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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-22311
Gulf South Bancshares [LETTERHEAD]
Dear Gulf South Bancshares, Inc. Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Gulf South Bancshares, Inc. ("Gulf South") to be held at Gulf South's main
office, 313 Westbank Expressway, Gretna, Louisiana, 70053 on April 10, 1997, at
2:00 p.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 Gulf South
will merge (the "Merger") with and into Regions, and Gulf South Bank and Trust
Company (the "Bank"), a wholly owned subsidiary of Gulf South, will become a
wholly owned subsidiary of Regions and will continue serving its current markets
as a Louisiana state-chartered commercial bank. Upon consummation of the Merger,
each share of Gulf South common stock issued and outstanding (except for certain
shares held by Gulf South or Regions and shares held by stockholders who perfect
their dissenters' rights of appraisal) will be converted into .4817 of a share
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 Gulf South has agreed to vote those Gulf South 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 Gulf South
stockholders and approval of the Merger by various regulatory agencies.
Stockholders of Gulf South 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 Gulf South shares in cash, as
provided by applicable law.
Approval of the Agreement requires the affirmative vote of at least two
thirds of the voting power represented in person or by proxy at the Special
Meeting, not just two-thirds of the votes cast. 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 Gulf South, 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,
/s/ Dean F. Gruder
---------------------------
Dean F. Gruder
Chairman of the Board and
Chief Executive Officer
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GULF SOUTH BANCSHARES, INC.
313 WESTBANK EXPRESSWAY, GRETNA, LOUISIANA, 70053
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 10, 1997
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Gulf South Bancshares, Inc. ("Gulf South"), a bank holding company,
will be held at Gulf South's main office, 313 Westbank Expressway, Gretna,
Louisiana, 70053 on April 10, 1997, at 2:00 p.m., local time, for the following
purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of September 23, 1996 (the "Agreement"), by and between Gulf South and
Regions Financial Corporation ("Regions") pursuant to which (i) Regions will
acquire all of the issued and outstanding common stock of Gulf South through the
merger of Gulf South with and into Regions (the "Merger"), (ii) each share of
Gulf South common stock (except for certain shares held by Gulf South or Regions
and shares held by stockholders who perfect their dissenters' rights of
appraisal) will be converted into .4817 of a share of Regions common stock, and
(iii) each Gulf South 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 March 10, 1997, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of Gulf South 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 C. DISSENTING SHAREHOLDERS WHO COMPLY
WITH THE PROCEDURAL REQUIREMENTS OF THE BUSINESS CORPORATION LAW OF LOUISIANA
WILL BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR CASH VALUE OF THEIR SHARES IF
THE TRANSACTION IS EFFECTED UPON APPROVAL BY LESS THAN 80% OF THE CORPORATION'S
TOTAL VOTING POWER.
The Board of Directors of Gulf South unanimously recommends that holders of
Gulf South 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
Gulf South 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
/s/ Max Gritzman
----------------------
Max Gritzman
Corporate Secretary
March 12, 1997
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GULF SOUTH BANCSHARES, INC. REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD APRIL 10, 1997 (PAR VALUE $.625)
187,863 SHARES
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 Gulf
South Bancshares, Inc., a bank holding company organized and existing under the
laws of the state of Louisiana ("Gulf South") upon consummation of the proposed
merger (the "Merger") described herein, by which Gulf South will merge with and
into Regions pursuant to the terms of an Agreement and Plan of Merger, dated as
of September 23, 1996 (the "Agreement"), by and between Regions and Gulf South.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) Gulf South will merge with and into Regions,
(ii) each outstanding share of the $1.00 par value common stock of Gulf South
("Gulf South Common Stock") will be converted into .4817 of a share of Regions
Common Stock, and (iii) each holder of Gulf South Common Stock will receive cash
in lieu of any remaining fractional share 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 Gulf South will cease,
and Gulf South Bank and Trust Company, a wholly owned subsidiary of Gulf South
(the "Bank"), will become a wholly owned subsidiary of Regions and will continue
in operation serving its current markets as a Louisiana state-chartered
commercial bank until combined with Regions Bank of Louisiana, the principal
banking subsidiary of Regions operating in Louisiana. For a further description
of the terms of the Merger, see "Description of the Transaction."
This Prospectus also constitutes a Proxy Statement of Gulf South and is
being furnished to the stockholders of Gulf South in connection with the
solicitation of proxies by the Board of Directors of Gulf South for use at its
special meeting of stockholders, including any adjournment or postponement
thereof (the "Special Meeting"), to be held on April 10, 1997, 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 Gulf
South on or about March 12, 1997.
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 March 12, 1997.
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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. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments thereto,
the "Registration Statement") filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Proxy Statement/Prospectus does not include all of the information
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. For further information about
Regions and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at prescribed
rates, at the SEC's public reference facilities at the addresses set forth
above. Regions Common Stock is traded in the Nasdaq National Market. Reports,
proxy statements, and other information concerning Regions may be inspected at
the offices of the National Association of Securities Dealers, Inc. (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 Gulf South. 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 Gulf South 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 Gulf
South was supplied by Gulf South.
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 Reports on Form 10-Q for the three months ended
March 31, June 30, and September 30, 1996;
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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' Current Report on Form 8-K filed June 26, 1996;
6. Regions' Current Report on Form 8-K filed November 20, 1996;
7. Regions' report on Form 10-C filed March 11, 1996; and
8. 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. 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."
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE (EXCEPT FOR THE EXHIBITS THERETO), FROM RONALD C.
JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION, P.O. BOX 1448,
MONTGOMERY, ALABAMA 36102 (TELEPHONE (334) 832-8401). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 3, 1997.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION.............................................................................................2
DOCUMENTS INCORPORATED BY REFERENCE...............................................................................2
SUMMARY...........................................................................................................6
The Parties..................................................................................................6
Special Meeting of Gulf South Stockholders...................................................................7
Record Date; Vote Required...................................................................................7
The Merger; Exchange Ratio...................................................................................7
Dissenting Stockholders......................................................................................7
Reasons for the Merger; Recommendation of Gulf South's Board
of Directors................................................................................................7
Opinion of Gulf South's Financial Advisor....................................................................8
Effective Date...............................................................................................8
Exchange of Stock Certificates...............................................................................8
Regulatory Approvals and Other Conditions....................................................................8
Waiver, Amendment, and Termination of the Agreement..........................................................9
Interests of Certain Persons in the Merger...................................................................9
Certain Federal Income Tax Consequences of the Merger........................................................9
Certain Differences in Stockholders' Rights..................................................................9
Comparative Market Prices of Common Stock...................................................................10
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
Background of and Reasons for the Merger....................................................................15
Opinion of Gulf South's Financial Advisor...................................................................17
Effective Date of the Merger................................................................................19
Distribution of Regions Stock Certificates and
Payment for Fractional Shares.............................................................................20
Conditions to Consummation of the Merger....................................................................20
Regulatory Approvals........................................................................................21
Waiver, Amendment, and Termination of the Agreement.........................................................22
Conduct of Business Pending the Merger......................................................................22
Management Following the Merger.............................................................................23
Interests of Certain Persons in the Merger..................................................................23
Dissenting Stockholders.....................................................................................24
Certain Federal Income Tax Consequences of the Merger.......................................................26
Accounting Treatment........................................................................................27
Expenses and Fees...........................................................................................27
Resales of Regions Common Stock.............................................................................27
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS...................................................................28
Antitakeover Provisions Generally...........................................................................28
Authorized Capital Stock....................................................................................29
Amendment of Certificate or Articles of Incorporation and Bylaws............................................29
Classified Board of Directors and Absence of Cumulative Voting..............................................30
</TABLE>
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<TABLE>
<S> <C>
Removal of Directors........................................................................................30
Limitations on Director Liability...........................................................................30
Indemnification.............................................................................................31
Special Meetings of Stockholders............................................................................31
Actions by Stockholders Without a Meeting...................................................................32
Stockholder Nominations and Proposals.......................................................................32
Mergers, Consolidations, and Sales of Assets Generally......................................................32
Business Combinations with Certain Persons..................................................................33
Dissenters' Rights of Appraisal.............................................................................34
Stockholders' Rights to Examine Books and Records...........................................................34
Dividends...................................................................................................35
COMPARATIVE MARKET PRICES AND DIVIDENDS..........................................................................35
GULF SOUTH MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................................37
BUSINESS OF GULF SOUTH...........................................................................................42
Business and Properties.....................................................................................42
Competition.................................................................................................42
Legal Proceedings...........................................................................................42
Management..................................................................................................43
Employee Benefit Plans......................................................................................43
Transactions with Management ...............................................................................43
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF Gulf SOUTH.......................................................44
BUSINESS OF REGIONS..............................................................................................45
General.....................................................................................................45
Recent Developments.........................................................................................45
SUMMARY PRO FORMA FINANCIAL DATA ................................................................................48
Selected Pro Forma Combined Data for Regions and Gulf South.................................................48
Selected Pro Forma Combined Data for Regions, Gulf South, and
Certain Transactions.....................................................................................49
CERTAIN REGULATORY CONSIDERATIONS................................................................................51
General.....................................................................................................51
Payment of Dividends........................................................................................52
Capital Adequacy............................................................................................53
Support of Subsidiary Institutions..........................................................................54
Prompt Corrective Action....................................................................................54
FDIC Insurance Assessments..................................................................................55
DESCRIPTION OF REGIONS COMMON STOCK..............................................................................57
STOCKHOLDER PROPOSALS............................................................................................57
EXPERTS..........................................................................................................57
OPINIONS.........................................................................................................57
INDEX TO GULF SOUTH FINANCIAL STATEMENTS........................................................................F-1
APPENDIX A--Agreement and Plan of Merger........................................................................A-1
APPENDIX B--Opinion of Baxter Fentriss and Company..............................................................B-1
APPENDIX C--Copy of Section 131 of the Louisiana Business Corporation Law.......................................C-1
</TABLE>
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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 "Gulf South" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
Gulf South. Gulf South is a bank holding company organized and existing
under the laws of the state of Louisiana, with its principal executive office
located in Gretna, Louisiana. Gulf South operates principally through the Bank,
which is a wholly owned subsidiary of Gulf South and a Louisiana state-chartered
commercial bank and which provides a range of retail banking services through
two offices in Jefferson Parish, Louisiana. At September 30, 1996, Gulf South
had total consolidated assets of approximately $55 million, total consolidated
deposits of approximately $48 million, and total consolidated stockholders'
equity of approximately $5 million. Gulf South's principal executive office is
located at 313 Westbank Expressway, Gretna, Louisiana, 70053 and its telephone
number at such address is (504) 361-7500.
