<PAGE> 1
As filed with the Securities and Exchange Commission on June 5, 1996
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
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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)
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Copies to:
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CHARLES C. PINCKNEY FRANK M. CONNER III KATHRYN L. KNUDSON
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD POWELL, GOLDSTEIN, FRAZER & MURPHY
SOMERVILLE 601 PENNSYLVANIA AVENUE, N.W. SIXTEENTH FLOOR
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 191 PEACHTREE STREET, N.E.
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 ATLANTA, GEORGIA 30303
(205) 250-5000 (202) 508-3303 (404) 572-6600
</TABLE>
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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. / /
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CALCULATION OF REGISTRATION FEE
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Title of each Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate Amount of
to be registered registered per unit* offering price* registration fee
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Common Stock 338,703 $ 23.19731 $ 7,857,000 $ 2,709.31
================================================================================================================================
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*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.
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<PAGE> 2
REGIONS FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
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CAPTION OR LOCATION IN
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
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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...................................... Summary; First Gwinnett Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business of First Gwinnett; Voting Securities and
Principal Stockholders of First Gwinnett; Index
to First Gwinnett 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>
2
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Dear First Gwinnett Bancshares Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
First Gwinnett Bancshares, Inc. ("First Gwinnett") to be held at First
Gwinnett's main office, 5935 Buford Highway, Norcross, Georgia, 30071 on
, 1996, at :00 .m., local time, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger (the "Agreement"), entered
into with Regions Financial Corporation ("Regions") pursuant to which First
Gwinnett will merge (the "Merger") with and into Regions, and First Gwinnett
Bank (the "Bank"), a wholly owned subsidiary of First Gwinnett, will become a
wholly owned subsidiary of Regions. Upon consummation of the Merger, each share
of First Gwinnett common stock issued and outstanding (except for certain
shares held by First Gwinnett or Regions and shares held by stockholders who
perfect their dissenters' rights of appraisal) will be converted into 1.1336
shares of Regions common stock.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and provides other specific information concerning the Special
Meeting. Please read these materials carefully and consider thoughtfully the
information set forth in them.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors of First Gwinnett has agreed to vote those First Gwinnett shares
beneficially owned by such member in favor of the Merger. Consummation of the
Merger is subject to certain conditions, including approval of the Agreement by
First Gwinnett stockholders.
Stockholders of First Gwinnett 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 First Gwinnett shares in cash, as
provided by applicable law.
It is important to understand that approval of the Agreement requires the
affirmative vote of a majority of the common stock of First Gwinnett entitled
to vote at the Special Meeting, not just a majority of the votes cast.
Consequently, a failure to vote will have the same effect as a vote against the
Agreement.
Accordingly, whether or not you plan to attend the Special Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Regions is a
significant step for First Gwinnett, and your vote on this matter is of great
importance. On behalf of the Board of Directors, I urge you to vote for
approval of the Merger by marking the enclosed proxy card "FOR" Item One.
Sincerely,
Monty G. Watson
President and Chief Executive Officer
<PAGE> 4
FIRST GWINNETT BANCSHARES, INC.
5935 BUFORD HIGHWAY, NORCROSS, GEORGIA, 30071
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1996
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of First Gwinnett Bancshares, Inc. ("First Gwinnett"), a bank holding
company, will be held at First Gwinnett's main office, 5935 Buford Highway,
Norcross, Georgia, 30071 on , 1996, at :00 .m., local time, for the
following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of October 23, 1995 (the "Agreement"), by and between First Gwinnett and
Regions Financial Corporation ("Regions") pursuant to which (i) Regions will
acquire all of the issued and outstanding common stock of First Gwinnett
through the merger of First Gwinnett with and into Regions (the "Merger"), (ii)
each share of First Gwinnett common stock (except for certain shares held by
First Gwinnett or Regions and shares held by stockholders who perfect their
dissenters' rights of appraisal) will be converted into 1.1336 shares of
Regions common stock, and (iii) each First Gwinnett stockholder will receive
cash in lieu of any remaining fractional share interest, all as described more
fully in the accompanying Proxy Statement/Prospectus; and
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 , 1996, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of First Gwinnett have a right to dissent from the Merger and
obtain payment of the fair value of their shares in cash by complying with the
applicable provisions of applicable law, which are attached to the accompanying
Proxy Statement/Prospectus as Appendix B.
The Board of Directors of First Gwinnett unanimously recommends that
holders of First Gwinnett common stock vote to approve the proposals listed
above.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Special Meeting in person. The proxy may
be revoked by the person executing the proxy by filing with the Secretary of
First Gwinnett an instrument of revocation or a duly executed proxy bearing a
later date or by electing to vote in person at the Special Meeting.
By Order of the Board of Directors
Kelly J. Johnson
Corporate Secretary
, 1996
<PAGE> 5
FIRST GWINNETT BANCSHARES, INC. REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD , 1996 (PAR VALUE $.625)
This Prospectus of Regions Financial Corporation, a regional bank holding
company organized and existing under the laws 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 First
Gwinnett Bancshares, Inc. ("First Gwinnett") upon consummation of the proposed
merger (the "Merger") described herein, by which First Gwinnett will merge with
and into Regions pursuant to the terms of an Agreement and Plan of Merger,
dated as of October 23, 1995, by and between Regions and First Gwinnett (the
"Agreement").
On the effective date of the Merger (the "Effective Date"), except as
described herein, (i) First Gwinnett will merge with and into Regions, (ii)
each outstanding share of the $1.00 par value common stock of First Gwinnett
("First Gwinnett Common Stock") will be converted into 1.1336 shares of Regions
Common Stock, and (iii) each holder of First Gwinnett Common Stock will receive
cash in lieu of any remaining fractional interest. A copy of the Agreement is
attached to this Proxy Statement/Prospectus as Appendix A.
As a result of the Merger, the separate existence of First Gwinnett will
cease, and First Gwinnett Bank, a wholly owned subsidiary of First Gwinnett
(the "Bank"), will become a wholly owned subsidiary of Regions. Regions
anticipates consolidating all of its commercial bank subsidiaries in Georgia,
including the Bank, into one commercial bank organized under Georgia law. For a
further description of the terms of the Merger, see "Description of the
Transaction."
This Prospectus also constitutes a Proxy Statement of First Gwinnett and is
being furnished to the stockholders of First Gwinnett in connection with the
solicitation of proxies by the Board of Directors of First Gwinnett for use at
its special meeting of stockholders, including any adjournment or postponement
thereof (the "Special Meeting"), to be held on , 1996 to consider and
vote on the proposed Merger and related matters. This Proxy
Statement/Prospectus and the accompanying proxy card are first being mailed to
stockholders of First Gwinnett on or about , 1996.
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
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is , 1996.
<PAGE> 6
AVAILABLE INFORMATION
Regions is subject to the reporting 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 on 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. (the "NASD"), 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 First Gwinnett. 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 First
Gwinnett 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 First
Gwinnett was supplied by First Gwinnett.
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, 1995 (which includes supplemental consolidated financial
statements of Regions, giving effect to the March 1, 1996 combination of
First National Bancorp with Regions, accounted for as a pooling of interests);
2. Regions' Quarterly Report on Form 10-Q for the three months ended
March 31, 1996;
2
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3. Regions' Current Report on Form 8-K dated as of March 1, 1996, and
amendment no. 1 thereto filed March 28, 1996;
4. Regions' Current Report on Form 8-K filed June 4, 1996; (which
includes management's discussion and analysis of financial condition and
results of operations of Regions, giving effect to the combination of First
National Bancorp with Regions, accounted for as a pooling of interests);
5. Regions' report on Form 10-C filed March 11, 1996; and
6. 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.
Regions' Annual Report on Form 10-K for the year ended December 31, 1995,
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Regions Annual Report to Stockholders"), but
does not incorporate other portions of the Regions Annual Report to
Stockholders. Only those portions of the Regions Annual Report to Stockholders
captioned "Financial Summary & Review 1995," "Financial 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. In
particular, reference is made to the Regions' Annual Report on Form 10-K for
the year ended December 31, 1995, and Regions' Current Report on Form 8-K dated
June 4, 1996, which include supplemental consolidated financial statements and
the related management's discussion and analysis of financial condition and
results of operations of Regions, giving effect to the combination of First
National Bancorp with Regions, effected March 1, 1996, and accounted for as a
pooling of interests. See "Summary" and "Business of Regions--Recent
Developments."
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 (334) 832-8401). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1996.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Special Meeting of First Gwinnett Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Merger; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reasons for the Merger; Recommendation of First Gwinnett's Board
of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals and Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Differences in Stockholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Comparative Market Prices of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DESCRIPTION OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Treatment of First Gwinnett Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Distribution of Regions Stock Certificates and
Payment for Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Resales of the Regions Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Antitakeover Provisions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Amendment of Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Classified Board of Directors and Absence of Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . . . 28
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Limitations on Director Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Special Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Actions by Stockholders Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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Stockholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Business Combinations with Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Mergers, Consolidations, and Sales of Assets Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Stockholders' Rights to Examine Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
FIRST GWINNETT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
BUSINESS OF FIRST GWINNETT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Transactions with Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF FIRST GWINNETT . . . . . . . . . . . . . . . . . . . . . . . . . 46
BUSINESS OF REGIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Support of Subsidiary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
DESCRIPTION OF REGIONS COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
INDEX TO FIRST GWINNETT FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A--Agreement and Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B--Copy of Title 14, Chapter 2, Article 13 of the Georgia
Code Relating to Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
5
<PAGE> 10
SUMMARY
The following is a summary of certain information relating to the Special
Meeting, the proposed Merger, and the offering of shares of Regions Common
Stock to be issued upon consummation thereof. 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 "First Gwinnett" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
First Gwinnett. First Gwinnett is a bank holding company organized under
the laws of the state of Georgia, with its principal executive office located
in Norcross, Georgia. First Gwinnett operates principally through the Bank,
which is a wholly owned subsidiary of First Gwinnett and a state-chartered
commercial bank and which provides a range of retail banking services through
its one office in Gwinnett County, Georgia. At March 31, 1996, First Gwinnett
had total consolidated assets of approximately $68.4 million, total
consolidated deposits of approximately $59.7 million, and total consolidated
stockholders' equity of approximately $7.9 million. First Gwinnett's principal
executive office is located at 5935 Buford Highway, Norcross, Georgia, 30071
and its telephone number at such address is (770) 368-2200.
Regions. Regions is a regional bank holding company organized and existing
under the laws of the state of Delaware and headquartered in Birmingham,
Alabama, with approximately 353 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee as of March 31, 1996. At that date, Regions
had total consolidated assets of approximately $17.5 billion, total
consolidated deposits of approximately $14.2 billion, and total consolidated
stockholders' equity of approximately $1.5 billion. Regions is the third
largest bank holding company headquartered in Alabama in terms of assets, based
on March 31, 1996 information. Regions operates banking subsidiaries in
Alabama, Florida, Georgia, Louisiana, and Tennessee and 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.
Since March 31, 1996, Regions has completed the acquisition of a financial
institution in Georgia. Regions also has entered into definitive agreements to
acquire, in addition to First Gwinnett, three additional financial
institutions, one of which is located in Georgia and two of which are located
in Louisiana (the "Other Pending Acquisitions"). For information with respect
to the Other Pending Acquisitions see "Documents Incorporated by Reference" and
"Business of Regions--Recent Developments."
Regions 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 FIRST GWINNETT STOCKHOLDERS
The Special Meeting will be held at :00 p.m., local time, on ,
1996, at First Gwinnett's main office, 5935 Buford Highway, Norcross, Georgia,
30071, for the purpose of considering and voting on approval of the Agreement.
See "The Special Meeting."
6
<PAGE> 11
RECORD DATE; VOTE REQUIRED
Only holders of record of First Gwinnett Common Stock at the close of
business on , 1996 (the "Record Date"), will be entitled to vote at the
Special Meeting. The affirmative vote of a majority of the First Gwinnett
Common Stock entitled to vote at the Special Meeting will be required to
approve the Agreement. As of the Record Date, there were 291,785 shares of
First Gwinnett Common Stock outstanding and entitled to be voted.
The directors and executive officers of First Gwinnett and their affiliates
beneficially owned, as of the Record Date, 84,658 shares (or approximately 29%
of the outstanding shares) of First Gwinnett Common Stock. Each member of the
Board of Directors of First Gwinnett has agreed to vote those First Gwinnett
shares beneficially owned by such member in favor of the Merger. The directors
and executive officers of Regions and their affiliates beneficially owned, as
of the Record Date, no shares of First Gwinnett Common Stock. As of that date,
neither First Gwinnett nor Regions held any shares of First Gwinnett Common
Stock in a fiduciary capacity for others, or as a result of debts previously
contracted. See "The Special Meeting--Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the acquisition of First Gwinnett by Regions
pursuant to the Merger of First Gwinnett with and into Regions. On the
Effective Date, each share of First Gwinnett Common Stock then issued and
outstanding (excluding any shares held by stockholders who perfect their
dissenters' rights of appraisal and shares held by First Gwinnett, Regions, or
their respective subsidiaries, other than shares held in a fiduciary capacity
or in satisfaction of debts previously contracted) will be converted into
1.1336 shares of Regions Common Stock (the "Exchange Ratio"). No fractional
shares of Regions Common Stock will be issued. Rather, cash will be paid in
lieu of any fractional share interest to which any First Gwinnett stockholder
would be entitled upon consummation of the Merger, based on the closing price
of Regions Common Stock on the Nasdaq National Market (as reported by The Wall
Street Journal, or, if not reported thereby, by another authoritative source
selected by Regions) on the last full trading day immediately preceding the
Effective Date, or the date of exercise, in the case of options. See
"Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of First Gwinnett Common Stock entitled to vote on approval of the
Agreement have the right to dissent from the Merger and, upon consummation of
the Merger and the satisfaction of certain specified procedures and conditions,
to receive fair value of such holders' shares of First Gwinnett Common Stock in
cash in accordance with the applicable provisions of the Georgia Business
Corporation Code (the "Georgia Act"). The procedures to be followed by
dissenting stockholders are summarized under "Description of the
Transaction--Dissenters' Rights," and the applicable provisions of the Georgia
Act are reproduced as Appendix B to this Proxy Statement/Prospectus.
REASONS FOR THE MERGER; RECOMMENDATION OF FIRST GWINNETT'S BOARD OF DIRECTORS
First Gwinnett's Board of Directors has unanimously approved the Merger and
the Agreement and has determined that the Merger is fair to, and in the best
interests of, First Gwinnett and its stockholders. Accordingly, First
Gwinnett's Board unanimously recommends that First Gwinnett's stockholders vote
FOR approval of the Agreement. EACH MEMBER OF THE BOARD OF DIRECTORS OF FIRST
GWINNETT HAS AGREED TO VOTE SUCH MEMBER'S SHARES OF FIRST GWINNETT COMMON STOCK
IN FAVOR OF THE AGREEMENT. In approving the Merger, First Gwinnett's directors
considered First Gwinnett'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 undue conditions or delay, and legal
advice concerning the proposed Merger. See "Description of the
Transaction--Background of and Reasons for the Merger."
7
<PAGE> 12
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
Delaware Certificate of Merger and the Georgia Certificate of Merger are filed
and become effective with, respectively, the Delaware Secretary of State and
the Georgia Secretary of State. Unless otherwise agreed upon by Regions and
First Gwinnett, 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 by 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
Agreement is approved by the requisite vote of First Gwinnett 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 during the third quarter of 1996, 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 Chicago Trust
Company of New York, acting in its capacity as exchange agent for Regions (the
"Exchange Agent"), to mail to the former stockholders of First Gwinnett a form
letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of First Gwinnett Common Stock
for certificates representing shares of Regions Common Stock. FIRST GWINNETT
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 approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Department of Banking and
Finance of the state of Georgia (the "Georgia Department"). Applications for
the requisite approvals have been filed with these agencies, each of which has
issued its approval of the Merger.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of First Gwinnett stockholders,
receipt of an opinion of counsel or a ruling from the Internal Revenue Service
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."
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 action of the Boards of Directors of both
First Gwinnett and Regions, or by action of the Board of Directors of either
company under certain circumstances, including if the Merger is not consummated
by September 30, 1996, 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, First Gwinnett will continue to operate as a
bank holding company 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 First Gwinnett's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of First
Gwinnett generally. Those interests relate to, among other things, provisions
in the Agreement regarding indemnification and eligibility for certain Regions
employee
8
<PAGE> 13
benefits, and treatment of outstanding options to acquire First Gwinnett Common
Stock. 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 on the receipt of an opinion of
counsel to the effect that, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the exchange in the Merger of First
Gwinnett Common Stock for Regions Common Stock will not give rise to gain or
loss to First Gwinnett stockholders, except to the extent of any cash received
in lieu of fractional share interests. Gain recognition, if any, will not be in
excess of the amount of cash received. Subject to the provisions and
limitations of Section 302(a) of the Code, gain or loss will be recognized upon
the receipt of cash in lieu of fractional share interests. 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, FIRST
GWINNETT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE
THE SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS.
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, First Gwinnett stockholders, whose rights are
governed by the Georgia Act and by First Gwinnett's Articles of Incorporation
and Bylaws, will automatically become Regions stockholders, and their rights as
Regions stockholders will be determined by the Delaware General Corporation Law
(the "Delaware GCL") and by Regions' Certificate of Incorporation and Bylaws.
The rights of Regions stockholders differ from the rights of First Gwinnett
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. First Gwinnett Common Stock is not traded in any
established market. The following table sets forth, as of the indicated dates,
(i) the last sale price of Regions Common Stock, (ii) the sale price in the last
known transaction of purchase and sale of First Gwinnett Common Stock, which
occurred in September 1995, and (iii) the equivalent per share price (as
explained below) of First Gwinnett Common Stock. The indicated dates of October
23, 1995, and , 1996 represent, respectively, the last trading day
immediately preceding public announcement of Merger and the latest practicable
date prior to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS FIRST GWINNETT OF FIRST GWINNETT
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
October 23, 1995 $40.38 $25.50 $45.77
, 1996
</TABLE>
The equivalent per share price of First Gwinnett Common Stock at each
specified date represents the last sale price of a share of Regions Common
Stock on such date multiplied by the Exchange Ratio of 1.1336. Stockholders are
advised to obtain current market quotations for Regions Common Stock and First
Gwinnett Common Stock. No assurance can be given as to the market price of
Regions Common Stock at or after the Effective Date.
9
<PAGE> 14
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 First Gwinnett, (ii) a pro forma combined basis per share of
Regions Common Stock, giving effect to the Merger, and (iii) an equivalent pro
forma basis per share of First Gwinnett Common Stock, giving effect to the
Merger. The Regions and First Gwinnett pro forma combined information and the
First Gwinnett pro forma Merger equivalent information give effect to the
Merger on a purchase accounting basis and assume an Exchange Ratio of 1.1336.
See "Description of the Transaction--Accounting Treatment." The pro forma data
are presented for information purposes only and are not necessarily indicative
of the results of operations or combined financial position that would have
resulted had the Merger 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 First Gwinnett, including the respective notes thereto. Regions' historical
financial information has been restated to give effect to the combination of
First National Bancorp with Regions, effected March 1, 1996, and accounted for
as a pooling of interests. See "Documents Incorporated by Reference," and
"--Selected Financial Data."
10
<PAGE> 15
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited) (Unaudited except Regions and
First Gwinnett historical)
<S> <C> <C> <C> <C> <C>
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE
PER COMMON SHARE
Regions historical . . . . . . . . . . . . . . . $ .85 $ .81 $ 3.21 $ 3.10 $ 2.81
First Gwinnett historical . . . . . . . . . . . .81 .73 2.55 2.44 0.09
Regions and First Gwinnett pro forma combined(1). .85 3.20
First Gwinnett pro forma Merger equivalent(2) . . .96 3.63
DIVIDENDS DECLARED PER COMMON
SHARE
Regions historical . . . . . . . . . . . . . . . $ .35 $ .33 $ 1.32 $ 1.20 $ 1.04
First Gwinnett historical . . . . . . . . . . . . .25 .25 0.45 0.10 0.10
First Gwinnett pro forma Merger equivalent(3) . . .40 .37 1.50 1.36 1.18
BOOK VALUE PER COMMON SHARE
(PERIOD END)
Regions historical . . . . . . . . . . . . . . . $23.84 $21.92 $23.38 $21.26 $19.85
First Gwinnett historical. . . . . . . . . . . . 26.93 24.13 26.41 22.99 21.42
Regions and First Gwinnett pro forma combined(4). 23.85
First Gwinnett pro forma Merger equivalent(2) . . 27.04
</TABLE>
_____________________
(1) Represents the combined results of Regions and First Gwinnett as if the
Merger were consummated on January 1, 1995, and were accounted for as a
purchase.
(2) Represents pro forma combined information multiplied by the Exchange
Ratio of 1.1336 shares of Regions Common Stock for each share of First
Gwinnett Common Stock.
(3) Represents historical dividends declared per share by Regions multiplied by
the Exchange Ratio of 1.1336 shares of Regions Common Stock for each share
of First Gwinnett Common Stock.
(4) Represents the combined information of Regions and First Gwinnett as
if the Merger were consummated on March 31, 1996, and were accounted for as
a purchase.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and First Gwinnett. The data for Regions have been
restated to give effect to the combination with First National Bancorp
consummated on March 1, 1996, which was accounted for as a pooling of
interests. Interim unaudited data for the three months ended March 31, 1996 and
1995 of Regions and First Gwinnett reflect, in the opinion of the respective
managements of Regions and First Gwinnett, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such data.
Results for the three months ended March 31, 1996, are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole. The data should be read in conjunction with the historical
financial statements, related notes, and other financial information concerning
Regions and First Gwinnett incorporated by reference or included herein. See
"Documents Incorporated by Reference."
11
<PAGE> 16
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . $ 329,005 $ 299,945 $ 1,259,600 $ 991,693 $ 746,544 $ 737,094 $778,848
Total interest expense . . . . . . . 165,119 147,415 635,336 436,157 296,195 324,420 428,083
Net interest income . . . . . . . . . 163,886 152,530 624,264 555,536 450,349 412,674 350,765
Provision for loan losses . . . . . . 6,874 5,050 30,271 20,580 24,695 39,367 34,879
Net interest income after
loan loss provision. . . . . . . 157,012 147,480 593,993 534,956 425,654 373,307 315,886
Total noninterest income excluding
security gains (losses). . . . . 55,551 43,912 187,830 171,705 169,318 148,007 129,232
Security gains (losses) . . . . . . . 131 7 (424) 344 831 2,353 (89)
Total noninterest expense . . . . . . 135,008 116,229 487,461 442,376 383,130 343,279 302,795
Income tax expense . . . . . . . . . 24,892 24,920 96,109 84,109 66,169 56,405 41,502
Net income . . . . . . . . . . . . . 52,794 50,250 197,829 180,520 146,504 123,983 100,732
PER SHARE DATA:
Net income . . . . . . . . . . . . . $ .85 $ .81 $ 3.21 $ 3.10 $ 2.81 $ 2.42 2.01
Cash dividends . . . . . . . . . . . .35 .33 1.32 1.20 1.04 0.91 0.87
Book value . . . . . . . . . . . . . 23.84 21.92 23.38 21.26 19.85 17.13 15.47
OTHER INFORMATION:
Average number of shares outstanding. 61,985 61,907 61,670 58,206 52,153 51,192 50,192
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets . . . . . . . . . . . . $17,531,422 $16,200,279 $16,851,774 $15,810,076 $13,163,161 $10,457,676 $9,188,048
Securities . . . . . . . . . . . . . 4,120,997 3,296,536 3,863,781 3,346,291 2,993,417 2,255,732 2,076,199
Loans, net of unearned income . . . . 11,864,356 11,412,740 11,542,311 10,855,195 8,430,931 6,657,557 5,726,818
Total deposits . . . . . . . . . . . 14,182,607 13,121,692 13,497,612 12,575,593 11,025,376 8,923,801 8,047,731
Long-term debt . . . . . . . . . . . 501,520 606,662 632,019 599,476 525,820 151,460 24,461
Stockholders' equity . . . . . . . . 1,482,790 1,358,964 1,429,253 1,286,322 1,106,361 886,116 779,002
PERFORMANCE RATIOS:
Return on average assets (1). . . . . 1.24% 1.28% 1.21% 1.27% 1.38% 1.29% 1.15%
Return on average stockholders'
equity (1) . . . . . . . . . . . 14.51 15.38 14.29 15.26 15.76 15.04 13.58
Net interest margin (1) . . . . . . . 4.22 4.31 4.21 4.37 4.77 4.85 4.58
Efficiency (2) . . . . . . . . . . . 60.49 57.94 58.79 59.44 60.23 59.62 60.92
Dividend payout . . . . . . . . . . . 41.18 40.74 41.12 38.71 37.01 37.60 43.28
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1) . . . .06% .03% .17% .19% .23% .36% .45%
Problem assets to net loans and
other real estate (3). . . . . . .61 .71 .59 .75 1.12 1.29 1.62
Nonperforming assets to net loans
and other real estate (4). . . . .70 .76 .68 .80 1.28 1.39 1.74
Allowance for loan losses to loans,
net of unearned income . . . . . 1.41 1.34 1.38 1.32 1.48 1.51 1.34
Allowance for loan losses to
nonperforming assets (4) . . . . 200.73 175.18 202.55 164.48 115.88 107.97 76.76
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . . . . . 8.56% 8.31% 8.44% 8.35% 8.76% 8.60% 8.49%
Average loans to average deposits . . 84.75 86.68 86.12 79.90 76.41 71.59 72.34
Tier 1 risk-based capital (5) . . . . 11.34 10.66 11.14 10.69 11.13 11.68 11.85
Total risk-based capital (5). . . . . 14.30 14.23 14.61 14.29 13.48 14.44 13.19
Tier 1 leverage (5) . . . . . . . . . 7.81 7.43 7.49 8.21 10.11 8.44 8.40
</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.
