTICLE 10 -- TERMINATION............................................................. A-29
10.1 Termination.................................................................. A-29
10.2 Effect of Termination........................................................ A-30
10.3 Non-Survival of Representations and Covenants................................ A-30
ARTICLE 11 -- MISCELLANEOUS........................................................... A-30
11.1 Definitions.................................................................. A-30
11.2 Expenses..................................................................... A-36
11.3 Brokers and Finders.......................................................... A-37
11.4 Entire Agreement............................................................. A-37
11.5 Amendments................................................................... A-37
11.6 Waivers...................................................................... A-37
11.7 Assignment................................................................... A-38
11.8 Notices...................................................................... A-38
11.9 Governing Law................................................................ A-39
11.10 Counterparts................................................................. A-39
11.11 Captions..................................................................... A-39
11.12 Enforcement of Agreement..................................................... A-39
11.13 Severability................................................................. A-39
Signatures............................................................................ A-39
</TABLE>
A-3
<PAGE> 107
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------
<C> <S> <C>
1. Form of Escrow Trust Agreement. (sec. 3.1(c)).
2. Form of Affiliate Agreement of Union. (sec. 8.10).
3. Form of Amended and Restated Plan of Merger. (sec.
11.1).
</TABLE>
A-4
<PAGE> 108
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into as of July 8, 1994, and amended and
restated as of August 22 and 31 and September 27, 1994, by and between UNION
BANK & TRUST COMPANY ("Union"), a state bank organized and existing under the
laws of the State of Alabama, with its principal office located in Montgomery,
Alabama; and REGIONS FINANCIAL CORPORATION ("Regions"), a corporation organized
and existing under the laws of the State of Delaware, with its principal office
located in Birmingham, Alabama.
PREAMBLE
The Boards of Directors of Union and Regions are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the acquisition of Union by
Regions pursuant to the merger of Union with and into a wholly owned, first tier
interim subsidiary of Regions ("Union Interim"). At the Effective Time, the
outstanding shares of the capital stock of Union shall be converted into shares
of the common stock of Regions and rights to receive on a deferred basis
possible additional shares of the common stock of Regions (except as provided
herein). As a result, shareholders of Union shall become shareholders of Regions
and Union Interim shall continue to conduct the business and operations formerly
conducted by Union as a wholly owned, first tier subsidiary of Regions until
such time as Union Interim is merged with and into First Alabama Bank, a wholly
owned bank subsidiary of Regions. The transactions described in this Agreement
are subject to the approvals of the shareholders of Union, the Board of
Governors of the Federal Reserve System, and the appropriate state regulatory
authorities and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Union shall be merged into and with Union Interim in
accordance with the provisions of Section 5-7A-1 of the ABC (the "Merger").
Union Interim shall be the Surviving Bank of the Merger and shall be a
wholly owned, first tier subsidiary of Regions and shall continue to be
governed by the Laws of the State of Alabama until such time as Union
Interim is merged with and into First Alabama Bank. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been
approved and adopted by the respective Boards of Directors of Union and
Regions, and the terms of the Plan of Merger to be entered into by Union
and Union Interim.
(b) The Parties acknowledge that Regions intends to cause Union
Interim, concurrently with or immediately subsequent to the Effective Time,
to be merged with and into First Alabama Bank. The Parties agree to
cooperate to take all actions and to prepare, approve, and execute all
documents and agreements (including appropriate regulatory applications)
reasonably determined by Regions to be necessary to permit such subsequent
merger to be effected concurrently with or as soon as practicable following
consummation of the Merger.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M.
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or
A-5
<PAGE> 109
at such other time as the Parties, acting through their chief executive officers
or chief financial officers (or other authorized officer), may mutually agree.
The place of Closing shall be at the offices of Regions, in Birmingham, Alabama,
or such other place as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
this Agreement shall become effective on the date and at the time the Alabama
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Alabama (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers or chief financial officers (or other
authorized officer) of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the last day of the month in
which occurs the last to occur of (i) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of Union approve this Agreement to the extent
such approval is required by applicable Law; or such later date within 30 days
thereof as may be specified by Regions.
ARTICLE 2
TERMS OF MERGER
2.1 BUSINESS OF SURVIVING BANK. The business of the Surviving Bank from
and after the Effective Time shall continue to be that of a state bank organized
under the laws of the State of Alabama. The business shall be conducted from its
main office and at its legally established branches, which shall also include
the main office and all branches, whether in operation or approved but unopened,
at the Effective Time.
2.2 ASSUMPTION OF RIGHTS. At the Effective Time, the separate existence
and corporate organization of Union shall be merged into and continued in the
Surviving Bank. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time and thereafter, except as otherwise provided
herein, all the rights, privileges, immunities, and franchises, of a public as
well as of a private nature, of each of Union and Union Interim; and all
property, real, personal, and mixed, and all debts due on whatever account, and
all other choses of action, and all and every other interest of or belonging to
or due to each of Union and Union Interim shall be taken and deemed to be
transferred to and vested in the Surviving Bank without further act or deed; and
the title to any real estate, or any interest therein, vested in any of Union or
Union Interim shall not revert or be in any way impaired by reason of the
Merger. The Surviving Bank, upon consummation of the Merger and without any
order or other action on the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises, and interests, including appointments,
designations, and nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, and committee of estates of incompetent persons, and in
every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises, and interests were held or enjoyed by either Union or
Union Interim at the Effective Time.
2.3 ASSUMPTION OF LIABILITIES. All liabilities and obligations of both
Union and Union Interim of every kind and description shall be assumed by the
Surviving Bank, and the Surviving Bank shall be bound thereby in the same manner
and to the same extent that Union and Union Interim were so bound at the
Effective Time.
2.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Union Interim in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Bank until otherwise amended or
repealed.
2.5 BYLAWS. The Bylaws of Union Interim in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Bank until otherwise
amended or repealed.
2.6 DIRECTORS AND OFFICERS. The directors of Union Interim in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving Bank
from and after the Effective Time in accordance with the Bylaws of the Surviving
Bank. The officers of Union Interim in office immediately prior to the Effective
Time, together with such additional
A-6
<PAGE> 110
persons as may thereafter be elected, shall serve as the officers of the
Surviving Bank from and after the Effective Time in accordance with the Bylaws
of the Surviving Bank.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Union Interim Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(c) Each share of Union Common Stock (excluding shares held by Union
or any of its wholly owned Subsidiaries or by Regions or any of its wholly
owned Subsidiaries, in each case other than in a fiduciary capacity or as a
result of debts previously contracted, and excluding shares held by
shareholders who perfect their dissenters' rights of appraisal as provided
in Section 3.4 of this Agreement) issued and outstanding at the Effective
Time shall be converted into and exchanged for (i) that number of shares of
Regions Common Stock (the "Exchange Ratio") equal to the quotient obtained
by dividing (a) $16.02 by (b) the Average Closing Price and (ii) the right
to receive on a deferred basis and pursuant to the terms of the Escrow
Trust Agreement (the "Escrow Stock Right" and collectively, the "Escrow
Stock Rights") that additional fraction of a share of Regions Common Stock
(the "Escrow Stock Ratio") equal to the quotient obtained by dividing (a)
$.51 by (b) the Average Closing Price.
3.2 ANTI-DILUTION PROVISIONS. In the event Union changes the number of
shares of Union Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted to
reflect such stock split, stock dividend, or recapitalization. In the event
Regions changes the number of shares of Regions Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio and the Escrow Stock Ratio shall be, to the extent necessary,
proportionately adjusted to reflect such stock split, stock dividend, or
recapitalization.
3.3 SHARES HELD BY UNION OR REGIONS. Each of the shares of Union Common
Stock held by Union or any of its wholly owned Subsidiaries or by Regions or any
of its wholly owned Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 DISSENTING SHAREHOLDERS. Any holder of shares of Union Common Stock
who perfects such holder's dissenter's rights of appraisal in accordance with
and as contemplated by Article 6 of the ABCA (or the applicable successor
article) shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided that no such payment
shall be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the ABCA and
surrendered to the Surviving Bank the certificate or certificates representing
the shares for which payment is being made. In the event that after the
Effective Time a dissenting shareholder of Union fails to perfect, or
effectively withdraws or loses, such holder's right to appraisal and of payment
for such holder's shares, Regions shall issue and deliver, subject to the
delivery of the shares of Regions Common Stock represented by such holder's
Escrow Stock Rights in accordance with the provisions of Section 1.2 of the
Escrow Trust Agreement,
A-7
<PAGE> 111
the consideration to which such holder of shares of Union Common Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Union Common Stock
held by him.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement and except with respect to fractional shares that may be otherwise
issuable pursuant to the Escrow Trust Agreement, each holder of shares of Union
Common Stock exchanged pursuant to the Merger, or of options to purchase shares
of Union Common Stock, who would otherwise have been entitled to receive a
fraction of a share of Regions Common Stock (after taking into account all
certificates representing shares of Union Common Stock delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Regions Common Stock multiplied by the market
value of one share of Regions Common Stock at the Effective Time, in the case of
shares exchanged pursuant to the Merger, or the date of exercise, in the case of
options. The market value of one share of Regions Common Stock at the Effective
Time or the date of exercise, as the case may be, shall be the last sale price
of such common stock on the Nasdaq National Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source) on
the last trading day preceding the Effective Time, in the case of shares
exchanged pursuant to the Merger, and the date of exercise, in the case of
options. No such holder will be entitled to dividends, voting rights, or any
other rights as a shareholder in respect of any fractional shares.
3.6 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, all rights with respect to Union Common
Stock pursuant to stock options ("Union Options") granted by Union under
the Union Stock Plan, which are outstanding at the Effective Time, whether
or not exercisable, shall be converted into and become rights with respect
to Regions Common Stock and, to the extent the Union Option assumed by
Regions is exercised prior to the termination of the Escrow Trust
Agreement, Escrow Stock Rights, and Regions shall assume each Union Option,
in accordance with the terms of the Union Stock Plan and stock option
agreement by which it is evidenced. From and after the Effective Time, (i)
each Union Option assumed by Regions may be exercised solely for shares of
Regions Common Stock and, prior to the termination of the Escrow Trust
Agreement, Escrow Stock Rights, (ii) the number of shares of Regions Common
Stock subject to such Union Option shall be equal to the number of shares
of Union Common Stock subject to such Union Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, (iii) the number of shares
of Regions Common Stock represented by the Escrow Stock Rights subject to
such Union Option, if exercised prior to the termination of the Escrow
Trust Agreement, shall be equal to the number of shares of Union Common
Stock subject to such option immediately prior to the Effective Time
multiplied by the Escrow Stock Ratio, (iv) the per share exercise price
under each such Union Option shall be adjusted by dividing the per share
exercise price under each such Union Option by the Exchange Ratio and
rounding down to the nearest cent, and (v) the aggregate exercise price for
all shares of Regions Common Stock issuable pursuant to the exercise of the
option and pursuant to the Escrow Stock Rights shall equal the product of
the number of shares of Regions Common Stock subject to such Union Option
as calculated in (ii) above and the per share exercise price under such
Union Option as calculated in (iv) above; provided, that in the event that
the Union Option assumed by Regions is exercised after the termination of
the Escrow Trust Agreement and the expiration of the Escrow Stock Rights,
such option shall be exercisable for that number of shares of Regions
Common Stock as calculated in (ii) above, plus that number of shares of
Regions Common Stock represented by the then expired Escrow Stock Rights as
calculated in (iii) above that would have been issuable upon termination of
the Escrow Trust Agreement if such option had been exercised prior to the
termination of the Escrow Trust Agreement, as adjusted if necessary from
the date of termination of the Escrow Trust Agreement to the date of
exercise.
It is intended that the foregoing assumption shall be undertaken in a
manner that will not constitute a "modification" as defined in Section 424
of the Internal Revenue Code, as to any stock option which is an "incentive
stock option." Each of Union and Regions agrees to take all necessary steps
to effectuate the foregoing provisions of this Section 3.6.
A-8
<PAGE> 112
(b) All restrictions or limitations on transfer with respect to Union
Common Stock awarded under the Union Stock Plan or any other plan, program,
or arrangement of any Union Company, to the extent that such restrictions
or limitations shall not have already lapsed, and except as otherwise
expressly provided in such plan, program, or arrangement, shall remain in
full force and effect with respect to shares of Regions Common Stock into
which such restricted stock is converted pursuant to Section 3.1 of this
Agreement.
(c) Regions shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Regions Common Stock for delivery
upon exercise of the Union Options. As soon as reasonably practicable after
the Effective Time, Regions shall file a registration statement under the
1933 Act on Form S-4 or Form S-8 (or any successor or other appropriate
form), with respect to the shares of Regions Common Stock subject to such
Union Options and shall use its reasonable efforts to cause to be declared
effective and to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Union
Options remain outstanding. In addition, Regions agrees to use its
reasonable efforts to cause such shares to be listed on the Nasdaq National
Market. As soon as reasonably practicable after the Effective Time, Regions
shall deliver to each holder of a Union Option an appropriate written
notice setting forth Regions' assumption of the Union Option in accordance
with the terms of this Section 3.6.
ARTICLE 4
EXCHANGE OF SHARES AND ESTABLISHMENT OF ESCROW TRUST
4.1 EXCHANGE PROCEDURES. As promptly as reasonably practicable after the
Effective Time, Regions and Union shall cause First Alabama Bank (the "Exchange
Agent") to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of Union
Common Stock appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Union Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). After the Effective
Time, each holder of shares of Union Common Stock (other than shares to be
canceled pursuant to Section 3.3 of this Agreement or as to which dissenters'
rights of appraisal have been perfected as provided in Section 3.4 of this
Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.5 of this Agreement, each holder of shares of Union Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of Regions Common Stock to which such holder may be
otherwise entitled (without interest). Regions shall not be obligated to deliver
the consideration to which any former holder of Union Common Stock is entitled
as a result of the Merger until such holder surrenders his certificate or
certificates representing the shares of Union Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of Union Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither Regions, Union,
nor the Exchange Agent shall be liable to a holder of Union Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law. Regions shall pay any transfer Taxes
required by reason of the issuance of a certificate representing shares of
Regions Common Stock pursuant to the Merger; provided, however, that such
certificate is issued in the name of the Person in whose name the certificate
surrendered and exchanged therefor is registered. If any portion of the
consideration to be received pursuant to Section 3.1 of this Agreement upon
exchange of a certificate (whether a certificate representing shares of Regions
Common Stock, a Escrow Stock Right, or a check representing cash for a
fractional share) is to be issued or paid to a Person other than the Person in
whose name the certificate surrendered in exchange therefor is registered, it
shall be a condition of such issuance and payment that the certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such exchange shall pay in
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advance any transfer Taxes required by reason of the issuance of a certificate
representing shares of Regions Common Stock or a check representing cash for a
fractional share to such other Person or establish to the satisfaction of the
Exchange Agent that such Tax has been paid or that no such Tax is applicable. In
the case of any lost, mislaid, stolen, or destroyed certificate or certificates
evidencing outstanding shares of Union Common Stock, the holder thereof may be
required, as a condition precedent to delivery to such holder of the
consideration described in Sections 3.1 and 3.5 of this Agreement, to deliver to
Regions a bond in such reasonable sum as Regions may direct as indemnity against
any claim that may be made against the Exchange Agent, Regions, or the Surviving
Bank with respect to such certificate or certificates alleged to have been lost,
mislaid, stolen, or destroyed.
4.2 RIGHTS OF FORMER UNION SHAREHOLDERS. At the Effective Time, the stock
transfer books of Union shall be closed as to holders of Union Common Stock
immediately prior to the Effective Time and no transfer of Union Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Union Common Stock (other
than shares to be canceled pursuant to Sections 3.3 and 3.4 of this Agreement)
shall from and after the Effective Time represent for all purposes the number of
shares of Regions Common Stock and Escrow Stock Rights into which the shares of
Union Common Stock represented thereby shall have been converted under Section
3.1 of this Agreement and the cash issuable in lieu of fractional shares under
Section 3.5 of this Agreement. To the extent permitted by Law, former
shareholders of record of Union shall be entitled to vote after the Effective
Time at any meeting of Regions shareholders the number of whole shares of
Regions Common Stock (including providing voting instructions to the Escrow
Agent with respect to those whole shares subject to the Escrow Stock Rights)
into which their respective shares of Union Common Stock are converted,
regardless of whether such holders have exchanged their certificates
representing Union Common Stock for certificates representing Regions Common
Stock in accordance with the provisions of this Agreement. Whenever a dividend
or other distribution is declared by Regions on the Regions Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of Regions Common Stock
issuable pursuant to this Agreement (including those whole shares subject to the
Escrow Stock Rights), but no dividend or other distribution payable to the
holders of record of Regions Common Stock (including those whole shares subject
to the Escrow Stock Rights) as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of Union
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this
Agreement. However, upon surrender of such Union Common Stock certificate, both
the Regions Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered cash
payments to be paid for fractional share interests (without interest) shall be
delivered and paid with respect to each share represented by such certificate.
4.3 ESTABLISHMENT OF ESCROW TRUST. Prior to the Effective Time, Regions,
the Escrow Agent, and the Shareholder Representative Committee shall enter into
the Escrow Trust Agreement in order to establish an escrow of shares of Regions
Common Stock to fund certain environmental remediation costs for the possible
removal of Hazardous Materials on, at, or emanating from the Union property (as
defined in Section 10.1(j) of the Union Disclosure Memorandum). Approval of this
Agreement by the shareholders of Union at the Shareholders' Meeting shall
constitute approval of the establishment of the escrow trust contemplated by the
Escrow Trust Agreement and the appointment of the Escrow Agent and the
Shareholder Representative Committee. At the Effective Time, Regions shall
deposit with the Escrow Agent that number of whole shares of Regions Common
Stock (rounding up to the nearest whole share) equal to the quotient obtained by
dividing (i) the product of (a) $.51 and (b) the total number of shares of Union
Common Stock outstanding at the Effective Time (other than shares as to which
the holder thereof has effected the procedural steps for preserving such
holder's dissenters' rights of appraisal as provided in Section 3.4 of this
Agreement and as specifically enumerated in Section 9.2(e) of this Agreement) by
(ii) the Average Closing Price. After the Effective Time, Regions shall deposit
with the Escrow Agent such additional shares of Regions Common Stock as may be
required under the circumstances set forth in Section 1.2 of the Escrow Trust
Agreement. Such shares of Regions Common Stock shall be held by the Escrow Agent
and distributed to the former
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shareholders of Union or applied to fund certain environmental remediation costs
in accordance with the terms of the Escrow Trust Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UNION
Union hereby represents and warrants to Regions as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Union is a state bank duly
organized and validly existing, and in good standing under the Laws of the State
of Alabama, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its material Assets. Union is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Union. Union is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund, as appropriate, to the
extent provided by applicable Law.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Union has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Union, subject to the approval of this Agreement and the Plan of Merger
by the required vote of the holders of outstanding Union Common Stock,
which is the only shareholder vote of Union required for approval of this
Agreement and the Plan of Merger and consummation of the Merger by Union.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid, and binding obligation of Union, enforceable against Union in
accordance with its terms (except in all cases as such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and (ii) application of, and limitations on the application of,
equitable principles and remedies, including limitations on the
availability of the equitable remedy of specific performance or injunctive
relief).
(b) Neither the execution and delivery of this Agreement by Union, nor
the consummation by Union of the transactions contemplated hereby, nor
compliance by Union with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Union's Certificate of
Incorporation or Bylaws, or (ii) except for those agreements set forth in
Section 5.12(iv) of the Union Disclosure Memorandum, constitute or result
in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any Union Company under, any Contract
or Permit of any Union Company, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Union, or, (iii) subject to
receipt of the requisite approvals referred to in Section 9.1(b) of this
Agreement, violate any Law or Order applicable to any Union Company or any
of their respective material Assets where such violation is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on Union.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation or both with respect to any
employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Union, no notice
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to, filing with, or Consent of, any public body or authority is necessary
for the consummation by Union of the Merger and the other transactions
contemplated in this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of Union consists of
3,965,000 shares of Union Common Stock, of which 3,874,000 shares are issued and
outstanding as of the date of this Agreement and not more than 3,932,000 shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of capital stock of Union are duly and validly issued and
outstanding and are fully paid and nonassessable under the ABA and the ABCA. To
the Knowledge of Union, none of the outstanding shares of capital stock of Union
has been issued in violation of any preemptive rights of the current or past
shareholders of Union. As of the date of this Agreement, Union has reserved
91,000 shares of Union Common Stock for issuance under the Union Stock Plan,
pursuant to which options to purchase 58,000 shares of Union Common Stock are
outstanding. Except as set forth above, there are no shares of capital stock or
other equity securities of Union out standing and no outstanding Rights relating
to the capital stock of Union.