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 373 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee as of September 30, 1996. At that date,
Regions had total consolidated assets of approximately $18.7 billion, total
consolidated deposits of approximately $15.2 billion, and total consolidated
stockholders' equity of approximately $1.6 billion. Regions is the second
largest bank holding company headquartered in Alabama in terms of assets, based
on September 30, 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 December 31, 1995, Regions has completed the acquisitions of ten
financial institutions and has pending six acquisitions, including the Merger.
For information concerning Regions' acquisition activities, see "Documents
Incorporated by Reference," "Business of Regions--Recent Developments," and
"Summary Pro Forma Financial Data."
Regions commenced operations in 1971, under its former name First Alabama
Bancshares, Inc., 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."
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SPECIAL MEETING OF GULF SOUTH STOCKHOLDERS
The Special Meeting will be held at 2:00 p.m., local time, on April 10,
1997, at Gulf South's main office, 313 Westbank Expressway, Gretna, Louisiana,
70053, for the purpose of considering and voting on approval of the Agreement.
See "The Special Meeting."
RECORD DATE; VOTE REQUIRED
Only holders of record of Gulf South Common Stock at the close of business
on March 10, 1997 (the "Record Date"), will be entitled to vote at the Special
Meeting. Approval of the Agreement will require the affirmative vote of at least
two thirds of the voting power represented in person or by proxy at the Special
Meeting. As of the Record Date, there were 390,000 shares of Gulf South Common
Stock outstanding and entitled to be voted.
The directors and executive officers of Gulf South and their affiliates
beneficially owned, as of the Record Date, 154,072 shares (or approximately
39.51 % of the outstanding shares) of Gulf South Common Stock. Each member of
the Board of Directors of Gulf South has agreed to vote those Gulf South 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 Gulf South Common Stock. As of that date, neither Gulf
South nor Regions held any shares of Gulf South Common Stock in a fiduciary
capacity for others. See "The Special Meeting--Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the acquisition of Gulf South by Regions
pursuant to the Merger of Gulf South with and into Regions. On the Effective
Date, each share of Gulf South Common Stock then issued and outstanding (except
for shares held by Gulf South, Regions, or their respective subsidiaries, in
each case other than shares held in a fiduciary capacity or as a result of debts
previously contracted and shares held by stockholders who perfect their
dissenters' rights of appraisal) will be converted into .4817 of a share 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 Gulf South 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. See
"Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of Gulf South 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 Gulf South Common Stock in cash
in accordance with the applicable provisions of the Louisiana Business
Corporation Law (the "Louisiana Act"). The procedures to be followed by
dissenting stockholders are summarized under "Description of the
Transaction--Dissenters' Rights," and the applicable provisions of the Louisiana
Act are reproduced as Appendix C.
REASONS FOR THE MERGER; RECOMMENDATION OF GULF SOUTH'S BOARD OF DIRECTORS
Gulf South'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, Gulf South and its stockholders. Accordingly, Gulf South's Board
unanimously recommends that Gulf South's stockholders vote FOR approval of the
Agreement. EACH MEMBER OF THE BOARD OF DIRECTORS OF GULF SOUTH HAS AGREED TO
VOTE THOSE SHARES OF GULF SOUTH COMMON STOCK BENEFICIALLY OWNED BY SUCH MEMBER
IN FAVOR OF THE AGREEMENT. In approving the Agreement, Gulf South's directors
considered Gulf South's financial condition, the financial
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terms and the income tax consequences of the Merger, the likelihood of the
Merger being approved by regulatory authorities without undue conditions or
delay, legal advice concerning the proposed Merger, and the opinion of Baxter
Fentriss and Company ("BFC"). See "Description of the Transaction--Background of
and Reasons for the Merger."
OPINION OF GULF SOUTH'S FINANCIAL ADVISOR
BFC has rendered an opinion to Gulf South that, based on and subject to the
procedures, matters, and limitations described in its opinion and such other
matters as it considered relevant, as of the date of its opinion, the Exchange
Ratio is fair, from a financial point of view, to the stockholders of Gulf
South. The opinion of BFC is attached as Appendix B to this Proxy
Statement/Prospectus. Gulf South stockholders are urged to read the opinion in
its entirety for a description of the procedures followed, matters considered,
and limitations on the reviews undertaken in connection therewith. See
"Description of the Transaction--Opinion of Gulf South's Financial Advisor."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Delaware Certificate of Merger and the Louisiana Certificate of Merger are filed
and become effective with, respectively, the Delaware Secretary of State and the
Louisiana Secretary of State. Unless otherwise agreed upon by Regions and Gulf
South, 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 Gulf South 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 second quarter of 1997, 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 an exchange agent
selected by Regions (the "Exchange Agent"), to mail to the former stockholders
of Gulf South a form letter of transmittal, together with instructions for the
exchange of such stockholders' certificates representing shares of Gulf South
Common Stock for certificates representing shares of Regions Common Stock. GULF
SOUTH 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 Commissioner of Financial
Institutions of the state of Louisiana (the "Louisiana Commissioner").
Applications for the requisite approvals have been filed with these agencies,
each of which has yet to issue its approval of the Merger. There can be no
assurance that the approvals of the Louisiana Commissioner and the Federal
Reserve will be given or as to the timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Gulf South stockholders, receipt
of an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, and certain other customary conditions. See "Description of the
Transaction--Conditions to Consummation of the Merger."
8
<PAGE> 11
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual consent of the Boards of Directors of both
Gulf South and Regions, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by May
15, 1997, 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, Gulf South 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 Gulf South's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of Gulf
South generally. Those interests relate to, among other things, provisions in
the Agreement regarding indemnification and eligibility for certain Regions
employee benefits. 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 Gulf South
Common Stock for Regions Common Stock will not give rise to gain or loss to Gulf
South 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, GULF
SOUTH 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, Gulf South stockholders, whose rights are governed
by the Louisiana Act and by Gulf South'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 Gulf South
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."