12
<PAGE> 17
Selected Historical Financial Data of First Gwinnett
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . . . $ 1,344 $ 1,210 $ 5,076 $ 4,058 $ 3,154 $ 3,418 $ 3,832
Total interest expense . . . . . . . . . 580 484 2,139 1,484 1,233 1,530 2,140
Net interest income . . . . . . . . . . . 764 726 2,937 2,574 1,921 1,888 1,692
Provision for loan losses . . . . . . . . 30 30 120 2 416 288 345
Net interest income after
loan loss provision . . . . . . . . . 734 696 2,817 2,572 1,505 1,600 1,347
Total noninterest income
excluding security gains (losses) . . 68 57 265 269 254 247 250
Security gains (losses) . . . . . . . . . -- -- (5) -- 147 -- --
Total noninterest expense . . . . . . . . 436 429 1,894 1,768 1,758 1,475 1,501
Income tax expense . . . . . . . . . . . 130 112 439 343 102 108 14
Cumulative effect of a change
in an accounting principle . . . . . . -- -- -- -- (18) -- --
Net income . . . . . . . . . . . . . . . $ 236 $ 212 $ 744 $ 730 $ 28 $ 264 $ 82
PER SHARE DATA:
Net income . . . . . . . . . . . . . . . $ .81 .73 $ 2.55 $ 2.44 $ .09(1) $ .88 $ .27
Cash dividends . . . . . . . . . . . . . .25 .25 .45 .10 .10 .10 --
Book value . . . . . . . . . . . . . . . 26.93 24.13 26.41 22.99 21.42 21.19 20.63
OTHER INFORMATION:
Average number of shares outstanding . . 292 292 292 300 300 300 300
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets . . . . . . . . . . . . . . $68,396 $60,295 $65,526 $56,771 $48,085 $43,689 $44,182
Securities . . . . . . . . . . . . . . . 10,563 10,898 11,762 10,627 6,165 7,286 8,640
Loans, net of unearned income . . . . . . 46,096 38,400 40,793 37,142 33,540 28,746 29,000
Total deposits . . . . . . . . . . . . . 59,744 52,701 57,224 49,064 41,448 36,895 37,529
Stockholders' equity . . . . . . . . . . 7,857 7,051 7,707 6,718 6,356 6,358 6,189
PERFORMANCE RATIOS:
Return on average assets (2) . . . . . . 1.42% 1.47% 1.21% 1.36% .06% .60% .19%
Return on average stockholders'
equity (2) . . . . . . . . . . . . . . 12.10 12.54 10.18 11.14 .44 4.19 1.33
Net interest margin (2) . . . . . . . . . 4.60 5.02 4.78 4.80 3.91 4.27 3.83
Efficiency (3) . . . . . . . . . . . . . 52.40 54.79 59.15 62.19 80.83 69.09 77.29
Dividend payout . . . . . . . . . . . . . 30.91 34.46 17.65 4.10 107.14 11.36 --
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (2) . . . . . . .45% .58% .80% (.65)% 1.57% .54% 1.28%
Nonperforming assets to net loans
and other real estate (4) . . . . . . .15 .50 .34 .31 5.03 8.71 3.42
Allowance for loan losses to loans,
net of unearned income . . . . . . . . 1.04 1.72 1.22 1.85 1.36 1.96 1.48
Allowance for loan losses to
nonperforming assets (4) . . . . . . . 714.93 352.94 357.84 581.36 26.75 21.91 42.39
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . . . . . . . . 11.73% 12.30% 11.88% 12.23% 13.05% 14.26% 13.96%
Average loans to average deposits . . . . 75.05 76.57 72.96 76.24 80.24 76.95 77.01
Tier 1 risk-based capital (4) . . . . . . 15.12 15.96 16.10 16.80 16.85 18.49 18.10
Total risk-based capital (4) . . . . . . 16.05 17.20 17.15 18.05 18.04 19.74 19.35
Tier 1 leverage (4) . . . . . . . . . . . 11.71 12.14 11.54 13.26 13.13 14.47 13.90
</TABLE>
__________________________
(1) 1993 Income before cumulative effect of a change in an accounting
principle is $47,000 or $.15 per share.
(2) Interim period ratios are annualized.
(3) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains
(losses) from security transactions.
(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.
13
<PAGE> 18
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of First
Gwinnett Common Stock in connection with the solicitation by the First Gwinnett
Board of Directors of proxies for use at the Special Meeting, at which First
Gwinnett stockholders will be asked to vote upon a proposal to approve the
Agreement. The Special Meeting will be held at :00 .m., local time, on
, 1996, at the main offices of First Gwinnett, located at 5935 Buford Highway,
Norcross, Georgia, 30071.
First Gwinnett stockholders are requested promptly to sign, date, and
return the accompanying proxy card to First Gwinnett 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 Agreement.
Any First Gwinnett 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 First Gwinnett a signed proxy card bearing a later date, provided
that such notice or proxy card is actually received by First Gwinnett 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 First Gwinnett Bancshares, Inc., 5935 Buford Highway, Norcross,
Georgia, 30071, Attention: Kelly Johnson, Corporate Secretary. A proxy will
not be revoked by death or supervening incapacity of the stockholder executing
the proxy unless, before the vote, notice of such death or incapacity is filed
with the Secretary. The shares of First Gwinnett Common Stock represented by
properly executed proxies received at or prior to the Special Meeting and not
subsequently revoked will be voted as directed in such proxies. IF INSTRUCTIONS
ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR
APPROVAL OF THE AGREEMENT 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
AGREEMENT. As of the date of this Proxy Statement/Prospectus, First Gwinnett 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 or telegram or in person by the directors, officers, and employees of
First Gwinnett, 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.
First Gwinnett stockholders should not forward any stock certificates with
their proxy cards.
RECORD DATE; VOTE REQUIRED
First Gwinnett's Board of Directors has established the close of business on
, 1996, as the Record Date for determining the First Gwinnett stockholders
entitled to notice of and to vote at the Special Meeting. Only First Gwinnett
stockholders of record as of the Record Date will be entitled to vote at the
Special Meeting. Approval of the Agreement will require the affirmative
vote of the holders of a majority of the First Gwinnett Common Stock entitled
to vote at the Special Meeting and not just a majority of the votes cast.
Therefore, an abstention or failure to return a properly executed proxy card
will have the same effect as a vote against the Agreement, as will a broker's
submitting a proxy card without exercising discretionary voting authority with
respect to the Agreement. As of the Record Date, there were approximately 474
holders of 291,785 shares of First Gwinnett 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 First Gwinnett to beneficially own more
than 5.0% of the outstanding
14
<PAGE> 19
shares of First Gwinnett Common Stock as of the Record Date, see "Voting
Securities and Principal Stockholders of First Gwinnett."
The presence, in person or by proxy, of a majority of the outstanding
shares of First Gwinnett 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 First Gwinnett Common Stock that are present, or
represented by proxy, at the Special Meeting will be counted for quorum
purposes regardless of whether the holder of the shares or proxy fails to vote
on the Agreement or whether a broker with discretionary authority fails to
exercise its discretionary voting authority with respect to the Agreement.
Once a quorum is established, approval of the Agreement requires the
affirmative vote of the holders of a majority of the First Gwinnett Common
Stock entitled to vote at the Special Meeting.
The directors and executive officers of First Gwinnett and their affiliates
beneficially owned, as of the Record Date, 84,658 shares (or approximately 29%
of the outstanding shares) of First Gwinnett Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of
the Record Date, no shares of First Gwinnett Common Stock. As of that date, no
subsidiary of either First Gwinnett or Regions held any shares of First
Gwinnett Common Stock in a fiduciary capacity for others, or as the result of
debts previously contracted.
DESCRIPTION OF THE TRANSACTION
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is attached
as Appendix A to this Proxy Statement/Prospectus and incorporated herein by
reference. All stockholders are urged to read the Appendices in their entirety.
GENERAL
Each share of First Gwinnett Common Stock (excluding any shares held by
First Gwinnett, Regions, or their respective 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) issued and outstanding at the Effective Date will be converted into
1.1336 shares of Regions Common Stock. Each share of Regions Common Stock
outstanding immediately prior to the Effective Date will remain outstanding and
unchanged as a result of the Merger.
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, Regions will make a cash
payment equal to the fractional interest which a First Gwinnett stockholder
would otherwise receive multiplied by the closing price of Regions Common Stock
on the Nasdaq National Market (as reported by The Wall Street Journal, or, if
not reported thereby, by another authoritative source selected by Regions), on
the last full trading day prior to the Effective Date or the date of exercise,
in the case of options.
TREATMENT OF FIRST GWINNETT OPTIONS
The Agreement provides that all rights with respect to First Gwinnett
Common Stock pursuant to stock options or stock appreciation rights granted by
First Gwinnett under its stock option plan which are outstanding at the
Effective Date, whether or not then exercisable, will be converted into and
will become rights with respect to Regions Common Stock, and Regions will
assume each of such options in accordance with the terms of the First Gwinnett
Stock Plan under which it was issued and the stock option agreement by which it
is evidenced. After the Effective Date, those options will become options to
purchase Regions Common Stock or cash in the case of stock appreciation rights,
with the exercise price and number of shares of Regions Common Stock
purchasable thereunder adjusted to reflect the Exchange Ratio. The only
executive officer or director of First Gwinnett who, as of the date of this
Proxy Statement/Prospectus holds outstanding
15
<PAGE> 20
options is Monty G. Watson. Mr. Watson holds exercisable options to purchase
6,500 shares of First Gwinnett Common Stock.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. During the last several years, there have been
significant developments in the banking and financial services industry. These
developments have included the increased emphasis and dependence on automation,
specialization of products and services, increased competition from other
financial institutions, and a trend toward consolidation and geographic
expansion, coupled with a relaxation of regulatory restrictions on interstate
conduct of business of financial institutions.
First Gwinnett and its Board of Directors concluded that it could best
serve its stockholders, employees, customers and community by combining with a
regional banking organization, provided that First Gwinnett could obtain a fair
price for its stockholders. Accordingly, First Gwinnett and Regions entered
into negotiations which culminated in the Agreement.
Over the course of the past year, First Gwinnett had discussions with
several different institutions regarding a business combination, and these
discussions included the possibility of selling First Gwinnett to a larger bank
holding company. In each instance, the other institution contacted First
Gwinnett.
In late 1994 and early 1995, the Chairman of First Gwinnett's Board of
Directors, Walter Thomas, had periodic discussions with a metropolitan Atlanta
financial institution concerning a possible combination with First Gwinnett,
but these discussions ended in early 1995 because the parties could not come to
agreeable terms regarding the price and post combination status of the parties.
In the summer of 1995, Mr. Thomas received a call from a representative of
an out-of-state regional bank holding company regarding a possible combination
of the two institutions. Mr. Thomas and a representative of the other
institution met in July, 1995 and discussed the possibility of merging the two
institutions. The parties also exchanged financial information to determine
whether a combination would be in the best interests of the institutions. The
financial information presented by the other institution was not sufficient to
convince First Gwinnett to pursue further discussions regarding a merger.
In August, 1995, a representative of another out-of-state regional bank
holding company contacted Mr. Thomas. Mr. Thomas again entertained
discussions of a possible business combination, but determined that the culture
of the other institution would not provide a relationship which would be
beneficial to First Gwinnett and its stockholders.
In the course of each of the discussions described above, Mr. Thomas, on
behalf of the Board of Directors of First Gwinnett, determined that the
proposed business combinations were not in the best interests of First Gwinnett
or its stockholders.
First Gwinnett was contacted by Regions in early September, 1995. Mr.
Thomas had several meetings with Regions' representatives, including William
Jordan, an executive officer of Regions, and discussed a possible combination
in which First Gwinnett would merge with Regions. During September, First
Gwinnett transmitted certain financial information to Regions and reviewed
certain financial information provided by Regions. Mr. Thomas also spoke with
each of the members of the Board of Directors regarding his discussions with
Regions.
On October 17, 1995, Mr. Jordan attended a special meeting of the First
Gwinnett Board of Directors and presented information regarding Regions and
Regions' offer to First Gwinnett. The Board discussed Regions' offer and
proposed a more favorable exchange ratio based upon First Gwinnett's expected
earnings, which was ultimately agreed to by Regions. The Board also asked Mr.
Jordan detailed questions regarding the expected effect on the business of
First Gwinnett and First Gwinnett's employees. At the October 17, 1995
16
<PAGE> 21
meeting, special counsel for First Gwinnett discussed with the directors their
fiduciary duties with regard to the sale of First Gwinnett and reviewed with
the directors the proposed agreement with Regions. Thereafter, the directors
adjourned the meeting and reconvened it on October 23, 1995 to review the terms
of the proposal. Following this review, the Board unanimously voted to enter
into a definitive agreement with Regions to merge First Gwinnett with and into
Regions. The definitive agreement was executed on October 23, 1995, and a
press release regarding the Merger was issued on October 24, 1995.
FIRST GWINNETT'S REASONS FOR THE MERGER. In approving the Merger, the
directors of First Gwinnett considered a number of factors. Without assigning
any relative or specific weights to the factors, the First Gwinnett Board of
Directors considered the following material factors:
(a) the information presented to the directors by the management of First
Gwinnett concerning the business, operations, earnings, asset quality, and
financial condition of First Gwinnett, including compliance with regulatory
capital requirements on an historical and prospective basis;
(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share
of First Gwinnett Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of First Gwinnett Common Stock for Regions Common
Stock for federal and state income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay; and
(e) the conclusion of the Board of Directors that, in general, the exchange
of First Gwinnett Common Stock for Regions Common Stock on the terms and
conditions set forth in the Agreement is fair to the holders of First Gwinnett
Common Stock.
The terms of the Merger were the result of arms-length negotiations between
representatives of First Gwinnett and representatives of Regions. Based upon
the consideration of the foregoing factors, the Board of Directors of First
Gwinnett unanimously approved the Merger as being in the best interests of
First Gwinnett and its stockholders. Each member of the Board of Directors of
First Gwinnett has agreed to vote such member's shares in favor of the Merger.
First Gwinnett's Board of Directors unanimously recommends that First
Gwinnett stockholders vote for approval of the Agreement.
Regions' Reasons for the Merger. The Regions Board of Directors has
approved the Agreement and determined that the Merger is in the best interests
of Regions and its stockholders. In approving the Agreement, the Regions Board
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 First Gwinnett 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 First Gwinnett operates, including
existing competition, history of the market areas with respect to financial
institutions, and average demand for credit, on an historical and prospective
basis, and (iii) the results of Regions' due diligence review of First
Gwinnett; and
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
17
<PAGE> 22
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 the
Delaware Certificate of Merger and the Georgia Certificate of Merger relating
to the Merger are filed and declared effective with, respectively, the Delaware
Secretary of State and the Georgia Secretary of State. Unless otherwise agreed
upon by Regions and First Gwinnett, 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 occur: (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 Agreement is approved by the requisite vote of First
Gwinnett stockholders; or such later date within 30 days thereof as specified
by Regions.
No assurance can be provided that the necessary stockholder approval can be
obtained or that other conditions precedent to the Merger can or will be
satisfied. Regions and First Gwinnett anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the third quarter of 1996. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or First Gwinnett generally may
terminate the Agreement if the Merger is not consummated by September 30, 1996,
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 Chicago Trust
Company of New York, acting in the capacity of Exchange Agent, to mail to the
former stockholders of First Gwinnett a form letter of transmittal, together
with instructions for the exchange of such stockholders' certificates
representing shares of First Gwinnett Common Stock for certificates
representing shares of Regions Common Stock.
FIRST GWINNETT 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 First Gwinnett Common Stock, together
with a properly completed letter of transmittal, there will be issued and
mailed to each holder of First Gwinnett Common Stock surrendering such items a
certificate or certificates representing the number of shares of Regions Common
Stock to which such holder is entitled, if any, and a check for the amount to
be paid in lieu of any fractional share interest, without interest and all
undelivered dividends and distributions in respect of such shares, without
interest. After the Effective Date, to the extent permitted by law, First
Gwinnett stockholders of record as of the Effective Date will be entitled to
vote at any meeting of holders of Regions Common Stock the number of whole
shares of Regions Common Stock into which their First Gwinnett Common Stock has
been converted, regardless of whether such stockholders have surrendered their
First Gwinnett Common Stock certificates. No dividend or other distribution
payable after the Effective Date with respect to Regions Common Stock, however,
will be paid to the holder of any unsurrendered First Gwinnett certificate
until the holder duly surrenders such certificate. Upon such surrender, all
undelivered dividends and other distributions and, if applicable, a check for
the amount to be paid in lieu of any fractional share interest will be
delivered to such stockholder, in each case without interest.
After the Effective Date, there will be no transfers of shares of First
Gwinnett Common Stock on First Gwinnett's stock transfer books. If certificates
representing shares of First Gwinnett 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.
18
<PAGE> 23
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Georgia Department without
any conditions or restrictions that would, in the reasonable judgment of
Regions' Board of Directors, so materially adversely impact the economic
benefits of the transactions contemplated by the Agreement as to render
inadvisable the consummation of the Merger, and the expiration of all
applicable waiting periods.
(b) the approval by the holders of a majority of the First Gwinnett Common
Stock issued and outstanding;
(c) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(d) the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under Section
368(a) of the Code and that the exchange of First Gwinnett Common Stock for
Regions Common Stock will not give rise to recognition of gain or loss to First
Gwinnett stockholders, except to the extent of any cash received; and
(e) notification for listing on the Nasdaq National Market of the shares of
Regions Common Stock to be issued in the Merger.
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 First Gwinnett of opinions of their respective
counsel and certificates executed by their respective Chief Executive Officers
and Chief Financial Officers as to compliance with the Agreement; (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; and (iii) the receipt by Regions of a letter from First Gwinnett's
independent accountants with respect to certain financial information regarding
First Gwinnett.
REGULATORY APPROVALS
Applications for the approvals described below have been submitted to the
appropriate regulatory agencies and each agency has issued its approval of the
Merger.
Regions and First Gwinnett 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
substantially lessen 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 may
not be consummated until the 30th day (which may be shortened to the 15th 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.
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The Merger also is subject to the approval of the Georgia Department. In
its evaluation, the Georgia Department took 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
First Gwinnett approved by their respective Boards of Directors; provided,
however, that after approval by the First Gwinnett stockholders, no amendment
decreasing the consideration to be received by First Gwinnett 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 First Gwinnett
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final denial of any
required regulatory approval, provided that the terminating party is not then
in material breach of any provision of the Agreement, or by the Board of
Directors of Regions if any required regulatory approval is conditioned or
restricted in the manner described under " --Conditions to Consummation of the
Merger" above;
(b) by the Board of Directors of either party, if the holders of a majority
of shares of First Gwinnett Common Stock issued and outstanding shall not have
approved the Agreement, provided that the terminating party is not then in
material breach of any provision of the Agreement;
(c) by mutual agreement of the Boards of Directors of Regions and First
Gwinnett;
(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 in the
Agreement; or
(e) by the Board of Directors of either party if the Merger shall not have
been consummated by September 30, 1996, 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.
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 breach of the Agreement giving rise to such
termination.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of First Gwinnett and Regions generally has agreed, unless the prior
consent of the other party 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, maintain its rights and
franchises, and take no 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 contemplated by the Agreement. In addition, the Agreement
contains certain other restrictions applicable to the conduct of the business
of either First Gwinnett or Regions prior to consummation of the Merger, as
described below.
First Gwinnett. First Gwinnett has agreed not to take certain action
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) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$100,000 (except in the ordinary course of business consistent with past
practices), or imposing or suffering the imposition (except in the ordinary
course
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of business) of a lien on any asset of First Gwinnett; (iii) acquiring or
exchanging any shares of its capital stock or paying any dividend or other
distribution in respect of its capital stock, except that First Gwinnett may,
but shall not be legally obligated to, declare and pay regular cash dividends
consistent with past practice, to the extent it is legally and contractually
permitted to do so; (iv) issuing or selling any additional shares of any First
Gwinnett capital stock, any rights to acquire any such stock, or any security
convertible into such stock (except as set forth in the Agreement or pursuant
to the exercise of outstanding stock options); (v) adjusting or reclassifying
any of its capital stock; (vi) making any material investment except in the
ordinary course of business; (vii) granting any increase in compensation or
benefits to employees or officers (except as previously disclosed to Regions or
as required by law), paying any bonus (except as previously disclosed to
Regions or in accordance with any existing program or plan), entering into or
amending any severance agreements with officers (except as previously disclosed
to Regions), or granting any increase in compensation or other benefits to
directors; (viii) entering into or amending any employment contract that it
does not have the unconditional right to terminate, except for any amendment
required by law; (ix) adopting any new employee benefit plan or program, or
materially changing any existing plan or program, 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 any
litigation (except in accordance with past practices); or (xii) modifying or
terminating any material contract.
In addition, First Gwinnett has agreed not to solicit, directly or
indirectly, any acquisition proposal from any other person or entity. First
Gwinnett 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 in compliance with
the fiduciary obligations of its Board of Directors. In addition, First
Gwinnett has agreed to use reasonable efforts to cause its advisors and other
representatives not to engage in any of the foregoing activities.
Regions. The Agreement prohibits Regions, prior to the earlier of the
Effective Date or the termination of the Agreement, from taking any action that
would materially adversely affect the ability of either party to obtain the
requisite governmental approvals or to perform its covenants and agreements
under the Agreement.
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."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement provides that Regions will, and will cause First Gwinnett to,
maintain all rights of indemnification existing in favor of each person
entitled to indemnification from First Gwinnett or any of its subsidiaries on
terms no less favorable than the rights provided in the Articles of
Incorporation or Bylaws of First Gwinnett or its subsidiaries, as the case may
be, or the rights provided by Georgia law on the date of the Agreement, and
that such rights will continue in full force and effect for six years from the
Effective Date with respect to matters occurring at or prior to the Effective
Date.
The Agreement also provides that, after the Effective Date, Regions will
provide generally to officers and employees of First Gwinnett and its
subsidiaries who 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) on terms
and conditions that, 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, (i) service under any
qualified defined benefit plans of First Gwinnett shall be treated as service
under Regions' qualified defined benefit plans, (ii) service under any
qualified defined contribution
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plan of First Gwinnett shall be treated as service under Regions' qualified
defined contribution plans, and (iii) service under any other employee benefit
plans of First Gwinnett shall be treated as service under any similar employee
benefit plans maintained by Regions. The Agreement further provides that
Regions will cause First Gwinnett to honor all employment, severance,
consulting, and other compensation contracts previously disclosed to Regions
between First Gwinnett or 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 First Gwinnett's benefit plans.
As described above under "--Treatment of First Gwinnett Options," the
Agreement also provides that all rights with respect to First Gwinnett Common
Stock pursuant to stock options or stock appreciation rights granted by First
Gwinnett under its stock option and other stock-based compensation plans which
are outstanding at the Effective Date, whether or not then exercisable, will be
converted into and will become rights with respect to Regions Common Stock, and
Regions will assume each of such options in accordance with its terms. The
number of shares of Regions Common Stock subject to the options shall be equal
to the number of shares of First Gwinnett Common Stock subject to the option
multiplied by the Exchange Ratio.
As of the Record Date, directors and executive officers of First Gwinnett
owned an aggregate of _______ shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 2, Article 13 of the Georgia Act, if
the Merger is consummated, any holder of record of First Gwinnett Common Stock
who (i) gives to First Gwinnett, prior to the vote at the Special Meeting with
respect to the approval of the Agreement, written notice of such holder's
intent to demand payment for such holder's shares, and (ii) does not vote in
favor thereof, shall be entitled to receive, upon compliance with the statutory
requirements summarized below, the fair value of such holder's shares as of the
Effective Date, excluding any appreciation or depreciation in anticipation of
the Merger.
A stockholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies First Gwinnett in writing of the name and address of each
person on whose behalf such holder asserts dissenters' rights. The rights of
such a partial dissenter are determined as if the shares as to which such
holder dissents and such holder's other shares were registered in the names of
different stockholders.
The written objection requirement referred to above will not be satisfied
under the Georgia statutory provisions by merely voting against approval of the
Agreement by proxy or in person at the Special Meeting. Any holder of First
Gwinnett Common Stock who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the transaction and will not be entitled to
assert dissenters' rights of appraisal. In addition to not voting in favor of
the Agreement, a stockholder wishing to preserve the right to dissent and seek
appraisal must give a separate written notice of such holder's intent to demand
payment for such holder's shares if the Merger is effected, as hereinabove
provided.
Any written objection to the Agreement satisfying the requirements
discussed above should be addressed as follows: First Gwinnett Bancshares,
Inc., 5935 Buford Highway, Norcross, Georgia, 30071, Attention: Corporate
Secretary.
If the Merger is authorized at the Special Meeting, First Gwinnett must
deliver a written dissenters' notice (the "Dissenters' Notice") to all holders
of First Gwinnett Common Stock who have satisfied the foregoing requirements.
The Dissenters' Notice must be sent within ten days after the Effective Date and
must (i) state where the demand for payment must be sent and where and when
certificates for shares of First Gwinnett Common Stock must be deposited, (ii)
inform holders of uncertificated shares to what extent transfer of these
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shares will be restricted after the demand for payment is received, (iii) set a
date by which First Gwinnett must receive the demand for payment (which date
may not be fewer than 30 nor more than 60 days after the Dissenters' Notice is
delivered), and (iv) be accompanied by a copy of Article 13 of the Georgia Act.
A stockholder of record who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such stockholder will retain all other rights of a
stockholder until those rights are canceled or modified by the consummation of
the Merger. A record stockholder who does not demand payment or deposit such
holder's shares certificates where required, each by the date set in the
Dissenters' Notice, is not entitled to payment for such holder's shares under
Article 13.
Except as described below, the surviving corporation resulting from the
Merger must, within ten days of the later of the Effective Date or receipt of a
payment demand, offer to pay to each dissenting stockholder who complied with
the payment demand and deposit requirements described above the amount the
surviving corporation estimates to be the fair value of such holder's shares,
plus accrued interest from the Effective Date. Such offer of payment must be
accompanied by (i) certain recent First Gwinnett financial statements, (ii) the
surviving corporation's estimate of the fair value of the shares, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Section 14-2-1327 of the Georgia Act,
and (v) a copy of the Article 13 of the Georgia Act. If the stockholder accepts
the surviving corporation's offer by written notice to the surviving
corporation within 30 days after the surviving corporation's offer, or is
deemed to have accepted the offer by failing to respond within 30 days, payment
must be made within 60 days after the later of the making of the offer or the
Effective Date.
If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, First Gwinnett must return
the deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, the surviving corporation must send a new Dissenter's Notice and
repeat the payment demand procedure described above.