5.4 UNION SUBSIDIARIES. Union has disclosed in Section 5.4 of the Union
Disclosure Memorandum all of the Union Subsidiaries as of the date of this
Agreement. Union or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each Union Subsidiary. No equity
securities of any Union Subsidiary are or may become required to be issued
(other than to another Union Company) by reason of any Rights, and there are no
Contracts by which any Union Subsidiary is bound to issue (other than to another
Union Company) additional shares of its capital stock or Rights or by which any
Union Company is or may be bound to transfer any shares of the capital stock of
any Union Subsidiary (other than to another Union Company). There are no
Contracts relating to the rights of any Union Company to vote or to dispose of
any shares of the capital stock of any Union Subsidiary. All of the shares of
capital stock of each Union Subsidiary held by a Union Company are fully paid
and (except pursuant to 12 USC Section 55 in the case of national banks and
comparable, applicable state Law, if any, in the case of state depository
institutions) nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the Union Company free and clear of any Lien. Each Union Subsidiary is either
a bank, a savings association, or a corporation, and is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Each Union Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Union.
5.5 FINANCIAL STATEMENTS. Union has included in Section 5.5 of the Union
Disclosure Memorandum copies of all Union Financial Statements for periods ended
prior to the date hereof and will deliver to Regions copies of all Union
Financial Statements prepared subsequent to the date hereof. The Union Financial
Statements (as of the dates thereof and for the periods covered thereby) (i) are
or, if dated after the date of this Agreement, will be in accordance with the
books and records of Union, and (ii) present or will present, as the case may
be, fairly the consolidated financial position of the Union Companies as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows of the Union Companies for the periods
indicated, in accordance with GAAP (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not material in amount or effect and to the absence of certain footnote
information in the unaudited statements).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Union Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Union, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Union as of
March 31, 1994 included in the Union Financial Statements or reflected in the
notes thereto. No Union Company has incurred or paid any Liability since March
31, 1994, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Union.
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5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1994, except as
disclosed in Section 5.7 of the Union Disclosure Memorandum, or in the Union
Financial Statements delivered prior to the date of this Agreement, to the
Knowledge of Union, (i) there have been no events, changes, or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Union, and (ii) the Union Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Union provided in Sections 7.1, 7.2, and 7.4 of this
Agreement.
5.8 TAX MATTERS.
(a) All Tax returns required to be filed by or on behalf of any of the
Union Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1993, and on or before the date of the most recent fiscal year
end immediately preceding the Effective Time, except to the extent that all
such failures to file or untimely filings, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on
Union and all returns filed are complete and accurate in all material
respects to the Knowledge of Union. All Taxes shown on filed returns have
been paid. There is no audit examination, deficiency, refund Litigation, or
penalties due or owed with respect to any Taxes that is reasonably likely
to result in a determination that would have a Material Adverse Effect on
Union, except as reserved against in the Union Financial Statements
delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) None of the Union Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable taxing authorities)
that is currently in effect.
(c) To the Knowledge of Union, adequate provision for any Taxes due or
to become due for any of the Union Companies for the period or periods
through and including the date of the respective Union Financial Statements
has been made and is reflected on such Union Financial Statements.
(d) Effective January 1, 1993, Union adopted Financial Accounting
Standards Board Statement 109, "Accounting for Income Taxes."
(e) Except for such matters that are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Union, each
of the Union Companies is in compliance with, and its records contain the
information and documents (including properly completed IRS Forms W-9)
necessary to comply with applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify the accounts subject to backup withholding under Section
3406 of the Internal Revenue Code.
5.9 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of Union, each Union Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with
all Environmental Laws, except for such instances of non-compliance that
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Union or except as disclosed in Section 5.9(a)
of the Union Disclosure Memorandum.
(b) To the Knowledge of Union, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other
forum in which any Union Company or any of its Loan Properties or
Participation Facilities has been or, with respect to threatened
Litigation, reasonably would be expected to be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by
any predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring
at, on, under, or involving a site owned, leased, or operated by any Union
Company or any of its Loan Properties or Participation Facilities, except
for such Litigation pending or threatened that is not reasonably likely to
have, individually or in
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the aggregate, a Material Adverse Effect on Union, and to the Knowledge of
Union, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of Union, there have been no releases in
violation of Environmental Laws of Hazardous Material in, on, under, or
affecting any Participation Facility, or Loan Property, except such as are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Union or except as disclosed in Section 5.9(c) of the
Union Disclosure Memorandum.
5.10 COMPLIANCE WITH LAWS. Each Union Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Union, and there has occurred no Default under any such Permit
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Union. None of the Union Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Union; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Union Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Union, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Union, or (iii) requiring any Union
Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.11 EMPLOYEE BENEFIT PLANS.
(a) Union has disclosed in Section 5.11 of the Union Disclosure
Memorandum, and has delivered or made available to Regions prior to the
execution of this Agreement copies in each case of, all written pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus, or other incentive plan,
all other written employee programs, arrangements, or agreements, all
written medical, vision, dental, or other health plans, all written life
insurance plans, and all other written employee benefit plans or fringe
benefit plans, including written "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to, by any Union Company
or Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and
under which employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries are eligible to participate
(collectively, the "Union Benefit Plans"). Any of the Union Benefit Plans
which is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "Union ERISA Plan." Each
Union ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a
"Union Pension Plan." No Union Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.11(b) of the Union Disclosure
Memorandum, to the Knowledge of Union, all Union Benefit Plans are in
compliance with the applicable terms of ERISA, the Internal Revenue Code,
and any other applicable Laws the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Union. Except as disclosed in Section 5.11(b) of the
Union Disclosure Memorandum, each Union ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination
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letter from the Internal Revenue Service, and Union is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. To the Knowledge of Union, no Union Company has
engaged in a transaction with respect to any Union Benefit Plan that,
assuming the taxable period of such transaction expired as of the date
hereof, would subject any Union Company to a tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA
in an amount that, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect on Union.
(c) Except as disclosed in Section 5.11(c) of the Union Disclosure
Memorandum, as of the most recent actuarial valuation for the plan, no
Union Pension Plan has any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the
assets of any such plan equals or exceeds the plan's "benefit liabilities,"
as that term is defined in Section 4001(a)(16) of ERISA, when determined
under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements as of such valuation.
Since the date of the most recent actuarial valuation, there has been (i)
no material change in the financial position of any Union Pension Plan,
(ii) no change in the actuarial assumptions with respect to any Union
Pension Plan, and (iii) no increase in benefits under any Union Pension
Plan as a result of plan amendments or changes in applicable Law, which in
each case with respect to (i) through (iii) above, is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Union
or materially adversely affect the funding status of any such plan. Neither
any Union Pension Plan nor any "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
Union Company, or the single-employer plan of any entity which is
considered one employer with Union under Section 4001 of ERISA or Section
414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (an "ERISA Affiliate") has as of the most recent actuarial
valuation for the plan an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA. No Union Company has provided, or is required to provide, security
to a Union Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any Union Company with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on Union. No Union Company has incurred any
withdrawal Liability with respect to a multiemployer plan under Subtitle B
of Title IV of ERISA (regardless of whether based on contributions of an
ERISA Affiliate). To the Knowledge of Union, no notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Union Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.11(e) of the Union Disclosure
Memorandum, no Union Company has any Liability for retiree health and life
benefits under any of the Union Benefit Plans and, to the Knowledge of
Union, there are no restrictions on the rights of such Union Company to
amend or terminate any such plan without incurring any Liability thereunder
which is reasonably likely to have a Material Adverse Effect on Union.
(f) Except as disclosed in Section 5.11(f) of the Union Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
or otherwise) becoming due to any director or any employee of any Union
Company from any Union Company under any Union Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any Union Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Union Company and their respective beneficiaries, other
than
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entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Union Financial Statements to the
extent required by and in accordance with GAAP.
5.12 MATERIAL CONTRACTS. Except as disclosed in Section 5.12 of the Union
Disclosure Memorandum or otherwise reflected in the Union Financial Statements,
none of the Union Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by any
Union Company or the guarantee by any Union Company of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contracts between or among Union Companies, and (iv) any other
material Contract or amendment thereto that was entered into other than in the
ordinary course of business (together with all Contracts referred to in Section
5.11(a) of this Agreement, the "Union Contracts"). None of the Union Companies
is in Default under any Union Contract where such Default, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect on Union.
All of the indebtedness of any Union Company for money borrowed is prepayable at
any time by such Union Company without penalty or premium.
5.13 LEGAL PROCEEDINGS. Union has disclosed in Section 5.13 of the Union
Disclosure Memorandum all pending Litigation to which it is, or to the Knowledge
of Union is reasonably likely to be, a named party. There is no Litigation
instituted or pending, or, to the Knowledge of Union, threatened (or unasserted
but considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Union Company, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Union,
nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Union Company that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Union. To the Knowledge of Union, after reasonable inquiry, there is
no Litigation threatened (or unasserted but considered probable of assertion)
nor are there claims, facts, or circumstances that are reasonably likely to give
rise to any claim by any officer or director of Union for indemnification under
Alabama Law or by Union's Certificate of Incorporation and Bylaws as in effect
on the date hereof, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Union.
5.14 STATEMENTS TRUE AND CORRECT. As of their respective dates, each
report and other document, including financial statements, exhibits, and
schedules thereto, filed by a Union Company with any Regulatory Authority
complied in all material respects with all applicable Laws, and as of its
respective date, each such report and document did not, in all material
respects, 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. None of the information supplied or to be supplied by any Union
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by Regions with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or contain
any untrue statement of a material fact, or omit to state any material fact
required to be stated thereunder or necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any Union
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Union shareholders in connection with the Shareholders' Meeting, and
any other documents to be filed by a Union Company or any Affiliate thereof with
the SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
Union, be false or misleading with respect to any material fact, or contain any
misstatement of material fact, or omit to state any material fact required to be
stated thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact required to be stated thereunder or
necessary to correct any material statement in any earlier communication with
respect to the
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solicitation of any proxy for the Shareholders' Meeting. All documents that any
Union Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
5.15 TAX AND REGULATORY MATTERS. Except as disclosed in Section 5.15 of
the Union Disclosure Memorandum, to the Knowledge of Union, no Union Company or
any Affiliate thereof has taken any action nor does Union have any Knowledge of
any fact or circumstance, that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to Union as follows:
6.1 ORGANIZATION, STANDING, AND POWER. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its material Assets. Regions is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions. Each Significant Regions
Subsidiary is either a bank, a savings association, or a corporation, and is
duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each
Significant Regions Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Regions has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its
terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar
Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions,
nor the consummation by Regions of the transactions contemplated hereby,
nor compliance by Regions with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Region's
Certificate of Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any Regions Company under, any
Contract or Permit of any Regions Company, where such Default or Lien, or
any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, or,
(iii) subject to receipt
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of the requisite approvals referred to in Section 9.1(b) of this Agreement,
violate any Law or Order applicable to any Regions Company or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation, or both, with respect to any
employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by Regions of
the Merger and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of Regions consists
solely of 120,000,000 shares of Regions Common Stock, of which 42,538,946 shares
were issued and outstanding and 1,474,579 shares were held as treasury shares as
of March 31, 1994. All of the issued and outstanding shares of Regions Common
Stock are, and all of the shares of Regions Common Stock to be issued in
exchange for shares of Union Common Stock upon consummation of the Merger, when
issued in accordance with the terms of this Agreement, will be, duly and validly
issued and outstanding, and fully paid and nonassessable under the DGCL. None of
the outstanding shares of Regions Common Stock has been, and none of the shares
of Regions Common Stock to be issued in exchange for shares of Union Common
Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past shareholders of Regions.
6.4 FINANCIAL STATEMENTS. Regions has included in Section 6.4 of the
Regions Disclosure Memorandum all Regions Financial Statements for periods ended
prior to the date hereof and will deliver to Union copies of all Regions
Financial Statements prepared subsequent to the date hereof. The Regions
Financial Statements (as of the dates thereof and for the periods covered
thereby) (i) are or, if dated after the date of this Agreement, will be in
accordance with the books and records of the Regions Companies, and (ii) present
or will present, as the case may be, fairly the consolidated financial position
of the Regions Companies as of the dates indicated and the consolidated results
of operations, changes in shareholders' equity, and cash flows of the Regions
Companies for the periods indicated, in accordance with GAAP (subject to
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material in amount or effect and to
the absence from interim financial statements of complete footnote disclosures).
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No Regions Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Regions as of
March 31, 1994, included in the Regions Financial Statements or reflected in the
notes thereto. No Regions Company has incurred or paid any Liability since March
31, 1994, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1994, except as
disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes, or occurrences which
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, and (ii) the Regions Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement
would represent or result in a material breach or violation of any of the
covenants and agreements of Regions provided in Sections 7.3 and 7.4 of this
Agreement.
6.7 COMPLIANCE WITH LAWS. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, and there has
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occurred no Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. No Regions Company:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, (ii) threatening to revoke any Permits, or (iii)
requiring any Regions Company to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit or reserve policies,
its management, or the payment of dividends.
6.8 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of Regions, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Regions Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Regions Company, that is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions.
6.9 STATEMENTS TRUE AND CORRECT. As of their respective dates, each
report and other document, including financial statements, exhibits, and
schedules thereto, filed by a Regions Company with any Regulatory Authority
complied in all material respects with all applicable Laws, and as of its
respective date, each such report and document did not, in all material
respects, 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. None of the information supplied or to be supplied by any Regions
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by Regions with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or contain
any untrue statement of a material fact, or omit to state any material fact
required to be stated thereunder or necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any Regions
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Union shareholders in connection with the Shareholders' Meeting, and
any other documents to be filed by any Regions Company or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of Union, be false or misleading with respect to any material fact,
or contain any misstatement of a material fact or, omit to state any material
fact required to be stated thereunder or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement, or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated thereunder or necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any Regions Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.10 TAX AND REGULATORY MATTERS. Except as disclosed in Section 6.10 of
the Regions Disclosure Memorandum, to the Knowledge of Regions, no Regions
Company or any Affiliate thereof has taken any action nor does Regions have any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying as a
reorganization
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within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede receipt of any Consents of Regulatory Authorities referred to
in Section 9.1(b) of this Agreement or result in the imposition of a condition
or restriction of the type referred to in the last sentence of such Section.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF UNION. Unless the prior written consent of
the chief executive officer, appropriate regional president, or chief financial
officer of Regions (or other authorized Regions officer) shall have been
obtained, and except as otherwise expressly contemplated herein or disclosed in
Section 7.1 of the Union Disclosure Memorandum, Union shall and shall cause each
of its Subsidiaries to, from the date of this Agreement until the Effective Time
or termination of this Agreement, (i) operate its business only in the usual,
regular, and ordinary course, (ii) preserve intact in all material respects its
business organization and Assets and maintain its rights and franchises, and
(iii) take no action which would (x) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c) of this Agreement, or (y)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF UNION. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, Union
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer, appropriate regional
president, or chief financial officer of Regions (or other authorized Regions
officer), which consent shall not be unreasonably withheld:
(a) amend the Certificate of Incorporation, Bylaws, or other governing
instruments of any Union Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than short-term indebtedness incurred to refinance
short-term indebtedness and indebtedness of a Union Company to another
Union Company) in excess of an aggregate amount outstanding at any time of
$100,000 (for the Union Companies on a consolidated basis) except in the
ordinary course of the business of Union Companies consistent with past
practices (which shall include, for Union Companies that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank, whether or not such Union Companies
have previously received any such advances, overnight borrowings to meet
temporary liquidity needs, and entry into repurchase agreements fully
secured by U.S. Government or agency securities), or impose, or suffer the
imposition, on any Asset of any Union Company of any Lien or permit any
such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, the satisfaction of legal requirements in
the exercise of trust powers, Liens to secure debt obligations or other
obligations for borrowed money permitted under this paragraph (b), and
Liens that would not have a Material Adverse Effect on Union); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Union Company, or declare or pay any dividend or
make any other distribution in respect of Union's capital stock; provided
that Union may (to the extent legally and contractually able to do so), but
shall not be obligated to, declare and pay regular quarterly cash dividends
on the shares of Union Common Stock at a rate not in excess of $.10 per
share with usual and regular record and payment dates in accordance with
past practice disclosed in Section 7.2(c) of the Union Disclosure
Memorandum; and provided further, that any dividend declared or payable on
the shares of Union Common Stock for the quarter during which the Effective
Time occurs shall, unless otherwise agreed upon in writing by Regions and
Union, be declared only if the record date for payment of the quarterly
dividend to holders of Regions Common Stock for the quarter in which the
Effective Time occurs is prior to the Effective Time and in such case such
Union quarterly dividend shall be paid at
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a rate not in excess of $.10 per share of Union Common Stock unless at the
time of payment of such dividend all conditions precedent to consummation
of the Merger have been satisfied (including the expiration of all
regulatory waiting periods) such that the Effective Time could have
occurred at a time and date prior to the record date for payment of the
quarterly dividend to holders of Regions Common Stock for the quarter in
which the Effective Time occurs but is delayed to accommodate Regions to a
date subsequent to such record date, in which case the dividend to be paid
by Union on the shares of Union Common Stock for the quarter in which the
Effective Time occurs may be paid at a rate not in excess of the amount
equal to the product of (i) the Exchange Ratio and (ii) the per share
dividend amount declared by Regions on the Regions Common Stock for the
quarter during which the Effective Time occurs (or if no dividend has been
declared by Regions for such quarter, the per share dividend amount
declared by Regions on the Regions Common Stock for the quarter immediately
preceding the quarter during which the Effective time occurs); or
(d) issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of Union Common Stock or any other capital stock of any Union
Company, or any Rights to acquire such stock (other than pursuant to the
exercise of Union Options outstanding on the date hereof); or
(e) adjust, split, combine, or reclassify any capital stock of any
Union Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Union Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any Union Subsidiary (unless any such shares of stock
are sold or otherwise transferred to another Union Company) or any Asset
having a book value in excess of $100,000 other than in the ordinary course
of business for reasonable and adequate consideration and other than
dispositions in the ordinary course of business of (i) investment
securities, (ii) loans, including dispositions thereof through loan
participation agreements, and (iii) other real estate owned by any Union
Company at a price not less than its book value; or
(f) except for purchases of securities in the ordinary course of
business in accordance with past practice, purchase any securities or make
any material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned Union Subsidiary, or otherwise acquire
direct or indirect control over any Person, other than in connection with
(i) foreclosures in the ordinary course of business, or (ii) acquisitions
of control by Union in its fiduciary capacity; or
(g) (i) grant any increase in compensation or benefits to the
employees or officers of any Union Company (1) having a salary as of the
date of this Agreement in excess of $65,000, except as required by Law or
(2) having a salary as of the date of this Agreement of less than $65,000,
except as required by Law or in the ordinary course of business of Union
consistent with past practice and with prior consultation with Regions, or
(ii) except as disclosed in Section 7.2(g) of the Union Disclosure
Memorandum, pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of
this Agreement and disclosed in Section 7.2(g) of the Union Disclosure
Memorandum; enter into or amend any severance agreements with officers of
any Union Company, except as disclosed in Section 7.2(g) of the Union
Disclosure Memorandum; grant any increase in fees or other increases in
compensation or other benefits to directors of any Union Company; or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits, except as disclosed in
Section 7.2(g) of the Union Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Union
Company and any Person (unless such amendment is required by Law) that the
Union Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Union Company or make
any material change in or to any existing employee benefit plans of any
Union Company other than any such change that is required
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by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan or to maintain the
status of any plan under Rule 16b-3 of the 1934 Act or to consummate the
transactions contemplated by this Agreement; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence or settle any Litigation for damages in excess of $50,000
other than in the ordinary course of business in accordance with past
practice; or
(l) modify, amend, or terminate any material Contract or waive,
release, compromise, or assign any material rights or claims.
7.3 COVENANTS OF REGIONS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that, except as disclosed in Section 7.3 of the Regions
Disclosure Memorandum, it shall and shall cause each of its Subsidiaries to (i)
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment, to enhance the long-term value of
the Regions Common Stock and the business prospects of the Regions Companies and
to the extent consistent therewith use all reasonable efforts to preserve intact
the Regions Companies' core businesses and goodwill with their respective
employees and the communities they serve, (ii) take no action which would (x)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c) of this Agreement, or (y) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any Regions Company
from discontinuing or disposing of any of its Assets or business if such action
is, in the judgment of Regions, desirable in the conduct of the business of
Regions and its Subsidiaries and such discontinuance or disposition would not
represent a material portion of the Assets of the Regions Companies, and (iii)
amend the Certificate of Incorporation or Bylaws of Regions, in each case, in
any manner which is adverse to, or discriminates against, the holders of Union
Common Stock.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flow for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material in amount or effect
and to the absence of certain footnote information in the unaudited statements
). As of the respective dates, such reports filed with the SEC will comply in
all material respects with the Securities Laws and will not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
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ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. Regions
shall prepare and file the Registration Statement with the SEC as promptly as
reasonably practicable after the date of this Agreement, and shall use its
reasonable efforts to cause the Registration Statement to become and remain
effective under the 1933 Act as promptly as reasonably practicable after the
date of this Agreement and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of Regions Common Stock upon consummation of the Merger; provided
that Union acknowledges that Regions may delay filing the Registration Statement
with the SEC and causing it to become effective until such time as Regions has
purchased in the open market in accordance with applicable Securities Laws
sufficient shares of Regions Common Stock to satisfy its obligations under the
terms of this Agreement as long as such delay in filing the Registration
Statement and causing it to become effective does not delay by more than 45 days
the reasonably anticipated Effective Time that would have occurred absent such
delay. Union shall furnish Regions all information concerning it and the holders
of its capital stock as Regions may reasonably request in connection with such
action. Union shall call a Shareholders' Meeting for the purpose of voting upon
approval of this Agreement and the Plan of Merger and such other related matters
as it deems appropriate. In connection with the Shareholders' Meeting, (i) Union
shall mail the Proxy Statement to its shareholders, (ii) the Parties shall
furnish to each other all information concerning them that they may reasonably
request in connection with such Proxy Statement, (iii) the Proxy Statement shall
include the recommendation of the Board of Directors of Union in favor of this
Agreement and the Plan of Merger, unless the Board of Directors of Union
determines after consultation with independent legal counsel (which may include
Union's regularly engaged legal counsel) that such recommendation would be
inconsistent with their fiduciary duties to Union's shareholders under
applicable Law, and (iv) Union shall use its reasonable efforts to solicit from
shareholders of Union proxies in favor of the approval of this Agreement and the
Plan of Merger and to secure the vote or consent of shareholders required by
Alabama Law to approve this Agreement and the Plan of Merger, unless the Board
of Directors of Union determines after consultation with independent legal
counsel (which may include the Union's regularly engaged legal counsel) that
such efforts would be inconsistent with their fiduciary duties to Union's
shareholders under applicable Law.