9
<PAGE> 12
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. Gulf South 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 and (ii) the equivalent per
share price (as explained below) of Gulf South Common Stock. The indicated dates
of September 26, 1996, and March 10, 1997 represent, respectively, the last
trading day immediately preceding public announcement of the proposed
acquisition of Gulf South by Regions and the latest practicable date prior to
the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS OF GULF SOUTH
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------
<S> <C> <C>
September 26, 1996 $ 47.88 $ 23.06
March 10, 1997 60.56 29.17
</TABLE>
The equivalent per share price of Gulf South 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 .4817. Stockholders are advised to
obtain current market quotations for Regions Common Stock. No assurance can be
given as to the market price of Regions Common Stock at or after the Effective
Date. There is no established market for Gulf South Common Stock and management
of Gulf South is not aware of, and the stockholder records of Gulf South do not
reflect, any recent purchase and sale of Gulf South Common Stock.
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 Gulf South, (ii) a pro forma combined basis per share of Regions
Common Stock, giving effect to the Merger, (iii) an equivalent pro forma basis
per share of Gulf South Common Stock, giving effect to the Merger, (iv) a pro
forma combined basis per share of Regions Common Stock, giving effect to the
Merger and certain other transactions (as specified under "Summary Pro Forma
Financial Data"), and (v) an equivalent pro forma basis per share of Gulf South
Common Stock, giving effect to the Merger and such certain other transactions.
The Regions and Gulf South pro forma combined information and the Gulf South pro
forma Merger equivalent information give effect to the Merger on a purchase
accounting basis and assume an Exchange Ratio of .4817. The Regions, Gulf South,
and Certain Transactions pro forma combined information and the Gulf South pro
forma Merger and Certain Transactions equivalent information give effect to (i)
the Merger as described in the preceding sentence and (ii) the other
acquisitions pending as of September 30, 1996, as described under "Summary Pro
Forma Financial Data--Selected Pro Forma Combined Data for Regions, Gulf South,
and Certain Transactions." 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
Gulf South, including the respective notes thereto. Regions' historical
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> 13
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited) (Unaudited except Regions
and Gulf South historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical....................................... $ 2.66 $ 2.49 $ 3.21 $ 3.10 $ 2.81
Gulf South historical ................................... 1.96 2.41 3.02 3.57 2.13
Regions and Gulf South pro forma combined(1)............. 2.67 3.22
Gulf South pro forma Merger equivalent(2)................ 1.29 1.55
Regions, Gulf South, and certain transactions
pro forma combined(3) .............................. 2.63 3.23
Gulf South pro forma Merger and certain
transactions equivalent(2).......................... 1.27 1.56
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical....................................... $ 1.05 $ .99 $ 1.32 $ 1.20 $ 1.04
Gulf South historical.................................... -- -- -- -- --
Gulf South pro forma Merger equivalent(4)................ .51 .48 .64
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical....................................... $24.86 $23.00 $23.38 $21.26 $19.85
Gulf South historical.................................... 13.80 11.57 12.41 9.03 5.54
Regions and Gulf South pro forma combined(1)............. 24.86
Gulf South pro forma Merger equivalent(2)................ 11.98
Regions, Gulf South, and certain transactions
pro forma combined(3)............................... 24.89
Gulf South pro forma Merger and certain
transactions equivalent(2).......................... 11.99
</TABLE>
(1) Represents the combined results of Regions and Gulf South as if the Merger
were consummated on January 1, 1995 (or September 30, 1996, in the case of
Book Value Per Share Data), and were accounted for as a purchase.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of .4817 of a share of Regions Common Stock for each share of Gulf South
Common Stock.
(3) Represents the pro forma combined information of Regions, Gulf South, and
the other acquisitions pending as of September 30, 1996, as if the Merger
were consummated at the time and pursuant to the accounting basis described
in note (1) and such other acquisitions were consummated at the time and
pursuant to the accounting bases described under "Summary Pro Forma
Financial Data--Selected Pro Forma Combined Data for Regions, Gulf South,
and Certain Transactions."
(4) Represents historical dividends declared per share by Regions multiplied by
the Exchange Ratio of .4817 of a share of Regions Common Stock for each
share of Gulf South Common Stock.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and Gulf South. 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. The data
should be read in conjunction with the historical financial statements, related
notes, and other financial information concerning Regions and Gulf South
incorporated by reference or included herein. Interim unaudited data for the
nine months ended September 30, 1996 and 1995 of Regions and Gulf South reflect,
in the opinion of the respective managements of Regions and Gulf South, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the nine months ended September 30,
1996, are not necessarily indicative of results which may be expected for any
other interim period or for the year as a whole. See "Documents Incorporated by
Reference."
11
<PAGE> 14
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------
1996 1995 1995
-------------- -------------- --------------
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income .......................... $ 1,029,151 $ 937,180 $ 1,259,600
Total interest expense ......................... 508,573 472,106 635,336
Net interest income ............................ 520,578 465,074 624,264
Provision for loan losses ...................... 21,734 17,275 30,271
Net interest income after
loan loss provision ....................... 498,844 447,799 593,993
Total noninterest income excluding
security gains (losses) ................... 162,759 138,919 187,830
Security gains (losses) ........................ 259 307 (424)
Total noninterest expense ...................... 415,955 355,734 487,461
Income tax expense ............................. 81,022 77,339 96,109
Net income ..................................... 164,885 153,952 197,829
PER SHARE DATA:
Net income ..................................... $ 2.66 $ 2.49 $ 3.21
Cash dividends ................................. 1.05 .99 1.32
Book value ..................................... 24.86 23.00 23.38
OTHER INFORMATION:
Average number of shares outstanding ........... 61,980 61,765 61,670
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ................................... $ 18,731,424 $ 16,959,785 $ 16,851,774
Securities ..................................... 4,005,675 3,848,618 3,863,781
Loans, net of unearned income .................. 13,032,238 11,567,327 11,542,311
Total deposits ................................. 15,186,950 13,329,310 13,497,612
Long-term debt ................................. 447,959 653,431 632,019
Stockholders' equity ........................... 1,554,740 1,418,056 1,429,253
PERFORMANCE RATIOS:
Return on average assets (1) ................... 1.25% 1.26% 1.21%
Return on average stockholders'
equity (1) ................................ 14.83 15.06 14.29
Net interest margin (1) ........................ 4.29 4.22 4.21
Efficiency (2) ................................. 59.97 57.70 58.79
Dividend payout ................................ 39.47 39.76 41.12
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1) ................ .10% .10% .17%
Problem assets to net loans and
other real estate (3) ..................... .54 .65 .59
Nonperforming assets to net loans
and other real estate (4) ................. .73 .71 .68
Allowance for loan losses to loans,
net of unearned income .................... 1.37 1.36 1.38
Allowance for loan losses to
nonperforming assets (4) .................. 186.89 191.54 202.55
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ............................ 8.41% 8.39% 8.44%
Average loans to average deposits .............. 85.01 86.91 86.12
Tier 1 risk-based capital (5) .................. 10.71 10.82 11.14
Total risk-based capital (5) ................... 13.53 14.28 14.61
Tier 1 leverage (5) ............................ 7.57 7.25 7.49
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1994 1993 1992 1991
-------------- -------------- -------------- --------------
(In thousands except per share data and ratios)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C>
Total interest income .......................... $ 991,693 $ 746,544 $ 737,094 $ 778,848
Total interest expense ......................... 436,157 296,195 324,420 428,083
Net interest income ............................ 555,536 450,349 412,674 350,765
Provision for loan losses ...................... 20,580 24,695 39,367 34,879
Net interest income after
loan loss provision ....................... 534,956 425,654 373,307 315,886
Total noninterest income excluding
security gains (losses) ................... 171,705 169,318 148,007 129,232
Security gains (losses) ........................ 344 831 2,353 (89)
Total noninterest expense ...................... 442,376 383,130 343,279 302,795
Income tax expense ............................. 84,109 66,169 56,405 41,502
Net income ..................................... 180,520 146,504 123,983 100,732