Section 14-2-1327 of the Georgia Act provides that a dissenting stockholder
may notify the surviving corporation in writing of such holder's own estimate
of the fair value or such holder's shares and the interest due, and may demand
payment of such holder's estimate, if (i) such holder believes that the amount
offered by the surviving corporation is less than the fair value of such
holder's shares or that the interest due has been calculated incorrectly, or
(ii) First Gwinnett, having failed to effect the Merger, does not return the
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment.
A dissenting stockholder waives such holder's right to demand payment under
Section 14-2-1327 unless such holder notifies the surviving corporation of such
holder's demand in writing within 30 days after the surviving corporation makes
or offers payment for such holder's shares. If the surviving corporation does
not offer payment within ten days of the later of the Effective Date or receipt
of a payment demand, then (i) the stockholder may demand the financial
statements and other information required to accompany the surviving
corporation's payment offer, and the surviving corporation must provide such
information within ten days after receipt of the written demand, and (ii) the
stockholder may notify the surviving corporation of such holder's own estimate
of the fair value of such holder's shares and the amount of interest due, and
may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, the
surviving corporation must commence a nonjury equity valuation proceeding in
the Superior Court of Gwinnett County, Georgia, within 60 days after receiving
the payment demand and must petition the court to determine the fair value of
the shares and accrued interest. If the surviving corporation does not commence
the proceeding within those 60 days, it is required to pay each dissenting
stockholder whose demand remains unsettled, the amount demanded. The surviving
corporation is required to make all dissenting stockholders whose demands
remain unsettled parties to the proceeding and to serve a copy of the petition
upon each dissenting stockholder. The court may appoint appraisers to receive
evidence and to recommend a decision on fair value. Each dissenting stockholder
made a party to the proceeding is entitled to judgment for the fair value of
such holder's shares plus interest to the date of judgment.
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The court in an appraisal proceeding commenced under the foregoing
provision must determine the costs of the proceeding, excluding fees and
expenses of attorneys and experts for the respective parties, and must assess
those costs against the surviving corporation, except that the court may assess
the costs against all or some of the dissenting stockholders to the extent the
court finds they acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 14-2-1327. The court also may assess the fees
and expenses of attorneys and experts for the respective parties against the
surviving corporation if the court finds the surviving corporation did not
substantially comply with the requirements of specified provisions of Article
13 of the Georgia Act, or against either the surviving corporation or a
dissenting stockholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by
Article 13 of the Georgia Act.
If the court finds that the services of attorneys for any dissenting
stockholder were of substantial benefit to other dissenting stockholders
similarly situated, and that the fees for those services should not be assessed
against the surviving corporation, the court may award those attorneys
reasonable fees out of the amounts awarded the dissenting stockholders who were
benefitted. No action by any dissenting stockholder to enforce dissenters'
rights may be brought more than three years after the Effective Date,
regardless of whether notice of the Merger and of the right to dissent was
given by First Gwinnett or the surviving corporation in compliance with the
Dissenters' Notice and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting
stockholder of First Gwinnett but is qualified in its entirety by reference to
Article 13 of the Georgia Act, included in Appendix B to this Proxy
Statement/Prospectus. Any First Gwinnett stockholder who intends to dissent
from approval of the Agreement should carefully review the text of such
provisions and should also consult with such holder's attorney. No further
notice of the events giving rise to dissenters' rights or any steps associated
therewith will be furnished to First Gwinnett stockholders, except as indicated
above or otherwise required by law.
Any dissenting First Gwinnett stockholder who perfects such holder's right
to be paid the value of such holder's shares will recognize taxable gain or
loss upon receipt of cash for such shares for federal income tax purposes. See
"Certain Federal Income Tax Consequences of the Merger."
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, AND CORPORATIONS, 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 and First Gwinnett
concerning certain federal income tax consequences of the proposed Merger under
federal income tax law. It is such firm's opinion that:
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(a) Provided the Merger qualifies as a statutory merger under the Delaware
GCL and the Georgia Act, the Merger will be a reorganization within the meaning
of Section 368(a)(1)(A). First Gwinnett and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b).
(b) First Gwinnett will recognize no gain or loss upon the transfer of its
assets to Regions in exchange solely for Regions Common Stock and the
assumption by Regions of the liabilities of First Gwinnett.
(c) No gain or loss will be recognized by Regions on receipt of First
Gwinnett's assets in exchange for Regions Common Stock.
(d) The basis of First Gwinnett's assets in the hands of Regions will, in
each case, be the same as the basis of those assets in the hands of First
Gwinnett immediately prior to the transaction.
(e) The holding period of the assets of First Gwinnett in the hands of
Regions will, in each case, include the period during which such assets were
held by First Gwinnett.
(f) The stockholders of First Gwinnett will recognize no gain or loss upon
the exchange of their First Gwinnett Common Stock solely for shares of Regions
Common Stock.
(g) The basis of the Regions Common Stock received by the First Gwinnett
stockholders in the proposed transaction will, in each instance, be the same as
the basis of the First Gwinnett Common Stock surrendered in exchange therefor.
(h) The holding period of the Regions Common Stock received by the First
Gwinnett stockholders will, in each instance, include the period during which
the First Gwinnett Common Stock surrendered in exchange therefor was held,
provided that the First Gwinnett Common Stock was held as a capital asset on
the date of the exchange.
(i) The payment of cash to First Gwinnett stockholders in lieu of
fractional share interests 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
stock redeemed. Generally, 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.
(j) Where solely cash is received by a First Gwinnett stockholder in
exchange for his First Gwinnett Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such holder's First Gwinnett Common Stock, subject to the
provisions and limitations of Section 302.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX
CONSEQUENCES OF THE MERGER. FIRST GWINNETT STOCKHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED
TRANSACTION TO THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE OR
LOCAL LAW.
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 First Gwinnett 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 after the Effective Date will reflect such values and will not
be restated retroactively to reflect the historical financial position or
results of operations of First Gwinnett.
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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
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that Regions
will bear and pay the filing fees and printing costs in connection with this
Proxy Statement/Prospectus.
RESALES OF THE REGIONS COMMON STOCK
The Regions Common Stock to be issued to First Gwinnett 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, First Gwinnett (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 SEC Rule 145 or another applicable
exemption from the Securities Act registration requirements.
Each person who First Gwinnett reasonably believes will be an affiliate of
First Gwinnett 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.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of First Gwinnett Common Stock will be
exchanging their shares of a Georgia corporation governed by the Georgia Act
and First Gwinnett'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 First Gwinnett stockholders
and those of Regions stockholders. The differences deemed material by First
Gwinnett 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 Georgia Act and the Delaware GCL as well as to Regions'
Certificate and Bylaws and First Gwinnett's Articles 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.
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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 believes 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 62,185,402 shares were issued as of
March 31, 1996, none of which were held as treasury stock. Regions' Board of
Directors may authorize the issuance of additional shares of Regions Common
Stock 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.
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.
First Gwinnett. First Gwinnett's authorized capital stock consists of
2,000,000 shares of First Gwinnett Common Stock, which is the only class of
capital stock authorized and of which 291,785 shares were issued and
outstanding as of the Record Date.
Pursuant to the Georgia Act, First Gwinnett's Board of Directors may
authorize the issuance of additional shares of First Gwinnett Common Stock
without further action by First Gwinnett's stockholders. First Gwinnett's
Articles do not provide the stockholders of First Gwinnett with preemptive
rights to purchase or subscribe to any unissued authorized shares of First
Gwinnett Common Stock or any option or warrant for the purchase thereof.
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<PAGE> 32
AMENDMENT OF CERTIFICATE OR ARTICLES 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 Common Stock.
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 outstanding shares
of Regions Common Stock.
First Gwinnett. The Georgia Act generally provides that a Georgia
corporation's articles of incorporation may be amended by the affirmative vote
of a majority of the shares entitled to vote thereon, unless the articles of
incorporation provide for a higher or lower voting requirement. First
Gwinnett's Articles provide that the affirmative vote of at least 66 2/3% of
the outstanding voting shares, excluding all shares owned beneficially by
interested stockholders, is required to amend the Articles, unless at least
two-thirds of First Gwinnett's directors then in office and who are
disinterested directors approve the proposed amendment, in which event the
affirmative vote of a majority of the outstanding voting shares is sufficient
to amend the Articles.
The Articles also provide that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws by a vote of a majority of the directors
then in office, subject to the right of the stockholders to adopt, amend, or
repeal the Bylaws by the affirmative vote of at least 66 2/3% of the
outstanding shares.
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 are elected each year;
consequently, two annual meetings are effectively required 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, therefore, 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.
First Gwinnett. Like Regions, First Gwinnett's Articles generally provide
for a classified board of directors with three classes, and provide that voting
stock does not have cumulative voting rights.
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<PAGE> 33
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 at least 75% of Regions' voting stock.
First Gwinnett. Pursuant to First Gwinnett's Articles and Bylaws, a
director may be removed only for cause at a meeting of stockholders with
respect to which notice of the purpose to remove one or more directors has been
given, by the affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of First Gwinnett voting stock, or by the affirmative vote
of the holders of a majority of First Gwinnett voting stock.
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 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 such director's 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.
First Gwinnett. The Georgia Act generally permits a corporation's articles
of incorporation to relieve directors of liability for monetary damages for
good faith conduct. The Articles provide that First Gwinnett directors shall
not be liable for monetary damages for breach of duty as a director except for
actions taken not in good faith or that involve intentional misconduct or
certain unlawful transactions. Such limitations on director liability are
substantially similar to those applicable to Regions.
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 indemnification 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, as discussed herein, whether civil, criminal, administrative, or
29
<PAGE> 34
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.
First Gwinnett. First Gwinnett's Bylaws provide for indemnification of its
directors, officers, employees, and agents in substantially the same manner and
with substantially the same effect as in the case of Regions.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders 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.
First Gwinnett. Under the Articles, a special meeting of First Gwinnett
stockholders may be called only (i) by the Chairman of the Board of Directors;
(ii) by the President; (iii) by the Secretary at the request in writing of a
majority of the Board of Directors; (iv) by the Secretary at the request in
writing of 66 2/3% of the outstanding stock that are not beneficially owned by
an interested stockholder.
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 meeting or
special meeting called by the Board of Directors, chief executive officer, or
secretary, even if a majority of the stockholders were in favor of such action.
First Gwinnett. Under the Articles, no action requiring or permitting
stockholder approval may be approved by written consent of stockholders.
STOCKHOLDER NOMINATIONS
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.
First Gwinnett. First Gwinnett's 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 First Gwinnett not less than 45 days before any meeting of the
stockholders called for the election of directors. The Nomination Notice must
set forth certain background
30
<PAGE> 35
information about the persons to be nominated as required by Regulation 14A
promulgated under the Exchange Act.
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 to include,
generally, mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested stockholder"
(as defined in Section 203 to include, 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), 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.
First Gwinnett. First Gwinnett's bylaws specifically provide that First
Gwinnett shall be subject to the sections of the Georgia Act that place
restrictions on certain business combinations. Section 14-2-1111 of the Georgia
Act restricts "business combinations" (as defined in Section 14-2-1110 to
include, generally, mergers, sales and leases of assets, issuances of
securities, and similar transactions) by a Georgia corporation with an
"interested stockholder" (as defined in Section 14-2-1110 to include,
generally, the beneficial owner of 10% or more of the corporation's outstanding
voting stock).
Section 14-2-1111 of the Georgia Act requires a business combination to be
(i) unanimously approved by the continuing directors, provided that continuing
directors constitute at least three members of the board of directors at the
time of such approval; or (ii) recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled to be
cast by holders of voting shares, other than shares beneficially owned by the
interested stockholder who is, or whose affiliate is, a party to the business
combination. These requirements are in addition to any other vote required by
Georgia law or the articles of incorporation or bylaws of the corporation. The
requirements of Section 14-2-1111 must be satisfied in order for a business
combination to avoid the necessity of compliance with the fair pricing and
procedural requirements of the Georgia Act, which are set forth in Section
14-2-1112.
Additionally, Section 14-2-1132 of the Georgia Act prohibits, with certain
stated exceptions, a business combination with an interested stockholder for
five years from the date the interested stockholder acquired that status.
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<PAGE> 36
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 Board of Directors after the party becomes such a 5.0% beneficial
owner. In addition, the Delaware GCL generally requires the approval of a
majority of the outstanding voting stock of Regions to effect (i) any merger or
consolidation with or into any other corporation, (ii) any sale, lease, or
exchange of all or substantially all of Regions property and assets, or (iii)
the dissolution of Regions. However, pursuant to the Delaware GCL, Regions may
enter into a merger transaction without stockholder approval if (i) Regions is
the surviving corporation, (ii) the agreement of merger does not amend in any
respect Regions' Certificate, (iii) each share of Regions stock outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of Regions after the effective date of the
merger, and (iv) either no shares of Regions Common Stock and no shares,
securities, or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of Regions Common Stock to be issued or delivered under the
plan of merger plus those initially issuable upon conversion of any other
shares, securities, or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of Regions Common Stock outstanding immediately
prior to the effective date of the merger.
First Gwinnett. The Articles provide that certain business combination
transactions may not be consummated unless approved by the affirmative vote of
either (i) 66 2/3% of the outstanding voting stock or (ii) a majority of the
voting power of outstanding voting stock in the case of a transaction approved
by 66 2/3% of the directors of First Gwinnett then in office. Absent such
provision, the Georgia Act would require approval of a majority of the voting
power of a corporation's stock.
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.
First Gwinnett. The rights of appraisal of dissenting stockholders under
Georgia law are generally similar to those afforded under the Delaware GCL. See
"Description of the Transaction--Rights of Dissenting Stockholders."
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<PAGE> 37
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.
First Gwinnett. Pursuant to the Georgia Act, upon written notice of a
demand to inspect corporate records, a stockholder is entitled to inspect
specified corporate records, including articles of incorporation and bylaws,
minutes of stockholder meetings and certain resolutions adopted at director
meetings, stockholder list, and all stockholder communications for the
preceding three years, including financial statements. Upon demonstration of a
proper purpose, a stockholder may be entitled to inspect other corporate
records.
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 "Certain Regulatory Considerations--Payment of Dividends."
First Gwinnett. Pursuant to the Georgia Act, a board of directors may from
time to time make distributions to its stockholders, subject to restrictions in
its articles of incorporation, provided that no distribution may be made if,
after giving it effect, (i) the corporation would not be able to pay its debts
as they become due in the usual course of business, or (ii) the corporation's
total assets would be less than the sum of its total liabilities plus (unless
the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." First Gwinnett Common Stock is not traded in any established
market. The following table sets forth, for the indicated periods, the high and
low closing sale prices for Regions Common Stock as reported on the Nasdaq
National Market and the cash dividends declared per share of Regions Common
Stock and First Gwinnett Common Stock for the indicated periods.
Based on actual transactions of which First Gwinnett management is aware,
the transactions of purchase and sale of First Gwinnett Common Stock since
January 1, 1994, have occurred in a price range of $19.50 to $25.50 per share.
However, over such period there has been only a very limited number of
transactions and all such transactions have involved limited numbers of shares
in First Gwinnett Common Stock, and no assurance can be given that the stated
price range represents the actual market value of the First Gwinnett Common
Stock.
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<PAGE> 38
<TABLE>
<CAPTION>
REGIONS
FIRST GWINNETT
PRICE RANGE CASH DIVIDENDS CASH DIVIDENDS
----------- DECLARED DECLARED
HIGH LOW PER SHARE PER SHARE
---- --- --------- ---------
<S> <C> <C> <C> <C>
1994
First Quarter . . . . . . $33.50 $30.13 $.30 $.10
Second Quarter . . . . . . 36.13 30.50 .30 --
Third Quarter . . . . . . 36.75 34.63 .30 --
Fourth Quarter . . . . . . 35.00 29.75 .30 --
1995
First Quarter . . . . . . 36.50 31.63 .33 .15
Second Quarter . . . . . . 37.44 34.50 .33 .10
Third Quarter . . . . . . . 41.25 37.00 .33 .10
Fourth Quarter . . . . . . 44.88 39.63 .33 .10
1996
First Quarter . . . . . . 48.00 40.75 .35 .15
Second Quarter (through
, 1996) . . . . . . .35 .10
</TABLE>
On , 1996, the last reported sale price of Regions Common Stock as
reported on the Nasdaq National Market, and the price of First Gwinnett Common
Stock in the last known transaction, which occurred in September 1995, were $
and $25.50, respectively. On October 23, 1995, 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
known price of First Gwinnett Common Stock, were $40.38 and $25.50,
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 "Certain Regulatory
Considerations--Payment of Dividends."
First Gwinnett has paid dividends since 1992. In the years 1992 through
1994, a $.10 per share annual dividend was paid. In 1995, dividends were paid
quarterly to include $.15 per share in the first quarter and $.10 per share in
each of the three remaining quarters for an aggregate annual dividend of $.45
per share. In 1996, First Gwinnett paid a $.15 per share dividend in January
and a $.10 per share dividend in March, and intends to pay a quarterly dividend
thereafter until the consummation of the Merger. Each dividend will approximate
the dividend that would have been paid on Regions Common Stock as a result of
the conversion of First Gwinnett Common Stock in the Merger, if the Merger had
been consummated in the second quarter of 1996. If for any reason the Merger is
not consummated, First Gwinnett anticipates resuming its historical practice of
paying regular quarterly cash dividends. However, First Gwinnett's future
dividend policy would depend on its results of operations, capital needs, and
other factors, and there can be no assurance that First Gwinnett would pay cash
dividends indefinitely into the future or as to the amount of cash dividends to
be paid.
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<PAGE> 39
FIRST GWINNETT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Gwinnett derives all of its income from the Bank, its wholly owned
subsidiary.
The Bank's results of operations are primarily affected by its net interest
income. Net interest income is defined as interest and fees on loans and
investments, less interest expense on deposits. Interest from loans and
investments is a function of the average rates earned. The Bank's cost of funds
is a function of the average rates paid on such deposits. Service charges and
other fees also affect income. The Bank's net income is further affected by the
level of other expenses such as employee compensation and benefits, occupancy
cost, advertising, and insurance.
INTEREST RATE SENSITIVITY
The relationship between rate-sensitive earning assets and rate-sensitive
interest bearing liabilities within given maturity ranges (interest rate
sensitivity) can have a potential impact on the stability of a financial
institution's net interest income. Gap analysis is one method of assessing
interest rate sensitivity. Under this method, the difference between earning
assets and interest-sensitive liabilities is derived within ranges of
maturities; the difference is referred to as the asset funding gap if such
earning assets exceed interest-sensitive liabilities, or the liability funding
gap if such earning assets are exceeded by interest-sensitive liabilities.
As a matter of policy, the Board of Directors monitors interest rate
sensitivity by comparing actual dollar changes in net interest income to
budgeted financial goals. The following analysis indicates the rate sensitivity
of earning assets and interest-bearing liabilities at March 31, 1996.
Interest Rate Sensitivity Analysis
As of March 31, 1996
<TABLE>
<CAPTION>
Repricing Within
0-90 91-365 Over
Days Days 1 Year Total
---- ---- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
EARNING ASSETS:
Loans . . . . . . . . . . . . . . . . . . . . . $30,913 $2,859 $12,324 $46,096
Securities . . . . . . . . . . . . . . . . . . . 750 490 9,323 10,563
Federal funds sold . . . . . . . . . . . . . . . 1,650 - - 1,650
Interest bearing balances
due from banks . . . . . . . . . . . . . . . . 3,460 -- -- 3,460
------- ------- ------- -------
Total earning assets . . . . . . . . . . . . . . . 36,773 3,349 21,647 61,769
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits . . . . . . . . . . . 26,974 13,178 6,208 46,360
------- ------- ------- -------
Interest-sensitivity gap . . . . . . . . . . . . . $ 9,799 $(9,829) $15,439 $15,409
======= ======= ======= =======
Cumulative gap at March 31, 1996 . . . . . . . . . $ 9,799 $ (30) $15,409
======= ======= =======
Cumulative gap at December 31, 1995 . . . . . . . . $ 5,483 $(1,932) $14,401
======= ======= =======
</TABLE>
<PAGE> 40
LIQUIDITY
The Bank manages liquidity to ensure that there is sufficient cash flow to
satisfy demands for credit, deposit withdrawals, and other banking needs.
Traditional sources of liquidity include asset maturities and growth in core
deposits. Wholesale purchased liabilities, such as negotiable certificates of
deposit, federal funds purchased and investment securities available for sale
represent other major sources of funding. The Bank also has available from
correspondent banks federal funds lines of credit totalling $2,500,000.
Liquidity has not been a problem, nor does management expect that it will be as
the economy expands, given the Bank's current liquidity position. The loan to
deposit ratio at March 31, 1996 and 1995, was 77% and 73%, respectively.
CAPITAL RESOURCES
Although the Bank has not made commitments for significant capital
expenditures, the Bank's capital is subject to regulatory constraints.
Regulatory agencies measure capital adequacy within a framework that makes
capital requirements sensitive to the risk profiles of individual banks. As
described in further detail under "Certain Regulatory Considerations-Capital
Adequacy", the Bank is required to maintain a "Total Risk-Based Capital Ratio"
of 8.0%, a "Tier 1 Capital" of 4.0%, and a "Leverage Ratio" of at least 3.0%
plus an additional cushion of 100 to 200 basis points. At March 31, 1996, the
Bank's Tier 1 Capital and Total Capital ratios were 15.12% and 16.05%,
respectively. Also at such date, the Bank's Leverage Ratio was 11.71%.
Accordingly, the Bank has the requisite capital levels to qualify it as a "well
capitalized" institution under the prompt corrective action regulations. See
"Certain Regulatory Considerations - Prompt Corrective Action."
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTH PERIODS
ENDED MARCH 31, 1996 AND 1995
The following is management's discussion and analysis of the significant
changes in income and expenses in relation to the changes in financial position
for the three months ended March 31, 1996 and 1995. This information should be
read in conjunction with First Gwinnett's audited consolidated financial
statements for the years ended December 31, 1995, 1994, and 1993, and the notes
thereto included elsewhere herein.
Overview
Net income for the quarter ended March 31, 1996 increased $24,000 or 11%
over the first quarter of 1995. The earnings increase was due to an improvement
in net interest income of $38,000 and an increase in non-interest income of
$11,000, which were partially offset by increases in income tax expense of
$18,000 and non-interest expenses of $7,000.
Interest income for the first quarter of 1996 was $1,344,000 compared to
$1,210,000 for the first quarter of 1995, an increase of $134,000 or 11%. This
increase was due primarily to income generated by strong growth in the loan
portfolio in the first quarter of 1996 compared to the first quarter of 1995.
Loans, net of unearned fees, averaged $43,046,000 for the first quarter of 1996
compared to an average of $38,397,000 for the first quarter of 1995.
Interest expense for the quarter ended March 31, 1996 increased $96,000 or
20% compared to the first quarter in 1995. While deposits increased on average
in the first quarter of 1996 to $57,357,000 from $49,700,000 in the first
quarter of 1995, the average interest rate paid on deposits increased as well.
36
<PAGE> 41
Total other income increased in the first quarter of 1996 by $11,000 or 20%
over the same period one year ago. Increases in deposit account service
charges and related fees due to growth in deposits accounted for this increase.
Total other expenses increased $7,000 or 2% in the quarter ended March 31,
1996 compared to the quarter ended March 31, 1995. Components of 1996 other
expenses reflecting changes include: Salaries and employee benefits which
increased $34,000 due primarily to salaries of additional employees, as well as
other expenses which declined $27,000 or 17%. Included in other expenses are
regulatory expenses, postage, data processing, printing, supplies, etc.
A reduction in the FDIC assessment rate contributed to the decline in other
expenses in the first quarter of 1996.
COMPARISON OF THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
The following is management's discussion and analysis of the significant
changes in income and expenses and related changes in financial position for
the years ended December 31, 1995 and 1994. This information should be read in
conjunction with First Gwinnett's audited consolidated financial statements for
the years ended December 31, 1995, 1994, and 1993, and the notes thereto
included elsewhere herein.
Overview
First Gwinnett's net income for 1995 was $744,000 compared to $730,000 in
1994. The increase in net income of $14,000 or 2% is primarily due to an
increase in net interest income of $363,000, which was partially offset by an
increase in the provision for loan losses of $118,000, an increase in
non-interest expenses of $126,000, an increase in income taxes of $97,000, and
a decrease in non-interest income of $8,000.
Net interest income, the principal source of earnings for First Gwinnett,
is the amount of interest income generated by earning assets (loans, investment
securities, federal funds sold and deposits in other financial institutions)
reduced by the total interest expense of the funds (primarily deposits)
obtained to carry them. In 1995, net interest income increased by $363,000 or
14% over 1994.
Earning assets contributed $5,076,000 to interest income in 1995 compared
to $4,058,000 in 1994, an increase of $1,018,000 or 25%. Interest and fees on
loans increased by $731,000 or 22%, interest on investment securities increased
by $164,000 or 28%, interest on federal funds sold increased by $110,000 or
193%, and interest earned on deposits in other financial institutions increased
by $13,000 or 18%. The increase in overall interest income is due both to a
greater level of earning assets in 1995 compared to 1994 as well as a higher
average interest rate earned.
Interest expense on deposits increased by $655,000 or 44% in 1995 compared
to 1994, primarily due to higher average interest rates paid on all categories
of interest-bearing deposits in 1995. While total deposits increased by
$8,160,000 at December 31, 1995 compared to December 31, 1994, the majority of
the growth was in non-interest bearing deposits. Non-interest bearing deposits
increased by $5,589,000, and interest-bearing demand and money market increased
$2,813,000.
The provision for loan losses, which is charged to income from operations,
is based upon the changes in the loan portfolio, the amount of net loan losses
incurred, and management's estimate of potential future losses based on several
factors including, but not limited to, current economic conditions, loan
portfolio composition, nonaccrual loans, problem loans, and prior loan loss
experience. The provision for loan losses was $120,000 for the year ended
December 31, 1995, significantly higher than the provision of $2,000 for the
year ended December 31, 1994. The significant difference is due to a recovery
in 1994 of a portion of a previously
37
<PAGE> 42
charged off loan which resulted in a reversal of amounts previously provided
during 1994 and a substantially lower provision for loan losses.