8.2 EXCHANGE LISTING. Regions shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq National Market the shares of Regions
Common Stock to be issued to the holders of Union Common Stock pursuant to the
Merger.
8.3 APPLICATIONS. Regions shall prepare and file, and Union shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. Regions shall permit
Union reasonable opportunity to review and comment upon such applications prior
to the filing thereof with the Regulatory Authorities.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Union and Union Interim shall execute and file the
Alabama Articles of Merger with the Alabama Banking Department and, if
necessary, the Secretary of State of the State of Alabama.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
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8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it
and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation
shall be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily with normal operations. Union shall
cooperate with Regions in obtaining, at Regions' election and expense,
environmental audits of any or all of the properties owned or occupied by
Union. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its Representatives to, maintain
the confidentiality of all written, oral, and other confidential
information furnished to it by the other Party concerning its and its
Subsidiaries' businesses, operations, and financial positions
("Confidential Information") and shall not use such information for any
purpose except in furtherance of the transactions contemplated by this
Agreement. Each Party shall maintain the confidentiality of all
Confidential Information obtained in connection with this Agreement or the
transactions contemplated hereby unless (i) such information becomes
publicly available through no fault of such Party, or was, is, or becomes
available to that Party from a source other than the other Party or its
Representatives, which source was itself not bound by a confidentiality
agreement with, or other contractual, legal, or fiduciary obligation of
confidentiality with respect to that information, or (ii) the furnishing or
use of such information is required by proper judicial, administrative, or
other legal proceeding, provided that the other Party is promptly notified
in writing of such request, unless such notification is not, in the opinion
of counsel, permitted by Law. Each Party and its Representatives will hold
and maintain all Confidential Information in confidence and will not
disclose to any third party or permit any third party access to any
Confidential Information or the substance thereof; provided that a Party
may disclose Confidential Information to such of its Representatives who
need to know such information in connection with the transactions
contemplated hereby. If this Agreement is terminated prior to the Effective
Time, each Party shall promptly return all documents and copies thereof,
and all work papers containing Confidential Information received from the
other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, Union and Regions shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any transaction
contemplated hereby; provided, that nothing in this Section 8.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no Union Company nor any Affiliate thereof nor
any Representative retained by any Union Company shall directly or indirectly
solicit any Acquisition Proposal by any Person. No Union Company or any
Affiliate or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, unless the Board of
Directors of Union, after consultation with independent legal counsel (which may
include Union's regularly engaged legal counsel), determines that the failure to
so furnish any non-public information or negotiate or enter into any Contract,
with respect to an Acquisition Proposal, would be inconsistent with their
fiduciary duties to Union's shareholders under applicable Law. Union shall as
promptly as practicable notify Regions orally and in writing in the event that
it receives any inquiry or proposal relating to any such transaction. Union
shall (i) immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
all of its Representatives not to engage in any of the foregoing.
8.9 TAX TREATMENT. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 AGREEMENT OF AFFILIATES. Union has disclosed in Section 8.10 of the
Union Disclosure Memorandum each Person whom it reasonably believes is an
"affiliate" of Union for purposes of Rule 145 under the
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1933 Act. Union shall use its reasonable efforts to cause each such Person to
deliver to Regions not later than 30 days prior to the Effective Time, a written
agreement, substantially in the form of Exhibit 2, providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of Regions
Common Stock to be received by such Person upon consummation of the Merger
except in compliance with applicable provisions of the 1933 Act and the rules
and regulations thereunder. Regions shall not be required to maintain the
effectiveness of a Registration Statement under the 1933 Act for the purposes of
resale of Regions Common Stock by such affiliates.
8.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
Regions shall provide generally to officers and employees of the Union
Companies, who at or after the Effective Time become employees of a Regions
Company, employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Regions Common Stock except
as set forth in this Section 8.11 or with respect to the Union Options to be
assumed pursuant to Section 3.6 of this Agreement), on terms and conditions
which when taken as a whole are substantially similar to those currently
provided by the Regions Companies to their similarly situated officers and
employees. For purposes of participation and vesting (but not accrual of
benefits) under such employee benefit plans, (i) service under any qualified
defined benefit plans of Union shall be treated as service under Regions'
qualified defined benefit plans, (ii) service under any qualified defined
contribution plans of Union shall be treated as service under Regions' qualified
defined contribution plans, and (iii) service under any other employee benefit
plans of Union shall be treated as service under any similar employee benefit
plans maintained by Regions. Regions also shall cause Union and its Subsidiaries
to honor in accordance with their terms, all employment, severance, consulting,
and other compensation Contracts disclosed in Section 8.11 of the Union
Disclosure Memorandum to Regions between any Union Company and any current or
former director, officer, or employee thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Time
under the Union Benefit Plans.
8.12 INDEMNIFICATION.
(a) For a period of six years after the Effective Time, Regions shall,
and shall cause the Surviving Bank or any successor or assign thereto to,
indemnify, defend, and hold harmless the present and former directors,
officers, employees, and agents of the Union Companies (each, an
"Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent permitted
under Alabama Law and by Union's Certificate of Incorporation and Bylaws as
in effect on the date hereof, including provisions relating to advances of
expenses incurred in the defense of any Litigation. Without limiting the
foregoing, in any case in which approval is required to effectuate any
indemnification, the determination of any such approval shall be made, at
the election of the Indemnified Party, by independent counsel mutually
agreed upon between Regions and the Indemnified Party.
(b) Regions shall, or shall cause the Surviving Bank to, use its
reasonable efforts to maintain Union's existing directors' and officers'
liability insurance policy (or a policy, including Regions' existing
policy, providing at least comparable coverage) covering persons who are
currently covered by such insurance for a period of one (1) year after the
Effective Time on terms no less favorable than those in effect on the date
hereof; provided, however, that Regions or the Surviving Bank may
substitute therefor policies providing at least comparable coverage
containing terms and conditions no less favorable than those in effect on
the date hereof.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.12, upon learning of any such Liability or
Litigation, shall promptly notify Regions thereof; provided, however, that
the failure so to notify shall not affect the obligations of Regions under
this Section 8.12. In the event of any such Litigation (whether arising
before or after the Effective Time), (i) Regions shall have the right to
assume the defense thereof and Regions shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if Regions elects not to assume such
defense or counsel for the Indemnified Parties advises in writing that
there are material
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substantive issues which raise conflicts of interest between Regions or
Union and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and Regions shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, that (i) Regions shall be obligated
pursuant to this paragraph (c) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction for any single Litigation , (ii)
the Indemnified Parties will cooperate in the defense of any such
Litigation, and (iii) Regions shall not be liable for any settlement
effected without its prior written consent, which shall not be unreasonably
withheld, and provided further that Regions shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall determine, and such determination shall have become
final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law.
(d) If Regions or the Surviving Bank or any of its successors or
assigns shall consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or
shall transfer all or substantially all of its assets to any Person, then
and in each case, proper provision shall be made so that the successors and
assigns of Regions or the Surviving Bank shall assume the obligations set
forth in this Section 8.12.
8.13 ADVISORY DIRECTORS. Promptly after the Effective Time, Regions shall
cause First Alabama Bank to appoint four members of the Board of Directors of
Union, to be selected by First Alabama Bank, to serve as advisory directors of
the Montgomery bank of First Alabama Bank.
8.14 UNION INTERIM ORGANIZATION. Regions shall organize Union Interim as
a bank subsidiary under the Laws of the State of Alabama with such officers and
directors as appointed by Regions. Regions shall further cause Union Interim,
upon its organization, to execute the Plan of Merger and, as the sole
shareholder of Union Interim, shall vote prior to the Effective Time shares of
Union Interim Common Stock held by Regions in favor of the Plan of Merger.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(A) SHAREHOLDER APPROVAL. The shareholders of Union shall have
approved this Agreement and the Plan of Merger, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law or by the provisions of any governing instruments.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of any Assets,
including branch offices, or deposit Liabilities) which in the reasonable
judgment of the Board of Directors of Regions would so materially adversely
impact the economic or business benefits of the transactions contemplated
by this Agreement (as in part described in Section 9.1(b) of the Regions
Disclosure Memorandum) so as to render inadvisable the consummation of the
Merger; provided, that Regions has used its reasonable efforts (it being
understood that such reasonable efforts shall not include the threatening
or commencement of any Litigation) to cause such conditions or restrictions
to be removed or modified as appropriate and; provided, further, that
notwithstanding the foregoing, in the event that such Consent is
conditioned or restricted as a result of a regulatory or legal issue
resulting from other acquisitions by the Regions Companies, whether
announced before or after the date of this Agreement, or otherwise
unrelated to
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Union, Regions shall not be entitled to refuse to consummate the Merger on
the basis set forth in this sentence.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on such Party. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of Regions would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the Merger.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
materially restricts, or makes illegal consummation of the transactions
contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing.
(F) EXCHANGE LISTING. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved, subject to official notice
of issuance, for listing on the Nasdaq National Market.
(G) TAX MATTERS. Each Party shall have received a written opinion of
Alston & Bird, special counsel to Regions, in form reasonably satisfactory
to the Parties (the "Tax Opinion"), to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of Union Common
Stock for Regions Common Stock will not give rise to gain or loss to the
shareholders of Union with respect to such exchange (except to the extent
of any cash received), and (iii) neither Union nor Regions will recognize
gain or loss as a consequence of the Merger. In rendering such Tax Opinion,
counsel for Regions shall be entitled to rely upon representations of
officers of Union and Regions reasonably satisfactory in form and substance
to such counsel.
(H) ESCROW TRUST AGREEMENT. Union shall have appointed the
Shareholder Representative Committee and the parties to the Escrow Trust
Agreement shall have entered into the Escrow Trust Agreement.
9.2 CONDITIONS TO OBLIGATIONS OF REGIONS. The obligations of Regions to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Regions pursuant to Section 11.6(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Union set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and as of the Effective
Time with the same effect as though all such representations and warranties
had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement,
which shall be true in all material respects) the inaccuracies of which
relate to matters that are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Union.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Union to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
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(C) CERTIFICATES. Union shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.2(a) and 9.2(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Union's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as Regions and its counsel shall request.
(D) EXAMINATION RESULTS. Union shall have received a final
"satisfactory" or higher rating with respect to the examination being
conducted as of the date of this Agreement by the Board of Governors of the
Federal Reserve System with respect to Union's compliance with the
Community Reinvestment Act of 1977 and related fair lending Laws or in the
event Union fails to receive a final "satisfactory" or higher rating,
Regions shall have determined in its sole discretion and on such basis as
it deems appropriate (which may include written confirmation from the
appropriate Regulatory Authorities) that such rating does not, after the
Effective Time, materially adversely impact in any manner the Regulatory
Authorities' view of Regions' compliance with the Community Reinvestment
Act of 1977 and related fair lending Laws or Regions' ability to receive
appropriate Consents from the Regulatory Authorities for other matters
contemplated by Regions requiring regulatory approval.
9.3 CONDITIONS TO OBLIGATIONS OF UNION. The obligations of Union to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Union pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Regions set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and as of the Effective
Time with the same effect as though all such representations and warranties
had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement, or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 16.3 of this Agreement,
which shall be true in all material respects) the inaccuracies of which
relate to matters that are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(C) CERTIFICATES. Regions shall have delivered to Union (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Sections 9.3(a) and 9.3(b)
of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Regions' Board of Directors evidencing the
taking of all corporate action necessary to authorize the execution,
delivery, and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Union
and its counsel shall request.
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ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of Union,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors of Regions and the
Board of Directors of Union; or
(b) By the Board of Directors of either Party in the event of a breach
by the other Party of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which
breach would provide the non-breaching Party the ability to refuse to
consummate the Merger under the standard set forth in Section 9.2(a) of
this Agreement in the case of Regions and Section 9.3(a) of this Agreement
in the case of Union, provided that the terminating Party is not then in
breach of any of its representations or warranties, contained herein under
the standard set forth in Section 9.3(a) of this Agreement in the case of
Regions and Section 9.2(a) of this Agreement in the case of Union; or
(c) By the Board of Directors of either Party in the event of a
material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such breach,
provided that the terminating Party is not then in material breach of any
of its covenants or agreements contained herein; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Union fail to vote their approval of this Agreement and the
Plan of Merger and the transactions contemplated hereby as required by
Alabama Law at the Shareholders' Meeting or any adjournment or postponement
thereof where the transactions were presented to such shareholders for
approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by March 31, 1995, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement; or
(g) By the Board of Directors of Regions in the event that any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby, or any Regulatory Authority shall
as a condition to approval or consummation of the Merger without
institution of Litigation, require that Regions or Union divest any Assets
(including any branch offices) or deposit Liabilities which, in the
reasonable judgment of the Board of Directors of Regions, would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement (as in part described in
Section 10.1(g) of the Regions Disclosure Memorandum) so as to render
inadvisable the consummation of the Merger; provided, that Regions has used
its reasonable efforts (it being understood that such reasonable efforts
shall not include the threatening or commencement of any Litigation) to
cause such conditions or restrictions to be removed or modified as
appropriate and; provided, further, that notwithstanding the foregoing, in
the event that such Consent is conditioned or restricted as a result of a
regulatory or legal issue resulting from other acquisitions by the Regions
Companies, whether announced before or after the date of this Agreement, or
otherwise unrelated to Union, Regions shall not be entitled to terminate
this Agreement on the basis set forth in this sentence; or
(h) By the Board of Directors of either Party in the event (i) of the
acquisition, by any person or group of persons, of beneficial ownership of
50% or more of the outstanding shares of Union Common
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Stock (the terms "person," "group," and "beneficial ownership" having the
respective meanings assigned thereto in Section 13(d) of the 1934 Act and
the regulations promulgated thereunder), or (ii) Union enters into a
definitive agreement providing for a third party to acquire 50% or more of
the outstanding Union Common Stock or of Union's consolidated Assets; or
(i) By the Board of Directors of Union in the event (i) of the
acquisition, by any person or group of persons, of beneficial ownership of
50% or more of the outstanding shares of Regions Common Stock (the terms
"person," "group," and "beneficial ownership" having the respective
meanings assigned thereto in Section 13(d) of the 1934 Act and the
regulations promulgated thereunder), or (ii) Regions enters into a
definitive agreement for a third party to acquire 50% or more of the
outstanding Regions Common Stock or of Regions' consolidated Assets.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, and neither Party shall have any
claim or legal right to redress, whether for breach of contract or otherwise, as
a result of a breach of any representation, warranty, covenant, or condition of
this Agreement, except that (i) the provisions of this Section 10.2 and Article
11 and Section 8.6(b) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Section 10.1(b), 10.1(c),
10.1(f), or 10.1(h) (but only in the case of termination pursuant to Section
10.1(h) if Union shall have breached Section 8.8) of this Agreement shall not
relieve the breaching Party from Liability for an uncured willful and knowing
breach of a representation, warranty, material covenant, or material agreement
giving rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except (i) this Section 10.3 and
Articles 2, 3, 4, and 11 of this Agreement and Sections 8.11, 8.12, and 8.13 of
this Agreement, and (ii) the Escrow Trust Agreement shall be governed by its own
terms.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"ABC" shall mean the Alabama Banking Code.
"ABCA" shall mean the Alabama Business Corporation Act.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of 25% or more of the voting
stock of, or 25% or more of the Assets of, such Party or any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Amended and Restated Agreement and Plan of
Reorganization, including the Exhibits delivered pursuant hereto and
incorporated herein by reference.
"ALABAMA ARTICLES OF MERGER" shall mean the Alabama Articles of Merger
to be executed by Union and Union Interim and filed with the Alabama
Banking Department relating to the Merger as contemplated by Section 1.1 of
this Agreement.
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"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"AVERAGE CLOSING PRICE" shall mean the average of the daily closing
sales prices of Regions Common Stock on the Nasdaq National Market (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source chosen by Regions) for the 10 consecutive full trading
days in which such shares are traded on the Nasdaq National Market ending
at the close of trading on the fifth trading day preceding the Effective
Time.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, or undertaking of any kind or character, or other document to
which any Person is a party or that is binding on any Person or its capital
stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit.
"DGCL" shall mean the General Corporation Law of Delaware.
"EFFECTIVE TIME" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean all Laws pertaining to pollution or
protection of the environment and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over pollution or protection of the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 5.11 of
this Agreement.
"ERISA PLAN" shall have the meaning provided in Section 5.11 of this
Agreement.
"ESCROW AGENT" shall mean the escrow agent mutually agreed upon by
Regions and the Shareholder Representative Committee to serve as Escrow
Agent under the Escrow Trust Agreement.
"ESCROW TRUST AGREEMENT" shall mean the Escrow Trust Agreement, in
substantially the form of Exhibit 1, to be entered into prior to the
Effective Time by Regions, the Escrow Agent, and the members of the
Shareholder Representative Committee.
"ESCROW STOCK RATIO" shall have the meaning provided in Section 3.1(c)
of this Agreement.
"ESCROW STOCK RIGHT(S)" shall have the meanings provided in Section
3.1(c) of this Agreement.
"EXCHANGE AGENT" shall have the meaning provided in Section 4.1 of
this Agreement.
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"EXCHANGE RATIO" shall have the meaning provided in Section 3.1(c) of
this Agreement.
"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or toxic
or hazardous substance, pollutant, chemical, or waste within the meaning of
the Comprehensive Environment Response, Compensation, and Liability Act, 42
U.S.C. sec. 9601 et seq., or any similar federal, state, or local Law (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities,
polychlorinated biphenyls, and petroleum and petroleum products).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the knowledge
of the chairman, president, chief financial officer, chief accounting
officer, chief credit officer, general counsel, any assistant or deputy
general counsel, or any senior or executive vice president of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute, or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) such imperfections of title and
encumbrances, if any, as do not materially detract from the value or
interfere with the present use of any of such Party's Assets, and (iii) for
depository institution Subsidiaries of a Party, pledges to secure deposits,
and other Liens incurred in the ordinary course of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative, or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information about a potential claim
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
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"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, together with any other event, change, or occurrence, has
a material adverse impact on (i) the financial position, business, or
results of operations of such Party and its Subsidiaries, taken as a whole,
or (ii) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact"
shall not be deemed to include the impact of (a) changes in banking and
similar Laws of general applicability or interpretations thereof by courts
or governmental authorities, (b) changes in GAAP or regulatory accounting
principles generally applicable to banks and savings associations and their
holding companies, (c) increases after the date of this Agreement in
Federal Deposit Insurance Corporation insurance assessments and premiums,
(d) out-of-pocket fees and expenses (including legal, accounting,
investment banking, and other fees and expenses) accrued or paid after the
date of this Agreement and directly relating to the consummation of the
transactions contemplated by this Agreement, (e) in the case of Union, the
amount of any severance payments by Union accrued or paid after the date of
this Agreement, to any employee of Union pursuant to employment or
severance contracts disclosed by Union pursuant to Section 5.11 of the
Union Disclosure Memorandum, and (f) in the case of Union, any Liability
resulting from any Hazardous Materials at, under, or emanating from the
Union property identified in the Union Disclosure Memorandum with respect
to Section 5.9 of this Agreement.
"MERGER" shall mean the merger of Union into and with Union Interim
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the National Market System of the
National Association of Securities Dealers' Automated Quotations System.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either Union or Regions, and "PARTIES" shall mean
both Union and Regions.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PLAN OF MERGER" shall mean the Amended and Restated Plan of Merger,
in substantially the form of Exhibit 3, to be entered into by Union and,
upon its organization, Union Interim setting forth the terms of the Merger.
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"PROXY STATEMENT" shall mean the proxy statement used by Union to
solicit the approval of its shareholders of the transactions contemplated
by this Agreement, which shall include the prospectus of Regions relating
to the issuance of the Regions Common Stock to holders of Union Common
Stock.
"REGIONS COMMON STOCK" shall mean the $.625 par value per share common
stock of Regions.
"REGIONS COMPANIES" shall mean, collectively, Regions and all Regions
Subsidiaries.