PER SHARE DATA:
Net income ..................................... $ 3.10 $ 2.81 $ 2.42 $ 2.01
Cash dividends ................................. 1.20 1.04 .91 .87
Book value ..................................... 21.26 19.85 17.13 15.47
OTHER INFORMATION:
Average number of shares outstanding ........... 58,206 52,153 51,192 50,192
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ................................... $ 15,810,076 $ 13,163,161 $ 10,457,676 $ 9,188,048
Securities ..................................... 3,346,291 2,993,417 2,255,732 2,076,199
Loans, net of unearned income .................. 10,855,195 8,430,931 6,657,557 5,726,818
Total deposits ................................. 12,575,593 11,025,376 8,923,801 8,047,731
Long-term debt ................................. 599,476 525,820 151,460 24,461
Stockholders' equity ........................... 1,286,322 1,106,361 886,116 779,002
PERFORMANCE RATIOS:
Return on average assets (1) ................... 1.27% 1.38% 1.29% 1.15%
Return on average stockholders'
equity (1) ................................ 15.26 15.76 15.04 13.58
Net interest margin (1) ........................ 4.37 4.77 4.85 4.58
Efficiency (2) ................................. 59.44 60.23 59.62 60.92
Dividend payout ................................ 38.71 37.01 37.60 43.28
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1) ................ .19% .23% .36% .45%
Problem assets to net loans and
other real estate (3) ..................... .75 1.12 1.29 1.62
Nonperforming assets to net loans
and other real estate (4) ................. .80 1.28 1.39 1.74
Allowance for loan losses to loans,
net of unearned income .................... 1.32 1.48 1.51 1.34
Allowance for loan losses to
nonperforming assets (4) .................. 164.48 115.88 107.97 76.76
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ............................ 8.35% 8.76% 8.60% 8.49%
Average loans to average deposits .............. 79.90 76.41 71.59 72.34
Tier 1 risk-based capital (5) .................. 10.69 11.13 11.68 11.85
Total risk-based capital (5) ................... 14.29 13.48 14.44 13.19
Tier 1 leverage (5) ............................ 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> 15
Selected Historical Financial Data of Gulf South
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, 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 ................. $ 3,417 $ 3,315 $ 4,453 $ 3,827 $ 3,686 $ 4,594 $ 5,708
Total interest expense ................ 864 865 1,171 912 903 1,467 2,808
Net interest income ................... 2,553 2,450 3,282 2,915 2,783 3,127 2,900
Provision (credit) for loan losses .... 162 (81) (141) 16 435 1,051 1,524
Net interest income after
loan loss provision .............. 2,391 2,531 3,423 2,899 2,348 2,076 1,376
Total noninterest income
excluding security gains (losses) 777 886 1,175 1,103 1,030 1,236 1,689
Security gains (losses) ............... -- -- -- -- 157 156 --
Total noninterest expense ............. 1,990 2,259 3,029 3,090 2,741 4,369 4,331
Income tax expense (benefit) .......... 413 218 392 (470) -- -- --
Net income (loss) ..................... $ 765 $ 940 $ 1,177 $ 1,382 $ 794 $ (901) $ (1,266)
PER SHARE DATA:
Net income (loss) ..................... $ 1.96 $ 2.41 $ 3.02 $ 3.57 $ 2.13 $ (4.02) $ (5.68)
Cash dividends ........................ -- -- -- -- -- -- --
Book value ............................ 13.80 11.57 12.41 9.03 5.54 3.58 7.85
OTHER INFORMATION:
Average number of shares outstanding .. 390 390 390 388 372 224 223
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets .......................... $54,705 $ 54,328 $ 53,959 $ 49,684 $46,586 $ 50,685 $ 61,940
Securities held to maturity ........... 500 12,088 -- 8,602 4,694 9,013 11,236
Securities available for sale ......... 16,377 3,494 16,223 2,423 2,501 -- --
Loans, net of unearned income ......... 29,483 29,885 31,593 31,001 32,371 31,750 39,376
Total deposits ........................ 48,396 49,094 48,369 45,215 43,410 48,418 58,479
Long-term debt ........................ -- 500 326 731 802 894 1,304
Stockholders' equity .................. 5,381 4,514 4,840 3,524 2,160 1,166 1,760
PERFORMANCE RATIOS:
Return on average assets (1) .......... 1.81% 1.98% 1.96% 2.51% 1.79% (1.39)% (1.83)%
Return on average stockholders'
equity (1) ....................... 19.79 24.17 23.61 35.28 32.63 (34.29) (37.76)
Net interest margin (1) ............... 6.21 6.30 6.28 6.13 6.13 5.33 4.28
Efficiency (2) ........................ 59.90 67.36 67.30 76.50 72.20 98.20 91.90
Dividend payout ....................... -- -- -- -- -- -- --
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1) ...... 1.09% .33% .31% .10% 2.27% 4.09% 2.12%
Problem assets to net loans and
other real estate (3) ............ 2.00 1.19 2.41 2.38 3.40 6.78 11.56
Nonperforming assets to net loans
and other real estate (4) ........ 1.69 .90 2.37 2.31 3.39 6.77 10.19
Allowance for loan losses to loans,
net of unearned income ........... 1.50 2.08 1.71 2.51 2.46 3.30 3.94
Allowance for loan losses to
nonperforming assets (4) ......... .89 2.32 .72 1.95 2.23 1.92 1.20
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ................... 9.27% 8.21% 9.00% 8.08% 6.34% 4.18% 4.23%
Average loans to average deposits ..... 63.39 61.19 63.08 65.45 73.14 79.94 71.19
Tier 1 risk-based capital (5) ......... 16.56 13.92 13.75 12.57 9.21 6.71 7.13
Total risk-based capital (5) .......... 17.81 15.18 15.00 13.84 10.47 7.99 8.42
Tier 1 leverage (5) ................... 9.94 8.49 8.78 8.14 6.44 3.91 4.06
</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.
13
<PAGE> 16
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of Gulf
South Common Stock in connection with the solicitation by the Gulf South Board
of Directors of proxies for use at the Special Meeting, at which Gulf South
stockholders will be asked to vote upon a proposal to approve the Agreement. The
Special Meeting will be held at 2:00 p.m., local time, on April 10, 1997, at the
main offices of Gulf South, located at 313 Westbank Expressway, Gretna,
Louisiana, 70053.
Gulf South stockholders are requested promptly to sign, date, and return
the accompanying proxy card to Gulf South in the enclosed postage-paid,
addressed envelope.
Any Gulf South 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 Gulf South a signed proxy card bearing a later date, provided that such
notice or proxy card is actually received by Gulf South 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 Gulf South
Bancshares, Inc., 313 Westbank Expressway, Gretna, Louisiana, 70053, Attention:
Max Gritzman, 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 Gulf South 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, Gulf South 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
Gulf South, 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.
Gulf South stockholders should not forward any stock certificates with
their proxy cards.
RECORD DATE; VOTE REQUIRED
Gulf South's Board of Directors has established the close of business on
March 10, 1997, as the Record Date for determining the Gulf South stockholders
entitled to notice of and to vote at the Special Meeting. Only Gulf South
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
at least two thirds of the voting power represented in person or by proxy at the
Special Meeting. Therefore, an abstention by a stockholder present in person or
represented by proxy at the Special Meeting 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 195 holders of 390,000 shares of Gulf
South 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 Gulf
South to beneficially own more than 5.0% of the outstanding shares of Gulf South
Common Stock as of the Record Date, see "Voting Securities and Principal
Stockholders of Gulf South."
14
<PAGE> 17
The presence, in person or by proxy, of a majority of the outstanding
shares of Gulf South 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 Gulf South 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 at least two thirds of the
voting power represented in person or by proxy at the Special Meeting.
The directors and executive officers of Gulf South and their affiliates
beneficially owned, as of the Record Date, 154,072 shares (or approximately
39.51% of the outstanding shares) of Gulf South Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of the
Record Date, no shares of Gulf South Common Stock. As of that date, no
subsidiary of either Gulf South or Regions held any shares of Gulf South Common
Stock in a fiduciary capacity for others.
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 Gulf South Common Stock (excluding any shares held by Gulf
South, Regions, or their respective subsidiaries, other than shares held in a
fiduciary capacity or as a result 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 .4817 of a share 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 part of a share which a Gulf South 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 preceding the time of the Merger on the Effective
Date.
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.
In early 1995 the Board of Directors of Gulf South began to evaluate
whether the interests of the stockholders, officers and employees, customers,
and the community would be better served by combining Gulf South with another
institution if a fair price could be negotiated or by retaining its independent
status. The directors unanimously concluded that Gulf South had insufficient
assets and was unlikely to develop sufficient assets to justify the costs to be
incurred to develop new and specialized products to compete with
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those being offered by its larger and better capitalized competitors and to
justify the increased cost of regulatory compliance. Accordingly, BFC was
retained as investment advisor and charged with finding a suitable merger
candidate.