First Gwinnett Bank maintains a reserve for loan losses which is available
to absorb potential losses in the loan portfolio. The level of reserve is
determined by internally generated credit quality gradings of the loan
portfolio, and takes into consideration the composition of the loans, payment
history, current economic conditions, and other factors which might affect the
future collectibility of loans. First Gwinnett's commitment to recognizing
potential loan problems requires a continuing review of loans for possible
credit weaknesses.
The allowance for possible loan losses was $497,000 or 1.2% of total loans
at December 31, 1995 compared to $686,000 or 1.8% of total loans at December
31, 1994. Based on the Bank's review of the loan portfolio and its aggressive
charge-off and collection policies, it is management's opinion that the
allowance for possible loan losses is adequate to absorb potential losses in
the existing portfolio.
Other income declined by $8,000 in 1995 compared to 1994, to $261,000 from
$269,000. The decline was primarily the result of a net loss of $5,000 on the
sale of investment securities as well as a decline in service charges on
deposit accounts in 1995.
First Gwinnett's operating expenses, which consist of salaries and employee
benefits, net occupancy and equipment expense, and other miscellaneous
expenses, increased by $126,000 or 7% in 1995. The largest increase in
operating expenses was in other expenses, which increased by $144,000 or 23%
over 1994. Other expenses include, among other things, expenses related to the
proposed merger with Regions Financial Corporation, which approximated $160,000
in 1995. This increase was partially offset by a decrease in the FDIC
assessment of $38,000 and a reduction of $39,000 in legal fees related to the
recovery of a portion of a previously charged off loan in 1994.
Financial Condition
The loan portfolio is the largest component of earning assets and therefore
generates the highest amount of revenues. First Gwinnett maintains a
diversified portfolio in its primary market area of Gwinnett County. The major
classifications of loans at December 31, 1995 and 1994 are commercial, real
estate, real estate construction, and consumer installment and simple interest.
Loan demand continued to be strong in 1995, fueled by economic growth in
the Atlanta metropolitan area. Net loans increased by $3,840,000 or 10.5% at
December 31, 1995 to $40,296,000. The greatest growth category was commercial
loans, which increased by $4,566,000 or 62% in 1995.
At December 31, 1995, commercial loans of $11,878,000 comprised 29% of
First Gwinnett's total loan portfolio. These loans consist of loans and lines
of credit to individuals, partnerships and corporations for a variety of
business purposes, such as equipment financing, business expansion, and working
capital. The terms of these business loans generally range from three months to
seven years, with substantially all of the business loans secured by business
assets or real estate.
Real estate construction loans totaled $14,936,000 or 36% of total loans at
December 31, 1995. Real estate construction loans are generally short term
maturities (less than one year) with interest rates that are variable based on
the prime rate. Management understands the risk inherent in real estate
construction financing and feels that it has designed an efficient method to
properly monitor those risks through strict underwriting criteria that
consider, among other things, the track record and financial condition of the
builder, the demand for the type of house to be constructed, the feasibility of
house plans, and growth prospects for the economy. Inspections are performed,
and construction progress and draws are closely monitored through building
completion. The Bank's construction loan portfolio includes 27.5% pre-sold
homes on December 31, 1995.
38
<PAGE> 43
Total deposits increased by $8,160,000 or 17% at December 31, 1995 to
$57,224,000. The majority of deposit growth was in non-interest bearing demand
deposits which increased by $5,589,000 or 75% compared to December 31, 1994.
Non-interest bearing deposits increased as a percentage of total deposits at
December 31, 1995 to 23% of total deposits, compared to 15% of total deposits
at December 31, 1994. NOW and money market accounts increased by $2,813,000 or
27% and total certificates of deposit increased by $518,000 or 2% compared to
balances at December 31, 1994, while savings deposits declined by $760,000 or
24% in the same period.
The significant growth in non-interest bearing demand deposits reflects
First Gwinnett's success in attracting more commercial customers in 1995. First
Gwinnett does not advertise for deposits outside its local market area, nor
does it use the services of deposit brokers. Growth in deposits continues to be
the principal source of funds to support loan growth.
Problem Assets and Asset Classification
Loans are reviewed on a regular basis and are placed on nonaccrual status
when, in the opinion of management, the collection of additional interest is
doubtful. Generally, this occurs when either principal or interest is 90 or
more days past due. Interest accrued and unpaid at the time a loan is placed on
nonaccrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
Real estate acquired by the Bank as a result of foreclosure is classified as
real estate owned until such time as it is sold. When such property is
acquired, it is recorded at the lower of the unpaid principal balance of the
related loan or its fair market value less estimated cost to sell. Any
writedown of the property subsequent to acquisition is charged to operations.
The following table presents information concerning loans with risk
elements. Risk elements include (i) loans accounted for on a nonaccrual basis,
(ii) accruing loans which are contractually past due 90 days or more as to
principal or interest payment, (iii) loans not included above which are
troubled debt restructuring, and (iv) real estate acquired through foreclosures
or repossession.
Nonperforming Assets
<TABLE>
<CAPTION>
March 31, December 31,
--------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans accounted for on a
nonaccrual basis $ - $147 $ - $ 87 $1,392 $1,748 $ 288
Accruing loans which are
contractually past due
days or more as to principal
or interest payments - 24 - 15 - 9 130
Restructured loans (exclusive
of non-accrual loans and
loans past due 90 days
or more) - - - - - - -
Real estate acquired through
foreclosure or repossession 67 16 139 16 309 817 594
--- ---- ---- ---- ------ ------ ------
Total $67 $187 $139 $118 $1,701 $2,574 $1,012
=== ==== ==== ==== ====== ====== ======
</TABLE>
39
<PAGE> 44
Allowance for Possible Losses on Loans
In making loans, the Bank recognizes that credit losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan, and
in the case of a secured loan, the quality of the security of the loan.
It is management's policy to maintain adequate allowances for estimated
losses on loans and real estate acquired. Such allowances are based on, among
other things, estimates of the historical loan loss experience, evaluation of
economic conditions in general and in various sectors of the Bank's customer
base, and periodic reviews of loan portfolio quality by the Bank's personnel.
Specific allowances will be provided for individual loans where management
considers the ultimate collections questionable after reviewing the current
status of loans which are contractually past due and considering the net
realizable value of the loan or guarantees, if applicable.
40
<PAGE> 45
The following analysis sets forth information with respect to the Bank's
loan loss experience and loan loss allowance for the periods indicated.
Analysis of Loan Loss Experience
<TABLE>
<CAPTION>
March 31, Year Ended December 31,
--------- --------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
Balance at beginning of year . . . . $497 $686 $686 $ 455 $ 564
LOANS CHARGED OFF:
Real estate . . . . . . . . . . . . . 54 -- 62 85 --
Consumer . . . . . . . . . . . . . . 5 46 54 188 29
Commercial . . . . . . . . . . . . . 10 18 278 99 500
---- ---- ---- ----- -----
Total . . . . . . . . . . . . . . 69 64 394 372 529
RECOVERIES:
Real estate . . . . . . . . . . . . . -- -- 37 85 --
Consumer . . . . . . . . . . . . . . 1 6 14 9 4
Commercial . . . . . . . . . . . . . 20 2 34 507 --
---- ---- ---- ----- -----
Total . . . . . . . . . . . . . . 21 8 85 601 4
NET LOANS CHARGED OFF (RECOVERED):
Real estate . . . . . . . . . . . . . 54 -- 25 -- --
Consumer . . . . . . . . . . . . . . 4 40 40 179 25
Commercial . . . . . . . . . . . . . (10) 16 244 (408) 500
---- ---- --- ----- -----
Total . . . . . . . . . . . . . . 48 56 309 (229) 525
Provision charged to expense . . . . . . 30 30 120 2 416
---- ----- -----
Balance at end of period . . . . . . . . $479 $660 $497 $ 686 $ 455
==== ==== ==== ===== =====
Net charge-offs (recoveries) as percent
of average loans outstanding during
the period (1) . . . . . . . . . . . .45% .58% .80% (.65)% 1.57%
==== ==== ==== ===== =====
</TABLE>
(1) Interim periods are annualized.
41
<PAGE> 46
COMPARISON OF THE YEARS ENDED
DECEMBER 31, 1994 AND 1993
Overview
First Gwinnett's net income for 1994 was $730,000 compared to $28,000 for
1993. The substantial increase in net income for 1994 was mainly attributable
to a $500,000 recovery of a particular loan which was charged off in 1993,
resulting in a small provision for loan losses in 1994. In addition, net income
improved due to an improved net interest margin, resulting from quicker
repricing of loans than deposits in a rising rate environment in 1994. These
improvements were partially offset by a decrease in gains on sales of
investments.
Return on average assets was 1.36% and return on average equity was 11.14%
for 1994, compared to .06% and .44%, respectively, for 1993.
Net interest income is the Bank's principal source of revenue and is
measured by the difference between interest income earned on loans and
investments and interest expense incurred on deposits and borrowings. In 1994,
net interest income increased by $653,000 or 34% over 1993's net interest
income. The primary reason for the increase in net interest income was a rising
interest rate environment in 1994. In 1994, the prime rate increased four
times, ranging from 6.0% to 8.5%. The Bank was able to reprice its loans
quicker than its deposits because a substantial portion of its loans have an
interest rate that floats with the prime rate.
The provision for loan losses, which is charged to income from operations,
is based upon the changes in the loan portfolio, the amount of net loan losses
incurred, and management's estimate of potential future losses based on several
factors including, but not limited to, current economic conditions, loan
portfolio composition, nonaccrual loans, problem loans, and prior loan loss
experience. The provision for loan losses was $2,000 in 1994 compared with
$416,000 in 1993. In 1993, $500,000 related to a single large commercial loan
which was charged off based on management's best determination of the ultimate
non-collectibility of the loan. In December 1994, the Bank recovered the
$500,000 previously charged off, which resulted in a reversal of amounts
previously provided and a substantially lower provision for loan losses in
1994.
The allowance for possible loan losses was $686,000 or 1.85% of loans at
December 31, 1994 compared to $455,000 or 1.36% of loans at December 31, 1993.
It is management's opinion that the allowance for possible loan losses at
December 31, 1994 is adequate, based on the Bank's review of the loan portfolio
and its aggressive charge-off and collection practices.
Non-interest income declined in 1994 compared with 1993, to $269,000 from
$401,000. The primary reason for the decline was a gain on the sale of
investment securities of $147,000 in 1993 with no sales in 1994.
Non-interest expense remained relatively stable in 1994 compared to 1993,
with less than a 1% increase. The components of the category are salaries and
employee benefits, which increased $170,000 or 23%, as the Bank added
additional employees and adjusted salaries; net occupancy and equipment expense
decreased $6,000 or 2%; amortization of organizational costs, unchanged from
1993 to 1994; and other operating expenses which declined $154,000 or 20%.
Items contributing to this decline included a reduction in legal expenses and a
decline in expense related to other real estate owned.
IMPACT OF INFLATION AND CHANGING PRICES
The majority of assets and liabilities of a financial institution are
monetary in nature and therefore differ greatly from those of other commercial
and industrial companies that have significant investments in fixed assets or
inventories. In industries with a high proportion of fixed assets, there is
greater potential for earnings to be inflated by understated depreciation
charges, as well as the potential for significant understatement of
42
<PAGE> 47
the current values of these assets. Likewise, in industries with high levels of
inventories, reported earnings may reflect significant increases in inventory
values. Neither of these factors is important in the banking industry.
However, inflation does have an important impact on the growth of total assets
in the banking industry and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity-to-asset
ratio.
Although inflation affects the growth of total assets, it is difficult to
measure the impact precisely. Only new assets acquired in each year are
directly affected rather than the total asset portfolio, so a simple adjustment
of asset totals by use of an inflation index is not satisfactory. The results
of operations also have been affected by inflation, but again there is no
simple way to measure the effect on various types of income and expense.
Interest rates in particular are significantly affected by inflation, but
neither the timing nor the magnitude of the changes coincides with changes in
the consumer price index. These factors in turn affect the composition of
sources of funds by reducing growth of core deposits and increasing the need
for purchased funds. On the other hand, many categories of operating expense
are more directly affected by current rates of inflation.
43
<PAGE> 48
BUSINESS OF FIRST GWINNETT
GENERAL
First Gwinnett is a bank holding company organized under the laws of the
state of Georgia with its principal executive office located in Norcross,
Georgia. First Gwinnett operates principally through the Bank, which is a
state-chartered commercial bank and which provides a range of retail banking
services through its one office in Gwinnett County, Georgia. At March 31,
1996, First Gwinnett had total consolidated assets of approximately $68.4
million, total consolidated deposits of approximately $59.7 million, and total
consolidated stockholders' equity of approximately $7.9 million. First
Gwinnett's principal executive office is located at 5935 Buford Highway,
Norcross, Georgia, 30071 and its telephone number at such address is (770)
368-2200.
BUSINESS AND PROPERTIES
The Bank offers a full range of traditional commercial banking services,
including demand, savings, and time deposits, consumer, commercial and real
estate loans, safe deposit boxes, access to a retail credit plan, drive-in
banking facilities and access to 24-hour teller machines through various
networks. The Bank owns the facility in which it operates described above.
As of March 31, 1996, the Bank had approximately 24 employees. The parent
company, First Gwinnett, has no salaried employees, although certain executive
officers hold parallel positions with the Bank. No employees are represented by
unions or other bargaining units, and management considers its relations with
employees to be satisfactory.
COMPETITION
First Gwinnett encounters vigorous competition in its market areas from a
number of sources, including bank holding companies and commercial banks,
thrift institutions, other financial institutions and financial intermediaries.
Regional interstate banking laws and other recent federal and state laws have
resulted in increased competition from both conventional banking institutions
and other business offering financial services and products. The Bank also
competes for interest bearing funds with a number of other financial
intermediaries and investment alternatives, including brokerage firms "money
market" funds, government and financial institutions, some of which have
greater financial resources than First Gwinnett. At March 31, 1996, there were
approximately 120 commercial bank branches, one savings bank branch, and three
credit union branches competing in Gwinnett County.
LEGAL PROCEEDINGS
First Gwinnett and the Bank are not parties to any material legal
proceedings other than ordinary routine litigation incidental to their
business.
44
<PAGE> 49
MANAGEMENT
The following table presents information about the directors and executive
officers of First Gwinnett and the Bank:
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
PRESENT OCCUPATION POSITION AND DIRECTOR OR OWNED AT MAY 30, 1996
AND PRINCIPAL OFFICES HELD EXECUTIVE -------------------------------
OCCUPATION FOR WITH FIRST GWINNETT OFFICER PERCENT OF
NAME AND AGE LAST FIVE YEARS AND BANK SINCE DIRECTLY INDIRECTLY CLASS
- -------------------------- --------------- ------------- ----- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul Donaldson President, Director 1987 2,875 280 1.08%
48 Donaldson
& Associates
Charles Douglas President, Director 1987 2,725 -- .93
72 Love, Douglas
& Pope Insurance
Agency
James H. Garner Owner, Director 1987 2,860 50 1.00
56 J. Garner
Contracting
J. Edwin Howard(1) Chairman, Director 1987 10,900 -- 3.73
68 First Gwinnett
Bank
John J. Howard(1) President, Director 1987 5,525 700 2.13
37 Howard Brothers Inc.
Leon D. Humphries President, Director 1987 10,773 6,750 6.01
48 Humphries
Concrete Block
Glenn E. Taylor Chairman Director 1987 14,985 -- 5.14
73 & CEO,
Bankhead Enterprises
Walter J. Thomas Chairman, Director 1987 2,500 10,000 4.28
76 Tull Charitable
Foundation and
First Gwinnett
C. Hunter Tison President, Director 1987 13,735 -- 4.71
46 Sewell Printing
Services, Inc.
Monty G. Watson President Director and 1990 6,500 -- 2.18
38 & CEO, First Executive Officer
Gwinnett and Bank
Kelly J. Johnson SVP & CFO Executive Officer 1995 -- -- --
39 First Gwinnett
and Bank
Charles K. Yorke VP & Senior Executive Officer 1995 -- -- --
38 Credit Officer,
First Gwinnett
and Bank
- --------------------
</TABLE>
(1) J. Edwin Howard is the father of John J. Howard.
45
<PAGE> 50
EMPLOYEE BENEFIT PLANS
First Gwinnett has a 401-K profit-sharing plan covering all employees after
specific periods of service and attainment of minimum age requirement. The plan
allows employee contributions, as limited by the Internal Revenue Code, and the
Bank matches 50% up to a maximum of 6% of the employee's contribution.
Contributions by First Gwinnett Bank to this plan including expenses for 1995,
1994, and 1993 were $16,886, $16,241, and $15,000, respectively.
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, the Bank has loans, deposits and other
transactions with its executive officers, directors, and organizations with
which such persons are associated. Such transactions are on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with others. The aggregate amount of loans to
the aforementioned person and company(s) in which they have a 10% or more
ownership interest as of March 31, 1996 were approximately $1,971,000.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF FIRST GWINNETT
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of First Gwinnett Common Stock, as of the
Record Date. Unless otherwise indicated, the person listed is the record owner
and has the sole voting and investment power over the shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT FEBRUARY 20, 1996
-----------------------------------
NAME AND ADDRESS PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER DIRECTLY INDIRECTLY CLASS
- -------------- ------------------- -------- ---------- -----
<S> <C> <C> <C> <C>
Common Stock Leon D. Humphries 10,773 6,750 6.01 %
4205 Berkeley Lake Road
Duluth, Georgia 30136
Common Stock Glenn E. Taylor 14,985 -- 5.14 %
875 Crest Valley Drive, N.W.
Atlanta, Georgia 30327
</TABLE>
46
<PAGE> 51
BUSINESS OF REGIONS
GENERAL
Regions is a regional bank holding company organized and existing under the
laws of the state of Delaware and headquartered in Birmingham, Alabama, with
approximately 353 banking offices located in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of March 31, 1996. At that date, Regions had total
consolidated assets of approximately $17.5 billion, total consolidated deposits
of approximately $14.2 billion, and total consolidated stockholders' equity of
approximately $1.5 billion. Regions operates banking subsidiaries in Alabama,
Florida, Georgia, Louisiana, and Tennessee and banking-related subsidiaries
engaged in mortgage banking, credit life insurance, and investment brokerage
activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
The following table presents information about Regions' banking operations
in the states in which its subsidiary depository institutions are located,
based on March 31, 1996 information:
<TABLE>
<CAPTION>
NUMBER OF TOTAL TOTAL
BANKING OFFICES ASSETS DEPOSITS
--------------- ------ --------
(In thousands)
<S> <C> <C> <C>
Alabama . . . . . . 181 $10,717,943 $8,330,187
Florida . . . . . . 36 1,225,590 1,102,605
Georgia . . . . . . 71 3,569,536 2,995,178
Louisiana . . . . . 41 2,049,759 1,626,968
Tennessee . . . . . 24 485,584 433,493
</TABLE>
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' principal executive offices are located at 417
North 20th Street, Birmingham, Alabama 35203, and its telephone number at such
address is (205) 326-7100.
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.
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
Recent Acquisition. Since March 31, 1996, Regions has completed the
acquisition of First Federal Bank of Northwest Georgia, Federal Savings Bank,
located in Cedartown, Georgia, with total assets of approximately $90 million.
The consideration for this acquisition, which was accounted for as a purchase,
consisted of Regions Common Stock having an approximate value on the date of
acquisition of $17.1 million.
47
<PAGE> 52
Other Pending Acquisitions. As of the date of this Proxy
Statement/Prospectus, Regions has pending three acquisitions in addition to
First Gwinnett, certain aspects of which transactions are set forth below:
<TABLE>
<CAPTION>
CONSIDERATION
-------------
APPROXIMATE
---------------------
ACCOUNTING
INSTITUTION ASSET SIZE VALUE TYPE TREATMENT
----------- ---------- ----- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Delta Bank & Trust Company, located in Belle $ 206 $ 34 Regions Purchase
Chasse, Louisiana (the "Delta Acquisition") Common
Stock
American Bancshares of Houma, Inc., located in 88 17 Regions Purchase
Houma, Louisiana (the "Houma Acquisition") Common
Stock
Rockdale Community Bank, located in Conyers, 46 13 Regions Purchase
Georgia (the "Rockdale Acquisition") Common
Stock
---- ---
Totals $340 $64
==== ===
</TABLE>
The Delta Acquisition, the Houma Acquisition, and the Rockdale Acquisition
are referred to in this Proxy Statement/Prospectus as the "Other Pending
Acquisitions." 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. 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 transactions will be
satisfied in a manner that will result in their consummation.
Pro forma information giving effect to the recent acquisition described
above and the Other Pending Acquisitions are not considered material in relation
to Regions' financial condition and results of operations.
In connection with the Merger and the Other Pending Acquisitions, Regions
has announced that it may purchase, in the open market, some or all of the
shares of Regions Common Stock to be issued in such transactions. Regions
anticipates that it may purchase in the open market as much as approximately
1.8 million shares 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 , 1996, Regions had purchased, in
the open market, approximately shares of Regions Common Stock to be
issued in the Merger and the Other Pending Aquisitions for an aggregate
purchase price of approximately $ .
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CERTAIN REGULATORY CONSIDERATIONS
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 and First Gwinnett.
Additional information is available in Regions' Annual Report on Form 10-K for
the fiscal year ended December 31, 1995. See "Documents Incorporated by
Reference."
GENERAL
Regions and First Gwinnett are both bank holding companies registered with
the Federal Reserve under the BHC Act. As such, Regions and First Gwinnett and
their non-bank subsidiaries are subject to the supervision, examination, and
reporting requirements of the BHC Act and the regulations of the Federal
Reserve. In addition, as a savings and loan holding company, Regions is also
registered with the OTS and is subject to the regulation, supervision,
examination, and reporting requirements of the OTS.
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 any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
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 Community Reinvestment Act of 1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective in September 1995, repealed
the prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that Regions, and any other bank holding company
located in Alabama may now acquire a bank located in any other state, and any
bank holding company located outside Alabama may lawfully acquire any
Alabama-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, 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. As of the date of this Proxy Statement/Prospectus, none
of the states in which the banking subsidiaries of Regions or First Gwinnett
are located has either moved up the date after which interstate branching will
be permissible or "opted out." Assuming no state action prior to June 1, 1997,
Regions would be able to consolidate all of its bank subsidiaries into a single
bank with interstate branches following that date.
The BHC Act generally prohibits Regions and First Gwinnett 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
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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 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 bank 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 depository institutions of Regions and First
Gwinnett is a member of the Federal Deposit Insurance Corporation (the "FDIC"),
and as such, its deposits are insured by the FDIC to the extent provided by
law. Each such subsidiary 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.
The regulatory agencies having supervisory jurisdiction over the
respective subsidiary institutions of Regions and First Gwinnett (the FDIC and
the applicable state authority in the case of state-chartered nonmember banks,
the OTS in the case of federally chartered thrift institutions, the Federal
Reserve in the case of state-chartered member banks, and the Comptroller of the
Currency (the "OCC") in the case of national banks) regularly examine the
operations of such institutions and have authority to approve or disapprove
mergers, consolidations, the establishment of branches, and similar corporate
actions. The federal and state banking regulators also have the power to
prevent the continuance or development of unsafe or unsound banking practices
or other violations of law.
PAYMENT OF DIVIDENDS
Regions and First Gwinnett are legal entities separate and distinct from
their banking, thrift, and other subsidiaries. The principal sources of cash
flow of both Regions and First Gwinnett, including cash flow to pay dividends
to their respective stockholders, are dividends from their subsidiary
depository institutions. There are statutory and regulatory limitations on the
payment of dividends by these subsidiary depository institutions to Regions and
First Gwinnett, as well as by Regions and First Gwinnett to their stockholders.
As to the payment of dividends, the Bank and all of Regions'
state-chartered banking subsidiaries are subject to the respective laws and
regulations of the state in which the bank is located, and to the regulations
of the bank's primary federal regulator. Regions' subsidiaries that are thrift
institutions are subject to the OTS' capital distributions regulation, and
those that are national banks are subject to the regulations of the OCC.
If, in the opinion of the federal banking regulatory agency, a depository
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
depository institution, could include the payment of dividends), such agency
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository 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."
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Moreover, the federal agencies have issued policy statements which provide that
bank holding companies and insured banks should generally pay dividends only
out of current operating earnings.
At March 31, 1996, under dividend restrictions imposed under federal and
state laws, the subsidiary depository institutions of Regions and First
Gwinnett, without obtaining governmental approvals, could declare aggregate
dividends to Regions and First Gwinnett of approximately $205 million and
$635,000 respectively.
The payment of dividends by Regions and First Gwinnett and their subsidiary
depository institutions may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Regions, First Gwinnett, and their respective subsidiary depository
institutions are required to comply with the capital adequacy standards
established by the Federal Reserve in the case of Regions and First Gwinnett
and the appropriate federal banking regulator in the case of each of their
subsidiary depository institutions. 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.
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 (the "Total Capital 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 equity, undivided profits,
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 ("Tier 2 Capital").
At March 31, 1996, Regions' consolidated Total Capital Ratio and its Tier 1
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
14.30% and 11.34%, respectively, and First Gwinnett's consolidated Total
Capital and Tier 1 Capital Ratios were 16.05% and 15.12%, 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' and First Gwinnett's respective Leverage Ratios at March 31,
1996, were 7.81% and 11.71%. 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
indicators of capital strength in evaluating proposals for expansion or new
activities.
Each of Regions' and First Gwinnett's subsidiary depository institutions is
subject to risk-based and leverage capital requirements adopted by its federal
banking regulator, which are substantially similar to those adopted by the
Federal Reserve. Each of the subsidiary depository institutions was in
compliance with applicable minimum capital requirements as of March 31, 1996.
Neither Regions, First Gwinnett, nor any of
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their subsidiary depository 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 or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. 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 OCC, and the FDIC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that 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. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions and First Gwinnett are expected to
act as sources of financial strength for, and to commit resources to support,
each of their respective banking subsidiaries. This support may be required at
times when, absent such Federal Reserve policy, Regions or First Gwinnett may
not be inclined to provide it. In addition, any capital loans by a bank holding
company to any of its banking subsidiaries are subordinate in right of payment
to deposits and to certain other indebtedness of such banks. 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 banking
subsidiary will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
Under the Federal Deposit Insurance Act ("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 depository institutions of Regions are
subject to these cross-guarantee provisions. As a result, any loss suffered by
the FDIC in respect of any of these subsidiaries would likely result in
assertion of the cross-guarantee provisions, the assessment of such estimated
losses against the depository institution's banking or thrift affiliates, and a
potential loss of Regions' respective investments in such other subsidiary
depository 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
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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 rules 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 or 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 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.