"REGIONS DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Regions Financial Corporation Disclosure Memorandum" delivered
prior to the date of this Agreement to Union describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"REGIONS FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of March 31, 1994, and as of December 31, 1993 and 1992, and the
related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the three months
ended March 31, 1994, and for each of the three years ended December 31,
1993, 1992, and 1991, as filed by Regions in SEC Documents and (ii) the
consolidated statements of condition of Regions (including related notes
and schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to March 31, 1994.
"REGIONS SUBSIDIARIES" shall mean the Subsidiaries of Regions at the
Effective Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Regions under the 1933 Act with respect to the shares of Regions Common
Stock to be issued to the shareholders of Union in connection with the
transactions contemplated by this Agreement and which shall include the
Proxy Statement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVES" means with respect to any Party its directors,
officers, employees, agents, advisors, attorneys, accountants, and other
representatives.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Union to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
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"SHAREHOLDER REPRESENTATIVE COMMITTEE" shall mean those individuals
unaffiliated with Regions selected by the Board of Directors of Union to
serve as members of the Shareholder Representative Committee under the
Escrow Trust Agreement.
"SIGNIFICANT REGIONS SUBSIDIARY" shall mean all those Subsidiaries of
Regions that constitute a Significant Subsidiary of Regions within the
meaning of Rule 1-02(v) of Regulation S-X of the SEC.
"SUBSIDIARIES" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"SURVIVING BANK" shall mean Union Interim as the surviving bank
resulting from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
"UNION BENEFIT PLANS" shall have the meaning set forth in Section 5.11
of this Agreement.
"UNION COMMON STOCK" shall mean the $.50 par value per share common
stock of Union.
"UNION COMPANIES" shall mean, collectively, Union and all Union
Subsidiaries.
"UNION DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Union Bank & Trust Company Disclosure Memorandum" delivered prior
to the date of this Agreement to Regions describing in reasonable detail
the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"UNION FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Union as of March
31, 1994, and as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) for the three
months ended March 31, 1994, and for each of the three fiscal years ended
December 31, 1993, 1992, and 1991, as filed by Union in SEC Documents, and
(ii) the consolidated balance sheets of Union (including related notes and
schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to March 31, 1994.
"UNION INTERIM COMMON STOCK" shall mean the $.50 par value per share
common stock of Union Interim.
"UNION STOCK PLAN" shall mean the 1991 Union Bank & Trust Company Long
Term Incentive Compensation Plan.
"UNION SUBSIDIARIES" shall mean the Subsidiaries of Union, which shall
include the Union Subsidiaries described in Section 5.4 of this Agreement
and any corporation, bank, savings association, or other organization
acquired as a Subsidiary of Union in the future and owned by Union at the
Effective Time.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
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11.2 EXPENSES.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including filing,
registration, and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, provided that (i) Regions shall bear and pay the filing fees payable in
connection with the Registration Statement and the Proxy Statement and printing
costs incurred in connection with the printing of the Registration Statement and
the Proxy Statement, (ii) Union shall bear and pay for all Environmental
Remediation Costs (which costs for actual clean up, removal, or abatement of
Hazardous Materials shall actually be incurred prior to the Effective Time by
Union in its sole discretion), and (iii) in the event Regions terminates this
Agreement pursuant to Section 10.1(g) of this Agreement (but only for the reason
expressly referenced in Section 10.1(g) of the Regions Disclosure Memorandum) or
the Merger is not consummated by reason of any failure of the Parties to satisfy
the conditions enumerated in Section 9.1(b) of this Agreement (but only for the
reason expressly referenced in Section 9.1(b) of the Regions Disclosure
Memorandum), then concurrently with termination of this Agreement Regions shall
pay to Union an amount not to exceed $200,000 for the direct costs and expenses
(including, without limitation, fees and expenses of Union's financial or other
consultants, printing costs, investment bankers, accountants, and counsel)
incurred by Union in negotiating and carrying out the transactions contemplated
by this Agreement, and in accordance with Section 10.2 of this Agreement, this
Agreement shall become void and have no effect and Union shall have no further
claim or legal right to redress, whether for breach of contract or otherwise,
the failure to consummate the Merger on the basis expressly referenced in
Sections 9.1(b) and 10.1(g) of the Regions Disclosure Memorandum.
(b) Notwithstanding the foregoing, if, after the date of this Agreement and
within 12 months following:
(i) any termination of this Agreement
(1) by Regions pursuant to Section 10.1(c) (but only in the case of
a willful breach by Union of a covenant or agreement) or 10.1(f) (but
only on the basis of the failure of Union to satisfy the condition
enumerated in Section 9.1(a) (but only in the event the Shareholders'
Meeting shall have been cancelled prior to the termination of this
Agreement or Union's Board of Directors shall have withdrawn or modified
in a manner adverse to Regions the recommendation of Union's Board of
Directors with respect to the Merger or this Agreement, in each case
after it shall have been publicly disclosed that any Person made, or
disclosed an intention to make, an Acquisition Proposal) or 9.2(b) (but
only in the case of a willful breach by Union of a covenant or
agreement) of this Agreement); or
(2) by either Party pursuant to Section 10.1(d)(ii) (but only in
the event Union's Board of Directors shall have withdrawn or modified in
a manner adverse to Regions the recommendation of Union's Board of
Directors with respect to the Merger or this Agreement after it shall
have been publicly disclosed that any Person made, or disclosed an
intention to make, an Acquisition Proposal) or 10.1(h) of this
Agreement; or
(3) by mutual consent of the Parties pursuant to Section 10.1(a)
(but only if Regions shall at that time have been entitled to terminate
this Agreement pursuant to Section 10.1(c) (but only in the case of a
willful breach by Union of a covenant or agreement) or if either Party
shall at that time have been entitled to terminate this Agreement
pursuant to Section 10.1(d)(ii) (but only in the event Union's Board of
Directors shall have withdrawn or modified in a manner adverse to
Regions the recommendation of Union's Board of Directors with respect to
the Merger or this Agreement after it shall have been publicly disclosed
that any Person made, or disclosed an intention to make, an Acquisition
Proposal) or 10.1(h) of this Agreement; or
(ii) failure to consummate the Merger by reason of any failure of
Union to satisfy the conditions enumerated in Section 9.1(a) (but only in
the event the Shareholders' Meeting shall have been cancelled prior to the
termination of this Agreement or Union's Board of Directors shall have
withdrawn or modified in a manner adverse to Regions the recommendation of
Union's Board of Directors with respect
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to the Merger or this Agreement, in each case after it shall have been
publicly disclosed that any Person made, or disclosed an intention to make,
an Acquisition Proposal) or 9.2(b) (but only in the case of a willful
breach by Union of a covenant or agreement) of this Agreement,
any third-party shall acquire, merge with, combine with, purchase 25% or more of
the Assets of, or engage in any other business combination with, or purchase any
equity securities involving an acquisition of 25% or more of the voting stock
of, any Union Company, or enter into any binding or nonbinding agreement, letter
of intent, memorandum of understanding, or similar instrument to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to Regions, prior to the earlier of
consummation of the Business Combination or execution of any binding or
nonbinding agreement, letter of intent, memorandum of understanding, or similar
instrument with Union relating to such Business Combination, an amount in cash
equal to the sum of (i) an amount not to exceed $500,000, for the direct costs
and expenses (including, without limitation, fees and expenses of Regions'
financial or other consultants, printing costs, investment bankers, accountants,
and counsel) incurred by Regions in negotiating and carrying out the
transactions contemplated by this Agreement, and (ii) $1,500,000 for the
indirect costs and expenses incurred by Regions in connection with the
transactions contemplated by this Agreement, including Regions' management time
devoted to negotiation and preparation for such transaction. In the event such
third-party shall refuse to pay such amounts, the amounts shall be an obligation
of Union and shall be paid by Union promptly upon notice to Union by Regions.
(c) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement.
11.3 BROKERS AND FINDERS. Except for J.P. Morgan Securities, Inc. with
respect to Union, each of the Parties represents and warrants that neither it
nor any of its officers, directors, employees, or Affiliates has employed any
broker or finder or incurred any Liability for any financial advisory fees,
investment bankers' fees, brokerage fees, commissions, or finders' fees in
connection with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his or its representing or
being retained by or allegedly representing or being retained by Union or
Regions, each of Union and Regions, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Except as contemplated by
Section 8.12 of this Agreement, nothing in this Agreement expressed or implied,
is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, that after any such
approval by the holders of Union Common Stock, there shall be made no amendment
that pursuant to the Section 5-7A-2 of the ABC requires further approval by such
shareholders without the further approval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, Regions, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Union, to waive or extend the time for the compliance or fulfillment by Union of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Regions under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Regions.
(b) Prior to or at the Effective Time, Union, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of
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this Agreement by Regions, to waive or extend the time for the compliance or
fulfillment by Regions of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of Union
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of Union.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Union: Union Bank & Trust Company
60 Commerce Street
Montgomery, Alabama 36104
Telecopy Number: (205) 240-2237
Attention: Robert C. Baird, Jr.
Chairman of the Board,
President, and Chief
Executive Officer
Copy to Counsel: King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1763
Telecopy Number: (404) 572-5146
Attention: John J. Kelley III
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive
Financial Officer
Copy to Counsel:
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7099
Attention: Samuel E. Upchurch, Jr.
General Counsel
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11.9 GOVERNING LAW. Except to the extent the laws of the State of Alabama
apply to the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: UNION BANK & TRUST COMPANY
/s/ ROBERT E. KELLY By: /s/ ROBERT C. BAIRD, JR.
------------------------------- -----------------------------------
Robert E. Kelly Robert C. Baird, Jr.
Secretary Chairman of the Board,
President, and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
/s/ VIRGINIA L. MARTIN By: /s/ RICHARD D. HORSLEY
------------------------------- -----------------------------------
Virginia L. Martin Richard D. Horsley
Assistant Secretary Vice Chairman and Executive Financial
Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
AMENDED AND RESTATED PLAN OF MERGER
THIS AMENDED AND RESTATED PLAN OF MERGER (this "Plan") is made and entered
into effective as of July 8, 1994, as amended and restated, by and between UNION
BANK & TRUST COMPANY, an Alabama banking corporation ("Union") and UNION INTERIM
BANK, an Alabama banking corporation ("Union Interim") and a wholly owned
subsidiary of Regions Financial Corporation ("Regions").
This Plan of Merger is executed by Union and Union Interim pursuant to
Section 1.1(a) of the Amended and Restated Agreement and Plan of Reorganization,
dated as of July 8,1994, and amended and restated as of August 22 and 31 and
September 27, 1994 (the "Reorganization Agreement"), by and between Union and
Regions. A majority of the respective entire Boards of Directors of Union and
Union Interim have approved this Plan, and have authorized its execution and
consummation.
Capitalized terms not defined herein shall have their respective meanings
set forth in Section 11.1 of the Reorganization Agreement.
In consideration of the premises and of the covenants contained herein, and
other good and valuable consideration, Union and Union Interim hereby make,
adopt and approve this Plan and prescribe the terms and conditions of this Plan
and the mode and manner of effecting this Plan, as follows:
ARTICLE 1
TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Plan, at the
Effective Time (as defined herein), Union shall be merged into and with Union
Interim (the "Merger") in accordance with the provisions of Section 5-7A-1 of
the Alabama Banking Code (the "ABC"). Union Interim shall be the Surviving Bank
resulting from the Merger and shall be a wholly owned subsidiary of Regions and
shall continue to be governed by the Laws of the State of Alabama until such
time as Union Interim is merged with and into First Alabama Bank. The Merger
shall be consummated pursuant to the terms of this Plan.
1.2 SURVIVING BANK. The business of the Surviving Bank from and after the
Effective Time shall continue to be that of a state bank organized under the
laws of the State of Alabama. The business shall be conducted from its main
office and at its legally established branches, which shall also include the
main office and all branches, whether in operation or approved but unopened, at
the Effective Time.
1.3 ASSUMPTION OF RIGHTS. At the Effective Time, the separate existence
and corporate organization of Union shall be merged into and continued in the
Surviving Bank. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time and thereafter, except as otherwise provided
herein, all the rights, privileges, immunities, and franchises, of a public as
well as of a private nature, of each of Union and Union Interim; and all
property, real, personal, and mixed, and all debts due on whatever account, and
all other choses of action, and all and every other interest of or belonging to
or due to each of Union and Union Interim shall be taken and deemed to be
transferred to and vested in the Surviving Bank without further act or deed; and
the title to any real estate, or any interest therein, vested in any of Union or
Union Interim shall not revert or be in any way impaired by reason of the
Merger. All rights, franchises, and interests of both Union and Union Interim in
and to every type of property (real, personal, and mixed), and all choses in
action of both Union and Union Interim shall be transferred to and vested in the
Surviving Bank without any deed or other transfer. The Surviving Bank, upon
consummation of the Merger and without any order or other action on the part of
any court or otherwise, shall hold and enjoy all rights of property, franchises,
and interests, including appointments, designations, and nominations, and all
other rights and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee, receiver, and committee of
estates of incompetent persons, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by either Union or Union Interim at the Effective Time.
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1.4 ASSUMPTION OF LIABILITIES. All liabilities and obligations of both
Union and Union Interim of every kind and description shall be assumed by the
Surviving Bank, and the Surviving Bank shall be bound thereby in the same manner
and to the same extent that Union and Union Interim were so bound at the
Effective Time.
1.5 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Union Interim in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Bank until otherwise amended or
repealed, except that Article I of the Certificate of Incorporation of Union
Interim shall be amended as follows:
"ARTICLE 1
NAME
The name of the corporation (the "Corporation") shall be: 'UNION BANK &
TRUST COMPANY'."
1.6 BYLAWS. The Bylaws of Union Interim in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Bank until otherwise
amended or repealed.
1.7 DIRECTORS AND OFFICERS. The directors of Union Interim in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving Bank
from and after Effective Time in accordance with the Bylaws of the Surviving
Bank. The officers of Union Interim in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the officers of the Surviving Bank from and after the Effective Time in
accordance with the Bylaws of the Surviving Bank.
1.8 CAPITAL STOCK. At the Effective Time, Union Interim shall have
outstanding common stock of $500, divided into 1,000 shares of $.50 par value,
all of which shall be issued to Regions, and Union Interim shall have surplus
and retained earnings equal to such accounts immediately prior to the Effective
Time. All such amounts of surplus and retained earnings shall be adjusted for
normal earnings and expenses, and for any accounting adjustments relating
hereto.
ARTICLE 2
MANNER OF CONVERTING SHARES
2.1 CONVERSION OF SHARES. Subject to the provisions of this Article 2, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of common stock, $.50 par value, of Union Interim
("Union Interim Common Stock") issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding from and after the
Effective Time.
(b) Each share of common stock, $.50 par value, of Union ("Union
Common Stock") (excluding shares held by Union or any of its wholly owned
Subsidiaries or by Regions or any of its wholly owned Subsidiaries, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, and excluding shares held by shareholders who perfect their
dissenters' rights of appraisal as provided in Section 2.4 of this Plan)
issued and outstanding at the Effective Time shall be converted into and
exchanged for (i) that number of shares of common stock, $.625 par value,
of Regions ("Regions Common Stock") (the "Exchange Ratio") equal to the
quotient obtained by dividing (a) $16.02 by (b) the Average Closing Price
(defined as the average of the daily closing sales prices of Regions Common
Stock on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotations System (the "Nasdaq National
Market"), as reported by The Wall Street Journal or, if not reported
thereby, another authoritative source chosen by Regions for the ten (10)
consecutive full trading days in which such shares are traded on the Nasdaq
National Market ending at the close of trading on the fifth trading day
preceding the Effective Time and (ii) the right to receive on a deferred
basis and
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pursuant to the terms of the Escrow Trust Agreement (the "Escrow Stock
Right" and collectively, the "Escrow Stock Rights") that additional
fraction of a share of Regions Common Stock (the "Escrow Stock Ratio")
equal to the quotient obtained by dividing (a) $.51 by (b) the Average
Closing Price.
2.2 ANTI-DILUTION PROVISIONS. In the event Union changes the number of
shares of Union Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted to
reflect such stock split, stock dividend, or recapitalization. In the event
Regions changes the number of shares of Regions Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio and the Escrow Stock Ratio shall be, to the extent necessary,
proportionately adjusted to reflect such stock split, stock dividend, or
recapitalization.
2.3 SHARES HELD BY UNION OR REGIONS. Each of the shares of Union Common
Stock held by Union or any of its wholly owned Subsidiaries or by Regions or any
of its wholly owned Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
2.4 DISSENTING SHAREHOLDERS. Any holder of shares of Union Common Stock
who perfects such holder's dissenter's rights of appraisal in accordance with
and as contemplated by Article 6 of the ABCA (or the applicable successor
article) shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of law; provided that no such payment
shall be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the ABCA and
surrendered to the Surviving Bank the certificate or certificates representing
the shares for which payment is being made. In the event that after the
Effective Time a dissenting shareholder of Union fails to perfect, or
effectively withdraws or loses, such holder's right to appraisal and of payment
for such holder's shares, Regions shall issue and deliver, subject to the
delivery of the shares of Regions Common Stock represented by such holder's
Escrow Stock Rights in accordance with the provisions of Section 1.2 of the
Escrow Trust Agreement, the consideration to which such holder of shares of
Union Common Stock is entitled under this Article 2 (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of Union Common Stock held by him.
2.5 FRACTIONAL SHARES. Notwithstanding any other provision of this Plan
and except with respect to fractional shares that may be otherwise issuable
pursuant to the Escrow Trust Agreement, each holder of shares of Union Common
Stock exchanged pursuant to the Merger, or of options to purchase shares of
Union Common Stock, who would otherwise have been entitled to receive a fraction
of a share of Regions Common Stock (after taking into account all certificates
representing shares of Union Common Stock delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Regions Common Stock multiplied by the market
value of one share of Regions Common Stock at the Effective Time, in the case of
shares exchanged pursuant to the Merger, or the date of exercise, in the case of
options. The market value of one share of Regions Common Stock at the Effective
Time or the date of exercise, as the case may be, shall be the last sale price
of such common stock on the Nasdaq National Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source) on
the last trading day preceding the Effective Time, in the case of shares
exchanged pursuant to the Merger, and the date of exercise, in the case of
options. No such holder will be entitled to dividends, voting rights, or any
other rights as a shareholder in respect of any fractional shares.
2.6 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, all rights with respect to Union Common Stock
pursuant to stock options ("Union Options") granted by Union under the Union
Stock Plan, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Regions
Common
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Stock and, to the extent the Union Option assumed by Regions is exercised prior
to the termination of the Escrow Trust Agreement, Escrow Stock Rights, and
Regions shall assume each Union Option, in accordance with the terms of the
Union Stock Plan and stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each Union Option assumed by Regions may be
exercised solely for shares of Regions Common Stock and, prior to the
termination of the Escrow Trust Agreement, Escrow Stock Rights, (ii) the number
of shares of Regions Common Stock subject to such Union Option shall be equal to
the number of shares of Union Common Stock subject to such Union Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, (iii)
the number of shares of Regions Common Stock represented by the Escrow Stock
Rights subject to such Union Option, if exercised prior to the termination of
the Escrow Trust Agreement, shall be equal to the number of shares of Union
Common Stock subject to such option immediately prior to the Effective Time
multiplied by the Escrow Stock Ratio, (iv) the per share exercise price under
each such Union Option shall be adjusted by dividing the per share exercise
price under each such Union Option by the Exchange Ratio and rounding down to
the nearest cent, and (v) the aggregate exercise price for all shares of Regions
Common Stock issuable pursuant to the exercise of the option and pursuant to the
Escrow Stock Rights shall equal the product of the number of shares of Regions
Common Stock subject to such Union Option as calculated in (ii) above and the
per share exercise price under such Union Option as calculated in (iv) above;
provided, that in the event that the Union Option assumed by Regions is
exercised after the termination of the Escrow Trust Agreement and the expiration
of the Escrow Stock Rights, such option shall be exercisable for that number of
shares of Regions Common Stock as calculated in (ii) above, plus that number of
shares of Regions Common Stock represented by the then expired Escrow Stock
Rights as calculated in (iii) above that would have been issuable upon
termination of the Escrow Trust Agreement if such option had been exercised
prior to the termination of the Escrow Trust Agreement, as adjusted if necessary
from the date of termination of the Escrow Trust Agreement to the date of
exercise. It is intended that the foregoing assumption shall be undertaken in a
manner that will not constitute a "modification" as defined in Section 424 of
the Internal Revenue Code, as to any stock option which is an "incentive stock
option."
(b) All restrictions or limitations on transfer with respect to Union
Common Stock awarded under the Union Stock Plans or any other plan, program, or
arrangement of any Union Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Regions Common Stock into which such restricted
stock is converted pursuant to Section 2.1 of this Plan.