Negotiations during the Spring and Summer of 1995 resulted in three
acceptable offers being received and BFC presented those offers to the Board in
August, 1995. After additional negotiation, the Board, in October, 1995,
accepted an all cash offer from a local institution. The acquiring institution,
however, was not able to obtain regulatory approval to consummate the
transaction and, after further efforts to obtain approval failed following an
extension to the agreement, the merger agreement was terminated in May, 1996.
The Board of Gulf South then requested BFC to contact larger local and
regional financial institutions to determine their interest in acquiring Gulf
South. These contacts resulted in negotiations with Regions, a proposal from
Regions in July, 1996 that was subsequently approved by the Gulf South Board and
a definitive Agreement and Plan of Merger that was executed in October 1996.
Gulf South's Reasons for the Merger. In approving the Merger, the directors
of Gulf South considered a number of factors. Without assigning any relative or
specific weights to the factors, the Gulf South Board of Directors considered
the following material factors:
(a) the information presented to the directors by the management of Gulf
South concerning business, operations, earnings, asset quality, and financial
condition of Gulf South, 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
Gulf South Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of Gulf South 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;
(e) the social and economic effects of the proposed Merger on Gulf South,
the Bank and its employees, customers and the communities served; and
(f) the opinion rendered by BFC to the effect that, from a financial point
of view, the Exchange Ratio is fair to the holders of Gulf South Common Stock.
The terms of the Merger were the result of arms-length negotiations between
representatives of Gulf South and Regions. Based upon its consideration of the
foregoing factors, the Board of Directors of Gulf South unanimously approved the
Merger as being in the best interests of Gulf South and its stockholders. Each
member of the Board of Directors of Gulf South has agreed to vote those shares
of Gulf South Common Stock beneficially owned by such member in favor of the
Merger and the Agreement.
Gulf South's Board of Directors unanimously recommends that Gulf South
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 Gulf South 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 Gulf South operates, including
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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 Gulf South; 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.
OPINION OF GULF SOUTH'S FINANCIAL ADVISOR
BFC has acted as financial advisor to Gulf South in connection with the
merger. BFC assisted Gulf South in identifying prospective acquirors. On January
2, 1997, BFC delivered to Gulf South its opinion that as of such date, and on
the basis of matters referred to herein, the offer is fair, from a financial
point of view, to the holders of Gulf South Common Stock. In rendering its
opinion BFC consulted with the management of Gulf South and Regions, reviewed
the Agreement and certain publicly-available information on the parties, and
reviewed certain additional materials made available by the management of the
respective banks.
In addition BFC discussed with the management of Gulf South and Regions
their respective businesses and outlooks. No limitations were imposed by Gulf
South's Board of Directors upon BFC with respect to the investigation made or
procedures followed by it in rendering its opinion. The written opinion of BFC
dated as of January 2, 1997 supplemented and confirmed BFC's earlier oral
opinion to the Board of Directors of Gulf South concerning the proposed Merger.
The full text of BFC's written opinion is attached as Appendix B to this Proxy
Statement/Prospectus and should be read in its entirety with respect to the
procedures followed, assumptions made, matters considered, and qualifications
and limitations on the review undertaken by BFC in connection therewith.
BFC's opinion is directed to Gulf South's Board of Directors only, and is
directed only to the fairness, from a financial point of view, of the Exchange
Ratio. It does not address Gulf South's underlying business decision to effect
the Merger, nor does it constitute a recommendation to any Gulf South
stockholder as to how such stockholder should vote with respect to the Merger at
the Special Meeting or as to any other matter.
BFC's opinion was one of many factors taken into consideration by Gulf
South's Board of Directors in making its determination to approve the Merger
Agreement, and the receipt of BFC's opinion is a condition precedent to Gulf
South consummating the Merger. The opinion of BFC does not address the relative
merits of the Merger as compared to any alternative business strategies that
might exist for Gulf South or the effect of any other business combination in
which Gulf South might engage.
BFC, as part of its investment banking business, is continually engaged in
the valuation of financial institutions and their securities in connection with
mergers and acquisitions and valuations for estate, corporate and other
purposes. BFC is a nationally recognized advisor to firms in the financial
services industry on mergers and acquisitions. Gulf South selected BFC as its
financial advisor because BFC is an investment banking firm focusing on bank and
thrift transactions, and because of the firm's extensive experience and
expertise in transactions similar to the Merger. BFC is not affiliated with
Regions or Gulf South.
In connection with rendering its opinion to Gulf South's Board of
Directors, BFC performed a variety of financial analyses. In conducting its
analyses and arriving at its opinion as expressed herein, BFC considered such
financial and other factors as it deemed appropriate under the circumstances
including, among other, the following: (i) the historical and current financial
condition and results of operations of Regions and Gulf South including interest
income, interest expense, interest sensitivity, noninterest income, noninterest
expense, earnings, book value, returns on assets and equity, capitalization, the
amount and type of non-performing assets, the impact of holding certain
non-earning real estate assets, the reserve for loan losses and possible tax
consequences resulting from the transaction; (ii) the business prospects of
Regions and Gulf South; (iii) the economies of Regions' and Gulf South's
respective market areas; (iv) the historical and current market for Regions and
Gulf South Common Stock; and (v) the nature and terms of certain other merger
transactions that
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it believed to be relevant. BFC also considered its assessment of general
economic, market, financial and regulatory conditions and trends, as well as its
knowledge of the financial institutions industry, its experience in connection
with similar transactions, its knowledge of securities valuation generally, and
its knowledge of merger transactions in Louisiana.
In connection with rendering its opinion, BFC reviewed (i) the Agreement;
(ii) drafts of this Proxy Statement/Prospectus; (iii) the Annual Reports to
stockholders, including the audited financial statements of Gulf South for the
year ended December 31, 1995 and unaudited financial data for June 30, 1996 and
Regions for the year ended December 31, 1995, and quarter ending June 30, 1996;
(iv) pro forma combined unaudited condensed balance sheets as of December 31,
1995 and June 30, 1996, pro forma combined unaudited statements of income for
the year ended December 31, 1995 and June 30, 1996; (v) certain additional
financial and operating information with respect to the business, operations and
prospects of Regions and Gulf South as it deemed appropriate. BFC also (vi) held
discussions with members of the senior management of Regions and Gulf South
regarding the historical and current business operation, financial condition and
future prospects of their respective companies; (vii) reviewed the historical
market prices and trading activity for the common stock of Gulf South and
Regions; (viii) compared the results of operations of Gulf South and Regions
with those of certain banking companies that it deemed to be relevant; (ix)
analyzed the pro forma financial impact of the Merger on Regions; (x) analyzed
the pro forma financial impact of the Merger on Gulf South; and (xi) conducted
such other studies, analyses, inquiries and examinations as BFC deemed
appropriate.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of fairness, from a financial point of
view, of the Exchange Ratio to holders of Gulf South Common Stock was to some
extent a subjective one based on the experience and judgment of BFC and not
merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, BFC believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be BFC's view of the actual
value of Gulf South or Regions.
In performing its analyses, BFC made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond the control of Gulf South or Regions. The analyses performed
by BFC are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold. In
rendering its opinion, BFC assumed that, in the course of obtaining the
necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger, on a pro forma basis, to Gulf South.
The following is a summary of selected analyses performed by BFC in
connection with its opinion.
1. Stock Price History. BFC studied the history of the trading prices and
volume for Gulf South and Regions Common Stock and compared that to publicly
traded banks in Louisiana and to the price offered by Regions. As of September
30, 1996, Regions' offer to Gulf South was $23.06 per share, or 1.73x June 30,
1996 book value.
2. Comparative Analysis. BFC compared the price to earnings multiple,
price to book multiple, and price to assets multiple of the Regions offer with
other comparable merger transactions in Louisiana after considering Gulf
South's non-performing assets and other variables. The comparative multiples
included both
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bank and thrift sales during the last 3 years. On a price/book basis, the Gulf
South transaction ranked 3rd out of 7 transactions. On a price/earnings basis,
it ranked 6th out of 7.
3. BFC considered the pro forma impact of the transaction, and concluded
the transaction should have a positive long-term impact on Regions earnings per
share, book value per share, and market price.