At March 31, 1996, all of the subsidiary depository institutions of Regions
and First Gwinnett had the requisite capital levels to qualify as well
capitalized.
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, 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 replaced 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 transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and
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supervisory subgroups) to which different assessment rates are applied.
Assessment rates for members of both the Bank Insurance Fund ("BIF") and the
Savings Association Insurance Fund ("SAIF") for the first half of 1995, as they
had been during 1994, ranged from 23 basis points (0.23% of deposits) for an
institution in the highest category (i.e., "well capitalized" and "healthy") to
31 basis points (0.31% of deposits) for an institution in the lowest category
(i.e., "undercapitalized" and "substantial supervisory concern"). These rates
were established for both funds to achieve a designated ratio of reserves to
insured deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC was
authorized to reduce the minimum assessment rate below the 23 basis points and
to set future assessment rates at such levels that would maintain the fund's
reserve ratio at the designated level. In August 1995, the FDIC adopted final
regulations reducing the assessment rates for BIF-member banks. Under the
revised schedule, BIF-member banks, starting with the second half of 1995, will
pay assessments ranging from 4.0 basis points to 31 basis points, with an
average assessment rate of 4.5 basis points. Refunds with interest were paid
for assessments for the month(s) after the month in which the designated
reserve ratio for the BIF was reached. Subsequently, on November 14, 1995, the
FDIC announced that, beginning in 1996, it would further reduce the deposit
insurance premiums for 92% of all BIF members that are in the highest capital
and supervisory categories to $2,000 per year, regardless of deposit size. At
the same time, the FDIC elected to retain the existing assessment rate range of
23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized nature of that insurance fund.
By virtue of the BIF assessments being reduced, Regions' subsidiary
institutions realized savings of approximately $7.9 million pre-tax, during the
second half of 1995, and anticipate annual savings of approximately $16.3
million pre-tax, with respect to their deposits that are assessed at BIF
rates. However, given that approximately 28% of the total deposits of the
Regions subsidiary institutions as of March 31, 1996 were (and are now being)
assessed at the much higher SAIF premium rates, Regions' subsidiary
institutions are now paying substantially more in insurance premium costs than
they would be if they did not hold any SAIF-assessed deposits.
Recognizing that the disparity between the SAIF and BIF premium rates have
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, on July 28, 1995, the FDIC,
the Treasury Department, and the OTS released statements outlining a proposed
plan (the "Proposed Plan") to recapitalize the SAIF, certain features of which
were subsequently approved by the Banking Committees of the House of
Representatives and the Senate of the United States in bills that provided for
different resolutions of the BIF-SAIF disparity. Under the Proposed Plan, as
approved by the members of the Banking Committees of the House and Senate, all
SAIF-member institutions were to pay a special assessment to recapitalize the
SAIF, and the assessment base for the payments on the FICO bonds would have
been expanded to include the deposits of both BIF- and SAIF-insured
institutions. As a result of the SAIF becoming fully capitalized, it was
anticipated that insurance premium rates for SAIF members shortly thereafter
would have been reduced to the same levels as those currently paid by BIF
members.
The amount of the special assessment required to recapitalize the SAIF was
estimated to be approximately 78 to 85 basis points. Under the latest version
of the Proposed Plan, banks that had acquired SAIF-insured deposits would have
paid a special assessment of approximately 64 basis points - 20% less than
SAIF-member institutions. The special assessment would have been payable some
time in 1996 based on deposits held on March 31, 1995. If the applicable 85 and
64 point assessments had been assessed against the Regions' subsidiary
institutions' deposits as of March 31, 1995, they would have been required to
pay an aggregate special assessment of $26.0 million pre-tax. However, the
special assessments paid by Regions' subsidiary institutions would have been at
least partially offset by a reduction in insurance premiums paid if, as
expected, the FDIC were to have reduced SAIF premiums to BIF levels following
payment of the special assessment and recapitalization of the SAIF.
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Congress adopted the Proposed Plan as part of a budget bill. However, in
December 1995, the President vetoed the balanced budget legislation passed by
Congress which included the proposed provisions of the Proposed Plan. With no
prospect of a budget agreement between the Administration and Congress, as well
as significant opposition to the Proposed Plan now coming from many BIF-insured
banks, the fate of the SAIF special assessment provisions of the legislation is
uncertain, and it now appears possible that a significant disparity between
SAIF and BIF insurance premium rates could continue to exist for some time.
In view of the legislative uncertainty that currently exist, it cannot be
predicted whether the Proposed Plan or any other legislative proposal will be
enacted as described above or, if enacted, the amount of any special SAIF
assessment, whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums, or whether such legislation, if enacted, may contain
other provisions, for example, requiring all federally-chartered thrifts to
convert to bank charters. A significant increase in SAIF insurance premiums,
either absolutely relative to BIF premiums, a significant one-time fee to
recapitalize the SAIF, or a significant tax liability associated with the
recapture of the bad debt reserve could have a potentially adverse effect on
the operating expenses and results of operations of Regions.
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.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 120,000,000 shares of Regions Common Stock,
of which 62,185,402 shares were issued at March 31, 1996, none of which were
held as treasury stock. 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
therefor. The ability of Regions to pay dividends is affected by the ability of
its Subsidiary Institutions to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At March 31, 1996, under such
requirements and guidelines, Regions' subsidiary institutions had $205 million
of undivided profits legally available for the payment of dividends. See
"Certain Regulatory Considerations--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 May, 1997. 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 December 2, 1996, for consideration
by Regions for possible inclusion in such proxy materials.
EXPERTS
The consolidated financial statements and the supplemental consolidated
financial statements of Regions incorporated by reference in or appearing as an
exhibit to Region's Annual Report (Form 10-K) for the year ended December 31,
1995, have been audited by Ernst & Young LLP, independent auditors, for the
periods indicated in their reports thereon incorporated by reference or
included therein and incorporated herein by reference. Such consolidated
financial statements and supplemental consolidated financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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statements audited by Ernst & Young LLP have been incorporated herein by
reference in reliance on the report of Ernst & Young LLP given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of First Gwinnett for the year ended
December 31, 1995, included in this Registration Statement, have been audited
by Bricker & Melton, P.A., independent auditors. The financial statements
audited by Bricker & Melton, P.A. have been included herein in reliance on
their report given on their authority as experts in accounting and auditing.
The consolidated financial statements of First Gwinnett for the years ended
December 31, 1994 and 1993, included in this Registration Statement, have been
audited by Birnbrey, Minsk & Minsk, independent auditors. The financial
statements audited by Birnbrey, Minsk & Minsk have been included herein 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 May , 1996, attorneys in the law firm of Lange, Simpson,
Robinson & Somerville owned an aggregate of 118,595 shares of Regions Common
Stock.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird, Atlanta, Georgia.
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INDEX TO FIRST GWINNETT FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
CONSOLIDATED BALANCE SHEETS (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
</TABLE>
F-1
<PAGE> 62
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
First Gwinnett Bancshares, Inc.
and Subsidiary
Norcross, Georgia
We have audited the accompanying consolidated balance sheet of First
Gwinnett Bancshares, Inc. and subsidiary as of December 31, 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of First Gwinnett Bancshares, Inc.'s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The consolidated financial statements of First
Gwinnett Bancshares, Inc. and subsidiary as of December 31, 1994, and for the
two years in the period then ended, were audited by other auditors whose
report, dated January 30, 1995, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of First Gwinnett Bancshares, Inc. and subsidiary as of December 31, 1995, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in 1995 the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 114 on the accounting for impaired loans.
BRICKER & MELTON, P.A.
February 2, 1996
Duluth, Georgia
F-2
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Gwinnett Bancshares, Inc.
Norcross, Georgia
We have studied the accompanying consolidated balance sheets of First Gwinnett
Bancshares, Inc. and its wholly-owned subsidiary as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the two years ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statement referred to above present
fairly, in all material respects, the financial position of First Gwinnett
Bancshares, Inc. and its wholly-owned subsidiary as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
two years ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note A to the consolidated financial statements, the Company
changed its method of accounting for investment securities in 1994 to adopt the
provisions of Statement of Financial Accounting Standards No. 115.
/s/ Birnbrey, Minsk & Minsk, LLC
January 30, 1995
F-3
<PAGE> 64
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash and due from banks (Note C) $ 5,058,144 $ 3,383,802
Federal funds sold 2,250,000 1,356,000
Interest-bearing deposits in other financial
institutions 3,669,806 2,378,000
Investment securities held to maturity (Note D) 1,578,675 1,893,390
Investment securities available for sale (Note D) 10,183,174 8,733,366
Loans, net (Notes E and J) 40,296,087 36,456,421
Premises and equipment, net (Note F) 1,801,658 1,745,882
Other real estate 139,000 16,000
Accrued interest receivable 426,297 389,998
Other assets (Note H) 123,657 418,534
----------- -----------
TOTAL ASSETS $65,526,498 $56,771,393
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $13,022,318 $ 7,433,128
Interest-bearing demand and money market 13,277,607 10,465,032
Savings 2,334,067 3,093,709
Time deposits of $100,000 or more 4,815,084 3,816,728
Other time deposits 23,774,587 24,255,161
----------- -----------
TOTAL DEPOSITS 57,223,663 49,063,758
Short-term borrowing - 84,625
Accrued interest payable 488,910 420,100
Other liabilities (Note H) 106,694 484,836
----------- -----------
TOTAL LIABILITIES 57,819,267 50,053,319
----------- -----------
STOCKHOLDERS' EQUITY (Note K)
Common stock, par value $1: 2,000,000
shares authorized, 293,205 and 292,250
shares issued and outstanding 293,205 292,250
Surplus 5,711,527 5,691,922
Retained earnings 1,662,687 1,049,936
Treasury stock - at cost, 1,420 shares (36,210) -
Market valuation reserve on investment
securities available for sale (Note D) 76,022 (316,034)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,707,231 6,718,074
----------- -----------
Commitments and contingent liabilities (Note L)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $65,526,498 $56,771,393
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 65
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 4,072,484 $ 3,341,614 $ 2,599,461
Interest on investment securities 748,522 584,778 454,233
Interest on federal funds sold 166,928 56,861 63,568
Interest on deposits in other financial
institutions 87,960 74,623 37,119
----------- ----------- -----------
TOTAL INTEREST INCOME 5,075,894 4,057,876 3,154,381
----------- ----------- -----------
INTEREST EXPENSE
Interest-bearing demand and money market 342,867 262,345 239,526
Savings 75,694 85,304 73,679
Time deposits of $100,000 or more 424,683 267,306 192,470
Other time deposits 1,294,352 868,285 727,131
Federal funds purchased 977 371 -
----------- ----------- -----------
TOTAL INTEREST EXPENSE 2,138,573 1,483,611 1,232,806
----------- ----------- -----------
NET INTEREST INCOME 2,937,321 2,574,265 1,921,575
PROVISION FOR LOAN LOSSES (Note E) 120,000 2,361 416,250
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,817,321 2,571,904 1,505,325
----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 194,990 199,765 202,298
Investment securities gains (losses),
net (Note D) (4,784) - 146,741
Other income 70,368 69,104 52,399
----------- ----------- -----------
TOTAL OTHER INCOME 260,574 268,869 401,438
----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits (Note I) 885,745 909,591 739,289
Net occupancy and equipment expense 237,997 232,470 238,142
Other expense (Note N) 770,754 626,308 780,167
----------- ----------- -----------
TOTAL OTHER EXPENSE 1,894,496 1,768,369 1,757,598
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,183,399 1,072,404 149,165
INCOME TAX EXPENSE (Note H) 439,292 342,263 102,337
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLES 744,107 730,141 46,828
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTNG
PRINCIPLES FOR INCOME TAXES (Note H) - - (18,425)
----------- ----------- -----------
NET INCOME $ 744,107 $ 730,141 $ 28,403
=========== =========== ===========
EARNINGS PER SHARE $ 2.55 $ 2.44 $ .09
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 66
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1995, 1994 and 1993
----------------------------------------------------------------------------------------
Cost of
Shares of Market
Parent Held Common Retained Treasury Valuation
by Subsidiary Stock Surplus Earnings Stock Reserve Total
------------- ------ ------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992 $(65,000) $300,000 $5,833,797 $ 289,160 $ - $ - $6,357,957
Net income - - - 28,403 - - 28,403
Cash dividends paid -
$.10 per share - - - (30,000) - - (30,000)
Dividend distributions 65,000 - - - (65,000) - -
-------- -------- ---------- ---------- -------- --------- ----------
BALANCE AT
DECEMBER 31, 1993 - 300,000 5,833,797 287,563 (65,000) - 6,356,360
Net income - - - 730,141 - - 730,141
Cash dividends paid -
$.10 per share - - - (30,000) - - (30,000)
Prior period adjustment
(Note M) - - - 62,232 - - 62,232
Shares purchased
and retired - (7,750) (141,875) - 65,000 - (84,625)
Market valuation
adjustment - - - - - (316,034) (316,034)
-------- -------- ---------- ---------- -------- --------- ----------
BALANCE AT
DECEMBER 31, 1994 - 292,250 5,691,922 1,049,936 - (316,034) 6,718,074
Net income - - - 744,107 - - 744,107
Cash dividends paid -
$.45 per share - - - (131,356) - - (131,356)
Shares purchased
and retired - (45) (945) - - - (990)
Shares purchased
as treasury stock - - - - (36,210) - (36,210)
Exercise of stock
options - 1,000 20,550 - - - 21,550
Market valuation
adjustment - - - - - 392,056 392,056
-------- -------- ---------- ---------- -------- --------- ----------
BALANCE AT
DECEMBER 31, 1995 $ - $293,205 $5,711,527 $1,662,687 $(36,210) $ 76,022 $7,707,231
======== ======== ========== ========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 67
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 744,107 $ 730,141 $ 28,403
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in
accounting principles - - 18,425
Income tax refund - 62,232 -
Investment securities (gains) losses, net 4,784 - (146,741)
Depreciation of premises and equipment 109,600 132,386 122,452
Provision for loan losses 120,000 2,361 416,250
Deferred income tax provision (benefit) 75,944 (56,898) 83,812
(Increase) decrease in other assets 16,965 32,162 (11,809)
(Increase) decrease in accrued interest
receivable (36,299) (187,989) 25,338
Increase in accrued interest payable 68,810 197,095 7,678
Increase (decrease) in other liabilities (378,142) 426,979 (162,477)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 725,769 1,338,469 381,331
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest-bearing deposits
in other financial institutions (1,291,806) (803,000) (1,476,000)
Purchases of investment securities held
to maturity - - (3,222,960)
Purchases of investment securities
available for sale (3,955,723) (5,985,800) -
Sales of investment securities available
for sale 1,845,155 - -
Sales of investment securities held to
maturity - - 2,773,735
Maturities of investment securities held
to maturity 314,715 545,377 1,717,043
Maturities of investment securities
available for sale 1,250,000 500,000 -
Loans originated, net of principal repayments (4,135,666) (3,373,503) (5,565,843)
Purchases of premises and equipment (165,376) (68,145) (118,628)
Proceeds from sales of other real estate 53,000 293,000 755,000
----------- ----------- -----------
NET CASH USED BY INVESTING
ACTIVITIES (6,085,701) (8,892,071) (5,137,653)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowing (84,625) 84,625 -
Net increase in demand, money market and
savings accounts 7,642,123 891,671 1,795,997
Time deposits accepted, net of repayments 517,782 6,724,086 2,757,080
Repurchase of common stock (36,210) - -
Stock repurchased and retired (990) (84,625) -
Exercise of stock options 21,550 - -
Cash dividends paid (131,356) (30,000) (30,000)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 7,928,274 7,585,757 4,523,077
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(Continued)
F-7
<PAGE> 68
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $2,568,342 $ 32,155 $ (233,245)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 4,739,802 4,707,647 4,940,892
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $7,308,144 $4,739,802 $4,707,647
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $2,069,763 $1,286,515 $1,225,128
========== ========== ==========
Income taxes $ 778,361 $ 20,000 $ 274,020
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING AND INVESTING ACTIVITIES:
Transfer of loans to other real estate $ 176,000 $ - $ 247,000
========== ========== ==========
Transfer of investment securities to
available for sale $ - $3,719,947 $ -
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 69
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Gwinnett Bancshares, Inc. and
subsidiary conform to generally accepted accounting principles and to general
practices within the banking industry. The following is a summary of the more
significant of these policies.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses and the valuation of other real estate
acquired in connection with foreclosures or in satisfaction of loans.
Management believes that the allowance for loan losses is adequate and the
valuation of other real estate is appropriate. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses and valuation of other
real estate. Such agencies may require the Bank to recognize additions to the
allowance or valuation adjustments to other real estate based on their
judgments about information available to them at the time of their examination.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of First Gwinnett
Bancshares, Inc. (Parent Company) and its wholly-owned subsidiary, First
Gwinnett Bank (Bank), collectively known as the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
INTEREST-BEARING DEPOSITS IN OTHER FINANCIAL INSTITUTIONS
Interest-bearing deposits are reported at cost. Interest income is
recognized based on the simple interest method for principal amounts
outstanding. At December 31, 1995, these deposits are in excess of $100,000 and
are not, therefore, fully insured by the Federal Deposit Insurance Corporation.
INVESTMENT SECURITIES
Investment securities held to maturity are reported at cost, adjusted for
amortization of premium and accretion of discount. Investment securities
available for sale are reported at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity, net of the related
tax effect.
Premium and discount on all investment securities are amortized (deducted)
and accreted (added), respectively, to interest income on the straight-line and
interest methods over the period to the maturity of the related securities.
Premium and discount on mortgage-backed securities are amortized (deducted) and
accreted (added), respectively, to interest income using a method which
approximates a level yield over the period to maturity of the related
securities taking into consideration assumed prepayment patterns.
Gains or losses on disposition are computed by the specific identification
method for all securities.
F-9
<PAGE> 70
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)
LOANS
Loans are reported at the gross amount outstanding, less net deferred loan
fees and a valuation allowance for loan losses. Interest income on all loans is
recognized over the terms of the loans based on the principal amount
outstanding. If the collectibility of interest appears doubtful, the accrual
thereof is discontinued. Accrued interest which appears doubtful of collection
is reversed to interest income if accrued in the current year or charged to the
allowance for loan losses if accrued in prior years. Loan origination fees, net
of direct loan origination costs, are deferred and recognized as income over
the life of the related loan on a level-yield basis. Interest income on
impaired loans is recognized on the accrual method.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 114 (SFAS 114) on accounting by creditors for
impairment of a loan. SFAS 114, as amended by SFAS 118, requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's fair value
if the loan is collateral dependent. The provisions of SFAS 114 were effective
for the Company beginning in 1995. The adoption did not have a significant
impact on the Company.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans that may become uncollectible. Management's judgment in determining the
adequacy of the allowance is based on evaluations of the collectibility of
loans and takes into consideration such factors as changes in the nature and
volume of the loan portfolio, current economic conditions that may affect the
borrower's ability to pay, overall portfolio quality and review of specific
problem loans. Periodic revisions are made to the allowance when circumstances
which necessitate such revisions become known. Recognized losses are charged to
the allowance for loan losses, while subsequent recoveries are added to the
allowance.
PREMISES AND EQUIPMENT
Premises and equipment are reported at cost less accumulated depreciation.
For financial reporting purposes, depreciation is computed using primarily the
straight-line method over the estimated useful lives of the assets.
Expenditures for maintenance and repairs are charged to operations as incurred,
while major renewals and betterments are capitalized. When property is disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any gain or loss is reflected in income. For Federal tax reporting
purposes, depreciation is computed using primarily accelerated methods.
OTHER REAL ESTATE
Other real estate represents property acquired through foreclosure or in
settlement of loans and is carried at the lower of cost or fair value less
estimated selling expenses. Losses incurred in the acquisition of foreclosed
properties are charged against the allowance for loan losses at the time of
foreclosure. Subsequent write-downs of other real estate are charged against
the current period's operations.
F-10
<PAGE> 71
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)
INCOME TAXES
The tax effect of transactions is recorded at current tax rates in the
periods the transactions are reported for financial statement purposes.
Deferred income taxes are established for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled. The Company files its income tax returns on a consolidated
basis.
PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to implement SFAS 121 by December 31, 1996. The provisions of SFAS 121
will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The adoption is not expected to have a
significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights," as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected
to have a significant impact on the Company.
EARNINGS PER SHARE
Earnings per share has been computed based on the weighted average number of
shares outstanding during the period, which totaled 292,290, 299,685 and
300,000 shares for the years ended December 31, 1995, 1994 and 1993,
respectively. Stock options, as described in Note K, are considered to be
common stock equivalents for purposes of calculating earnings per share. The
effect of including these common stock equivalents in the earnings per share
calculations for each of the three years in the period ended December 31, 1995,
is anti-dilutive.
FINANCIAL INSTRUMENTS
In the ordinary course of business, the Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit and standby letters of credit. Such financial instruments are recorded
in the financial statements when they are funded or related fees are incurred
or received.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company uses the following methods and assumptions in estimating fair
values of financial instruments (see Note O):
F-11
<PAGE> 72
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)
Cash and cash equivalents--The carrying amount of cash and cash equivalents
approximates fair value.
Interest-bearing deposits--The carrying amount of interest-bearing deposits
approximates fair value.
Investment securities--The fair value of investment securities held to
maturity and available for sale is estimated based on bid quotations received
from independent pricing services.
Loans--For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
For all other loans, fair values are calculated by discounting the contractual
cash flows using estimated market discount rates which reflect the credit and
interest rate risk inherent in the loan, or by using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for
the same remaining maturities.
Deposits--The fair value of deposits with no stated maturity, such as
demand, NOW and money market, and savings accounts, is equal to the amount
payable on demand at year-end. The fair value of certificates of deposit is
based on the discounted value of contractual cash flows using the rates
currently offered for deposits of similar remaining maturities.
Accrued interest--The carrying amount of accrued interest receivable and
payable approximates fair value.
Off-balance-sheet instruments--Fair values for off-balance-sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
borrowers' credit standing.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and federal funds sold. Generally, federal
funds are purchased and sold for one-day periods.
RECLASSIFICATION
Certain reclassifications have been made in the 1994 and 1993 financial
statements to conform with the 1995 presentation.
NOTE B - MERGER
During 1995, the Company and Regions Financial Corporation executed an
agreement to merge the two companies. The merger will be accounted for as a
purchase. At December 31, 1995, the Bank has accrued approximately $77,000 for
merger expenses based on management's best estimate of expected costs. The
merger is subject to regulatory and shareholder approval and is expected to be
consummated in the third quarter of 1996.
F-12
<PAGE> 73
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE C - CASH AND DUE FROM BANKS
A bank is required to maintain average reserve balances with the Federal
Reserve Bank, on deposit with national banks or in cash. At December 31, 1995
and 1994, the Bank's reserve requirement averaged approximately $265,000 and
$141,000, respectively. The Bank maintained cash balances which were adequate
to meet these requirements.
NOTE D - INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities held
to maturity are as follows at December 31:
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government agencies
and corporations $ 750,000 $1,163 $13,750 $ 737,413
Mortgage-backed securities 828,675 7,888 18,423 818,140
---------- ------ ------- ----------
$1,578,675 $9,051 $32,173 $1,555,553
========== ====== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government agencies
and corporations $1,000,000 $ - $24,585 $ 975,415
Mortgage-backed securities 893,390 3,076 62,669 833,797
---------- ------ ------- ----------
$1,893,390 $3,076 $87,254 $1,809,212
========== ====== ======= ==========
</TABLE>
The amortized cost and estimated market value of investment securities
available for sale are as follows at December 31:
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 1,494,427 $ 15,263 $ - $ 1,509,690
U.S. Government agencies
and corporations 6,754,017 47,893 11,496 6,790,414
States and political
subdivisions 1,819,545 73,777 10,252 1,883,070
----------- -------- ------- -----------
$10,067,989 $136,933 $21,748 $10,183,174
=========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 493,494 $ - $ 20,369 $ 473,125
U.S. Government agencies
and corporations 6,999,582 1,005 404,522 6,596,065
States and political
subdivisions 1,719,129 11,709 66,662 1,664,176
---------- ------- -------- ----------
$9,212,205 $12,714 $491,553 $8,733,366
========== ======= ======== ==========
</TABLE>
F-13
<PAGE> 74
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE D - INVESTMENT SECURITIES, (Continued)
The Bank adopted Statement of Financial Accounting Standards No. 115 in
1994 as required. In conjunction with the adoption, investment securities
totaling $3,719,947 were transferred to available for sale.
At December 31, 1995, the unrealized gain on available for sale
securities, net of the related deferred taxes of $39,163, is $76,022, and is
included as a separate component of stockholders' equity. At December 31,
1994, the unrealized loss on available for sale securities, net of the related
deferred taxes of $162,805, is $316,034, and is included as a separate
component of stockholders' equity.
The amortized cost and estimated market value of investment securities
held to maturity and available for sale at December 31, 1995, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
without call or prepayment penalties. Mortgage-backed securities have been
allocated based on stated maturity dates after considering assumed prepayment
patterns.
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
----------------------------- ------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 52,190 $ 52,190 $ 90,000 $ 90,605
Due after one year
through five years 1,208,024 1,193,167 8,148,729 8,201,908
Due after five years
through ten years 318,461 310,196 1,829,260 1,890,661
Due after ten years - - - -
---------- ----------- ----------- -----------
$1,578,675 $ 1,555,553 $10,067,989 $10,183,174
========== =========== =========== ===========
</TABLE>
Proceeds from sales of investment securities available for sale during
1995 were $1,845,155 with gross gains of $5,529 and gross losses of $10,313
realized on those transactions. There were no sales of investment securities
during 1994. Proceeds from sales of investment securities held to maturity
during 1993 were $2,773,735, with gross gains of $146,741 and gross losses of
$0 realized on those transactions.