ARTICLE 3
EXCHANGE OF SHARES AND ESTABLISHMENT OF THE ESCROW TRUST
3.1 EXCHANGE PROCEDURES. As promptly as reasonably practicable after the
Effective Time, Regions and Union shall cause First Alabama Bank (the "Exchange
Agent") to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of Union
Common Stock appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Union Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). After the Effective
Time, each holder of shares of Union Common Stock (other than shares to be
canceled pursuant to Section 2.3 of this Plan or as to which dissenters' rights
of appraisal have been perfected as provided in Section 2.4 of this Plan) issued
and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 2.1 of this Plan, together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 3.2 of this Plan. To the extent required by Section 2.5 of this Plan,
each holder of shares of Union Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the certificate or
certificates representing such shares, cash in lieu of any fractional share of
Regions Common Stock to which such holder may be otherwise entitled (without
interest). Regions shall not be obligated to deliver the consideration to which
any former holder of Union Common Stock is entitled as a result of the Merger
until such holder surrenders his certificate or certificates
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representing the shares of Union Common Stock for exchange as provided in this
Section 3.1. The certificate or certificates of Union Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Plan notwithstanding, neither Regions, Union, nor the Exchange
Agent shall be liable to a holder of Union Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property Law. Regions shall pay any transfer Taxes required by reason
of the issuance of a certificate representing shares of Regions Common Stock
pursuant to the Merger; provided, however, that such certificate is issued in
the name of the Person in whose name the certificate surrendered and exchanged
therefor is registered. If any portion of the consideration to be received
pursuant to Section 2.1 of this Plan upon exchange of a certificate (whether a
certificate representing shares of Regions Common Stock, a Escrow Stock Right,
or a check representing cash for a fractional share) is to be issued or paid to
a Person other than the Person in whose name the certificate surrendered in
exchange therefor is registered, it shall be a condition of such issuance and
payment that the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
exchange shall pay in advance any transfer Taxes required by reason of the
issuance of a certificate representing shares of Regions Common Stock or a check
representing cash for a fractional share to such other Person or establish to
the satisfaction of the Exchange Agent that such Tax has been paid or that no
such Tax is applicable. In the case of any lost, mislaid, stolen, or destroyed
certificate or certificates evidencing outstanding shares of Union Common Stock,
the holder thereof may be required, as a condition precedent to delivery to such
holder of the consideration described in Sections 2.1 and 2.5 of this Plan
deliver to Regions a bond in such reasonable sum as Regions may direct as
indemnity against any claim that may be made against the Exchange Agent,
Regions, or the Surviving Bank with respect to such certificate or certificates
alleged to have been lost, mislaid, stolen, or destroyed.
3.2 RIGHTS OF FORMER UNION SHAREHOLDERS. At the Effective Time, the stock
transfer books of Union shall be closed as to holders of Union Common Stock
immediately prior to the Effective Time and no transfer of Union Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 3.1 of this Plan, each
certificate theretofore representing shares of Union Common Stock (other than
shares to be canceled pursuant to Sections 2.3 and 2.4 of this Plan) shall from
and after the Effective Time represent for all purposes the number of shares of
Regions Common Stock and Escrow Stock Rights into which the shares of Union
Common Stock represented thereby shall have been converted under Section 2.1 of
this Plan and the cash issuable in lieu of fractional shares under Section 2.5
of this Plan. To the extent permitted by Law, former shareholders of record of
Union shall be entitled to vote after the Effective Time at any meeting of
Regions shareholders the number of whole shares of Regions Common Stock
(including providing voting instructions to the Escrow Agent with respect to
those whole shares subject to the Escrow Stock Rights) into which their
respective shares of Union Common Stock are converted, regardless of whether
such holders have exchanged their certificates representing Union Common Stock
for certificates representing Regions Common Stock in accordance with the
provisions of this Plan. Whenever a dividend or other distribution is declared
by Regions on the Regions Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of Regions Common Stock issuable pursuant to this
Plan (including those whole shares subject to the Escrow Stock Rights), but no
dividend or other distribution payable to the holders of record of Regions
Common Stock (including those whole shares subject to the Escrow Stock Rights)
as of any time subsequent to the Effective Time shall be delivered to the holder
of any certificate representing shares of Union Common Stock issued and
outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 3.1 of this Plan. However, upon surrender of
such Union Common Stock certificate, both the Regions Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
3.3 ESTABLISHMENT OF ESCROW TRUST. Prior to the Effective Time, Regions,
the Escrow Agent, and the Shareholder Representative Committee shall enter into
the Escrow Trust Agreement in order to establish an escrow of shares of Regions
Common Stock to fund certain environmental remediation costs for the possible
removal of Hazardous Materials on, at, or emanating from the Union property (as
defined in Section 10.1(j)
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of the Union Disclosure Memorandum). Approval of this Plan by the shareholders
of Union at the Shareholders' Meeting shall constitute approval of the
establishment of the escrow trust contemplated by the Escrow Trust Agreement and
the appointment of the Escrow Agent and the Shareholder Representative
Committee. At the Effective Time, Regions shall deposit with the Escrow Agent
that number of whole shares of Regions Common Stock (rounding up to the nearest
whole share) equal to the quotient obtained by dividing (i) the product of (a)
$.51 and (b) the total number of shares of Union Common Stock outstanding at the
Effective Time (other than shares as to which the holder thereof has effected
the procedural steps for preserving such holder's dissenters' rights of
appraisal as provided in Section 2.4 of this Plan and as specifically enumerated
in Section 9.2(e) of the Reorganization Agreement) by (ii) the Average Closing
Price. After the Effective Time, Regions shall deposit with the Escrow Agent
such additional shares of Regions Common Stock as may be required under the
circumstances set forth in Section 1.2 of the Escrow Trust Agreement. Such
shares of Regions Common Stock shall be held by the Escrow Agent and distributed
to the former shareholders of Union or applied to fund certain environmental
remediation costs in accordance with the terms of the Escrow Trust Agreement.
ARTICLE 4
EFFECTIVENESS
4.1 CONDITIONS PRECEDENT. Consummation of the Merger and the other
transactions contemplated hereunder is conditioned upon the fulfillment (or
waiver, when permissible) of the conditions precedent set forth in Article 9 of
the Reorganization Agreement, which include, among other things, the approval of
the Reorganization Agreement and this Plan by the shareholders of Union and
Union Interim and by the Superintendent of Banks of the State of Alabama (the
"Superintendent").
4.2 TERMINATION. This Plan may be terminated at any time prior to the
Effective Time by the parties hereto as provided in Article 10 of the
Reorganization Agreement.
4.3 EFFECTIVENESS. The Merger and other transactions contemplated by this
Plan shall become effective on the date and at the time the Alabama Articles of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Alabama (the "Effective Time").
ARTICLE 5
AMENDMENT AND WAIVER
5.1 AMENDMENT. This Plan may be amended at any time prior to the
Effective Time by the parties hereto as provided in Section 11.5 of the
Reorganization Agreement.
5.2 WAIVER.
(a) Prior to or at the Effective Time, Union Interim, acting through its
Board of Directors or other authorized officer, shall have the right to waive
any Default in the performance of any term of this Plan by Union, to waive or
extend the time for the compliance or fulfillment by Union of any and all of its
obligations under this Plan, and to waive any or all of the conditions precedent
to the obligations of Union Interim under this Plan, except any condition which,
if not satisfied, would result in the violation of any Law. No such waiver shall
be effective unless in writing signed by a duly authorized officer of Union
Interim.
(b) Prior to or at the Effective Time, Union, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Plan by Union
Interim, to waive or extend the time for the compliance or fulfillment by Union
Interim of any and all of its obligations under this Plan, and to waive any or
all of the conditions precedent to the obligations of Union under this Plan,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Union.
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ARTICLE 6
MISCELLANEOUS
6.1 NOTICES. Any notices or other communications required or permitted
under this Plan shall be in writing and shall be given as provided in Section
11.8 of the Reorganization Agreement.
6.2 COUNTERPARTS. This Plan may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
6.3 BINDING EFFECT; GOVERNING LAW. This Plan shall be binding upon and
inure to the benefit of the parties hereto, and their respective shareholders,
successors and assigns, and shall be governed by, and construed in accordance
with, the Laws of the State of Alabama.
IN WITNESS WHEREOF, Union and Union Interim have caused this Plan to be
executed in counterparts by their duly authorized officers and their corporate
seals to be hereunto affixed as of the date first above written, and a majority
of the entire Board of Directors of Union and Union Interim have hereunto
subscribed their names.
<TABLE>
<S> <C>
ATTEST: UNION BANK & TRUST COMPANY
/s/ ROBERT E. KELLY By: /s/ ROBERT C. BAIRD, JR.
- -------------------------------------------- -------------------------------------------
Robert E. Kelly Robert C. Baird, Jr.
Secretary President
</TABLE>
[BANK SEAL]
A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS
OF UNION BANK & TRUST COMPANY
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
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<TABLE>
<S> <C>
ATTEST: UNION INTERIM BANK
By:
- ------------------------------------------ ------------------------------------------
Cashier Wilbur B. Hufham
President
</TABLE>
[BANK SEAL]
A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS OF
UNION INTERIM BANK
<TABLE>
<S> <C>
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
</TABLE>
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APPENDIX C
ESCROW TRUST AGREEMENT
THIS ESCROW TRUST AGREEMENT (this "Agreement") is made and entered into
this day of , 199 , by and among Regions Financial
Corporation, a Delaware corporation ("Regions"); ,
and , constituting the committee of
representatives (each individually a "Stockholder Representative" and
collectively, the "Stockholder Representative Committee") appointed by the Board
of Directors and approved by the former holders (the "Stockholders") of the
issued and outstanding shares of Union Common Stock of Union Bank & Trust
Company, an Alabama state bank ("Union"); and , a
as escrow agent hereunder ("Escrow Agent").
PREAMBLE
Regions and Union are parties to an Amended and Restated Agreement and Plan
of Reorganization, dated as of July 8, 1994, and amended and restated as of
August 22 and 31 and September 22, 1994 (together with the related Plan of
Merger, the "Merger Agreement"), pursuant to which Union has on this date merged
(the "Merger") with and into a wholly owned subsidiary of Regions ("Union
Interim"), with Union Interim being the surviving bank resulting from the
Merger.
Pursuant to Sections 3.1(c) and 4.1 of the Merger Agreement, each of the
Stockholders is entitled to receive, in exchange for each share of Union Common
Stock held by such Stockholder at the Effective Time, (i) that number of shares
of Regions Common Stock (the "Exchange Ratio") equal to the quotient obtained by
dividing (a) $16.02 by (b) the Average Closing Price and (ii) the right to
receive on a deferred basis (the "Escrow Stock Right" and collectively, the
"Escrow Stock Rights") that additional fraction of a share of Regions Common
Stock (the "Escrow Stock Ratio") equal to the quotient obtained by dividing (a)
$.51 by (b) the Average Closing Price.
Pursuant to Section 3.6 of the Merger Agreement, each outstanding Union
Option shall be assumed by Regions (each an "Assumed Option"), whereupon (i)
such Assumed Option may be exercised solely for shares of Regions Common Stock
and, prior to the termination of this Agreement, Escrow Stock Rights, (ii) the
number of shares of Regions Common Stock subject to such Assumed Option shall be
equal to the number of shares of Union Common Stock subject to such option
immediately prior to the Effective Time multiplied by the Exchange Ratio, (iii)
the number of shares of Regions Common Stock represented by the Escrow Stock
Rights subject to such Assumed Option, if exercised prior to the expiration of
the Term of this Agreement, shall be equal to the number of shares of Union
Common Stock subject to such option immediately prior to the Effective Time
multiplied by the Escrow Stock Ratio, (iv) the per share exercise price under
each such Assumed Option shall be adjusted by dividing the per share exercise
price under each such option by the Exchange Ratio and rounding down to the
nearest cent, and (v) the aggregate exercise price for all shares of Regions
Common Stock issuable pursuant to the exercise of the option and pursuant to the
Escrow Stock Rights shall equal the product of the number of shares of Regions
Common Stock subject to such Assumed Option as calculated in (ii) above and the
per share exercise price under such Assumed Option as calculated in (iv) above;
provided, that in the event that the Assumed Option is exercised after the
termination of this Agreement and the expiration of the Escrow Stock Rights,
such option shall be exercisable for that number of shares of Regions Common
Stock as calculated in (ii) above, plus that number of shares of Regions Common
Stock represented by the then expired Escrow Stock Rights as calculated in (iii)
above that would have been issuable upon termination of this Agreement if such
option had been exercised prior to the termination of this Agreement, as
adjusted if necessary from the date of termination of this Agreement to the date
of exercise.
Pursuant to the terms of the Merger Agreement, the number of shares of
Regions Common Stock issued in respect of the Escrow Stock Rights, as calculated
in accordance with Section 4.3 of the Merger Agreement (the "Escrow Shares")
have been issued and will be held by the Escrow Agent pursuant to the terms of
this Agreement until termination of this Agreement as provided herein.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE ONE
ESTABLISHMENT OF ESCROW
1.1 INITIAL ESCROW SHARES. On this date, Regions has executed a stock
certificate in negotiable form representing the Escrow Shares and naming the
Escrow Agent as the registered holder of such shares. Schedule I to this
Agreement shows for each Stockholder (i) the respective percentage interest (the
"Percentage Interest") of each such Stockholder in the Escrow Shares, and (ii)
the corresponding aggregate maximum number of Escrow Shares issuable to each
Stockholder, subject to the adjustments provided herein. For purposes of this
Agreement, the Percentage Interest of each Stockholder (other than Stockholders
who have perfected their dissenters' rights of appraisal pursuant to Section 3.4
of the Merger Agreement and as a result of which shall have no Percentage
Interest and shall not be deemed to be a Shareholder for purposes of this
Agreement) shall equal the quotient obtained by dividing (i) the number of
shares of Union Common Stock held of record by such Stockholder at the Effective
Time plus, in the case of holders of Assumed Options that have been exercised,
the number of former shares of Union Common Stock that the exercised Assumed
Option represented at the time of exercise (as provided by Section 3.6 of the
Merger Agreement) by (ii) the total number of shares of Union Common Stock
outstanding at the Effective Time plus, upon the exercise of an Assumed Option,
the number of former shares of Union Common Stock that the exercised Assumed
Option represented at the time of exercise (as provided by Section 3.6 of the
Merger Agreement).
1.2 ADDITIONAL ESCROW SHARES. The number of Escrow Shares shall be
increased and the Percentage Interest of each Stockholder shall be adjusted
under the circumstances described below. In each case, the additional shares of
Regions Common Stock issuable upon the circumstances described below as are
represented by Escrow Stock Rights shall be regarded as additional "Escrow
Shares" for all purposes under this Agreement. In addition, the Escrow Agent
shall make the appropriate revisions to Schedule I to this Agreement (including
appropriate revisions to each Shareholder's Percentage Interest and the addition
of any new Stockholder and such Stockholder's shares) necessary to reflect the
adjustment.
(a) STOCK SPLITS, STOCK DIVIDENDS. In the event any stock split or stock
dividend with respect to Regions Common Stock becomes effective during the Term
of this Agreement the additional shares so issued with respect to the Escrow
Shares shall be added to the Escrow Shares and Regions shall deliver to the
Escrow Agent a stock certificate in negotiable form representing such additional
shares of Regions Common Stock.
(b) ASSUMED OPTION EXERCISES. On proper exercise of an Assumed Option
during the Term of this Agreement, Regions shall deliver to the Escrow Agent a
stock certificate in negotiable form representing such portion of the shares of
Regions Common Stock issuable upon exercise of such Assumed Option as are
represented by the Escrow Stock Rights. Such certificate shall name the Escrow
Agent as the registered holder of such shares, and the holder of such Assumed
Option shall be regarded as a "Stockholder" with respect to such shares for all
purposes under this Agreement.
(c) DISSENTING SHARES. In the event that after the Effective Time and
during the Term of this Agreement, a dissenting shareholder of Union fails to
perfect, or effectively withdraws or loses, such holder's right to appraisal and
of payment for such holder's shares and Regions issues shares of Regions Common
Stock to such holder in accordance with the provisions of Section 3.4 of the
Merger Agreement, Regions shall deliver to the Escrow Agent a stock certificate
in negotiable form representing that number of whole shares of Regions Common
stock as are represented by the Escrow Stock Rights issuable to such holder.
Such certificate shall name the Escrow Agent as the registered holder of such
shares, and such holder shall be regarded as a "Stockholder" with respect to
such shares for all purposes under this Agreement.
1.3 HANDLING OF ESCROW SHARES. The Escrow Agent shall hold the Escrow
Shares as escrow agent on behalf of, and as a convenience to, the Stockholders
with the same force and effect as if such shares had been delivered by Regions
to each Stockholder and subsequently delivered by such Stockholder to the Escrow
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Agent. The Escrow Agent shall hold the Escrow Shares for the benefit of Regions
and the Shareholders, as the case may be, pursuant to the terms of this
Agreement.
ARTICLE TWO
REIMBURSEMENT
2.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "ADEM CONSENT" shall mean a written acceptance, approval, or
authorization, from the Alabama Department of Environmental Management
("ADEM") for the implementation of a remediation plan (as modified as
required by ADEM) submitted by Union prior to the Effective Time or,
thereafter and with the approval of the Stockholder Representative
Committee, by Regions, with respect to any groundwater or soil
contamination resulting from any Hazardous Material at, under, or emanating
from the Site.
(b) "COST NOTICE" shall mean a written notice, as prescribed in
Section 2.3 of this Agreement, provided by Regions to the Escrow Agent and
the Stockholder Representative Committee setting forth in reasonable detail
the nature and amount of an Environmental Remediation Cost or potential
Environmental Remediation Cost.
(c) "DISPUTED COST NOTICE" shall mean a Cost Notice that is disputed
by the Stockholder Representative Committee by delivery of a Protest Notice
within fifteen (15) days of the date on which any Cost Notice is given.
(d) "ENVIRONMENTAL REMEDIATION COSTS" shall mean all Liabilities,
including without limitation, (i) all costs and expenses (including costs
of legal counsel and engineering and environmental consultants) associated
with any removal or remedial action (as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. sec.
9601 et seq., or any similar federal, state, or local Law) with respect to
any Hazardous Material contemplated by the remediation plan submitted to
ADEM under Article Four of this Agreement as approved by the ADEM Consent,
including without limitation, post-remediation testing, monitoring, and
pumping, (ii) all costs and expenses associated with the investigation
and/or evaluation of the Site (including costs of legal counsel and
engineering and environmental consultants) required or reasonably necessary
to be incurred after September 27, 1994, in connection with obtaining the
ADEM Consent, and (iii) all costs and expenses (including costs of legal
counsel and consultants) associated with any claims brought prior to the
expiration of the Term of this Agreement by a property owner claiming
contamination of its property by a Hazardous Material at, under, or
emanating from the Site.
(e) "PROTEST NOTICE" shall mean a written notice, as prescribed in
Section 2.3 of this Agreement, provided by the Stockholder Representative
Committee to Regions if it disputes any Cost Notice received from Regions.
(f) "REIMBURSABLE COSTS" shall mean those Environmental Remediation
Costs for which Regions is entitled to reimbursement hereunder, after
application of the express limitations set forth in Sections 2.6 and 2.7 of
this Agreement.
(g) "SITE" shall mean the property identified in the Union Disclosure
Memorandum with respect to Section 5.9 of the Merger Agreement.
(h) "TERM" or "TERM OF THIS AGREEMENT" shall have the meaning set
forth in Section 3.1 of this Agreement.
(i) Any capitalized term used herein but not defined herein shall have
the same meaning as provided in the Merger Agreement.
2.2 REIMBURSEMENT OF ENVIRONMENTAL REMEDIATION COSTS. Subject to the
procedures provided in this Article Two and the express limitations of Sections
2.6 and 2.7 of this Agreement, the Stockholder
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Representative Committee, as the representative of the Stockholders, shall
reimburse Regions and its Affiliates from and against all Reimbursable Costs.
Upon expiration of the Term of this Agreement, the Escrow Agent shall, upon the
direction of Regions, either (x) surrender to Regions a certificate representing
that number of Escrow Shares (the "Canceled Escrow Shares") equal to the
quotient (rounded to the nearest whole share) obtained by dividing (i) the
aggregate amount of Reimbursable Costs by (ii) the average of the daily closing
sales prices of Regions Common Stock on the Nasdaq National Market (as reported
by The Wall Street Journal or, if not reported thereby, another authoritative
source chosen by Regions) for the ten (10) consecutive full trading days in
which such shares are traded ending at the close of trading on the fifth trading
day preceding the expiration of the Term of this Agreement or (y) sell in the
open market sufficient Escrow Shares (the "Sold Escrow Shares") to generate
proceeds equal to the aggregate amount of Reimbursable Costs and deliver to
Regions such cash proceeds (and Regions shall pay all of the Escrow Agent's
costs of selling such Escrow Shares). The remaining Escrow Shares shall be
distributed to the Stockholders as provided in Section 3.2 of this Agreement.