4. BFC performed a discounted cash flow analysis to determine hypothetical
present values for a share of Gulf South's common stock as a 5 and 10 year
investment. Under this analysis, BFC considered various scenarios for the
performance of Gulf South's stock using (i) a range from 4% to 8% in the growth
of Gulf South's earnings and dividends and (ii) a range from 8 times to 12 times
earnings as the terminal value for Gulf South's stock. A range of discount rates
from 12% to 15% were applied to these alternative growth and terminal value
scenarios. These ranges of discount rates, growth alternatives, and terminal
values were chosen based upon what BFC, in its judgment, considered to be
appropriate taking into account, among other things, Gulf South's past and
current performance, the general level of inflation, rates of return for fixed
income and equity securities in the marketplace generally and for companies with
similar risk profiles. In all of the scenarios considered, the present value of
a share of Gulf South's common stock was calculated at less than that of the
Regions offer. Thus, BFC discounted cash flow analysis indicated that Gulf South
stockholders would be in a better financial position by receiving the Regions
common stock offered in the Merger transaction rather than continuing to hold
Gulf South Common Stock.
Using publicly available information on Regions and applying the capital
guidelines of banking regulators, BFC's analysis indicated that the Merger would
not seriously dilute the capital and earnings capacity of Regions and would,
therefore, likely not be opposed by the banking regulatory agencies from a
capital perspective. Furthermore, BFC considered the likely market overlap and
the Federal Reserve guidelines with regard to market concentration and did not
believe there to be an issue with regard to possible antitrust concerns.
BFC has relied, without any independent verification, upon the accuracy and
completeness of all financial and other information reviewed. BFC has assumed
that all estimates, including those as to possible economics of scale, were
reasonably prepared by management, and reflect their best current judgments. BFC
did not make an independent appraisal of the assets or liabilities of either
Gulf South or Regions, and has not been furnished such an appraisal.
No company or transaction used as a comparison in the above analysis is
identical to Gulf South, Regions, or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
BFC will be paid an amount equal to 1.5% of aggregate consideration plus
reasonable out-of-pocket expenses for its services. Gulf South has agreed to
indemnify BFC against certain liabilities, including certain liabilities under
federal securities laws.
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 Louisiana Certificate of Merger relating
to the Merger are filed and declared effective with, respectively, the Delaware
Secretary of State and the Louisiana Secretary of State. Unless otherwise agreed
upon by Regions and Gulf South, 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
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Agreement is approved by the requisite vote of Gulf South stockholders; or such
later date within 30 days thereof as may be specified by Regions.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and Gulf South anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the second quarter of 1997. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or Gulf South generally may
terminate the Agreement if the Merger is not consummated by May 15, 1997, 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 an exchange agent
selected by Regions to mail to the former stockholders of Gulf South a form
letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of Gulf South Common Stock for
certificates representing shares of Regions Common Stock.
GULF SOUTH 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 Gulf South Common Stock, together with a
properly completed letter of transmittal, there will be issued and mailed to
each holder of Gulf South 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. After the Effective Date, to
the extent permitted by law, Gulf South 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
Gulf South Common Stock has been converted, regardless of whether such
stockholders have surrendered their Gulf South 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
Gulf South 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.
The stock transfer books of Gulf South will be closed at the effective time
of the Merger and after the Effective Date, there will be no transfers of shares
of Gulf South Common Stock on Gulf South's stock transfer books. If certificates
representing shares of Gulf South Common Stock are presented for transfer after
the Effective Date, they will be canceled and exchanged for the shares of
Regions Common Stock and a check for the amount due in lieu of fractional
shares, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Louisiana Commissioner, and
the expiration of all applicable waiting periods associated with these
approvals, 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 that, had
such condition or requirement been known, Regions would not, in its reasonable
judgment have entered into the Agreement;
(b) the approval by the holders of requisite number of shares of Gulf
South Common Stock;
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(c) the absence of any action by any court or governmental authority of
competent jurisdiction restricting, prohibiting, or making illegal consummation
of the Merger and the other transactions contemplated by the Agreement;
(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 Gulf South Common Stock for Regions
Common Stock will not give rise to recognition of gain or loss to Gulf South
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 Gulf South of opinions of their respective
counsel and certificates executed by their respective duly authorized officers
as to the satisfaction of certain conditions and obligations set forth in the
Agreement and (ii) as of the Effective Date, the accuracy of certain
representations and warranties and the compliance in all material respects with
the agreements and covenants of each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have been
submitted to the appropriate regulatory agencies.
Regions and Gulf South 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 following the date of Federal Reserve approval,
which may be shortened by the Federal Reserve to the 15th day, during which time
the United States Department of Justice may challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the Federal Reserve's approval, unless a court specifically
orders otherwise.
The Merger also is subject to the approval of the Louisiana Commissioner.
In its evaluation, the Louisiana Commissioner will take into account
considerations similar to those applied by the Federal Reserve.
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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 Gulf
South approved by their respective Boards of Directors; provided, however, that
after approval by the Gulf South stockholders, no amendment that requires
further approval of the Gulf South stockholders pursuant to the Louisiana Act,
including decreasing the consideration to be received by Gulf South
stockholders, may be made without such approval.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by Gulf South
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final denial of any
required regulatory approval or consent, 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 the
requisite number of shares of Gulf South Common Stock shall not have approved
the Agreement;
(c) by mutual agreement of the Boards of Directors of Regions and Gulf
South;
(d) by the Board of Directors of either party, in the event of a breach by
the other party of any provision of the Agreement which meets certain standards
specified in the Agreement and cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party; or
(e) by the Board of Directors of either party if the Merger shall not have
been consummated by May 15. 1997, 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 generally 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 Gulf South and Regions generally has agreed to 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 Gulf South or Regions prior
to consummation of the Merger, as described below.
GULF SOUTH. Gulf South has agreed generally to operate its business only
in the ordinary course, preserve intact its business organizations and assets,
and maintain its rights and franchises. Gulf South has agreed not to take
certain actions relating to the operation of its business pending consummation
of the Merger without the prior written consent of Regions. Those actions
generally include, without limitation: (i) amending the Articles of
Incorporation or Bylaws or other governing instrument of Gulf South and its
subsidiaries; (ii) incur any additional debt or other obligation for borrowed
money (other than indebtedness among Gulf South and its subsidiaries) in excess
of an aggregate amount outstanding at any time of $150,000 (for Gulf South and
its subsidiaries on a consolidated basis) except in the ordinary course of
business consistent with past practices; (iii) acquiring or exchanging (other
than exchanges in the ordinary course under employee benefit plans) any shares,
or any securities convertible into shares, of its capital stock or paying any
dividend or other distribution in respect of its capital stock, except that Gulf
South may, but shall not be legally obligated to, declare and pay annual cash
dividends, in accordance with past practice; (iv) issuing, encumbering, or
selling
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any additional shares of any Gulf South capital stock, any rights to acquire any
such stock, or any security convertible into such stock (except as set forth in
the Agreement); (v) adjusting, splitting, combining, or reclassifying any of its
capital stock or the capital stock of the Bank; (vi) making any material
investment in or otherwise acquiring control over any other entity; (vii)
granting any increase in compensation or benefits to employees, officers, or
directors (except in accordance with past practice or previously approved by the
Gulf South Board of Directors, in each case as previously disclosed to Regions
or as required by law), paying any severance pay or bonus (except pursuant to
any existing written policies or contracts as previously disclosed to Regions),
entering into or amending any severance agreements with officers, or voluntarily
accelerating the vesting of any employee benefits; (viii) entering into or
amending any employment contract that it does not have the unconditional right
to terminate (unless such amendment is 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 a change which, in the opinion
of counsel, is necessary 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 settling any
litigation for money damages in excess of $100,000 or imposing restrictions upon
the operations of Gulf South or any of its subsidiaries; or (xii) modifying,
amending or terminating any material contract or waiving, releasing,
compromising or assigning any material rights or claims.
In addition, Gulf South has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Gulf South 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, Gulf South has agreed to use
reasonable efforts to cause its advisors and other representatives not to engage
in any of the foregoing activities.
REGIONS. Regions has generally agreed that Regions and each of its
subsidiaries will continue to conduct its business in a manner designed in its
reasonable judgment to enhance the long-term value of Regions Common Stock and
the business prospect of Regions and its subsidiaries and to the extent
consistent therewith use all reasonable efforts to preserve intact Regions'
subsidiaries' core businesses and goodwill with their respective employees and
the communities they serve. The Agreement prohibits Regions from amending its
certificate of incorporation or bylaws in any manner which is adverse to, and
discriminates against, the holders of Gulf South Common Stock.