Investment securities with carrying values of $3,552,190 and $5,307,227
and market values of $3,569,002 and $5,016,317 at December 31, 1995 and 1994,
respectively, were pledged to secure public funds and certain other deposits as
required by law.
At December 31, 1995, the Bank has no outstanding derivative financial
instruments such as swaps, options, futures or forward contracts.
F-14
<PAGE> 75
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE E - LOANS
Major classifications of loans are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial $11,877,820 $ 7,311,378
Real estate 8,637,892 11,810,582
Real estate - construction 14,935,912 13,859,787
Installment and simple interest individual 5,470,002 4,286,175
----------- -----------
Total loans 40,921,626 37,267,922
Less: Net deferred loan fees (128,426) (125,915)
Allowance for loan losses (497,113) (685,586)
----------- -----------
Loans, net $40,296,087 $36,456,421
=========== ===========
</TABLE>
Most of the Bank's business activity is with customers located within
Gwinnett County and the surrounding area. As of December 31, 1995 and 1994, the
Bank had approximately $23,574,000 and $25,670,000, respectively, of its loan
portfolio secured by real estate.
At December 31, 1995, the Bank had no nonaccrual loans. Nonaccrual loans
totaled approximately $85,000 at December 31, 1994. If such loans had been on a
full-accrual basis, interest income in 1994 would have been approximately
$14,800 higher.
At December 31, 1995, the Bank had approximately $451,000 in loans which
are impaired under SFAS 114. The allowance for loan losses related to these
loans is approximately $33,000. The average amount of impaired loans during
1995 was approximately $342,000.
The following is a summary of transactions in the allowance for loan
losses for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 685,586 $ 455,000 $ 563,500
Provision charged to expense 120,000 2,361 416,250
Loans charged off (394,330) (372,344) (529,265)
Recoveries of loans previously charged off 85,857 600,569 4,515
--------- --------- ---------
Balance, end of year $ 497,113 $ 685,586 $ 455,000
========= ========= =========
</TABLE>
NOTE F - PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land $ 464,000 $ 464,000
Buildings 1,524,177 1,443,791
Furniture, fixtures and equipment 686,570 625,430
---------- ----------
2,674,747 2,533,221
Less accumulated depreciation (873,089) (787,339)
---------- ----------
Premises and equipment, net $1,801,658 $1,745,882
========== ==========
</TABLE>
Depreciation expense totaled $109,600, $132,386 and $122,452 in 1995,
1994 and 1993, respectively.
F-15
<PAGE> 76
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE G - SHORT-TERM BORROWINGS
The Bank utilizes short-term borrowings as needed for liquidity purposes
in the form of federal funds purchased. The Bank has unsecured lines of credit
for federal funds purchased from other banks totaling $2,500,000. At December
31, 1995, there were no amounts outstanding under these lines.
NOTE H - INCOME TAXES
The following are the components of income tax expense as provided for
the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current income tax provision $363,348 $399,161 $ 18,525
Deferred income tax provision (benefit) 75,944 (56,898) 83,812
-------- -------- --------
$439,292 $342,263 $102,337
======== ======== ========
</TABLE>
A reconciliation of income tax computed at the federal statutory income
tax rate to total income taxes is as follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Pretax income $1,183,399 $1,072,404 $ 149,165
========== ========== ==========
Income taxes computed at federal
statutory tax rate $ 402,356 $ 364,617 $ 41,424
Increase (decrease) resulting from:
Tax-exempt interest (31,977) (31,268) (24,590)
Nondeductible interest on tax-exempt
investments 4,204 13,807 6,031
Nondeductible expenses 37,080 - -
Restatement of deferred taxes - - 83,812
Other, net 27,629 (4,893) (4,340)
---------- ---------- ----------
$ 439,292 $ 342,263 $ 102,337
========== ========== ==========
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 109
as of January 1, 1993. The cumulative effect on prior years of this change in
accounting principles decreased net income in 1993 by $65,615, of which $18,425
is reported separately in the consolidated statement of income. In addition,
the deferred tax beneft for 1993 has also been restated to reflect the
adoption.
The following summarizes the tax effects of temporary differences which
comprise the net deferred tax assets at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Reserve for loan losses $ 79,661 $143,742
Accumulated depreciation (14,239) (15,207)
Deferred loan fees 38,903 47,561
Market valuation adjustment (39,163) 162,035
Other, net - 4,943
-------- --------
$ 65,162 $343,074
======== ========
</TABLE>
F-16
<PAGE> 77
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE I - EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
The Bank sponsors an Internal Revenue Code Section 401(k) Employee
Savings Plan that permits an employee to defer annual cash compensation. The
Bank's Board of Directors determines the Bank's contribution, which was
$16,886, $16,241 and $15,000 in 1995, 1994 and 1993, respectively.
NOTE J - RELATED PARTY TRANSACTIONS
As of December 31, 1995 and 1994, the Bank had direct and indirect loans
which aggregated $2,182,098 and $2,917,143, respectively, outstanding to or for
the benefit of certain of the Bank's executive officers, directors, and their
related interests. During 1995, $713,835 of such loans were made and repayments
totaled $1,448,880. These loans were made in the ordinary course of business in
conformity with normal credit terms, including interest rates and collateral
requirements prevailing at the time for comparable transactions with other
borrowers. These individuals and their related interests also maintain
customary demand and time deposit accounts at the Bank.
NOTE K - STOCKHOLDERS' EQUITY
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. The regulations require the
Bank to meet specific capital adequacy guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital
classification is also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of Tier 1 capital (as defined in the regulations) to total
average assets (as defined), and minimum ratios of Tier 1 and total capital (as
defined) to risk-weighted assets (as defined). To be considered adequately
capitalized (as defined) under the regulatory framework for prompt corrective
action, the Bank must maintain minimum Tier 1 leverage, Tier 1 risk-based, and
total risk-based ratios as set forth in the table. The Bank's actual capital
amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
1995
--------------------------------------
Required Actual
Amount (Ratio) Amount (Ratio)
--------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital (to Average Assets) $2,645,000 4.0% $7,627,000 11.5%
Tier 1 Capital (to Risk Weighted Assets) $1,894,000 4.0% $7,627,000 16.1%
Total Capital (to Risk Weighted Assets) $3,788,000 8.0% $8,124,000 17.2%
</TABLE>
Management believes, as of December 31, 1995 and 1994, that the Bank
meets all capital requirements to which it is subject.
F-17
<PAGE> 78
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE K - STOCKHOLDERS' EQUITY, (Continued)
Banking regulations limit the amount of dividends which the Bank may pay
without obtaining prior approval. Under current state banking laws, the
approval of the Georgia Department of Banking and Finance will be required if
the total of all dividends declared in the calendar year exceeds 50 percent of
the net profits, after taxes but before dividends, for the previous calendar
year, and the ratio of equity capital to adjusted total assets is less than 6
percent. During 1995, the Bank could pay approximately $400,000 in dividends
without prior approval or violation of regulatory capital requirements.
The Company has a stock option plan which permits a total of 20,000 options
to be granted to executive officers and key management employees. A total of
6,500 options are outstanding with an exercise price ranging from $20.00 to
$24.83 per share. The options vest over a six-year period and expire over a
range from 2000 to 2005. A total of 500 options are outstanding with an
exercise price of $25.35 per share. The options vest after a six-month period
and expire in 2005.
Summarized information related to these options is as follows at December
31:
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Outstanding, beginning of year 8,000 8,000
Granted during year 3,000 12,000
Exercised during year at $21.55 per share (1,000) -
Forfeited during year (3,000) (12,000)
------ -------
Outstanding, end of year 7,000 8,000
====== =======
</TABLE>
NOTE L - OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
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. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract amounts of these instruments reflect
the extent of involvement the Bank has in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations 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. At December 31, 1995 and 1994, commitments
to extend credit totaled approximately $10,817,000 and $7,469,000,
respectively. The Bank's experience has been that approximately 80 percent of
loan commitments are drawn upon by customers.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. At December 31, 1995 and 1994,
commitments under letters of credit aggregated approximately $1,575,000 and
$498,000, respectively. The Bank has not been required to perform on any
standby letters of credit during 1995 and 1994.
F-18
<PAGE> 79
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE L - OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS, (Continued)
The Bank evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the other
party. Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial properties on
those commitments for which collateral is deemed necessary.
NOTE M - PRIOR PERIOD ADJUSTMENT
Certain errors in the reporting of loan fees collected in prior years, which
resulted in an overstatement of previously reported tax revenues and income
taxes, were discovered during 1994. Correction of these errors resulted in an
income tax refund of $62,232.
NOTE N - SUPPLEMENTAL FINANCIAL DATA
Components of other expense in excess of 1% of total interest and other
income are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
FDIC assessment $ 56,785 $ 94,948 $ 87,065
Data processing fees 94,266 82,181 91,231
Legal fees 22,318 56,748 119,003
Merger expenses 160,273 56,216 -
Director and committee fees 61,250 48,950 50,175
Other real estate (income) expense 1,252 (36,588) 149,609
</TABLE>
NOTE O - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows at December 31:
<TABLE>
<CAPTION>
1995
---------------------------------
Estimated
Carrying Fair
Value Value
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 7,308,144 $ 7,308,144
Interest-bearing deposits 3,669,806 3,669,806
Investment securities held to maturity 1,578,675 1,555,553
Investment securities available for sale 10,183,174 10,183,174
Loans 40,921,626 40,774,028
Accrued interest receivable 426,297 426,297
</TABLE>
F-19
<PAGE> 80
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE O - FAIR VALUES OF FINANCIAL INSTRUMENTS, (Continued)
<TABLE>
<CAPTION>
1995
---------------------------------
Estimated
Carrying Fair
Value Value
----------- -----------
<S> <C> <C>
Financial liabilities:
Noncontractual deposits $28,633,992 $28,633,992
Contractual deposits 28,589,671 28,466,911
Accrued interest payable 488,910 488,910
Off-balance-sheet instruments:
Undisbursed credit lines $10,680,706
Standby letters of credit 1,555,155
</TABLE>
NOTE P - CONDENSED FINANCIAL INFORMATION OF FIRST GWINNETT BANCSHARES, INC.
CONDENSED BALANCE SHEETS
(Parent Only)
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Cash $ 68,065 $ 3,037
Investment in Bank subsidiary 7,702,730 6,793,084
Other assets 21,000 6,578
---------- ----------
TOTAL ASSETS $7,791,795 $6,802,699
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Short-term borrowing $ - $ 84,625
Other liabilities 84,564 -
---------- ----------
TOTAL LIABILITIES 84,564 84,625
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 293,205 292,250
Surplus 5,711,527 5,691,922
Retained earnings 1,662,687 1,049,936
Treasury stock (36,210) -
Market valuation reserve 76,022 (316,034)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 7,707,231 6,718,074
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,791,795 $6,802,699
========== ==========
</TABLE>
F-20
<PAGE> 81
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE P - CONDENSED FINANCIAL INFORMATION OF FIRST GWINNETT BANCSHARES, INC.,
(Continued)
CONDENSED STATEMENTS OF INCOME
(Parent Only)
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
OPERATING INCOME
Dividends from Bank subsidiary $376,210 $ 95,500 $ 95,000
Other income - 325 -
-------- -------- --------
TOTAL OPERATING INCOME 376,210 95,825 95,000
-------- -------- --------
OPERATING EXPENSES
Merger expense 160,273 56,216 -
Other expense 10,416 14,893 14,039
-------- -------- --------
TOTAL OPERATING EXPENSES 170,689 71,109 14,039
-------- -------- --------
INCOME BEFORE INCOME TAX BENEFIT AND
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 205,521 24,716 80,961
INCOME TAX BENEFIT 21,000 - -
-------- -------- --------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 226,521 24,716 80,961
EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARY 517,586 705,425 (52,558)
-------- -------- --------
NET INCOME $744,107 $730,141 $ 28,403
======== ======== ========
</TABLE>
F-21
<PAGE> 82
FIRST GWINNETT BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE P - CONDENSED FINANCIAL INFORMATION OF FIRST GWINNETT BANCSHARES, INC.,
(Continued)
CONDENSED STATEMENTS OF CASH FLOWS
(Parent Only)
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 744,107 $ 730,141 $ 28,403
Equity in undistributed earnings of
subsidiary (517,586) (705,425) 52,558
(Increase) decrease in other assets (14,426) 10,524 10,524
Increase (decrease) in other liabilities 84,564 (5,000) 5,000
--------- --------- --------
NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES 296,659 30,240 96,485
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowing (84,625) 84,625 -
Shares purchased and retired (990) (84,625) -
Repurchase of common stock (36,210) - -
Exercise of stock options 21,550 - -
Dividend distributions - - (65,000)
Cash dividends paid (131,356) (30,000) (30,000)
--------- --------- --------
NET CASH FLOWS USED BY FINANCING
ACTIVITIES (231,631) (30,000) (95,000)
--------- --------- ---------
NET INCREASE IN CASH 65,028 240 1,485
CASH AT BEGINNING OF YEAR 3,037 2,797 1,312
--------- --------- --------
CASH AT END OF YEAR $ 68,065 $ 3,037 $ 2,797
========= ========= ========
</TABLE>
F-22
<PAGE> 83
FIRST GWINNETT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CONDITION (UNAUDITED)
MARCH 31, 1996 AND 1995
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
March 31,
----------------------------
1996 1995
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,547 $ 3,194
Federal funds sold 1,650 4,140
Interest-bearing deposits
in other financial institutions 3,460 1,784
Investment securities held to maturity
(market value of $1,496 and $1,824) 1,519 1,887
Investment securities available for sale 9,044 9,011
Loans, net of unearned income 46,096 38,400
Less allowance for loan losses (479) (660)
------- -------
Net loans 45,617 37,740
Bank premises and equipment, net 1,787 1,754
Other real estate owned 67 16
Accrued interest receivable 442 484
Other assets 263 285
------- -------
TOTAL $68,396 $60,295
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits $13,384 $ 9,195
NOW accounts 4,701 3,736
Money market accounts 9,709 6,254
Savings deposits 2,372 3,095
Time deposits of $100,000 and over 9,195 6,644
Other time deposits 20,383 23,777
------- -------
Total deposits 59,744 52,701
Accrued interest payable 478 407
Other liabilities 317 136
------- -------
Total liabilities 60,539 53,244
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value; 2,000,000 shares
authorized; 293,205 and 292,205 shares
issued and outstanding 293 292
Surplus 5,712 5,691
Retained earnings 1,838 1,201
Unrealized gain (loss) on securities available for sale 50 (133)
Treasury stock, 1,420 shares at cost (36) --
------- -------
Total stockholders' equity 7,857 7,051
TOTAL $68,396 $60,295
======= =======
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE> 84
FIRST GWINNETT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
------ ------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,105 $ 996
Interest on investment securities:
U.S. Treasury securities 22 7
Obligations of other U.S. Government
agencies and corporations 124 133
Obligations of state and political
subdivisions 24 23
Interest on balances due from banks 53 32
Interest on federal funds sold 16 19
------ ------
1,344 1,210
INTEREST EXPENSE:
Deposits 580 482
Other borrowings -- 2
------ ------
580 484
NET INTEREST INCOME 764 726
PROVISION FOR LOAN LOSSES 30 30
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 734 696
OTHER INCOME:
Service fees 48 42
Other 20 15
------ ------
68 57
OTHER EXPENSES:
Salaries and employee benefits 249 215
Occupancy expense 29 31
Furniture and equipment expense 26 24
Other 132 159
------ ------
436 429
------ ------
INCOME BEFORE INCOME TAXES 366 324
------ ------
INCOME TAXES 130 112
NET INCOME $ 236 $ 212
====== ======
NET INCOME PER SHARE OF COMMON STOCK $ .81 $ .73
====== ======
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE> 85
FIRST GWINNETT BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 236 $ 212
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 29 27
Amortization of organizational costs -- 4
Amortization, net -- 1
Provision for loan losses 30 30
Gain on sale of ORE (4) --
(Increase) decrease in other assets (113) 47
Increase in accrued interest receivable (16) (94)
Increase in accrued interest payable (11) (13)
Increase (decrease) in other liabilities 210 (349)
------- -------
Net cash provided (used) by operating activities 361 (135)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations, net of repayments (5,418) (1,314)
Proceeds from maturities of investment securities
available for sale 1,100 --
Proceeds from maturities of investment securities
held to maturity 60 6
Purchases of property and equipment (14) (35)
Proceeds from sales of other real estate 143 --
------- -------
Net cash used by investing activities (4,129) (1,343)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short term note payable -- (85)
Net increase in demand deposits, NOW accounts
and savings accounts 1,532 1,288
Net increase in certificates of deposit 988 2,349
Cash dividends paid (73) (73)
Stock repurchased -- (1)
------- -------
Net cash provided by financing activities 2,447 3,478
------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,321) 2,000
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 10,978 7,118
------- -------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 9,657 $ 9,118
======= =======
SUPPLEMENTAL INFORMATION:
Loans transferred to other real estate owned $ 67 --
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE> 86
FIRST GWINNETT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed by First Gwinnett Bancshares, Inc. and
the methods of applying principles conform with generally accepted accounting
principles consistently applied and generally practiced within the banking
industry.
The consolidated financial statements include the accounts of First
Gwinnett Bancshares, Inc. and its wholly owned subsidiary, First Gwinnett Bank.
All significant intercompany transactions and balances have been eliminated in
consolidation.
The accompanying Unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for interim
periods are not necessarily indicative of the results that may be expected for
the entire year. For further information, refer to the consolidated financial
statements and notes thereto of First Gwinnett Bancshares, Inc. and subsidiary
for the three years ended December 31, 1995, included elsewhere herein.
2. PROPOSED MERGER
On October 23, 1995, the Company entered into an agreement and plan of
reorganization with Regions Financial Corporation, a bank holding company with
its principal office in Birmingham, Alabama, pursuant to which the Company will
merge with and into Regions. The proposed merger is subject to various
conditions, including approval by the shareholders of the Company and by
certain regulatory agencies. The agreement contemplates that the shareholders
of the Company will receive approximately 338,703 shares of Regions common
stock, subject to adjustment under certain circumstances.
3. PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to implement SFAS 121 by December 31, 1996. The provisions of SFAS 121
will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The adoption is not expected to have a
significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights", as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected
to have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." The Company is required to implement SFAS 123 in 1996. SFAS 123
establishes a method of accounting for stock compensation plans based on fair
value. Companies are permitted to continue to use the existing method of
accounting but are required to disclose pro forma net income and earnings per
share as if SFAS 123 had been used to measure compensation cost. The adoption
of SFAS 123 is not expected to have a significant impact on the Company.
F-26
<PAGE> 87
FIRST GWINNETT BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed by First Gwinnett Bancshares, Inc. and the
methods of applying principles conform with generally accepted accounting
principles consistently applied and generally practiced within the banking
industry.
The consolidated financial statements include the accounts of First Gwinnett
Bancshares, Inc. and its wholly owned subsidiary, First Gwinnett Bank. All
significant intercompany transactions and balances have been eliminated in
consolidation.
The accompanying Unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the entire year. For further
information, refer to the consolidated financial statements and notes thereto
of First Gwinnett Bancshares, Inc. and subsidiary for the three years ended
December 31, 1994, included elsewhere herein.
2. PROPOSED MERGER
On October 23, 1995, the Company entered into an agreement and plan of
reorganization with Regions Financial Corporation, a bank holding company with
its principal office in Birmingham, Alabama, pursuant to which the Company will
merge with and into Regions. The proposed merger is subject to various
conditions, including approval by the shareholders of the Company and by
certain regulatory agencies. The agreement contemplates that the shareholders
of the Company will receive approximately 338,700 shares of Regions common
stock, subject to adjustment under certain circumstances.
3. ADOPTION OF SIGNIFICANT ACCOUNTING POLICY
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 114 (SFAS 114) on accounting by creditors for
impairment of a loan. SFAS 114, as amended by SFAS 118, requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's fair value
if the loan is collateral dependent. The provisions of SFAS 114 were effective
for the Company beginning in 1995. The adoption did not have a significant
impact on the Company.
F-27
<PAGE> 88
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 107 (SFAS 107) which requires disclosure of current
market value information related to certain assets and liabilities, and
Statement of Financial Accounting Standards No. 119 (SFAS 119) which requires
disclosure about derivative financial instruments. These pronouncements were
effective for the Company begining in 1995. The adoption did not have a
significant impact on the Company.
4. PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company is
required to implement SFAS 121 by December 31, 1996. The provisions of SFAS 121
will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The adoption is not expected to have a
significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights", as an
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected
to have a significant impact on the Company.
F-28
<PAGE> 89
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FIRST GWINNETT BANCSHARES, INC.
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF OCTOBER 23, 1995
A-1
<PAGE> 90
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <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-5
ARTICLE 2 -- TERMS OF MERGER........................................................ A-6
2.1 Certificate of Incorporation................................................. A-6
2.2 Bylaws....................................................................... A-6
2.3 Directors and Officers....................................................... A-6
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................................ A-6
3.1 Conversion of Shares......................................................... A-6
3.2 Anti-Dilution Provisions..................................................... A-6
3.3 Shares Held by First Gwinnett or Regions..................................... A-6
3.4 Fractional Shares............................................................ A-6
3.5 Conversion of Stock Options; Restricted Stock................................ A-7
3.6 Dissenting Shareholders...................................................... A-7
ARTICLE 4 -- EXCHANGE OF SHARES..................................................... A-7
4.1 Exchange Procedures.......................................................... A-7
4.2 Rights of Former First Gwinnett Shareholders................................. A-8
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF FIRST GWINNETT....................... A-8
5.1 Organization, Standing, and Power............................................ A-8
5.2 Authority; No Breach By Agreement............................................ A-8
5.3 Capital Stock................................................................ A-9
5.4 First Gwinnett Subsidiaries.................................................. A-9
5.5 Financial Statements......................................................... A-10
5.6 Absence of Undisclosed Liabilities........................................... A-10
5.7 Absence of Certain Changes or Events......................................... A-10
5.8 Tax Matters.................................................................. A-10
5.9 Environmental Matters........................................................ A-11
5.10 Compliance With Laws......................................................... A-11
5.11 Employee Benefit Plans....................................................... A-11
5.12 Material Contracts........................................................... A-13
5.13 Legal Proceedings............................................................ A-13
5.14 Statements True and Correct.................................................. A-13
5.15 Accounting, Tax and Regulatory Matters....................................... A-13
5.16 State Takeover Laws.......................................................... A-14
5.17 Directors' Agreements........................................................ A-14
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS.............................. A-14
6.1 Organization, Standing, and Power............................................ A-14
6.2 Authority; No Breach By Agreement............................................ A-14
6.3 Capital Stock................................................................ A-14
6.4 Financial Statements......................................................... A-15
6.5 Absence of Undisclosed Liabilities........................................... A-15
6.6 Absence of Certain Changes or Events......................................... A-15
6.7 Compliance With Laws......................................................... A-15
6.8 Legal Proceedings............................................................ A-16
6.9 Statements True and Correct.................................................. A-16
</TABLE>
A-2
<PAGE> 91
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
6.10 Accounting, Tax and Regulatory Matters....................................... A-16
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION............................... A-16
7.1 Affirmative Covenants of First Gwinnett...................................... A-16
7.2 Negative Covenants of First Gwinnett......................................... A-16
7.3 Covenants of Regions......................................................... A-18
7.4 Adverse Changes in Condition................................................. A-18
7.5 Reports...................................................................... A-18
ARTICLE 8 -- ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval................ A-18
8.2 Exchange Listing............................................................. A-19
8.3 Applications................................................................. A-19
8.4 Filings with State Offices................................................... A-19
8.5 Agreement as to Efforts to Consummate........................................ A-19
8.6 Investigation and Confidentiality............................................ A-19
8.7 Press Releases............................................................... A-20
8.8 Certain Actions.............................................................. A-20
8.9 Tax Treatment................................................................ A-20
8.10 Agreements of Affiliates..................................................... A-20
8.11 Employee Benefits and Contracts.............................................. A-20
8.12 Indemnification.............................................................. A-21
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE...................... A-21
9.1 Conditions to Obligations of Each Party...................................... A-21
9.2 Conditions to Obligations of Regions......................................... A-22
9.3 Conditions to Obligations of First Gwinnett.................................. A-23
ARTICLE 10 -- TERMINATION........................................................... A-24
10.1 Termination.................................................................. A-24
10.2 Effect of Termination........................................................ A-25
10.3 Non-Survival of Representations and Covenants................................ A-25
ARTICLE 11 -- MISCELLANEOUS......................................................... A-25
11.1 Definitions.................................................................. A-30
11.2 Expenses..................................................................... A-30
11.3 Brokers and Finders.......................................................... A-30
11.4 Entire Agreement............................................................. A-30
11.5 Amendments................................................................... A-31
11.6 Waivers...................................................................... A-31
11.7 Assignment................................................................... A-31
11.8 Notices...................................................................... A-31
11.9 Governing Law................................................................ A-31
11.10 Counterparts................................................................. A-32
11.11 Captions..................................................................... A-32
11.12 Enforcement of Agreement..................................................... A-32
11.13 Severability................................................................. A-32
Signatures.......................................................................... A-33
</TABLE>
A-3
<PAGE> 92
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <C> <S>
1. -- Form of Directors' Agreement. (sec.5.17).
2. -- Form of agreement of affiliates of First Gwinnett. (sec.sec.8.10, 9.2(f)).
3. -- Matters as to which Powell, Goldstein, Frazer & Murphy will opine. (sec.9.2(d)).
4. -- Form of Claims Letter. (sec.9.2(g)).
5. -- Matters as to which Lange, Simpson, Robinson & Somerville will opine. (sec.9.3(d)).
</TABLE>
A-4
<PAGE> 93
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of the 23rd day of October, 1995, by and between FIRST GWINNETT
BANCSHARES, INC. ("First Gwinnett"), a corporation organized and existing under
the laws of the State of Georgia, with its principal office located in Atlanta,
Georgia; 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 First Gwinnett 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 First Gwinnett by Regions pursuant to the merger of First Gwinnett into and
with Regions. At the effective time of such merger, the outstanding shares of
the capital stock of First Gwinnett shall be converted into shares of the common
stock of Regions (except as provided herein). As a result, shareholders of First
Gwinnett shall become shareholders of Regions and each of the subsidiaries of
First Gwinnett shall continue to conduct its business and operations as a wholly
owned subsidiary of Regions. The transactions described in this Agreement are
subject to the approvals of the shareholders of First Gwinnett, 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
(i) for federal income tax purposes shall qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes shall be accounted for as a "pooling of interests."