2.3 NOTICE OF CLAIM. If Regions incurs an Environmental Remediation Cost
or obtains a binding commitment from a third party (as agreed upon by the
Stockholder Representative Committee and Regions) to perform remediation or
removal services in connection with any final ADEM Consent, it shall promptly
provide a Cost Notice to the Stockholder Representative Committee; provided,
however, that no Cost Notice may be submitted after the Term of this Agreement
and any Cost Notice submitted after such date shall have no effect under this
Agreement. If the Stockholder Representative Committee disputes the amount
sought under any such Cost Notice or otherwise disputes the right of Regions to
be reimbursed hereunder, the Stockholder Representative Committee shall provide
Regions a Protest Notice within fifteen (15) days of the date such Cost Notice
was given. If no Protest Notice is received by Regions and the Escrow Agent
within fifteen (15) days of the date on which any Cost Notice is given, then the
amount of Environmental Remediation Costs set forth in such Cost Notice shall be
a Reimbursable Cost. If Regions and the Escrow Agent receive a Protest Notice
within such 15-day period, the amount of Environmental Remediation Costs (if
any) which shall be regarded as Reimbursable Costs shall be those costs finally
determined (in accordance with the procedures set forth in Section 2.4 of this
Agreement) to be Reimbursable Costs, as evidenced in a written notice delivered
to the Escrow Agent and either (i) signed by both a Stockholder Representative
and a duly authorized officer of Regions or (ii) signed by an arbitration panel
that has considered and resolved such dispute as provided in Section 2.4 of this
Agreement.
2.4 PROCEDURE WITH RESPECT TO DISPUTED ENVIRONMENTAL REMEDIATION COST. A
Disputed Cost Notice may be resolved by the agreement of the Stockholder
Representative Committee and Regions, in which case written notice of such
agreement shall be promptly provided to the Escrow Agent, together with a
statement of the agreed upon amount to be reimbursed to Regions, as provided in
the last sentence of Section 2.3 of this Agreement. If the Stockholder
Representative Committee and Regions are unable to resolve a Disputed Cost
Notice, then such Disputed Cost Notice shall be submitted to arbitration (to be
conducted in Montgomery, Alabama or other location as agreed upon by the
Stockholder Representative Committee and Regions) on an informal basis. If a
Disputed Cost Notice is to be arbitrated, the Stockholder Representative
Committee shall select one arbitrator, Regions shall select one arbitrator, and
the two arbitrators so chosen shall select a third (provided that in the event
any such arbitrator is not designated within thirty (30) days after the date the
first arbitrator is designated by any party, then such arbitrator(s) shall be
designated by the American Arbitration Association). Any decision of the
informal arbitration panel shall require the vote of at least two (2) of such
arbitrators and shall be deemed conclusive and each party shall be deemed to
have waived any rights to appeal therefrom. Any resolution of a Disputed Cost
Notice, whether by agreement of the parties or by arbitration, must be made
within sixty (60) days of the date of the Protest Notice in regard to which the
dispute relates. If any arbitration decision is rendered in favor of Regions,
then the reasonable legal and other expenses incurred by Regions and the
Stockholder Representative Committee in the arbitration proceeding shall be
added to the amount of the Reimbursable Cost. If any arbitration decision is
rendered in favor of the Stockholder Representative Committee, then Regions
shall reimburse the Stockholder Representative Committee for the benefit of the
Stockholders for reasonable legal and other expenses incurred by the Stockholder
Representative Committee in the arbitration proceeding.
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2.5 EMPLOYMENT OF COUNSEL. Regions may employ legal counsel of its choice
and at its expense to conduct and direct the entire defense of any litigation or
claim described in a Cost Notice. Upon the receipt by Regions of notice of any
such claim contained in a Cost Notice and the employment by Regions of counsel
to defend any such claim, Regions shall notify the Stockholder Representative
Committee in writing. Regions shall be responsible for any attorneys' fees
incurred in connection with the defense of such litigation or claim, subject to
its right to reimbursement of such expenses as provided herein. The Stockholder
Representative Committee may, at its expense, participate in the defense of any
litigation or claim; provided that control of any such defense shall be with
counsel selected by Regions.
2.6 LIMITATIONS ON REIMBURSABLE COSTS. Regions shall not be permitted to
be reimbursed for any Environmental Remediation Costs until the amount of such
costs exceeds $500,000, in which event, Regions shall be entitled to
reimbursement only for the amount of such costs which exceeds $500,000 (the
"Reimbursable Costs"); provided, that Regions shall not be entitled to
reimbursement for Reimbursable Costs in excess of $2,000,000.
2.7 EXCLUSIVE REMEDY. If Regions incurs an Environmental Remediation
Cost, the sole and exclusive means of recovery shall be as set forth in this
Agreement and the escrow established hereunder. Neither the Stockholder
Representatives nor the Stockholders have any obligation or liability to Regions
beyond the several interests of such Stockholders in the Escrow Shares. Regions
agrees that if it incurs any Environmental Remediation Cost it will not sue or
seek recourse against the Stockholder Representatives or the Stockholders, or
any of them, other than as provided in this Agreement.
ARTICLE THREE
TERM; EXPIRATION; LIMITS
3.1 TERM. Subject to Section 3.4 of this Agreement, the term of this
Agreement shall commence at the Effective Time and shall terminate one (1) year
from such Effective Time (the "Primary Term"); provided that, notwithstanding
the foregoing, upon notice to the Escrow Agent and the Stockholder
Representative Committee given not less than fifteen (15) days prior to
expiration of the Primary Term, Regions may extend the term of this Agreement
for one additional six (6) month period after the expiration of the Primary Term
(the "Additional Term" and together with the Primary Term, the "Term") in the
event (i) the ADEM Consent has not been received by such date or (ii) the ADEM
Consent has been received by such date but contains possible additional remedial
action based on post-remediation testing, the cost of which has not been
determined as to amount (as contemplated by Section 2.2 of this Agreement);
further provided that, in the event that the ADEM Consent is received prior to
expiration of either the Primary Term or the Additional Term and does not
include the contingent remedial condition referenced in (ii) above, and a
binding agreement to perform all remediation and removal services contemplated
by the remediation plan approved by the ADEM Consent is obtained from a third
party agreed upon by the Stockholder Representative Committee and Regions, this
Agreement may be immediately terminated by either party at such time.
3.2 EXPIRATION OF TERM -- NO CLAIM PENDING. If at the expiration of the
Term of this Agreement, the ADEM Consent has been received and either (i) no
Cost Notice has been received, or (ii) any Cost Notice that has been received
has been resolved in accordance with this Agreement, or (iii) no litigation or
claim is pending for which Regions may be entitled to reimbursement hereunder,
the Escrow Agent shall deliver to each Stockholder (x) a certificate
representing the number of whole shares of Regions Common Stock (the "Whole
Escrow Shares") equal to the product of (1) the aggregate number of Escrow
Shares then subject to escrow and (2) such Stockholder's Percentage Interest and
(y) cash (without interest) in an amount equal to any fractional part of an
Escrow Share to which such Stockholder otherwise would be entitled to receive,
multiplied by, at the sole election of Regions, either (I) the "Market Value" of
one share of Regions Common Stock at the date the Escrow Agent commences such
distribution or (II) the "Available Value" per share of Regions Common Stock.
The "Market Value" of one share of Regions Common Stock shall be the last sale
price of Regions Common Stock on the Nasdaq National Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative source)
on the fifth full trading day preceding the date the Escrow Agent commences
distribution of Escrow Shares. The "Available Value" of one share of Regions
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Common Stock shall be the actual cash proceeds from the sale by the Escrow Agent
of all Escrow Shares other than Whole Escrow Shares (the "Fractional Escrow
Shares"). In the event that Regions elects that the Market Value be paid,
Regions shall promptly deliver to the Escrow Agent sufficient cash to fund the
aggregate fractional share payments to be made, and the Escrow Agent shall
surrender to Regions for cancellation all Fractional Escrow Shares. In the event
that Regions elects that the Available Value be paid, Regions shall pay all of
the Escrow Agent's costs of selling the Fractional Escrow Shares.
3.3 EXPIRATION OF TERM -- CLAIM PENDING. If at the expiration of the Term
of this Agreement, (i) the ADEM Consent has been received but any litigation or
claim is pending under Section 2.2 of this Agreement for which Regions would be
entitled to reimbursement if such claim were resolved adversely to it, or (ii)
the ADEM Consent has not been received, then in each case the Escrow Agent shall
retain in escrow that number of shares of Regions Common Stock (the "Retained
Escrow Shares") as shall equal the number of Escrow Shares (rounded to the next
highest whole number) that, when multiplied by the "Market Value" of the Regions
Common Stock, equals the amount set forth by Regions in the Cost Notice with
respect to such claims. The amount set forth in the Cost Notice by Regions in
the event the ADEM Consent has not been obtained at the expiration of the Term
of this Agreement shall equal the cost estimate included in a binding commitment
from a third party (as agreed upon by the Stockholder Representative Committee
and Regions) to complete the remediation and removal services contemplated by
the remediation plan as then pending before ADEM (which remediation plan shall
as agreed upon by the Stockholder Representative Committee and Regions provide
for remediation that the parties reasonably believe, based on information then
available, would be acceptable to ADEM) plus the amount of any other claim
pending under Section 2.2 of this Agreement for which Regions would be entitled
to reimbursement if such claim were resolved adversely to it. The number of
Escrow Shares, less the number of Canceled Escrow Shares, Sold Escrow Shares,
and Retained Escrow Shares (if any), shall then be distributed to the
Stockholders as set forth in Section 3.2 of this Agreement. Upon the resolution
of any claim for which shares were retained in escrow at the expiration of the
Term of this Agreement, the Escrow Agent shall deliver to Regions or sell the
appropriate number of Retained Shares (if any) that when multiplied by the
"Market Value" of the Regions Common Stock equals the cost incurred by Regions
in resolving such claim and shall distribute any remaining Retained Escrow
Shares to the Stockholders as set forth in Section 3.2 of this Agreement.
3.4 EFFECT OF FINAL DELIVERY. This Agreement shall continue in full force
and effect until the Escrow Agent has delivered all of the Escrow Shares (and
related cash payments) pursuant to the terms of this Agreement. After all Escrow
Shares have been so delivered and all cash payments made, all rights, duties,
and obligations of the respective parties hereunder shall terminate.
3.5 LIMITATIONS. Subject to the limitations in Section 2.6 of this
Agreement, notwithstanding anything to the contrary contained in this Agreement,
Regions may not submit a Cost Notice (and no obligation to reimburse shall
exist) until the aggregate Environmental Remediation Costs hereunder shall equal
$500,000 (the "Threshold Amount"). If and when the sum of all Environmental
Remediation Costs equals or exceeds the Threshold Amount, then Regions may
submit a Cost Notice, or Cost Notices for all Environmental Remediation Costs
incurred over and above the Threshold Amount.
ARTICLE FOUR
REMEDIATION PLAN
Regions and Union, if prior to the Effective Time, or the Stockholder
Representative Committee, if after the Effective Time, shall cooperate in the
preparation of the remediation plan, and any amendments thereto, to be submitted
to ADEM for purposes of obtaining the ADEM Consent and shall use their
respective best efforts to obtain the ADEM Consent. Any remediation plan
submitted to ADEM shall include all information known to the parties, including
the results of any testing, with respect to the existence of Hazardous Materials
and any groundwater or soil contamination at, under, or emanating from the Site.
Regions and the Stockholder Representative Committee shall be entitled to retain
appropriate consultants, engineers, counsel, and other advisors as may be
necessary or appropriate in preparing and submitting the remediation plan to
ADEM and
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in negotiating with ADEM in connection with obtaining the ADEM Consent. In all
discussions or meetings with ADEM, each of Regions and the Stockholder
Representative Committee shall be entitled to participate.
ARTICLE FIVE
DIVIDENDS; VOTING RIGHTS
5.1 DIVIDENDS. The Shareholders shall be entitled to receive currently
any and all dividends or other distributions payable in cash or other property
with respect to the Escrow Shares in accordance with their respective Percentage
Interests; provided, that the Escrow Agent shall retain, and shall treat as
additional Escrow Shares, (i) any dividends or other distributions payable in
the form of additional shares of capital stock or other securities of Regions or
(ii) any shares of capital stock or other securities or cash or other property
into which any Escrow Shares may be converted or exchanged as a result of any
merger, share exchange, tender offer, or other business combination to which
Regions is a party.
5.2 VOTING RIGHTS. So long as the Escrow Agent continues to hold Escrow
Shares under this Agreement, the Escrow Agent shall, in connection with all
meetings of stockholders of Regions, vote such Escrow Shares entitled to vote at
each such meeting only in such manner as Shareholders in proportion to their
respective Percentage Interests as set forth in Schedule I shall direct in
written instructions delivered to the Escrow Agent. In any such case, the Escrow
Agent shall mail to the Shareholders copies of each annual report to
stockholders, notice of meetings of stockholders, proxy statement, or other
solicitation material distributed generally to stockholders of Regions in
connection with each meeting of stockholders of Regions, not later than five (5)
business days after receipt by the Escrow Agent of any such materials. In the
absence of such directions, the Escrow Agent shall not vote any such Escrow
Shares.
ARTICLE SIX
THE ESCROW AGENT
6.1 LIABILITY. The Escrow Agent (and any successor escrow agent) shall be
liable only to hold the Escrow Shares and to deliver the same to the parties
named herein in accordance with the provisions of this Agreement. The Escrow
Agent shall not be bound in any way by any other agreement or contract between
Regions, Union, the Stockholder Representatives, or any other party, and the
Escrow Agent's only duties or responsibilities shall be to hold the Escrow
Shares as Escrow Agent and to dispose of the Escrow Shares in accordance with
the terms of this Agreement. By acceptance of this Escrow Agreement, the Escrow
Agent (and any successor escrow agent) is acting in the capacity of a depository
only, and shall not be liable or responsible for any damages, losses, or
expenses, unless such damages, losses, or expenses shall be caused by the
negligence or malfeasance of the Escrow Agent (or in the case of any successor
escrow agent, such successor's negligence or malfeasance). Neither the Escrow
Agent nor any successor escrow agent shall incur any liability with respect to
(i) any action taken or omitted in good faith upon the advice of its counsel
with respect to any questions relating to the duties and responsibilities of the
Escrow Agent under this Agreement or (ii) any action taken or omitted in
reliance upon any instrument, including the written instructions provided for
herein, not only as to the due execution of such instrument, or the identity, or
authority of any person executing such instrument, or the validity and
effectiveness of such instrument, but also as to the truth and accuracy of any
information contained therein, provided that the Escrow Agent shall in good
faith believe such instrument to be genuine, to have been signed by a proper
person or persons, and to conform to the provisions of this Agreement.
6.2 SUCCESSOR. The Escrow Agent may by written instrument designate a
bank or trust company to act as successor escrow agent acceptable to the
Stockholder Representative Committee and Regions. Any such successor escrow
agent shall have all the rights, duties, and responsibilities of the Escrow
Agent under this Agreement.
6.3 EXPENSES. Regions shall be responsible for all expenses and fees of
the Escrow Agent incurred in carrying out its obligations under this Agreement.
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6.4 DEGREE OF CARE. Neither the Escrow Agent nor any successor escrow
agent shall be required to give a greater degree of care to the Escrow Shares
than to its own similar property.
6.5 ESCROW STOCK CERTIFICATES. The Escrow Agent may, at any time, request
Regions to issue new certificates representing the Escrow Shares in such
denominations as may be necessary or appropriate in carrying out the Escrow
Agent's obligations under this Agreement, and Regions agrees to issue, or cause
to be issued, such new certificates promptly upon surrender of certificates to
be exchanged therefor.
ARTICLE SEVEN
STOCKHOLDER REPRESENTATIVES
7.1 POWER AND AUTHORITY. The Stockholder Representative Committee shall
have full power and authority to represent the Stockholders and their successors
with respect to all matters arising under this Agreement, and all action taken
by the Stockholder Representative Committee hereunder, whether acting as a
committee of the whole or individually pursuant to authority granted by the
Stockholder Representative Committee, shall be binding upon each Stockholder
Representative, each Stockholder, and their successors as if expressly ratified
and confirmed in writing by each of them. Without limiting the generality of the
foregoing, the Stockholder Representative Committee shall have full power and
authority, on behalf of all the Stockholders and their successors, to interpret
all the terms and provisions of this Agreement, to dispute or fail to dispute
any claim of Environmental Remediation Cost against the Escrow Shares made by
Regions, to negotiate and compromise any dispute which may arise under this
Agreement, to sign any releases or other documents with respect to any such
dispute, to authorize payments to be made with respect thereto, and to retain
such counsel and consultants as appropriate and necessary to carry out its
duties under this Agreement. Any action taken by the Stockholder Representative
Committee may only be taken with a quorum of at least two members of the
committee present and shall be deemed to have been taken with the affirmative
vote of a majority of the members of the committee once a quorum is established.
7.2 RESIGNATION; SUCCESSORS. Any Stockholder Representative, or any
successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Stockholder Representative as
hereinafter provided. In case of such resignation, or in the event of the death
or inability to act of any Stockholder Representative, a successor shall be
named by a majority of the remaining members of the Stockholder Representative
Committee. Each such successor Stockholder Representative shall have all the
power, authority, rights, and privileges hereby conferred upon an original
Stockholder Representative, and the term "Stockholder Representative" as used
herein shall be deemed to include each such successor Stockholder
Representative.
7.3 INDEMNIFICATION OF STOCKHOLDER REPRESENTATIVES. Regions shall
indemnify and hold harmless the Stockholder Representatives from and against any
"Loss" (defined to mean any direct or indirect demand, claim, payment,
obligation, action or cause of action, assessment, loss, liability, cost or
expense, including without limitation, penalties, interest on any amount payable
to a third party as a result of the foregoing, and any legal or other expense
reasonably incurred in connection with investigating or defending any claim or
action, whether or not resulting in any liability, and any amount paid in
settlement of any claim or action) incurred in connection with the performance
of his duties hereunder, including the advancement of expenses incurred in
connection with investigating or defending any claim or action.
ARTICLE EIGHT
MISCELLANEOUS
8.1 ESCROW STOCK RIGHTS. The contingent right to receive Escrow Shares
(or cash payments in lieu of any Fractional Escrow Shares) as represented by the
Escrow Stock Rights shall not be (i) transferable by the Stockholders otherwise
than by will or by the laws of descent and distribution or (ii) represented by
any form of certificate or instrument.
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8.2 NOTICES. Each party shall keep each of the other parties hereto
advised in writing of all transactions pursuant to this Agreement. Any notices
or other communications required or permitted under this Agreement shall be in
writing and shall be sufficiently given if given in person or if sent by
overnight delivery service, postage prepaid, addressed as follows, or by
facsimile to the facsimile numbers identified below:
<TABLE>
<S> <C>
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive Financial
Officer
Copy to Counsel: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7099
Attention: Samuel E. Upchurch, Jr.
General Counsel
Stockholder Representative ---------------------------------------------
Committee: ---------------------------------------------
---------------------------------------------
Telecopy Number: ------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Telecopy Number: ------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Telecopy Number: ------------------------
Copy to Counsel: King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1763
Telecopy Number: (404) 572-5146
Attention: John J. Kelley III
</TABLE>
or such other person or address as shall be furnished in writing by any of the
parties and any such notice or communication shall be deemed to have been given
as of the date so mailed.
8.3 CONSTRUCTION. The validity, enforcement, and construction of this
Agreement shall be governed by the Laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
8.4 BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the respective heirs, executors, administrators, successors, and
assigns of the parties hereto.
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8.5 SEVERABILITY. If any provision or section of this Agreement is
determined to be void or otherwise unenforceable, it shall not affect the
validity or enforceability of any other provisions of this Agreement which shall
remain enforceable in accordance with their terms.
8.6 HEADINGS. The headings and subheadings contained in this Agreement
are for reference only and for the benefit of the parties and shall not be
considered in the interpretation or construction of this Agreement.
8.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
8.8 AMENDMENTS. This Agreement may be amended from time to time but only
by written agreement signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Escrow Trust Agreement
as of the day and year first above written.
STOCKHOLDER REPRESENTATIVES:
(SEAL)
-------------------------------
(SEAL)
-------------------------------
(SEAL)
-------------------------------
<TABLE>
<S> <C>
ATTEST: REGIONS FINANCIAL CORPORATION
By:
- --------------------------------------------- ---------------------------------------------
Samuel E. Upchurch, Jr. Richard D. Horsley
Secretary Vice Chairman and Executive Financial Officer
[CORPORATE SEAL]
TRUST COMPANY BANK
ATTEST: as Escrow Agent
By:
- --------------------------------------------- ---------------------------------------------
[CORPORATE SEAL]
</TABLE>
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APPENDIX D
July 11, 1994
Board of Directors
Union Bank & Trust
60 Commerce Street
Montgomery, Alabama 36102-2191
Dear Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the common shareholders of Union Bank & Trust Company (the
"Company") of the consideration to be paid to the Company's common shareholders
in connection with the proposed merger (the "Merger") of the Company and Regions
Financial Corporation ("Regions"), pursuant to the Agreement and Plan of
Reorganization to be entered into by and between Regions and the Company (the
"Agreement"). All capitalized terms used but not otherwise defined herein shall
have the meanings provided in the Agreement.
We understand that the Company may enter into the Merger as follows:
In the Merger, each share of Union Common Stock (excluding shares held by
Union or any of its wholly owned Subsidiaries or by Regions or any of its wholly
owned Subsidiaries, in each case other than in a fiduciary capacity or as a
result of debts previously contracted, and excluding shares held by shareholders
who perfect their dissenters' rights of appraisal as provided in Section 3.4 of
the Agreement) issued and outstanding at the Effective Time shall be converted
into and exchanged for that number of shares of Common Stock (the "Exchange
Ratio") equal to the quotient obtained by dividing (i) $16.53 by (ii) the
Average Closing Price.