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 generally provides that Regions will indemnify each person
entitled to indemnification from Gulf South or any of its subsidiaries, to the
full extent permitted by the Louisiana Act and by Gulf South's Articles of
Incorporation or Bylaws as in effect on the date of the Agreement, 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 Gulf South and its subsidiaries
who, at or after the Effective Date, become officers or employees of Regions or
its subsidiaries, employee benefits under employee benefit plans (other than
stock option or other plans involving the potential issuance of Regions Common
Stock) on terms and conditions that, taken as a whole, are substantially similar
to those currently provided by Regions and its subsidiaries to their
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similarly situated officers and employees. For purposes of participation and
vesting (but not benefit accrual) under such employee benefit plans, service
with Gulf South or its subsidiaries prior to the Effective Date will be treated
as service with Regions or its subsidiaries. The Agreement further provides that
Regions will cause Gulf South to honor all employment, severance, consulting,
and other compensation contracts previously disclosed to Regions between Gulf
South 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 Gulf South's benefit plans.
As of the Record Date, directors and executive officers of Gulf South owned
no shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
General. Each Gulf South stockholder who objects to the Merger shall be
entitled to the rights and remedies of dissenting stockholders provided in
Section 131 of the Louisiana Act, a copy of which is included as Appendix C to
this Proxy Statement/Prospectus.
Statutory Requirements. The following is a summary of the steps to be taken
by an Gulf South stockholder who is interested in perfecting such holder's
dissenters' rights and should be read in conjunction with the full text of
Section 131 of the Louisiana Act. Each of the steps enumerated below must be
taken in strict compliance with the applicable provisions of the statute in
order for holders of Gulf South Common Stock to perfect their dissenters'
rights. If the Merger is approved by 80% or more of the total voting power of
Gulf South, then dissenters' rights of appraisal, in accordance with the
Louisiana Act, will not be available.
Any written objection, demand, or notice required by the Louisiana Act in
connection with the exercise of dissenters' rights should be sent to Gulf South
at 313 Westbank Expressway, Gretna, Louisiana, 70053, Attention: Max Gritzman,
Corporate Secretary. It is recommended that all required documents to be
delivered by mail be sent by registered or certified mail with return receipt
requested.
Any holder of Gulf South Common Stock who disapproves of or objects to the
proposed Merger and who wishes to receive in cash the "fair value" of such
shares (determined as of the day before the Agreement is approved) may elect to
do so by taking all of the following steps:
(a) Such stockholder must file with Gulf South, prior to or at the Special
Meeting, a written objection to the proposed Merger.
(b) Such stockholder must also vote such holder's shares of Gulf South
Common Stock against the Merger. If the Merger is approved by the required vote,
but by less than 80% of the total voting power, and the Merger authorized
thereby is effected, Regions promptly thereafter shall give written notice
thereof, by registered mail, to each stockholder who both filed such written
objection to, and voted such holder's shares against, the Merger, at such
stockholder's last address on Gulf South's records.
(c) Each such stockholder, within 20 days after the mailing of such notice
to such holder, but not thereafter, must file with Regions a demand in writing
for the fair cash value of such holder's shares of Gulf South Common Stock as of
the day before such vote was taken, and such holder must state in such demand
the value demanded and a post office address to which the reply of Regions may
be sent.
(d) At the same time, such stockholder must deposit in escrow in a
chartered bank or trust company located in Jefferson Parish the certificates
representing such holder's shares of Gulf South Common Stock, duly endorsed and
transferred to Regions upon the sole condition that such certificates shall be
delivered to Regions upon payment of the value of the shares determined in
accordance with the provisions of Section 131 of the Louisiana Act.
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(e) With the demand, the stockholder must deliver to Regions the written
acknowledgment of such bank or trust company that it so holds such holder's
certificates of Gulf South Common Stock.
Any stockholder who fails to take each of the required actions outlined
above in a timely manner will not be entitled to exercise the rights of a
dissenting stockholder.
Unless the objection, demand, and acknowledgment are made and delivered by
the stockholder within the required time period, such holder conclusively shall
be presumed to have acquiesced in the Merger. If Regions does not agree to the
value so stated and demanded, or does not agree that a payment is due, within 20
days after receipt of such demand and acknowledgment, it shall notify the
stockholder in writing, at the designated post office address, of its
disagreement and shall state in such notice the value it will agree to pay if
any payment should be held to be due; otherwise it shall be liable for, and
shall pay to the dissatisfied stockholder, the value demanded.
In case of disagreement as to such fair cash value, or as to whether any
payment is due, after compliance by the parties with the provisions described
above, the dissatisfied stockholder, within 60 days after receipt of notice in
writing of Regions' disagreement, but not thereafter, may file suit against
Regions, in the district court of Jefferson Parish praying the court to fix and
decree the fair cash value of the dissatisfied stockholder's shares of Gulf
South Common Stock as of the day before the vote on the Agreement was taken, and
the court, on such evidence as may be adduced in relation thereto, shall
determine whether any payment is due and, if so, such cash value and render
judgment accordingly. Any stockholder entitled to file such suit, within such
60-day period, but not thereafter, may intervene as a plaintiff in such suit
filed by another stockholder and recover therein judgment against Regions for
the fair cash value of such holder's shares of Gulf South Common Stock. Failure
of the stockholder to bring suit, or to intervene in such a suit, within 60 days
after receipt of notice of disagreement by Regions conclusively shall bind the
stockholder (i) to acquiesce in, and not contest Regions' statement that no
payment is due or (ii) if Regions does not contend that no payment is due, to
accept the value of such holder's shares of Gulf South Common Stock as fixed by
Regions in its notice of disagreement.
A stockholder, upon filing a demand for the value of such holder's shares,
shall cease to have any of the rights of a stockholder, except the rights
accorded by Section 131 of the Louisiana Act. Such a demand may be withdrawn by
the stockholder at any time before Regions gives notice of disagreement, as
provided by the Louisiana Act. After such notice of disagreement is given,
withdrawal of the demand shall require the consent of Regions. If a demand is
withdrawn, or the Merger is abandoned or rescinded, or a court shall determine
that the stockholder is not entitled to receive payment for such holder's shares
of Gulf South Common Stock, or the stockholder shall otherwise lose such
holder's dissenters' rights, such holder shall not have the right to receive a
cash payment for such holder's shares of Gulf South Common Stock, such holder's
share certificates shall be returned (and, on such holder's request, new
certificates shall be issued in exchange for the old ones endorsed to Regions),
and such holder shall be reinstated to all rights as a stockholder as of the
filing of such holder's demand for value, including the right to payment of any
intervening dividend or other distribution, or if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of Regions, the fair value thereof in cash as
determined by the Regions Board, but without prejudice otherwise to any
corporate proceedings that may have been taken in the interim.
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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 Gulf South concerning
certain federal income tax consequences of the proposed Merger under federal
income tax law. It is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Delaware
GCL and the Louisiana Act, the Merger will be a reorganization within the
meaning of Section 368(a)(1)(A) of the Code. Gulf South and Regions will each be
"a party to a reorganization" within the meaning of Section 368(b) of the Code.
(b) The stockholders of Gulf South will recognize no gain or loss upon the
exchange of their Gulf South Common Stock solely for shares of Regions Common
Stock.
(c) The basis of the Regions Common Stock received by the Gulf South
stockholders in the Merger will, in each instance, be the same as the basis of
the Gulf South Common Stock surrendered in exchange therefor, less the basis of
any fractional share of Regions Common Stock settled by cash payment.
(d) The holding period of the Regions Common Stock received by the Gulf
South stockholders will, in each instance, include the period during which the
Gulf South Common Stock surrendered in exchange therefor was held, provided that
the Gulf South Common Stock was held as a capital asset on the date of the
exchange.
(e) The payment of cash to Gulf South 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.
(f) Where solely cash is received by a Gulf South stockholder in exchange
for Gulf South Common Stock pursuant to the exercise of dissenters' rights, such
cash will be treated as having been received in redemption of such holder's Gulf
South Common Stock, subject to the provisions and limitations of Section 302 of
the Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX
CONSEQUENCES OF THE MERGER. GULF SOUTH 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.