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. Subject to the terms and conditions of this Agreement, at the
Effective Time, First Gwinnett shall be merged into and with Regions in
accordance with the provisions of Sections 14-2-1107 and 14-2-1103 of the GBCC
and with the effect provided in Section 14-2-1106 of the GBCC and of Section 258
of the DGCL and with the effect provided in Section 259 of the DGCL (the
"Merger"). Regions shall be the Surviving Corporation of the Merger and shall
continue to be governed by the Laws of the State of Delaware. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the Boards of Directors of First Gwinnett and Regions.
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 at such other time as the Parties,
acting through their chief executive officers or chief financial officers, 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 Georgia
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia and the Delaware Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Delaware (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 of each Party, the Parties shall
use their reasonable efforts to cause the Effective Time to occur on the last
business 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
A-5
<PAGE> 94
any Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the date on which the shareholders of First Gwinnett 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 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Regions in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of Regions in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Regions 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 Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Regions 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 Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
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 First Gwinnett Common Stock (excluding shares held
by First Gwinnett or any of its Subsidiaries or by Regions or any of its
Subsidiaries, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at the
Effective Time shall be converted into 1.1336 shares of Regions Common
Stock (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event First Gwinnett changes the
number of shares of First Gwinnett 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, the Exchange Ratio shall be
proportionately adjusted. 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 shall be proportionately adjusted.
3.3 SHARES HELD BY FIRST GWINNETT OR REGIONS. Each of the shares of First
Gwinnett Common Stock held by any First Gwinnett Company or by any Regions
Company, 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 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of First Gwinnett Common Stock exchanged
pursuant to the Merger, or of options to purchase shares of First Gwinnett
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
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
A-6
<PAGE> 95
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/NMS (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.
3.5 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK. (a) At the Effective
Time, all rights with respect to First Gwinnett Common Stock pursuant to stock
options or stock appreciation rights ("First Gwinnett Options") granted by First
Gwinnett under the First Gwinnett Stock Plans, 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 Regions shall assume each First
Gwinnett Option, in accordance with the terms of the First Gwinnett Stock Plan
and stock option agreement by which it is evidenced. From and after the
Effective Time, (i) each First Gwinnett Option assumed by Regions may be
exercised solely for shares of Regions Common Stock (or cash in the case of
stock appreciation rights), (ii) the number of shares of Regions Common Stock
subject to such First Gwinnett Option shall be equal to the number of shares of
First Gwinnett Common Stock subject to such First Gwinnett Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iii) the per
share exercise price under each such First Gwinnett Option shall be adjusted by
dividing the per share exercise price under each such First Gwinnett Option by
the Exchange Ratio and rounding down to the nearest cent. 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." First
Gwinnett agrees to take all necessary steps to effectuate the foregoing
provisions of this Section 3.5.
(b) All restrictions or limitations on transfer with respect to First
Gwinnett Common Stock awarded under the First Gwinnett Stock Plans or any other
plan, program, or arrangement of any First Gwinnett 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.
3.6 DISSENTING SHAREHOLDERS.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions and
First Gwinnett shall cause the exchange agent selected by Regions (the "Exchange
Agent") to mail to the former shareholders of First Gwinnett appropriate
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
First Gwinnett Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent). After the Effective Time, each holder of
shares of First Gwinnett Common Stock (other than shares to be canceled pursuant
to Section 3.3 of this Agreement or as to which dissenters' rights have been
perfected as provided in Section 3.6 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 3.4 of this Agreement, each
holder of shares of First Gwinnett 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 First Gwinnett Common Stock is entitled as a result of the
A-7
<PAGE> 96
Merger until such holder surrenders his certificate or certificates representing
the shares of First Gwinnett Common Stock for exchange as provided in this
Section 4.1. The certificate or certificates of First Gwinnett Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Agreement notwithstanding, neither Regions, First Gwinnett,
nor the Exchange Agent shall be liable to a holder of First Gwinnett Common
Stock for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property Law.
4.2 RIGHTS OF FORMER FIRST GWINNETT SHAREHOLDERS. At the Effective Time,
the stock transfer books of First Gwinnett shall be closed as to holders of
First Gwinnett Common Stock immediately prior to the Effective Time and no
transfer of First Gwinnett 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 First Gwinnett Common Stock (other than shares to be
canceled pursuant to Section 3.3 or Section 3.6 of this Agreement) shall from
and after the Effective Time represent for all purposes only the right to
receive the consideration provided in Sections 3.1 and 3.4 of this Agreement in
exchange therefor. To the extent permitted by Law, former shareholders of record
of First Gwinnett shall be entitled to vote after the Effective Time at any
meeting of Regions shareholders the number of whole shares of Regions Common
Stock into which their respective shares of First Gwinnett Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing First Gwinnett 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
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of Regions Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of First Gwinnett 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 First Gwinnett 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.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FIRST GWINNETT
First Gwinnett hereby represents and warrants to Regions as follows:
5.1 ORGANIZATION, STANDING, AND POWER. First Gwinnett is a corporation
duly organized and validly existing, and in good standing under the Laws of the
State of Georgia, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its material Assets.
First Gwinnett 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 First Gwinnett.
5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) First Gwinnett 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 First Gwinnett, subject to the approval of this Agreement
by the holders of a majority of the outstanding First Gwinnett Common Stock,
which is the only shareholder vote required for approval of this Agreement and
consummation of the Merger by First Gwinnett. Subject to such requisite
shareholder approval, this Agreement represents a legal, valid, and binding
obligation of First Gwinnett, enforceable against First Gwinnett in accordance
with its terms
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(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 First Gwinnett,
nor the consummation by First Gwinnett of the transactions contemplated hereby,
nor compliance by First Gwinnett with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of First Gwinnett's
Articles 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 First Gwinnett Company under, any Contract or Permit of any
First Gwinnett 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 First Gwinnett, 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 First Gwinnett 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 NYSE and 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 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 First Gwinnett,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by First Gwinnett of the Merger and the other
transactions contemplated in this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of First Gwinnett consists
of 2,000,000 shares of First Gwinnett Common Stock, of which 290,785 shares are
issued and outstanding as of the date of this Agreement and not more than
298,785 shares will be issued and outstanding at the Effective Time. All of the
issued and outstanding shares of capital stock of First Gwinnett are duly and
validly issued and outstanding and are fully paid and nonassessable under the
GBCC. None of the outstanding shares of capital stock of First Gwinnett has been
issued in violation of any preemptive rights of the current or past shareholders
of First Gwinnett. First Gwinnett has reserved 8,000 shares of First Gwinnett
Common Stock for issuance under the First Gwinnett Stock Plans, pursuant to
which options to purchase not more than 8,000 shares of First Gwinnett Common
Stock are outstanding. Except as set forth above or as disclosed in Section 5.3
of the First Gwinnett Disclosure Memorandum, there are no shares of capital
stock or other equity securities of First Gwinnett outstanding and no
outstanding Rights relating to the capital stock of First Gwinnett.
5.4 FIRST GWINNETT SUBSIDIARIES. First Gwinnett has disclosed in Section
5.4 of the First Gwinnett Disclosure Memorandum all of the First Gwinnett
Subsidiaries as of the date of this Agreement. Except as disclosed in Section
5.4 of the First Gwinnett Disclosure Memorandum, First Gwinnett or one of its
Subsidiaries owns all of the issued and outstanding shares of capital stock of
each First Gwinnett Subsidiary. No equity securities of any First Gwinnett
Subsidiary are or may become required to be issued (other than to another First
Gwinnett Company) by reason of any Rights, and there are no Contracts by which
any First Gwinnett Subsidiary is bound to issue (other than to another First
Gwinnett Company) additional shares of its capital stock or Rights or by which
any First Gwinnett Company is or may be bound to transfer any shares of the
capital stock of any First Gwinnett Subsidiary (other than to another First
Gwinnett Company). There are no Contracts relating to the rights of any First
Gwinnett Company to vote or to dispose of any shares of the capital stock of any
First Gwinnett Subsidiary. All of the shares of capital stock of each First
Gwinnett Subsidiary held by a First Gwinnett Company are fully paid and (except
pursuant to 12 U.S.C. 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 First Gwinnett
Company free and clear of any Lien. Each First Gwinnett 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 First Gwinnett Subsidiary is
duly
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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 First Gwinnett. Each First
Gwinnett Subsidiary that is a depository institution 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.
5.5 FINANCIAL STATEMENTS. First Gwinnett has included in Section 5.5 of
the First Gwinnett Disclosure Memorandum copies of all First Gwinnett Financial
Statements for periods ended prior to the date hereof and will deliver to
Regions copies of all First Gwinnett Financial Statements prepared subsequent to
the date hereof. The First Gwinnett 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 First
Gwinnett Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (ii) present or will present, as
the case may be, fairly the consolidated financial position of the First
Gwinnett Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the First
Gwinnett 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 of effect).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No First Gwinnett Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Gwinnett, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of First
Gwinnett as of June 30, 1995 included in the First Gwinnett Financial Statements
or reflected in the notes thereto. No First Gwinnett Company has incurred or
paid any Liability since June 30, 1995, 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 First Gwinnett.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1995, except as
disclosed in Section 5.7 of the First Gwinnett Disclosure Memorandum, (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
First Gwinnett, and (ii) the First Gwinnett 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
First Gwinnett provided in Article 7 of this Agreement.
5.8 TAX MATTERS. (a) All Tax returns required to be filed by or on behalf
of any of the First Gwinnett 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, 1994, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, and all returns
filed are complete and accurate to the Knowledge of First Gwinnett. All Taxes
shown on filed returns have been paid. There is no audit examination,
deficiency, refund Litigation, or penalties owed with respect to any Taxes,
except as reserved against in the First Gwinnett Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 5.8 of the First
Gwinnett Disclosure Memorandum. All Taxes and other Liabilities due with respect
to completed and settled examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the First Gwinnett Disclosure
Memorandum, none of the First Gwinnett 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) Adequate provision for any Taxes due or to become due for any of the
First Gwinnett Companies for the period or periods through and including the
date of the respective First Gwinnett Financial Statements has been made and is
reflected on such First Gwinnett Financial Statements.
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(d) Deferred Taxes of the First Gwinnett Companies have been provided for
in accordance with GAAP.
(e) Each of the First Gwinnett Companies is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
5.9 ENVIRONMENTAL MATTERS. (a) Except as disclosed in Section 5.9(a) of
the First Gwinnett Disclosure Memorandum, to the Knowledge of First Gwinnett,
each First Gwinnett 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 First Gwinnett.
(b) To the Knowledge of First Gwinnett, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum in
which any First Gwinnett Company or any of its Loan Properties or Participation
Facilities has been or, with respect to threatened Litigation, may 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
First Gwinnett 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 the aggregate, a Material Adverse
Effect on First Gwinnett, and to the Knowledge of First Gwinnett, there is no
reasonable basis for any such Litigation.
(c) To the Knowledge of First Gwinnett, there have been no releases 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 First Gwinnett.
5.10 COMPLIANCE WITH LAWS. First Gwinnett is duly registered as a bank
holding company under the BHC Act. Each First Gwinnett 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 the absence of Permits which
do not have, individually or in the aggregate, a Material Adverse Effect on
First Gwinnett, and there has occurred no Default under any such Permit. Except
as disclosed in Section 5.10 of the First Gwinnett Disclosure Memorandum, none
of the First Gwinnett 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 First Gwinnett; 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 First Gwinnett
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 First Gwinnett, (ii) threatening to
revoke any Permits, or (iii) requiring any First Gwinnett Company to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, 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) First Gwinnett has disclosed in Section
5.11 of the First Gwinnett Disclosure Memorandum, and has delivered or made
available to Regions prior to the execution of this Agreement copies in each
case of, all 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 medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "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 First Gwinnett Company or Affiliate thereof for the
benefit of employees, retirees,
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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 "First Gwinnett Benefit Plans"). Any of the First Gwinnett 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 "First Gwinnett ERISA Plan." Each
First Gwinnett 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 "First
Gwinnett Pension Plan." No First Gwinnett Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All First Gwinnett 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 First Gwinnett. No First Gwinnett
Company has engaged in a transaction with respect to any First Gwinnett Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject any First Gwinnett Company to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA.
(c) No First Gwinnett 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 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. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any First Gwinnett Pension Plan, (ii) no change in the actuarial assumptions
with respect to any First Gwinnett Pension Plan, and (iii) no increase in
benefits under any First Gwinnett Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on First Gwinnett or materially
adversely affect the funding status of any such plan. Neither any First Gwinnett
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any First Gwinnett
Company, or the single-employer plan of any entity which is considered one
employer with First Gwinnett 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 an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA. No First
Gwinnett Company has provided, or is required to provide, security to a First
Gwinnett 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 First Gwinnett Company with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No First Gwinnett 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). 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 First Gwinnett 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 First Gwinnett Disclosure
Memorandum, no First Gwinnett Company has any Liability for retiree health and
life benefits under any of the First Gwinnett Benefit Plans and there are no
restrictions on the rights of such First Gwinnett Company to amend or terminate
any such Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.11(f) of the First Gwinnett 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 First Gwinnett
Company from any First Gwinnett Company under any First Gwinnett Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any First Gwinnett
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
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(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 First Gwinnett Company and their respective beneficiaries,
other than 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 First Gwinnett 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 First
Gwinnett Disclosure Memorandum or otherwise reflected in the First Gwinnett
Financial Statements, none of the First Gwinnett 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 First Gwinnett Company or the
guarantee by any First Gwinnett Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds,
fully-secured repurchase agreements, and Federal Home Loan Bank advances of
depository institution Subsidiaries, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contracts between or among First Gwinnett Companies, and (iv) any other Contract
or amendment thereto that would be required to be filed as an exhibit to a Form
10-K filed by First Gwinnett with the SEC as of the date of this Agreement if
First Gwinnett were required to file a Form 10-K with the SEC (together with all
Contracts referred to in Section 5.11(a) of this Agreement, the "First Gwinnett
Contracts"). None of the First Gwinnett Companies is in Default under any First
Gwinnett Contract. Except as disclosed in Section 5.12 of the First Gwinnett
Disclosure Memorandum, all of the indebtedness of any First Gwinnett Company for
money borrowed is prepayable at any time by such First Gwinnett Company without
penalty or premium.
5.13 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
to the Knowledge of First Gwinnett, 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 First Gwinnett 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 First
Gwinnett, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any First Gwinnett
Company. Section 5.13 of the First Gwinnett Disclosure Memorandum includes a
summary report of all Litigation as of the date of this Agreement to which any
First Gwinnett Company is a party and which names a First Gwinnett Company as a
defendant or cross-defendant.
5.14 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by any First Gwinnett Company or
any Affiliate thereof to Regions pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, each report
and other document, including financial statements, exhibits, and schedules
thereto, filed by a First Gwinnett 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. All documents that any First Gwinnett 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 ACCOUNTING, TAX AND REGULATORY MATTERS. No First Gwinnett Company or
any Affiliate thereof has taken any action, or agreed to take any action, or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying for pooling-of-interests accounting treatment or treatment 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
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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.
5.16 STATE TAKEOVER LAWS. To the extent applicable, each First Gwinnett
Company has taken all necessary action to exempt the transactions contemplated
by this Agreement from any applicable state takeover Law, including Parts 2 and
3 of Article 11 of the GBCC.
5.17 DIRECTORS' AGREEMENTS. Each of the directors of First Gwinnett has
executed and delivered to Regions an agreement in substantially the form of
Exhibit 1.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to First Gwinnett 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.
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 Regions' 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 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 NYSE and 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 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 of
120,000,000 shares of Regions Common Stock, of which 45,397,944 shares were
issued and outstanding and 1,474,579 shares were held as treasury shares as of
June 30, 1995. All of the issued and outstanding shares of Regions Common Stock
are,
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and all of the shares of Regions Common Stock to be issued in exchange for
shares of First Gwinnett 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 First Gwinnett
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 disclosed 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 First Gwinnett 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, which are or
will be, as the case may be, complete and correct and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, 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 of effect).
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
June 30, 1995, included in the Regions Financial Statements or reflected in the
notes thereto. No Regions Company has incurred or paid any Liability since June
30, 1995, 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 June 30, 1995, 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 Article 7 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 the absence of Permits which do not
have, individually or in the aggregate, a Material Adverse Effect on Regions,
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 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, which restricts materially
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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. No statement, certificate, instrument, or
other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to First Gwinnett pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. 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. 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 ACCOUNTING, TAX AND REGULATORY MATTERS. No Regions Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or treatment 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 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF FIRST GWINNETT. Unless the prior written
consent of Regions shall have been obtained, and except as otherwise expressly
contemplated herein, First Gwinnett 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 its business organization and
Assets and maintain its rights and franchises, and (iii) take no action which
would (x) 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) adversely affect the ability
of any Party to perform its covenants and agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF FIRST GWINNETT. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
First Gwinnett 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, or
chief financial officer of Regions, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any First Gwinnett Company; or
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(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a First Gwinnett Company to
another First Gwinnett Company) in excess of an aggregate of $100,000 (for
the First Gwinnett Companies on a consolidated basis) except in the
ordinary course of the business of First Gwinnett Subsidiaries consistent
with past practices (which shall include, for First Gwinnett Subsidiaries
that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or
Federal Home Loan Bank, 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 First Gwinnett Company of any Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan"
accounts established in the ordinary course of business, the satisfaction
of legal requirements in the exercise of trust powers, and Liens in effect
as of the date hereof that are disclosed in the First Gwinnett Disclosure
Memorandum); 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 First Gwinnett Company, or declare or pay any
dividend or make any other distribution in respect of First Gwinnett's
capital stock, provided that First Gwinnett may (to the extent legally and
contractually permitted to do so, but shall not be obligated to) declare
and pay regular cash dividends on the shares of First Gwinnett Common Stock
in the amounts and with the usual and regular record and payment dates in
accordance with past practice as disclosed in Section 7.2(c) of the First
Gwinnett Disclosure Memorandum; provided, that any dividend declared or
payable on the shares of First Gwinnett Common Stock for the quarterly
period during which the Effective Time occurs shall, unless otherwise
agreed upon in writing by Regions and First Gwinnett, be declared (with a
record date prior to the Effective Time) only if the normal record date for
payment of such quarterly dividend to holders of Regions Common Stock is
before the Effective Time; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.2(d) of the
First Gwinnett Disclosure Memorandum, 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 First Gwinnett Common Stock or any
other capital stock of any First Gwinnett Company, or any Rights to acquire
such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
First Gwinnett Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of First Gwinnett
Common Stock, or sell, lease, mortgage, or otherwise dispose of or
otherwise encumber any shares of capital stock of any First Gwinnett
Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another First Gwinnett 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; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities or securities of like maturity or grade,
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 First
Gwinnett 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 a depository
institution Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any First Gwinnett Company, except in accordance with past
practice or previously approved by the Board of Directors of First
Gwinnett, in each case as disclosed in Section 7.2(g) of the First Gwinnett
Disclosure Memorandum or as required by Law; 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 First Gwinnett Disclosure Memorandum; and enter into
or amend any severance agreements with officers of any First Gwinnett
Company; grant any increase in fees or other increases in compensation or
other benefits to directors of any First Gwinnett Company except in
accordance with
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past practice disclosed in Section 7.2(g) of the First Gwinnett Disclosure
Memorandum; or except as disclosed in Section 7.2(g) of the First Gwinnett
Disclosure Memorandum, voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any First
Gwinnett Company and any Person (unless such amendment is required by Law)
that the First Gwinnett 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 First Gwinnett Company
or make any material change in or to any existing employee benefit plans of
any First Gwinnett Company other than any such change that is required by
Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan; 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 any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any First
Gwinnett Company for material money damages or restrictions upon the
operations of any First Gwinnett Company; or
(l) modify, amend, or terminate any material Contract (including any
loan Contract with an Affiliate)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 (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, and
(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.
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 each Party and the First Gwinnett
Subsidiaries shall deliver to the other Party copies of all material reports
promptly after the same are filed.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. Regions
shall file the Registration Statement with the SEC as soon as reasonably
practicable, but in no case later than January 15, 1996,
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provided First Gwinnett has provided Regions all information with respect to
First Gwinnett necessary for the Registration Statement, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act as soon as reasonably practicable thereafter 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. First Gwinnett shall furnish all information
concerning it and the holders of its capital stock as Regions may reasonably
request in connection with such action. First Gwinnett shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders' Meeting, (i) First
Gwinnett 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 Board of
Directors of First Gwinnett shall recommend (subject to compliance with their
fiduciary duties as advised by counsel) to its shareholders the approval of this
Agreement, and (iv) the Board of Directors and officers of First Gwinnett shall
(subject to compliance with their fiduciary duties as advised by counsel) use
their reasonable efforts to obtain such shareholders' approval.
8.2 EXCHANGE LISTING. Regions shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq/NMS the shares of Regions Common
Stock to be issued to the holders of First Gwinnett Common Stock pursuant to the
Merger.
8.3 APPLICATIONS. Regions shall prepare and file, as soon as reasonably
practicable, but in no case later than January 15, 1996, and First Gwinnett
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.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Regions shall execute and file the Georgia
Certificate of Merger with the Secretary of State of the State of Georgia and
Regions shall execute and file the Delaware Certificate of Merger with the
Secretary of State of the State of Delaware in connection with the Closing.
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
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.
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, after the 30th day after execution of this Agreement, shall not
interfere unnecessarily with normal operations. First Gwinnett shall cooperate
with Regions in obtaining, at Regions' election and expense, environmental
audits of any or all of the properties owned or occupied by First Gwinnett. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time,
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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, First Gwinnett 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
other 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 First Gwinnett Company nor any Affiliate
thereof nor any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any First Gwinnett Company shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of First Gwinnett's
Board of Directors, no First Gwinnett 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, but First Gwinnett may communicate
information about such an Acquisition Proposal to its shareholders if and to the
extent that it is required to do so in order to comply with its legal
obligations. First Gwinnett shall promptly notify Regions orally and in writing
in the event that it receives any inquiry or proposal relating to any such
transaction. First Gwinnett 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. First Gwinnett has disclosed in Section 8.10
of the First Gwinnett Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of First Gwinnett for purposes of Rule 145 under the
1933 Act. First Gwinnett shall use its reasonable efforts to cause each such
Person to deliver to Regions no 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
First Gwinnett Common Stock held by such Person except as contemplated by such
agreement or by this Agreement and 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 (and Regions shall be
entitled to place restrictive legends upon certificates for shares of Regions
Common Stock issued to affiliates of First Gwinnett pursuant to this Agreement
to enforce the provisions of this Section 8.10). Regions shall not be required
to maintain the effectiveness of the 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 First Gwinnett
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), 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 First
Gwinnett shall be treated as service under Regions' qualified defined benefit
plans, (ii) service under any qualified defined contribution plans of First
Gwinnett shall be treated as service under Regions' qualified defined
contribution plans, and (iii) service under any other employee benefit plans of
First Gwinnett shall be treated as service under any similar employee benefit
plans maintained by Regions. Regions also shall cause First Gwinnett and its
Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 8.11 of the First Gwinnett
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Disclosure Memorandum to Regions between any First Gwinnett 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 First Gwinnett Benefit Plans.
8.12 INDEMNIFICATION. (a) For a period of six years after the Effective
Time, Regions shall, and shall cause First Gwinnett to, indemnify, defend, and
hold harmless the present and former directors, officers, employees, and agents
of the First Gwinnett 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 Georgia Law and by First Gwinnett's Articles of
Incorporation and Bylaws or any Contract providing for indemnification 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 by First Gwinnett is required to effectuate any
indemnification, Regions shall cause First Gwinnett to direct, at the election
of the Indemnified Party, that the determination of any such approval shall be
made by independent counsel mutually agreed upon between Regions and the
Indemnified Party.
(b) 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. In the event of any such Litigation
(whether arising before or after the Effective Time), (i) Regions or First
Gwinnett 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 or First Gwinnett
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are substantive issues which raise conflicts of interest between
Regions or First Gwinnett and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Regions or First Gwinnett shall pay
all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Regions shall be
obligated pursuant to this paragraph (b) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (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; and
provided further that First Gwinnett 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.
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 First Gwinnett shall
have approved this Agreement, 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 Assets) which in
the reasonable judgment of the Board of Directors of Regions would so
materially adversely impact the economic or business benefits of the
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transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(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,
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, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(F) EXCHANGE LISTING. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the
Nasdaq/NMS.
(G) TAX MATTERS. Each Party shall have received a written opinion of
Alston & Bird, special counsel to Regions, in form reasonably satisfactory
to it (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 First Gwinnett
Common Stock for Regions Common Stock will not give rise to gain or loss to
the shareholders of First Gwinnett with respect to such exchange (except to
the extent of any cash received), and (iii) neither First Gwinnett 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 First Gwinnett and Regions reasonably
satisfactory in form and substance to such counsel.
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. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of First
Gwinnett set forth in this Agreement shall be assessed 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). The
representations and warranties of First Gwinnett set forth in Section 5.3
of this Agreement shall be true and correct (except for inaccuracies which
are de minimus in amount). The representations and warranties of First
Gwinnett set forth in Sections 5.15 and 5.16 of this Agreement shall be
true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of First Gwinnett set
forth in this Agreement (excluding the representations and warranties set
forth in Sections 5.3, 5.15, and 5.16) such that the aggregate effect of
such inaccuracies would have, or is reasonably likely to have, a Material
Adverse Effect on First Gwinnett; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" shall be deemed not
to include such qualifications.
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(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of First Gwinnett 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. First Gwinnett 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 First Gwinnett'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) OPINION OF COUNSEL. Regions shall have received an opinion of
Powell, Goldstein, Frazer & Murphy, counsel to First Gwinnett, dated as of
the Effective Time, in form reasonably satisfactory to Regions, as to the
matters set forth in Exhibit 3.
(E) ACCOUNTANT'S LETTERS. Regions shall have received from Bricker &
Melton, P.A. letters dated not more than five days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding First Gwinnett, in form and substance
reasonably satisfactory to Regions, which letters shall be based upon
customary specified procedures undertaken by such firm.