The Agreement also provides for the potential reimbursement by Union to
Regions of Regions' fees and expenses associated with the transaction
contemplated by the Agreement (up to $2 million) in the event a Business
Combination occurs between Union and a third party pursuant to Section 11.2.
Please be advised that while certain provisions of the Merger are
summarized above, the terms of the Merger are more fully described in the
Agreement. As a result, the description of the Merger and certain other
information contained herein is qualified in its entirety by reference to the
more detailed information appearing or incorporated by reference in the
Agreement.
In arriving at our opinion, we have reviewed (1) the Agreement, (2)
financial and other publicly available information with respect to the Company
and Regions, including among other things (i) with respect to the Company,
Annual Reports on Form 10-K and Proxy Statements for the five years ending
December 31, 1993 and unaudited financial results for the three months ending
March 31, 1994, FFIEC Consolidated Reports of Condition and Income for the three
month period ending March 31, 1994, and (ii) with respect to Regions, Annual
Reports on Form 10-K and Proxy Statements for the five years ending December 31,
1993 and unaudited financial results for the three months ending March 31, 1994,
FFIEC Consolidated Reports of Condition and Income for the three month period
ending March 31, 1994. In addition, we have reviewed the financial and other
terms of certain other acquisitions involving banks and bank holding companies
we deemed to be comparable to the Merger, and the reported price and trading
activity for the securities of certain companies deemed comparable; compared
certain financial and stock market information for the Company and Regions with
similar information for certain other companies the securities of which are
publicly traded; and performed such other studies and analyses as we deemed
necessary or appropriate; and reviewed certain internal financial analyses and
forecasts prepared by the Company.
We also have held discussions with certain members of the senior management
of the Company and Regions regarding the Merger and certain aspects of the past
and current business operations, financial condition and future prospects of
their respective companies.
In performing such analysis, we have used such valuation and other
methodologies as we have deemed necessary or appropriate for the purposes of
this opinion. Our view is based on (i) our consideration of the
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information the Company and Regions have supplied to us to date, (ii) our
understanding of the terms upon which the parties intend to consummate the
Merger, and (iii) the cooperation of all parties at interest to consummate the
Merger on a timely basis.
In arriving at our opinion, we have relied without independent verification
upon the accuracy and completeness of all of the financial and other information
provided to us by the Company and Regions or otherwise reviewed by us. In
addition, in arriving at our opinion, we have not made an independent evaluation
or appraisal of any other assets or liabilities of the Company or Regions or any
of their Subsidiaries. We have also assumed that the Agreement accurately
reflects all of the terms upon which the parties will consummate the Merger.
In relying on financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of the Company and
Regions to which such analyses or forecasts relate. We have also assumed that
the Merger will have the tax consequences described in the Agreement, and that
the other transactions contemplated by the Agreement will be consummated as
described in the Agreement. We have relied as to all legal matters relevant to
rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion.
We are expressing no opinion herein as to the price at which the common
shares of Regions will trade if and when issued or at any further time. Other
factors after the date hereof may affect the value of the businesses of the
Company and Regions after consummation of the Merger, including but not limited
to (i) the total or partial disposition of the common stock of Regions by
shareholders of the Company or Regions within a short period of time after the
effective date of the Merger, (ii) changes in prevailing interest rates and
other factors which generally influence the price of securities, (iii) adverse
changes in the current capital markets, (iv) the occurrence of adverse changes
in the financial condition, business, assets, results of operations or prospects
of the Company or of Regions, (v) any necessary actions by or restrictions of
federal, state or other governmental agencies or regulatory authorities, and
(vi) timely execution of all necessary agreements to complete the Merger on
terms and conditions that are acceptable to all parties at interest.
J.P. Morgan Securities Inc. ("J.P. Morgan") is regularly engaged in a full
range of investment banking activities, including mergers and acquisitions and
the underwriting and placement of debt and equity securities. We have acted as
financial advisor to the Company with respect to the proposed Merger and will
receive a fee from the Company for our services. We will also receive an
additional fee if the Merger is consummated.
In the ordinary course of their businesses, the undersigned and its
affiliates may actively trade the debt and equity securities of Regions, for
their own accounts, or for the accounts of customers, and accordingly, may at
any time hold a long or short position in such securities.
On the basis of the foregoing, it is our opinion that the consideration be
received by the common shareholders of the Company in the Merger is fair, from a
financial point of view, to the common shareholders of the Company.
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This letter is provided solely for the benefit of the Board of Directors of
the Company and is not on behalf of, and shall not confer rights or remedies
upon, any shareholder of the Company or Regions, or any other person other than
the Board of Directors of the Company. This opinion may not be used or relied
upon by, or disclosed, referred to or communicated by you (in whole or in part)
to any third party for any purpose whatsoever except with our prior written
consent in each instance. This opinion may be reproduced in full in any proxy or
information statement mailed to stockholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written approval
and must be treated as confidential.
Very truly yours,
J.P. Morgan Securities Inc.
By: /s/ GERALD F. BAUM
----------------------------------
Gerald F. Baum
Managing Director
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APPENDIX E
PROVISIONS REPRODUCED FROM THE ALABAMA BUSINESS CORPORATION ACT
SEC. 10-2A-162. RIGHT OF SHAREHOLDERS TO DISSENT.
(a) Any shareholder of a corporation shall have the right to dissent from any of
the following corporate actions:
(1) Any plan of merger or consolidation to which the corporation is a
party; or
(2) Any sale or exchange of all or substantially all of the property
and assets of the corporation not made in the usual and regular course of
its business, including a sale in dissolution, but not including a sale
pursuant to an order of a court having jurisdiction in the premises or a
sale for cash on terms requiring that all or substantially all of the net
proceeds of sale be distributed to the shareholders in accordance with
their respective interests within one year after the date of sale.
(b) A shareholder may dissent as to less than all of the shares registered
in his name. In that event, his rights shall be determined as if the shares as
to which he has dissented and his other shares were registered in the names of
different shareholders.
(c) This section shall not apply to the shareholders of the surviving
corporation in a merger if a vote of the shareholders of such corporation is not
necessary to authorize such merger. Nor shall it apply to the holders of shares
of any class or series if the shares of such class or series were registered on
a national securities exchange on the date fixed to determine the shareholders
entitled to vote at the meeting of shareholders at which a plan of merger or
consolidation or a proposed sale or exchange of property and assets is to be
acted upon unless the articles of incorporation of the corporation shall
otherwise provide.
SEC. 10-2A-163. RIGHTS OF DISSENTING SHAREHOLDERS.
(a) Any shareholder electing to exercise such right of dissent shall file
with the corporation, prior to or at the meeting of shareholders at which such
proposed corporate action is submitted to a vote, a written objection to such
proposed corporate action. If such proposed corporate action be approved by the
required vote and such shareholder shall not have voted in favor thereof, such
shareholder may, within 10 days after the date on which the vote was taken or if
a corporation is to be merged without a vote of its shareholders into another
corporation, any of its shareholders may, within 15 days after the plan of such
merger shall have been mailed to such shareholders, make written demand on the
corporation, or, in the case of a merger or consolidation, on the surviving or
new corporation, domestic or foreign, for payment of the fair value of such
shareholder's shares, and, if such proposed corporate action is effected, such
corporation shall pay to such shareholder, upon surrender of the certificate or
certificates representing such shares, the fair value thereof as of the day
prior to the date on which the vote was taken approving the proposed corporate
action, excluding any appreciation or depreciation in anticipation of such
corporate action. Any shareholder failing to make demand within the applicable
10-day or 15-day period shall be bound by the terms of the proposed corporate
action. Any shareholder making such demand shall thereafter be entitled only to
payment as in this section provided and shall not be entitled to vote or to
exercise any other rights of a shareholder.
(b) No such demand may be withdrawn unless the corporation shall consent
thereto. If, however, such demand shall be withdrawn upon consent, or if the
proposed corporate action shall be abandoned or rescinded or the shareholders
shall revoke the authority to effect such action, or if, in the case of a
merger, on the date of the filing of the articles of merger the surviving
corporation is the owner of all the outstanding shares of the other
corporations, domestic and foreign, that are parties to the merger, or if no
demand or petition for the determination of fair value by a court shall have
been made or filed within the time provided in this section, or if a court of
competent jurisdiction shall determine that such shareholder is not entitled to
the relief provided by this section, then the right of such shareholder to be
paid the fair value of his shares shall cease and his status as a shareholder
shall be restored, without prejudice to any corporate proceedings which may have
been taken during the interim.
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(c) Within 10 days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or new
corporation, domestic or foreign, shall give written notice thereof to each
dissenting shareholder who has made demand as herein provided, and shall make a
written offer to each such shareholder to pay for such shares at a specified
price deemed by such corporation to be the fair value thereof. Such notice and
offer shall be accompanied by a balance sheet of the corporation the shares of
which the dissenting shareholder holds, as of the latest available date and not
more than 12 months prior to the making of such offer, and a profit and loss
statement of such corporation for the 12 months' period ended on the date of
such balance sheet.
(d) If within 30 days after the date on which such corporate action was
effected the fair value of such shares is agreed upon between any such
dissenting shareholder and the corporation, payment therefor shall be made
within 90 days after the date on which such corporate action was effected, upon
surrender of the certificate or certificates representing such shares. Upon
payment of the agreed value the dissenting shareholder shall cease to have any
interest in such shares.
(e) If within such period of 30 days a dissenting shareholder and the
corporation do not so agree, then the corporation, within 30 days after receipt
of written demand from any dissenting shareholder given within 60 days after the
date on which such corporate action was effected, shall, or at its election at
any time within such period of 60 days may, file a petition in any court of
competent jurisdiction in the county in this state where the registered office
of the corporation is located requesting that the fair value of such shares be
found and determined. If, in the case of a merger or consolidation, the
surviving or new corporation is a foreign corporation without a registered
office in this state, such petition shall be filed in the county where the
registered office of the domestic corporation was last located. If the
corporation shall fail to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the corporation. All dissenting
shareholders, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each dissenting shareholder who is a resident of this state and shall be
served by registered or certified mail on each dissenting shareholder who is a
nonresident. Service on nonresidents shall also be made by publication as
provided by law. The jurisdiction of the court shall be plenary and exclusive.
All shareholders who are parties to the proceeding shall be entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as shall be specified in the order of their
appointment or an amendment thereof. The judgment shall be payable only upon and
concurrently with the surrender to the corporation of the certificate or
certificates representing such shares. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares.
(f) The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable in all the circumstances, from the
date on which the vote was taken on the proposed corporate action to the date of
payment.
(g) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation shall have made an offer to pay for the
shares if the court shall find that the action of such shareholders in failing
to accept such offer was arbitrary or vexatious or not in good faith. Such
expenses shall include reasonable compensation for and reasonable expenses of
the appraisers and a reasonable attorney's fee, but shall exclude the fees and
expenses of experts employed by any party; but if the fair value of the shares
as determined materially exceeds the amount which the corporation offered to pay
therefor, or if no offer was made, the court in its discretion may award to any
shareholder who is a party to the proceeding such sum as the court may determine
to be reasonable compensation to any expert or experts employed by the
shareholder in the proceeding.
(h) Within 20 days after demanding payment for his shares, each shareholder
demanding payment shall submit the certificate or certificates representing his
shares to the corporation for notation thereon that such demand has been made.
His failure to do so shall, at the option of the corporation, terminate his
rights under
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this section unless a court of competent jurisdiction, for good and sufficient
cause shown, shall otherwise direct. If shares represented by a certificate on
which notation has been so made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
(i) Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
section provided, may be held and disposed of by such corporation as in the case
of other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation
or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
under Section 174 of the Delaware General Corporation Law; or (iv) for
any transaction from which the director derived an improper personal
benefit."
Section 145 of the Delaware General Corporation law empowers the Company
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
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authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination
shall be made (1) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the
stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving corporation
as he would have with respect to such constituent corporation if its
separate existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services
by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
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otherwise. The Court of Chancery may summarily determine a corporation's
obligation to advance expenses (including attorneys' fees)."
The Company has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity result in liability, or to
the Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on
inside information, illegal payments, dishonesty, accounting of securities
profits in violation of Section 16(b) of the Securities Exchange Act of 1934
and acts within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------------
2.1 -- Amended and Restated Agreement and Plan of Reorganization,
dated as of July 8, 1994, as amended and restated as of August
22 and 31 and September 27, 1994, by and between Union Bank &
Trust Company and Regions Financial Corporation -- included as
Appendix A to the Proxy Statement/Prospectus.
2.2 -- Form of Amended and Restated Plan of Merger, dated as of July 8,
1994, as amended and restated, to be entered into between Union
and an interim bank to be formed as a subsidiary of Regions
Financial Corporation -- included as Appendix B to the Proxy
Statement/Prospectus.
2.3 -- Form of Escrow Trust Agreement to be entered into by and among
certain stockholder representatives, Regions Financial
Corporation, and Trust Company Bank, as escrow agent -- included
as Appendix C to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation
-- incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 33-54231.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by
reference from S-4 Registration Statement of Regions Financial
Corporation, file no. 33-54231.
5. -- Form of Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Wilson, Price, Baranco & Billingsley, P.C.
23.4 -- Consent of Lange, Simpson, Robinson & Somerville -- to be
included in Exhibit 5.
23.5 -- Consent of Alston & Bird -- to be included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is
set forth in the signature page of the registration statement.
ITEM 22. UNDERTAKINGS.
A. 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 Section 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.
B. 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
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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.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant undertakes 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. The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. 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 Birmingham, State of
Alabama on this the 2nd day of November, 1994.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
/s/ Richard D. Horsley
BY: --------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Virginia L. Martin, and
each of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this registration
statement, and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-
in-fact and agents, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ------------------------------ ------------------
<S> <C> <C>
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board and November 2, 1994
J. Stanley Mackin Chief Executive Officer and
Director
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and November 2, 1994
Richard D. Horsley Executive Financial Officer
and Director
/s/ Robert P. Houston
- -------------------------- Executive Vice President and November 2, 1994
Robert P. Houston Comptroller
/s/ Sheila S. Blair
- -------------------------- Director November 2, 1994
Sheila S. Blair
/s/ James B. Boone, Jr.
- -------------------------- Director November 2, 1994
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director November 2, 1994
Albert P. Brewer
/s/ James S.M. French
- -------------------------- Director November 2, 1994
James S.M. French
</TABLE>
II-5
<PAGE> 172
<TABLE>
<S> <C> <C>
/s/ Catesby ap C. Jones
- -------------------------- Director November 2, 1994
Catesby ap C. Jones
- -------------------------- Director
Olin B. King
/s/ H. Manning McPhillips, Jr.
- -------------------------- Director November 2, 1994
H. Manning McPhillips, Jr.
/s/ Henry E. Simpson
- -------------------------- Director November 2, 1994
Henry E. Simpson
/s/ Robert E. Steiner, III
- -------------------------- Director November 2, 1994
Robert E. Steiner, III
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director November 2, 1994
Lee J. Styslinger, Jr.
</TABLE>
II-6
<PAGE> 173
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------ ------------
2.1 -- Amended and Restated Agreement and Plan of Reorganization,
dated as of July 8, 1994, as amended and restated as of August
22 and 31 and September 27, 1994, by and between Union Bank &
Trust Company and Regions Financial Corporation -- included as
Appendix A to the Proxy Statement/Prospectus.
2.2 -- Form of Amended and Restated Plan of Merger, dated as of July 8,
1994, as amended and restated, to be entered into between
Union and an interim bank to be formed as a subsidiary
of Regions Financial Corporation -- included as Appendix B to
the Proxy Statement/Prospectus.
2.3 -- Form of Escrow Trust Agreement to be entered into by and among
certain stockholder representatives, Regions Financial
Corporation, and Trust Company Bank, as escrow agent -- included
as Appendix C to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation
-- incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 33-54231.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by
reference from S-4 Registration Statement of Regions Financial
Corporation, file no. 33-54231.
5. -- Form of Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Wilson, Price, Baranco & Billingsley, P.C.
23.4 -- Consent of Lange, Simpson, Robinson & Somerville -- to be
included in Exhibit 5.
23.5 -- Consent of Alston & Bird -- to be included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is
set forth in the signature page of the registration statement.
<PAGE> 1
EXHIBIT 5
[Lange, Simpson, Robinson & Somerville letterhead]
November , 1994
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation--S4 Registration Statement, No.
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger between Union Bank &
Trust Company ("Union") and an interim banking subsidiary of Regions (the
"Merger") and in connection with the registration of shares of common stock of
Regions, par value $.625 per share ("Regions Common Stock"), on Form S-4 under
the Securities Act of 1933. The Merger provides for issuance of shares of
Regions Common Stock to the stockholders of Union upon consummation of the
Merger. The number of shares of Regions Common Stock to be issued in the
Merger depends on the average of the closing prices of Regions Common Stock
over a specified period.
We have examined and are familiar with the registration statement on Form
S-4 (33- ) filed with the Securities and Exchange Commission, as such
registration statement has been amended to date. We have examined and are
familiar with the records relating to the organization of Regions and the
documents and records as we have deemed relevant for purposes of rendering this
opinion.
<PAGE> 2
Regions Financial Corporation
November __, 1994
Page 2
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such
conditions capable of being waived, and upon consummation of the Merger, the
shares of Regions Common Stock issued pursuant to the Merger will be duly
authorized, validly issued and outstanding, fully paid and non-assessable, with
no personal liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
<PAGE> 1
EXHIBIT 8
[LETTERHEAD]
, 1994
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Union Bank & Trust Company
60 Commerce Street
Montgomery, Alabama 36104
RE: PROPOSED AGREEMENT AND PLAN OF REORGANIZATION INVOLVING UNION BANK & TRUST
COMPANY, REGIONS FINANCIAL CORPORATION, AND FIRST ALABAMA BANK
Ladies and Gentlemen:
We have served as counsel to Regions Financial Corporation ("Regions") in
connection with the proposed reorganization of Regions and Union Bank & Trust
Company ("Union") pursuant to the Amended and Restated Agreement and Plan of
Reorganization, dated as of July 8, 1994, and amended and restated as of August
22 and 31, and September 27, 1994 (the "Reorganization Agreement"), by and
between Union and Regions, and the related Amended and Restated Plan of Merger,
dated as of July 8, 1994, as amended and restated (the "Plan of Merger"), to be
entered into between Union and Union Interim, a wholly-owned subsidiary of
Regions ("Interim), which provide for the merger of Union with and into Interim,
and the Plan of Merger (the "Plan"), to be entered into between Interim and
First Alabama Bank, a wholly-owned subsidiary of Regions ("First Alabama"),
which provides for the concurrent merger of Interim with and into First Alabama.
In our capacity as counsel to Regions, our opinion has been requested with
respect to certain of the federal income tax consequences of the merger.
In rendering this opinion, we have examined (i) the Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury Regulations, (ii) the legislative
history of applicable sections of the Code, and (iii) appropriate Internal
Revenue Service and court decisional authority. In addition, we have relied upon
certain assumptions as more fully described below. All terms used herein without
definition shall have the respective meanings specified in the Reorganization
Agreement, and unless otherwise specified, all section references herein are to
the Code.
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such documents
as we have deemed appropriate, including:
(1) The Reorganization Agreement and the Plan of Merger;
<PAGE> 2
(2) The Registration Statement that is being filed with the Securities
and Exchange Commission regarding the Interim Merger, which includes the
preliminary Proxy Statement/Prospectus; and
(3) The Plan; and
(4) Such additional documents as we have considered relevant.
In our examination of the documents, we have assumed with your consent that
all documents submitted to us as photocopies faithfully reproduce the originals
thereof, that such originals are authentic, that all such documents have been or
will be duly executed to the extent required, and that all statements set forth
in such documents are accurate.
We have also obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various officers
and representatives of Union and Regions and through certificates provided by
the management of Union and the management of Regions.
You have advised us that the proposed transactions will enable the combined
organization to realize certain economies of scale, yield a wider array of
banking and banking-related services to consumers and businesses, and provide
for a stronger market position and for greater financial resources to meet
competitive challenges within the Montgomery, Alabama market area. To achieve
these goals, the following will occur pursuant to the Reorganization Agreement
and the Merger Agreement:
(1) Union will merge with and into Interim (the "Interim Merger").
Interim shall be the surviving entity and shall be a wholly-owned,
first-tier subsidiary of Regions. Interim shall continue to be governed by
the laws of the State of Alabama until such time as Interim is merged with
and into First Alabama. The Interim Merger shall be consummated pursuant to
the terms of the Reorganization Agreement and the Plan of Merger.
(2) Simultaneously with or immediately after the Interim Merger,
Interim will merge with and into First Alabama (the "First Alabama Merger")
(the Interim Merger and the First Alabama Merger together being referred to
as the "Merger"). First Alabama shall be the surviving entity and shall be
a wholly-owned first tier subsidiary of Regions and shall continue to be
governed by the laws of the State of Alabama. The First Alabama Merger
shall be consummated pursuant to the terms of the Merger Agreement. First
Alabama shall hold all of the assets of and continue to operate the
businesses of Union conducted by Union prior to the Interim Merger and the
First Alabama Merger.