(F) AFFILIATES AGREEMENTS. Regions shall have received from each
affiliate of First Gwinnett the affiliates letter referred to in Section
8.10 of this Agreement.
(G) CLAIMS LETTERS. Each of the directors and executive officers of
First Gwinnett shall have executed and delivered to Regions letters in
substantially the form of Exhibit 4.
(H) POOLING LETTER. Regions shall have received a letter from Ernst &
Young, LLP, dated as of the Effective Time, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance
with this Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF FIRST GWINNETT. The obligations of First
Gwinnett 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 First Gwinnett pursuant to Section
11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Regions set
forth in this Agreement shall be assessed 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). The representations and
warranties of Regions set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Regions set forth in Section 6.10 of
this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of
Regions set forth in this Agreement (excluding the representations and
warranties set forth in Sections 6.3 and 6.10) such that the aggregate
effect of such inaccuracies would have, or is reasonably likely to have, a
Material Adverse Effect on Regions; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" shall be deemed not
to include such qualifications.
(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.
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(C) CERTIFICATES. Regions shall have delivered to First Gwinnett (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 First
Gwinnett and its counsel shall request.
(D) OPINION OF COUNSEL. First Gwinnett shall have received an opinion
of Lange, Simpson, Robinson & Somerville, counsel to Regions, dated as of
the Effective Time, in form reasonably acceptable to First Gwinnett, as to
the matters set forth in Exhibit 5.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of First
Gwinnett, 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 First Gwinnett; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Gwinnett and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) in the event of a material
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 First Gwinnett; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Gwinnett and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) 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; or
(d) By the Board of Directors of either Party in the event (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set
forth in Section 9.2(a) of this Agreement in the case of First Federal and
Section 9.3(a) in the case of Regions or in material breach of any covenant
or other agreement contained in this Agreement) (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 First Gwinnett fail to vote their approval of this
Agreement and the transactions contemplated hereby as required by the GBCC
at the Shareholders' Meeting 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 September 30, 1996, 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
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(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of First Gwinnett and Section
9.3(a) in the case of Regions or in material breach of any covenant or
other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement)
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, at any time prior to the
31st day after execution of this Agreement without any Liability in the
event that the review of the Assets, business, financial condition, results
of operations, and prospects of First Gwinnett undertaken by Regions during
such time period or any of the disclosures contained in the First Gwinnett
Disclosure Memorandum causes the Board of Directors of Regions to
determine, in its reasonable good faith judgment, that a fact or
circumstance exists or is likely to exist or result which materially and
adversely impacts one or more of the economic benefits to Regions of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
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, 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), or 10.1(f) of this Agreement shall not relieve the
breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or 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 this Section 10.3 and
Articles 2, 3, 4, and 11 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"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 a substantial equity
interest in, or a substantial portion 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 Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"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 as reported on the Nasdaq/NMS (as
reported by The Wall Street Journal, or if not
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reported thereby, another authoritative source as chosen by Regions) for
the 10 consecutive full trading days in which such shares are traded on the
Nasdaq/NMS ending at the close of trading on the fifth full trading day
preceding the Determination Date.
"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 control 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.
"DELAWARE CERTIFICATE OF MERGER" shall mean the Delaware Certificate
of Merger to be executed by Regions and filed with the Secretary of State
of the State of Delaware relating to the Merger as contemplated by Section
1.1 of this Agreement.
"DETERMINATION DATE" shall mean the date on which the Consent of the
Board of Governors of the Federal Reserve System of the Merger and the
other transactions contemplated by this Agreement shall be received.
"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.
"EXCHANGE AGENT" shall have the meaning provided in Section 4.1 of
this Agreement.
"EXCHANGE RATIO" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"EXHIBITS" 1 through 5, 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.
"FIRST GWINNETT BENEFIT PLANS" shall have the meaning set forth in
Section 5.11 of this Agreement.
"FIRST GWINNETT COMMON STOCK" shall mean the $1.00 par value common
stock of First Gwinnett.
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"FIRST GWINNETT COMPANIES" shall mean, collectively, First Gwinnett
and all First Gwinnett Subsidiaries.
"FIRST GWINNETT DISCLOSURE MEMORANDUM" shall mean the written
information entitled "First Gwinnett Financial Corporation Disclosure
Memorandum" delivered within seven days after 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.
"FIRST GWINNETT FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of First
Gwinnett as of December 31, 1994 and 1993, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three fiscal years ended
December 31, 1994, 1993, and 1992, included in the First Gwinnett
Disclosure Memorandum, (ii) the financial statements as of and for the six
months ended June 30, 1995, included in the Call Reports filed by First
Gwinnett Bank with the appropriate Regulatory Authorities, and (iii) the
financial statements included in the Call Reports filed by First Gwinnett
Bank with the appropriate Regulatory Authorities with respect to periods
ended subsequent to June 30, 1995.
"FIRST GWINNETT STOCK PLANS" shall mean the existing stock options and
other stock-based compensation plans of First Gwinnett disclosed in Section
5.11 of the First Gwinnett Disclosure Memorandum.
"FIRST GWINNETT SUBSIDIARIES" shall mean the Subsidiaries of First
Gwinnett, which shall include the First Gwinnett Subsidiaries described in
Section 5.4 of this Agreement and any corporation, bank, savings
association, or other organization acquired as a Subsidiary of First
Gwinnett in the future and owned by First Gwinnett at the Effective Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GEORGIA CERTIFICATE OF MERGER" shall mean the Georgia Certificate of
Merger to be executed by Regions and filed with the Secretary of State of
the State of Georgia relating to the Merger as contemplated by Section 1.1
of this Agreement.
"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.
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"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, and (ii) 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 written notice 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.
"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) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"MERGER" shall mean the merger of First Gwinnett into and with Regions
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" 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.
"NYSE" shall mean the New York Stock Exchange, Inc.
"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.
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"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 First Gwinnett or Regions, and "PARTIES"
shall mean both First Gwinnett 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.
"PROXY STATEMENT" shall mean the proxy statement used by First
Gwinnett 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
First Gwinnett Common Stock.
"REGIONS COMMON STOCK" shall mean the $.625 par value 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 First Gwinnett 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 balance
sheets (including related notes and schedules, if any) of Regions as of
June 30, 1995, and as of December 31, 1994 and 1993, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
June 30, 1995, and for each of the three fiscal years ended December 31,
1994, 1993, and 1992, as filed by Regions in SEC Documents, and (ii) the
consolidated balance sheets 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 June 30, 1995.
"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 First Gwinnett 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 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, Federal Deposit Insurance Corporation, all
state regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NYSE, the NASD, and the SEC.
"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.
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"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
First Gwinnett to be held pursuant to Section 8.1 of this Agreement,
including any adjournment or adjournments thereof.
"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 CORPORATION" shall mean Regions as the surviving
corporation 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.
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."
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, except that 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.
(b) 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 or otherwise limit the rights of the nonbreaching Party.
11.3 BROKERS AND FINDERS. 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
First Gwinnett or Regions, each of First Gwinnett 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. 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.
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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 First Gwinnett Common Stock, there shall be made no
amendment that pursuant to the GBCC 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 First Gwinnett, to waive or extend the time for the
compliance or fulfillment by First Gwinnett 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, First Gwinnett, 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 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 First
Gwinnett 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 First Gwinnett.
(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:
<TABLE>
<S> <C>
First Gwinnett: First Gwinnett Bancshares, Inc.
5935 Buford Highway
Norcross, Georgia 30071
Telecopy Number: (404) 368-2220
Attention: Monty G. Watson
President and Chief Executive Officer
Copy to Counsel: Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E., Sixteenth Floor
Atlanta, Georgia 30303
Telecopy Number: (404) 572-5958
Attention: Kathryn L. Knudson
</TABLE>
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<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 and Corporate
Secretary
</TABLE>
11.9 GOVERNING LAW. Except to the extent the laws of the State of Georgia
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.
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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.
ATTEST: FIRST GWINNETT BANCSHARES, INC.
By:
- ----------------------------------- -----------------------------------
Secretary Monty G. Watson
Secretary President and Chief
Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By:
- ----------------------------------- -----------------------------------
Samuel E. Upchurch, Jr. William E. Jordon
Corporate Secretary Regional President
[CORPORATE SEAL]
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APPENDIX B
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
14-2-1320 Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
(Code 1981, s 14-2-1320, enacted by Ga. L. 1988, p. 1070, s 1; Ga. L. 1993,
p. 1231, s 17.)
14-2-1321 Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
14-2-1324 Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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14-2-1325 Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated; (4) A statement
of the dissenter's right to demand payment under Code Section 14-2-1327;
and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326 Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
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(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
14-2-1330 Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
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14-2-1332 Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
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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
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section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by 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.
II-2
<PAGE> 130
"(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 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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of October 23, 1995 by and between First Gwinnett Bancshares, Inc.
and Regions Financial Corporation -- included as Appendix A 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. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Birnbrey, Minsk & Minsk LLP
23.3 -- Consent of Bricker & Melton, P.A.
23.4 -- Consent of Lange, Simpson, Robinson & Somerville -- included in Exhibit 5.
23.5 -- Consent of Alston & Bird -- 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.
</TABLE>
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.
II-3
<PAGE> 131
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
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.
II-4
<PAGE> 132
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 4th day of June, 1996.
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 Samuel E. Upchurch, Jr.
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 June 4, 1996
J. Stanley Mackin Chief Executive Officer and
Director
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and June 4, 1996
Richard D. Horsley Executive Financial Officer
and Director
/s/ Robert P. Houston
- -------------------------- Executive Vice President and June 4, 1996
Robert P. Houston Comptroller
/s/ Shelia S. Blair
- -------------------------- Director June 4, 1996
Sheila S. Blair
/s/ William B. Boles, Sr.
- -------------------------- Director June 4, 1996
William B. Boles, Sr.
/s/ James B. Boone, Jr.
- -------------------------- Director June 4, 1996
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director June 4, 1996
Albert P. Brewer
</TABLE>
II-5
<PAGE> 133
<TABLE>
<S> <C> <C>
/s/ James S.M. French
- -------------------------- Director June 4, 1996
James S.M. French
/s/ Catesby ap C. Jones
- -------------------------- Director June 4, 1996
Catesby ap C. Jones
/s/ Olin B. King
- -------------------------- Director June 4, 1996
Olin B. King
/s/ Henry E. Simpson
- -------------------------- Director June 4, 1996
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director June 4, 1996
Lee J. Styslinger, Jr.
/s/ Robert J. Williams
- -------------------------- Director June 4, 1996
Robert J. Williams
</TABLE>
<PAGE> 134
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------- ------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of October 23, 1995 by and between First Gwinnett Bancshares,
Inc. and Regions Financial Corporation -- included as Appendix A 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. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Birnbrey, Minsk & Minsk, LLC
23.3 -- Consent of Bricker & Melton, P.A.
23.4 -- Consent of Lange, Simpson, Robinson & Somerville -- included in Exhibit 5.
23.6 -- Consent of Alston & Bird -- 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.
</TABLE>
<PAGE> 1
EXHIBIT 5
LANGE, SIMPSON, ROBINSON & SOMERVILLE
ATTORNEYS & COUNSELORS
417 20TH STREET NORTH, SUITE 1700
BIRMINGHAM, ALABAMA 35203-3272
TELEPHONE (205) 250-5000
FACSIMILE (205) 250-5034
June 4, 1996
Regions Financial Corporation
417 North 20th Street
Birmingham, AL. 35203
Re: Regions Financial Corporation -- S-4 Registration
Statement, Merger of First Gwinnett Bancshares, Inc.
with and into Regions
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation, ("Regions") in connection with the merger between First Gwinnett
Bancshares, Inc. ("First Gwinnett") and Regions (the "Merger") and in
connection with the registration of common stock of Regions on Form S-4 under
the Securities Act of 1933. The Merger provides for issuance of shares of
common stock of Regions, par value $.625 per share, issuable to the
stockholders of First Gwinnett upon consummation of the Merger. The maximum
number of shares of Regions to be issued in the Merger is 338,703.
<PAGE> 2
Regions Financial Corporation
June 4, 1996
Page 2
We have examined and are familiar with the registration statement on
Form S-4 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
proceedings taken by its directors to date, and we have examined such other
documents and records as we have deemed relevant for purposes of rendering this
opinion.
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 stock of Regions 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,
/s/ LANGE, SIMPSON, ROBINSON & SOMERVILLE
<PAGE> 1
EXHIBIT 8
ALSTON & BIRD
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777
Philip C. Cook Direct Dial: 404-881-7491 Internet: [email protected]
June 5, 1996
Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
First Gwinnett Bancshares, Inc.
5935 Buford Highway
Norcross, Georgia 30071
RE: PROPOSED MERGER OF FIRST GWINNETT BANCSHARES, INC. WITH AND INTO
REGIONS FINANCIAL CORPORATION
Ladies and Gentlemen:
We have acted as special tax counsel to Regions Financial Corporation
("Regions"), a corporation organized and existing under the laws of the State of
Delaware, in connection with the proposed merger of First Gwinnett Bancshares,
Inc. ("First Gwinnett"), a corporation organized and existing under the laws of
the State of Georgia, with and into Regions. The Merger will be effected
pursuant to the Agreement and Plan of Merger, dated as of October 23, 1995, by
and between First Gwinnett and Regions (the "Agreement"). In our capacity as
counsel to Regions, our opinion has been requested with respect to certain of
the federal income tax consequences of the proposed 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 information made known to us as more fully described below. All
capitalized terms used herein without definition shall have the respective
meanings specified in the 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 Agreement;
(2) the Registration Statement on Form S-4 filed by Regions with the
Securities and Exchange Commission under the Securities Act of 1933, on
June 5, 1996, including the Proxy Statement/Prospectus for the Special
Meeting of the shareholders of First Gwinnett.
(3) such additional documents as we have considered relevant.
In our examination of such 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.
1
<PAGE> 2
We have also obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various officers
and representatives of Regions and First Gwinnett and through certificates
provided by the management of Regions and the management of First Gwinnett.
You have advised us that the proposed transaction 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 Atlanta, Georgia market area. To achieve these
goals, the following will occur pursuant to the Agreement:
(1) Subject to the terms and conditions of the Agreement, at the
Effective Time, First Gwinnett shall be merged into and with Regions in
accordance with the provisions of Sections 14-2-1107 and 14-2-1103 of the
Georgia Business Corporation Code ("GBCC") and with the effect provided in
Section 14-2-1106 of the GBCC and of Section 258 of the Delaware General
Corporation Law ("DGCL") and with the effect provided in Section 259 of the
DGCL (the "Merger"). Regions shall be the Surviving Corporation and shall
continue to be governed by the Laws of the State of Delaware. The Merger
shall be consummated pursuant to the terms of the Agreement, which has been
approved and adopted by the Boards of Directors of First Gwinnett and
Regions.
(2) Subject to provisions of Article 3 of the Agreement, 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 First Gwinnett Common Stock (excluding shares
held by First Gwinnett or any of its Subsidiaries or by Regions or any
of its Subsidiaries, in each case other than in a fiduciary capacity or
as a result of debts previously contracted) issued and outstanding at
the Effective Time shall be converted into 1.1336 shares of Regions
Common Stock (the "Exchange Ratio").
(3) In the event First Gwinnett changes the number of shares of First
Gwinnett 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, the Exchange Ratio shall be proportionately
adjusted. 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 shall be proportionately
adjusted.
(4) Each of the shares of First Gwinnett Common Stock held by any
First Gwinnett Company or by any Regions Company, 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) Notwithstanding any other provision of the Agreement, each holder
of shares of First Gwinnett Common Stock exchanged pursuant to the Merger,
or of options to purchase shares of First Gwinnett 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 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/NMS (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
2
<PAGE> 3
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.
(6) At the Effective Time, all rights with respect to First Gwinnett
Common Stock pursuant to stock options or stock appreciation rights ("First
Gwinnett Options") granted by First Gwinnett under the First Gwinnett Stock
Plans, 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 Regions shall assume each First Gwinnett Option,
in accordance with the terms of the First Gwinnett Stock Plan and stock
option agreement by which it is evidenced. From and after the Effective
Time, (i) each First Gwinnett Option assumed by Regions may be exercised
solely for shares of Regions Common Stock (or cash in the case of stock
appreciation rights), (ii) the number of shares of Regions Common Stock
subject to such First Gwinnett Option shall be equal to the number of
shares of First Gwinnett Common Stock subject to such First Gwinnett Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (iii) the per share exercise price under each such First Gwinnett
Option shall be adjusted by dividing the per share exercise price under
each such First Gwinnett Option by the Exchange Ratio and rounding down to
the nearest cent. 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."
(7) All restrictions or limitations on transfer with respect to First
Gwinnett Common Stock awarded under the First Gwinnett Stock Plans or any
other plan, program, or arrangement of any First Gwinnett 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 the Agreement.
(8) Any holder of shares of First Gwinnett Common Stock who perfects
such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Section 14-2-1106 of the GBCC 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 GBCC and surrendered to First Gwinnett 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 First Gwinnett 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 the consideration to which such
holder of shares of First Gwinnett Common Stock is entitled under Article 3
of the Agreement (without interest) upon surrender by such holder of the
certificate or certificates representing shares of First Gwinnett Common
Stock held by such holder.
With your consent, we have also assumed that the following statements are
true on the date hereof and will be true on the date the proposed transaction is
consummated:
(1) The fair market value of the Regions Common Stock and other
consideration received in the aggregate by the shareholders of First
Gwinnett will be approximately equal to the fair market value of the First
Gwinnett Common Stock surrendered in exchange therefor.
(2) There is no plan or intention on the part of the shareholders of
First Gwinnett who own five percent (5%) or more of First Gwinnett Common
Stock, and to the best of the knowledge of the management of First
Gwinnett, there is no plan or intention on the part of the remaining
shareholders of First Gwinnett to sell, exchange, or otherwise dispose of a
number of shares of Regions Common Stock to be received in the proposed
transaction that would reduce their holdings in Regions Common Stock
received to a number of shares having, in the aggregate, a value as of the
Effective Time of less than fifty percent (50%) of the total value of all
of the stock of First Gwinnett outstanding immediately prior to the
Effective Time. For purposes of this assumption, shares of First Gwinnett
stock exchanged for cash or other property, surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Regions stock will be
treated as outstanding First Gwinnett stock as of the Effective Time.
Moreover, shares of
3
<PAGE> 4
First Gwinnett stock and shares of Regions stock held by First Gwinnett
shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the transaction will be considered in making this assumption.
(3) Regions has no plan or intention to redeem or otherwise reacquire
any shares of Regions Common Stock 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 First Gwinnett shareholders.
(4) Regions will not dispose of any of the assets of First Gwinnett
acquired in the transaction, except for dispositions made in the ordinary
course of business, unless either the Internal Revenue Service issues a
letter ruling or Alston & Bird opines that this Merger will continue to
qualify as a reorganization under Section 368(a) of the Code
notwithstanding such disposition.
(5) The liabilities of First Gwinnett assumed by Regions and the
liabilities to which the transferred assets of First Gwinnett are subject
were incurred by First Gwinnett in the ordinary course of its business.
(6) Following the transaction, Regions will continue the historic
business of First Gwinnett or use a significant portion of First Gwinnett's
historic business assets in a business.
(7) Regions, First Gwinnett, and the shareholders of First Gwinnett
will pay their respective expenses, if any, incurred in connection with the
transaction, except that 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.
(8) There is no intercorporate indebtedness existing between First
Gwinnett and Regions that was issued, acquired, or will be settled at a
discount.
(9) First Gwinnett is not under the jurisdiction of a court in a case
under Title 11 of the United States Code or a receivership, foreclosure, or
similar proceeding in a federal or state court.
(10) Both the fair market value and the total adjusted basis of the
assets of First Gwinnett transferred to Regions will equal or exceed the
sum of the liabilities assumed by Regions plus the amount of the
liabilities, if any, to which the transferred assets are subject.
(11) The payment of cash in lieu of fractional shares of Regions stock
is solely for the purpose of avoiding the expense and inconvenience to
Regions of issuing fractional shares and does not represent separately
bargained for consideration. The total cash consideration that will be paid
in the transaction to the First Gwinnett shareholders instead of issuing
fractional shares of Regions stock will not exceed one percent (1%) of the
total consideration that will be issued in the transaction to the First
Gwinnett shareholders in exchange for their shares of First Gwinnett stock.
The fractional share interests of each First Gwinnett shareholder will be
aggregated, and no First Gwinnett shareholder will receive cash in an
amount equal to or greater than the value of one full share of Regions
stock.
(12) None of the compensation received by any shareholder-employees of
First Gwinnett will be separate consideration for, or allocable to, any of
their shares of First Gwinnett stock; none of the shares of Regions stock
received by any shareholder-employees will be separate consideration for,
or allocable to, any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length
for similar services.
(13) At all times during the five-year period ending on the Effective
Date of the Merger, the fair market value of all of First Gwinnett's United
States real property interests was and will have been less than fifty
percent (50%) of the fair market value of the total of (a) its United
States real property interests, (b) its interests in real property located
outside the United States, and (c) its other assets used or held for use in
a trade or business. For purposes of the preceding sentence, (i) United
States real property interests include all interests (other than an
interest solely as a creditor) in real property and
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associated personal property (such as movable walls and furnishings)
located in the United States or the Virgin Islands and interests in any
corporation (other than a controlled corporation) owning any United States
real property interest, (ii) First Gwinnett is treated as owning its
proportionate share (based on the relative fair market value of its
ownership interest to all ownership interests) of the assets owned by any
controlled corporation or any partnership, trust, or estate in which First
Gwinnett is a partner or beneficiary, and (iii) any such entity in turn is
treated as owning its proportionate share of the assets owned by any
controlled corporation or any partnership, trust, or estate in which the
entity is a partner or beneficiary. As used in this paragraph, "controlled
corporation" means any corporation at least fifty percent (50%) of the fair
market value of the stock of which is owned by First Gwinnett, in the case
of a first-tier subsidiary of First Gwinnett or by a controlled
corporation, in the case of a lower-tier subsidiary.
(14) Neither Regions or First Gwinnett are investment companies as
defined in Code section 368(a)(2)(F).
(15) The Agreement represents the entire understanding of First
Gwinnett and Regions with respect to the Merger.
OPINIONS
Based solely on the information submitted and the representations set forth
above and assuming that the Merger will take place as described in the Agreement
and that the representations made by Regions and First Gwinnett (including the
representation that First Gwinnett shareholders will maintain sufficient equity
ownership interests in Regions after the Merger) are true and correct at the
time of the consummation of the Merger, we are of the opinion that:
(1) Provided the Merger qualifies as a statutory merger under the
Delaware General Corporation Law and the Georgia Business Corporation Code,
the Merger will be a reorganization within the meaning of section 368(a).
First Gwinnett and Regions will each be "a party to a reorganization"
within the meaning of section 368(b).
(2) First Gwinnett will recognize no gain or loss upon the transfer of
its assets to Regions in exchange solely for Regions Common Stock and the
assumption by Regions of the liabilities of First Gwinnett.
(3) No gain or loss will be recognized by Regions on receipt of First
Gwinnett's assets in exchange for Regions Common Stock.
(4) The basis of First Gwinnett's assets in the hands of Regions will,
in each case, be the same as the basis of those assets in the hands of
First Gwinnett immediately prior to the transaction.
(5) The holding period of the assets of First Gwinnett in the hands of
Regions will, in each case, include the period during which such assets
were held by First Gwinnett.
(6) The shareholders of First Gwinnett will recognize no gain or loss
upon the exchange of their First Gwinnett Common Stock solely for shares of
Regions Common Stock.
(7) The basis of the Regions Common Stock received by the First
Gwinnett shareholders in the proposed transaction will, in each instance,
be the same as the basis of the First Gwinnett Common Stock surrendered in
exchange therefor.
(8) The holding period of the Regions Common Stock received by the
First Gwinnett shareholders will, in each instance, include the period
during which the First Gwinnett Common Stock surrendered in exchange
therefor was held, provided that the First Gwinnett Common Stock was held
as a capital asset on the date of the exchange.
(9) The payment of cash to First Gwinnett shareholders in lieu of
fractional share interests 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
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treated as having been received as distributions in full payment in
exchange for the stock redeemed. Generally 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.
(10) Where solely cash is received by a First Gwinnett shareholder in
exchange for his First Gwinnett Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of his First Gwinnett Common Stock, subject to the provisions
and limitations of Section 302.
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 and you have confirmed to be
true on the date hereof and will be true on the date on which the proposed
transaction is consummated. Our opinions cannot be relied upon if any of the
facts contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, 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 proposed transaction, 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, First
Gwinnett and their shareholders. No other person or party shall be entitled to
rely on this opinion.
We 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" and "Description of the Transaction -- Certain Federal Income Tax
Consequences of the Merger" in the Proxy Statement/Prospectus constituting part
of the Registration Statement on Form S-4 of Regions.
Very truly yours,
ALSTON & BIRD
By: /s/ PHILIP C. COOK
------------------------------------
Philip C. Cook
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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 338,703 shares of its common stock and
to the incorporation by reference therein of our reports dated February 2, 1996
(except for the last two paragraphs of Note Q as to which the date is March 1,
1996) and March 25, 1996, with respect to the consolidated financial statements
and supplemental consolidated financial statements, respectively, of Regions
Financial Corporation included or incorporated by reference in its Annual Report
(Form 10-K) for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
June 3, 1996
<PAGE> 1
EXHIBIT 23.2
BIRNBREY, MINSK & MINSK, LLC
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use of our report dated January 30, 1995, relating to
the consolidated financial statements of First Gwinnett Bancshares, Inc. and
Subsidiary, included in the Registration Statement on Form S-4 and Proxy
Statement.
/s/ BIRNBREY, MINSK & MINSK LLC
Atlanta, Georgia
May 31, 1996
<PAGE> 1
EXHIBIT 23.3
B&M
BRICKER & MELTON, P.A.
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
3700 CRESTWOOD PARKWAY
SUITE 590
DULUTH, GEORGIA 30136
(770) 717-1175
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use of our report dated February 2, 1996, relating to
the consolidated financial statements of First Gwinnett Bancshares, Inc. and
Subsidiary, included in the Registration Statement on Form S-4 and Proxy
Statement.
/s/ Bricker & Melton, P.A.
Duluth, Georgia
June 3, 1996