(3) At the Effective Time, by virtue of the Interim Merger, and
without any action on the part of the holders thereof, the shares of the
constituent corporations shall be converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of Interim Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) Each share of Union Common Stock (excluding shares held by
Union or any of its wholly owned Subsidiaries or by Regions or any of
its wholly owned Subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding
shares held by shareholders who perfect their dissenters' rights of
appraisal) issued and outstanding at the Effective Time shall be
converted into and exchanged for (a) that number of shares of Regions
Common Stock (the "Exchange Ratio") equal to the quotient obtained by
dividing (i) $16.02 by (ii) the Average Closing Price and (b) the right
to receive on a deferred basis and pursuant to the terms of the Escrow
Trust Agreement (the "Escrow Stock Right" and collectively, the "Escrow
Stock Rights") that additional fraction of a share of Regions Common
Stock (the "Escrow Stock Ratio") equal to the quotient obtained by
dividing (a) $.51 by (b) the Average Closing Price. The Average Closing
Price shall mean the average of the daily closing sales prices of
Regions Common Stock on the NASDAQ National Market (as reported by The
Wall Street Journal or, if not reported thereby, another authoritative
source chosen by Regions) for the 10 consecutive full trading days in
which
2
<PAGE> 3
such shares are traded on the Nasdaq National Market ending at the close
of trading on the fifth trading day preceding the Effective Time. In the
event Union changes the number of shares of Union Common Stock issued
and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or
the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be
prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted to reflect such stock split, stock dividend, or
recapitalization. In the event Regions changes the number of shares of
Regions Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor
(in the case of a stock dividend) or the effective date thereof (in the
case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the
Exchange Ratio and the Escrow Stock Ratio shall be, to the extent
necessary, proportionately adjusted to reflect such stock split, stock
dividend, or recapitalization.
(4) Each of the shares of Union Common Stock held by Union or any of its
wholly owned Subsidiaries or by Regions or any of its wholly owned Subsidiaries,
in each case other than in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled and retired at the Effective Time, and
no consideration shall be issued in exchange therefor.
(5) Any holder of shares of Union Common Stock who perfects such holder's
dissenter's rights of appraisal in accordance with and as contemplated by
Article 6 of the Alabama Business Corporation Act (or the applicable successor
article) shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of law and in accordance with the terms of
the Reorganization Agreement. In the event that any Union shareholder perfects
such holder's dissenters' rights in connection with the Merger, Regions shall
establish a separate, segregated account using solely assets acquired from
Union, and any and all payments to such dissenters shall originate solely from
that account. Under no circumstances shall such dissenters receive payment or
any form of remuneration from Regions or any entity existing as an affiliate of
Regions prior to the Merger.
(6) Notwithstanding any other provision of the Reorganization Agreement and
except with respect to fractional shares that may be otherwise issuable pursuant
to the Escrow Trust Agreement, each holder of shares of Union Common Stock
exchanged pursuant to the Interim Merger, or of options to purchase shares of
Union Common Stock, who would otherwise have been entitled to receive a fraction
of a share of Regions Common Stock (after taking into account all certificates
representing shares of Union Common Stock delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Regions Common Stock multiplied by the market
value of one share of Regions Common Stock at the Effective Time, in the case of
shares exchanged pursuant to the Interim Merger, or the date of exercise, in the
case of options. The market value of one share of Regions Common Stock at the
Effective Time or the date of exercise, as the case may be, shall be the last
sale price of such common stock on the Nasdaq National Market (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source) on the last trading day preceding the Effective Time, in the case of
shares exchanged pursuant to the Interim Merger, and the date of exercise, in
the case of options. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
(7) At the Effective Time, all rights with respect to Union Common Stock
pursuant to stock options ("Union Options") granted by Union under the Union
Stock Plan, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Regions
Common Stock and, to the extent the Union Option assumed by Regions is exercised
prior to the termination of the Escrow Trust Agreement, Escrow Stock Rights, and
Regions shall assume each Union Option, in accordance with the terms of the
Union Stock Plan and stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each Union Option assumed by Regions may be
exercised solely for shares of Regions Common Stock and, prior to the
termination of the Escrow Trust Agreement, Escrow Stock Rights, (ii) the number
of shares of Regions Common Stock subject to such Union Option shall be equal to
the number of
3
<PAGE> 4
shares of Union Common Stock subject to such Union Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, (iii) the number of shares
of Regions Common Stock represented by the Escrow Stock Rights subject to such
Union Option, if exercised prior to the termination of the Escrow Trust
Agreement, shall be equal to the number of shares of Union Common Stock subject
to such option immediately prior to the Effective Time multiplied by the Escrow
Stock Ratio, (iv) the per share exercise price under each such Union Option
shall be adjusted by dividing the per share exercise price under each such Union
Option by the Exchange Ratio and rounding down to the nearest cent, and (v) the
aggregate exercise price for all shares of Regions Common Stock issuable
pursuant to the exercise of the option and pursuant to the Escrow Stock Rights
shall equal the product of the number of shares of Regions Common Stock subject
to such Union Option as calculated in (ii) above and the per share exercise
price under such Union Option as calculated in (iv) above; provided, that in the
event that the Union Option assumed by Regions is exercised after the
termination of the Escrow Trust Agreement and the expiration of the Escrow Stock
Rights, such option shall be exercisable for that number of shares of Regions
Common stock represented by the then-expired Escrow Stock Rights as calculated
in (iii) above that would have been issuable upon termination of the Escrow
Trust Agreement if such option had been exercised prior to the termination of
the Escrow Trust Agreement, as adjusted if necessary from the date of
termination of the Escrow Trust Agreement to the date of exercise. It is
intended that the foregoing assumption shall be undertaken in a manner that will
not constitute a "modification," as defined in Section 424 of the Code, as to
any stock option which is an "incentive stock option."
(8) All restrictions or limitations on transfer with respect to Union
Common Stock awarded under the Union Stock Plan or any other plan, program, or
arrangement of any Union Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Regions Common Stock into which such restricted
stock is converted.
With your consent, we have also assumed that the following statements are
true on the date hereof and will be true on the date on which the Merger is
consummated:
(1) The Exchange Ratio and the Escrow Stock Ratio, both of which determine
the amount of Regions Common Stock to be received in the Merger by each
exchanging Union shareholder, is a product of bona fide negotiations between
parties bargaining at arm's length.
(2) There is no plan or intention by any of the shareholders of Union who
own 5% or more of the outstanding Union stock, and to the best of the knowledge
of the management of Union, the remaining Union shareholders have no plan or
intention, to sell, exchange, or otherwise dispose of a number of shares of
Regions stock that they will receive in the Merger that will reduce on the part
of the Union shareholders such shareholders' ownership of Regions stock to a
number of shares having an aggregate value as of the date of the Merger of less
than 50% of the aggregate value of all of the stock of Union outstanding
immediately prior to the Merger. For purposes of this representation, shares of
Union stock that are disposed of or exchanged for cash in lieu of fractional
shares of Regions stock will be treated as outstanding Union stock immediately
prior to the Merger. Moreover, shares of Union stock and shares of Regions stock
held by Union shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the transactions will be considered outstanding immediately prior
to the Merger in making this representation.
(3) In the Interim Merger, Interim will acquire, and in the First Alabama
Merger First Alabama will acquire, assets representing at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Union immediately prior to the Merger. For this purpose,
all redemptions and distributions (except for regular, normal dividends) made by
Union immediately preceding the Merger and all amounts paid out of the assets of
Union as reorganization expenses will be considered as assets held by Union
immediately prior to the Merger. In addition, assets disposed of in
contemplation of the Merger will be considered as assets held by Union
immediately prior to the Merger.
(4) Simultaneously with or immediately after the Interim Merger, Regions
plans and intends to merge Interim with and into First Alabama. Regions has no
plan or intention to liquidate Interim, to sell or otherwise dispose of its
stock in Interim, or to cause Interim to sell or otherwise dispose of any of the
assets acquired by
4
<PAGE> 5
Interim from Union, except for dispositions made in the ordinary course of
business or transfers to a corporation controlled by Interim.
(5) Regions has no plan or intention to liquidate First Alabama, or to sell
or otherwise dispose of its stock in First Alabama, to merge First Alabama with
and into another corporation, or to cause First Alabama to sell or otherwise
dispose of any of the assets acquired by First Alabama from Interim, except for
dispositions made in the ordinary course of business or transfers to a
corporation controlled by First Alabama.
(6) From and after the consummation of the Interim Merger and until the
First Alabama Merger, Interim will continue the historic business of Union or
use a significant portion of Union's business assets in a business. From and
after the consummation of the First Alabama Merger, First Alabama will continue
the historic business of Interim or use a significant portion of Interim's
business assets in a business.
(7) The liabilities of Union to be assumed by Interim in the Interim Merger
(and the liabilities to which the assets to be transferred are subject) were
incurred or will be incurred by Union in the ordinary course of its business.
(8) There is not now nor will there be at the time of the Merger any
intercorporate indebtedness existing between Union, Regions, First Alabama and
Interim that was issued, acquired, or will be settled at a discount.
(9) Union will pay all direct costs and expenses incurred by it or on its
behalf in connection with the Merger, except that Regions shall pay the fees and
printing costs in connection with certain regulatory proceedings before such
authorities and in connection with the Registration Statement and Proxy
Statement/ Prospectus (which are directly related to the Merger). Shareholders
of Union will pay their own expenses, if any, incurred in connection with the
Merger.
(10) Prior to the Merger, Regions will be in control of Interim and First
Alabama. For purposes of this assumption, as well as assumption 11, a
corporation is considered to control a corporation in which it holds at least
80% of the total combined voting power of all classes of stock entitled to vote
and at least 80% of the total number of shares of all other classes of stock.
(11) Following the Interim Merger, Interim will not issue additional shares
of its stock that would result in Regions losing control of Interim. Following
the First Alabama Merger, First Alabama will not issue additional shares of its
stock that would result in Regions losing control of First Alabama.
(12) The fair market value and adjusted basis of the assets to be
transferred from Union to Interim as a result of the Interim Merger will equal
or exceed the sum of the liabilities of Union to be assumed by Interim plus the
amount of liabilities to which the assets to be transferred are subject.
(13) The payment of cash to Union shareholders in lieu of fractional shares
of Regions stock will not be a separately bargained for consideration, but will
be undertaken solely for the purpose of avoiding the expense and inconvenience
of issuing and transferring fractional shares. The total cash consideration that
will be paid to Union shareholders in lieu of fractional shares of Regions stock
will represent less than 1.0% of the total consideration issued in the Interim
Merger.
(14) Regions has no plan or intention to redeem or otherwise reacquire its
stock that will be issued in the Merger, except for purchases of stock in the
open market in the normal course of business executed through an independent
broker in which Regions is not aware of the identity of any seller or in private
placement transactions in which the sellers are not former Union shareholders.
(15) None of the compensation received by any shareholder-employee of Union
represents separate consideration for, or is allocable to, any of his Union
stock. None of the Regions stock that will be received by Union
shareholder-employees in the Merger represents separately bargained for
consideration which is allocable to any employment agreement or arrangement. Any
compensation to be paid to a Union shareholder-employee who continues as an
employee of First Alabama, Regions, or Interim subsequent to the Merger will be
for services rendered and will be commensurate with amounts paid to third
parties bargaining at arms length for similar services.
5
<PAGE> 6
(16) Union has no plan or intention to make, and has not made, any
distributions other than regular, normal dividends to shareholders prior to the
Merger.
(17) Interim has no plan or intention to make, and has not made, any
distributions other than regular, normal dividends to shareholders prior to the
First Alabama Merger.
(18) Regions does not own, directly or indirectly, nor has it owned during
the past five years, directly or indirectly, any stock of Union.
(19) Interim will not issue any of its stock in the Interim Merger. First
Alabama will not issue any of its stock in the First Alabama Merger.
(20) Union has not reacquired or redeemed any of its stock in contemplation
of the Merger.
(21) Neither First Alabama nor Interim has reacquired or redeemed any of
its stock within the last three (3) years.
(22) The Reorganization Agreement represents the entire understanding of
Union, Regions and Interim with respect to the Interim Merger.
(23) The Interim Merger and, if applicable, the First Alabama Merger are
part of an integrated plan being undertaken for the purposes of enhancing the
business of Union through utilization of the financial resources of Regions and
allowing Regions to expand its banking business into the markets served by Union
and for other business purposes.
(24) For each of Regions, Interim, First Alabama and Union, not more than
25 percent of the fair market value of its adjusted total assets consists of
stock and securities of any one issuer, and not more than 50 percent of the fair
market value of its adjusted total assets consists of stock and securities of
five or fewer issuers. For purposes of the preceding sentence, (a) a
corporation's adjusted total assets exclude cash, cash items (including accounts
receivable and cash equivalents), and United States government securities, (b) a
corporation's adjusted total assets exclude stock and securities issued by any
subsidiary at least 50 percent of the voting power or 50 percent of the total
fair market value of the stock of which is owned by the corporation, but the
corporation is treated as owning directly a ratable share (based on the
percentage of the fair market value of the subsidiary's stock owned by the
corporation) of the assets owned by any such subsidiary, and (c) all
corporations that are members of the same "controlled group" within the meaning
of section 1563(a) of the Code are treated as a single issuer.
(25) Neither Regions, Interim, First Alabama nor Union, is under the
jurisdiction of a court in a case under Title 11 of the United States Code, a
receivership, foreclosure, or similar proceeding in a federal or state court.
In addition, we have assumed, with your consent, that the following
statements regarding the stock placed in escrow pursuant to the terms of the
Escrow Trust Agreement are true on the date hereof and will be true on the date
on which the Merger is consummated:
(1) There is a valid business reason for establishing the arrangement.
(2) The stock subject to such arrangement appears as issued and outstanding
on Regions' balance sheet, and such stock is legally outstanding under Delaware
law.
(3) All dividends paid on such stock will be distributed currently to the
exchanging Union shareholders.
(4) All voting rights of such stock (if any) are exercisable by or on
behalf of the Union shareholders or their authorized agent.
(5) No shares of such stock are subject to restrictions requiring their
return to Regions because of death, failure to continue employment, or similar
restrictions.
(6) All such stock is released from the arrangement within five years from
the date of consummation of the Interim Merger (except where there is a bona
fide dispute as to whom the stock should be released);
6
<PAGE> 7
(7) At least fifty percent of the number of shares of each class of stock
issued initially to the shareholders is not subject to the arrangement.
(8) Except as otherwise contemplated in the Escrow Trust Agreement, the
return of stock to Regions (or the payment of proceeds from the sale of Regions
Common Stock as reimbursement) will not be triggered by an event the occurrence
or nonoccurrence of which is within the control of Union shareholders.
(9) The return of stock to Regions will not be triggered by the payment of
additional tax or reduction in a tax paid as a result of a Service audit of the
Union shareholders or Regions either (a) with respect to the reorganization in
which the escrowed stock will be used, or (b) when the reorganization in which
the escrowed stock will be issued involves persons related within the meaning of
section 267(c)(4) of the Code.
(10) The mechanism for the calculation of the number of shares of stock to
be returned to Regions (or sold for the reimbursement of Regions) is objective
and readily ascertainable.
OPINIONS
Based on the foregoing assumptions, we are of the opinion that:
(1) The Merger, together with the merger of Union Interim with and
into First Alabama (the "First Alabama Merger"), if the First Alabama
Merger is consummated, will qualify as a reorganization within the meaning
of Section 368(a). Union, Regions, and, if the First Alabama Merger is
consummated, First Alabama will each be "a party to a reorganization"
within the meaning of Section 368(b).
(2) Union will recognize no gain or loss upon the transfer of
substantially all of its assets pursuant to the Merger. Sections 361 and
357(a).
(3) Regions, Interim, and First Alabama will recognize no gain or loss
upon the receipt of substantially all of the assets of Union pursuant to
the Merger and the First Alabama Merger. Section 1032; Rev. Rul. 57-278,
1957-1 C.B. 124.
(4) Except as discussed below, no gain or loss will be recognized by a
Union shareholder upon the exchange of the shareholder's Union Common Stock
for shares of Regions Common Stock (including the shares held as Escrow
Shares). Section 354(a)(1).
(5) The basis of Regions Common Stock to be received by a Union
shareholder (including the shares held as Escrow Shares and any fractional
share interests) will, in each instance, be the same as the basis of the
Union Common Stock surrendered in exchange therefor. Section 358(a)(1).
(6) The holding period of Regions Common Stock to be received by Union
shareholders will, in each instance, include the period during which Union
Common Stock surrendered in exchange therefor was held, provided such stock
was held as a capital asset in the hands of the Union shareholder on the
date of the exchange. Section 1223(1).
(7) The payment of cash to Union shareholders in lieu of fractional
shares of Regions Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the
exchange and then were redeemed by Regions. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the shares redeemed as provided in Section 302(a). Any gain or
loss recognized upon such exchange will be capital gain or loss, provided
the fractional share would constitute a capital asset in the hands of the
exchanging shareholder. Rev. Proc. 77-41, 1977-2 C.B. 574; Rev. Rul.
66-365, 1966-2 C.B. 116.
(8) Where solely cash is received by a Union shareholder in exchange
for such holder's Union Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such holder's Union Common Stock, subject to the provisions
and limitations of Section 302.
7
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(9) In the event that the Merger is consummated, but the First Alabama
Merger is not consummated, then the Merger will qualify as a reorganization
within the meaning of Section 368(a), and, except as discussed herein, no
gain or loss will be recognized by a Union stockholder upon the exchange of
the stockholder's Union Common Stock for shares of Regions Common Stock
(including the shares held as Escrow Shares).
In the event that the Escrow Shares held pursuant to the Escrow Trust
Agreement are used to pay Regions for those Environmental Remediation Costs for
which Regions is entitled to reimbursement pursuant to the terms of the Escrow
Trust Agreement, the stockholders of Union will be required to recognize gain or
loss equal to the difference between the fair market value at the time of the
reimbursement of the Escrow Shares returned to Regions (or sold to reimburse
Regions) under the Escrow Trust Agreement and the adjusted basis of such shares.
While each stockholder should consult its own tax advisor with respect to its
particular circumstances, it is the position of the Internal Revenue Service set
forth in Revenue Ruling 78-376 that the return of Escrow Shares to Regions under
the Escrow Trust Agreement will not result in a deductible loss to the
stockholders and that the basis in each stockholder's remaining shares received
in the Merger will be increased by an amount equal to the fair market value of
the returned shares.
When Escrow Shares not used to pay Environmental Remediation Costs are
released from escrow, any payment of cash to a Union stockholder in lieu of a
fractional share of Regions Common Stock will be treated as if the fractional
share had been distributed to the Union stockholder and then redeemed by
Regions. The cash payment will be treated as having been received in exchange
for the fractional share redeemed as provided in Section 302(a) of the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed are true on the date hereof and
will be true on the date on which the Merger is consummated. Our opinions cannot
be relied upon if any of the facts pertinent to the Federal income tax treatment
of the Interim Merger and the First Alabama Merger stated in such documents or
in such additional information is, or later becomes, inaccurate, or if any of
the statements set out herein are, or later become, inaccurate. Finally, our
opinions are limited to the tax matters specifically covered thereby, and we
have not been asked to address, nor have we addressed, any other tax
consequences of the Merger, including for example any issues related to
intercompany transactions, accounting methods, or changes in accounting methods
resulting from the Merger.
This opinion is being provided solely for the benefit of Regions, Union,
and their shareholders. No other person or party shall be entitled to rely on
this opinion.
We hereby consent to the use of this opinion and to the references made to
the firm under the captions "Summary -- Certain Federal Income Tax Consequences
of the Merger," "Description of the Transaction -- Certain Federal Income Tax
Consequences of the Merger," and "Opinions" in the Proxy Statement/ Prospectus
constituting part of the Registration Statement on Form S-4 of Regions.
Very truly yours,
ALSTON & BIRD
By:
--------------------------------------
Philip C. Cook
8
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 2,520,825 shares of its common stock
and to the incorporation by reference therein of our report dated February 4,
1994, with respect to the consolidated financial statements of Regions
Financial Corporation (formerly First Alabama Bancshares, Inc.) included in its
Annual Report to Stockholders which is incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1993, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Birmingham, Alabama
October 31, 1994
<PAGE> 1
EXHIBIT 23.2
WILSON,
PRICE,
BARRANCO &
BILLINGSLEY, P.C.
-----------------
Certified Public Accountants
Montgomery, Alabama
We consent to the inclusion of our report dated January 31, 1994
accompanying the financial statements of Union Bank & Trust Company in the
Proxy Statement/Prospectus constituting part of the Registration statement on
Form S-4 of Regions Financial Corporation filed November 4, 1994 with the SEC
under the Securities Act of 1933 as amended.
/s/ Wilson, Price, Barranco & Billingsley, P.C.
-------------------------------------------
Wilson, Price, Barranco & Billingsley, P.C.
November 2, 1994
Montgomery, Alabama