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ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "purchase," as
that term is used pursuant to GAAP, for accounting and financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities of
Gulf South 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 Gulf South.
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 REGIONS COMMON STOCK
The Regions Common Stock to be issued to Gulf South 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, Gulf South (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 in accordance with a legal opinion
satisfactory to Regions that such sale or transfer is otherwise exempt from the
Securities Act registration requirements.
Each person who Gulf South reasonably believes will be an affiliate of Gulf
South has delivered to Regions a written agreement providing that such person
generally will not sell, pledge, transfer, or otherwise dispose of any Regions
Common Stock to be received by such person upon consummation of the Merger,
except in compliance with the Securities Act and the rules and regulations of
the SEC promulgated thereunder.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Gulf South Common Stock will be
exchanging their shares of a Louisiana corporation governed by the Louisiana Act
and Gulf South's Articles of Incorporation, as amended (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 Gulf South
stockholders and those of Regions stockholders. The differences deemed material
by Gulf South 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 Louisiana Act and the Delaware GCL as well as to Regions'
Certificate and Bylaws and Gulf South'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 or Articles
of Incorporation and Bylaws," "--Classified Board of Directors and Absence of
Cumulative Voting," "--Removal of Directors," "--Limitations on Director
Liability," "--Special Meetings of Stockholders," "--Actions by Stockholders
Without a Meeting," "--Stockholder Nominations and Proposals," and "--Mergers,
Consolidations, and Sales of Assets Generally," and the provisions of the
Delaware GCL described under the heading "--Business Combinations With Certain
Persons," are referred to herein as the "Protective Provisions." In general, one
purpose of the Protective Provisions is to assist Regions' Board of Directors in
playing a role in connection with attempts to acquire control of Regions, so
that the Board can further and protect the interests of Regions and its
stockholders as appropriate under the circumstances, including, if the Board
determines that a sale of control is in their best interests, by enhancing the
Board's ability to maximize the value to be received by the stockholders upon
such a sale.
Although Regions' management believes the Protective Provisions are,
therefore, beneficial to Regions' stockholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Regions' stockholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Regions may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders 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.
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AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 120,000,000
shares of Regions Common Stock, of which 62,810,998 shares were issued,
including 260,000 treasury shares as of September 30, 1996. Subject to
stockholder approval, Regions intends to effect a 2 for 1 stock split on June 1,
1997. 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 Certificate does not provide preemptive rights to Regions
stockholders.
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.
Gulf South. Gulf South's authorized capital stock consists of 1,000,000
shares of Gulf South Common Stock, which is the only class of capital stock
authorized and of which 390,000 shares were issued and outstanding as of the
Record Date.
Pursuant to the Louisiana Act, Gulf South's Board of Directors may
authorize the issuance of additional shares of Gulf South Common Stock without
further action by Gulf South's stockholders. Gulf South's Articles, as amended,
do not provide the stockholders of Gulf South with preemptive rights to purchase
or subscribe to any unissued authorized shares of Gulf South Common Stock or any
option or warrant for the purchase thereof.
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.
Gulf South. The Louisiana Act generally provides that a Louisiana
corporation's articles of incorporation may be amended by the affirmative vote
of two-thirds of the voting power present at a meeting, unless the articles of
incorporation provide for a higher or lower voting requirement. Gulf South's
Articles provide that
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the affirmative vote of not less than two-thirds of the voting power present and
voting at a meeting is required to amend the Articles.
The Bylaws provide that the stockholders and the Board of Directors have
the power to amend or alter the Bylaws, subject to the right of the stockholders
to amend or repeal any Bylaws made by the Board of Directors.
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.
Gulf South. Gulf South's Articles do not provide for a classified board of
directors, and provide that voting stock does not have cumulative voting rights.
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.
Gulf South. Pursuant to Gulf South's Bylaws, a director may be removed with
or without cause at a special meeting of stockholders called for such purpose,
by the affirmative vote of the holders of a majority of the voting power present
or represented by proxy at the meeting.
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.
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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.
Gulf South. The Louisiana Act generally permits a corporation's articles
of incorporation to relieve directors and officers of liability for money
damages for good faith conduct. The Articles of Gulf South do not include
limitations on director or officer liability.
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
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.
Gulf South. Gulf South'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.
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Gulf South. Under the Articles, a special meeting of Gulf South
stockholders may be called by the chairman of the board, the president, a
majority of the Board of Directors, or the holders of one-fifth interest of the
shares of Gulf South Common Stock entitled to vote.
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.
Gulf South. Under the Articles, any action requiring or permitting
stockholder approval may be approved by written consent of stockholders holding
the proportion of voting power sufficient to determine the matter.
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.
Gulf South. Gulf South's Articles and Bylaws do not provide for advance
notice of director nominations.
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
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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.
Gulf South. The Louisiana Act generally requires the affirmative vote of at
least two-thirds of the voting power present, or by such larger or smaller vote,
but not less than a majority of the voting power present or of the total voting
power, as the Articles of Incorporation may prescribe 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 the corporation if the corporation is
not insolvent. Gulf South's Articles do not effectively alter the basic
statutory requirement, so approval of such actions requires the affirmative vote
of at least two-thirds of the voting power present or represented by proxy.
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.
Gulf South. Section 133 of the Louisiana Act ("Section 133") places similar
restrictions on "business combinations" (as defined in Section 132(4) of the
Louisiana Act, generally including mergers, consolidations, share exchanges,
sales and leases of assets, issuances of securities, and similar transactions)
by Louisiana corporations with an "interested stockholder" (as defined in
Section 132(9) of the Louisiana Act, generally the beneficial owner of 10% or
more of the voting power of the then outstanding voting stock). Section 133
generally applies to business combinations of Louisiana corporations having
greater than 100 beneficial owners of its stock or which did not have an
interested stockholder on January 1, 1985, unless the articles of incorporation
expressly provide otherwise. Section 133 generally does not apply provided the
stockholders receive in the business combination substantially similar
consideration for their shares of stock in the corporation in terms of price and
method of payment, as determined in accordance with Section 134B of the
Louisiana Act, as the interested stockholder received for its shares of stock in
the corporation acquired by such interested stockholder within two years of such
business combination.
33
<PAGE> 36
As Gulf South has not specifically elected to avoid the application of
Section 133, Section 133 generally would prohibit a business combination by Gulf
South with an interested stockholder unless the business combination is
recommended by Gulf South's Board and approved by the affirmative vote of at
least each of the following: (i) 80% of the votes entitled to be cast by
outstanding shares of Gulf South voting stock voting together as a single voting
group and (ii) two-thirds of the votes entitled to be cast by holders of Gulf
South voting stock, other than voting stock held by the interested stockholder
who is a party to the business combination with Gulf South, voting together as a
single voting group. As Regions is not an "interested stockholder" with respect
to Gulf South, Section 133 does not apply to the Merger.
Under Sections 135 through 140.2 of the Louisiana Act (the "Control Share
Law"), a person who acquires shares in certain Louisiana corporations (including
Gulf South) and as a result increases such person's voting power in the
corporation to or above any of three threshold levels (i.e., 20%, 33 1/3%, and
50%), acquires the voting rights with respect to such shares only to the extent
granted by a majority in voting interest of the pre-existing, disinterested
stockholders of the corporation. Certain acquisitions of shares are exempted
from the provisions of the Control Share Law, including acquisitions pursuant to
a merger, consolidation, or share exchange agreement to which the corporation is
a party. Since Regions' acquisition of Gulf South Common Stock is to be made
pursuant to a merger and Gulf South and Regions are parties to the Agreement
with respect thereto, the Control Share Law does not apply to the Merger.
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.
Gulf South. The rights of appraisal of dissenting stockholders under
Louisiana law are generally similar to those afforded under the Delaware GCL.
See "Description of the Transaction--Dissenting Stockholders."
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.
Gulf South. Pursuant to the Louisiana Act, upon written notice of a demand
to inspect corporate records, a stockholder who owns at least 2% of the
outstanding stock (25% in the case of a business competitor) is entitled to
inspect specified corporate records.
34
<PAGE> 37
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."
Gulf South. Pursuant to the Louisiana Act, a board of directors may from
time to time make distributions out of surplus, as defined in the Louisiana Act,
to its stockholders, subject to restrictions in its articles of incorporation,
except (i) when the corporation is insolvent, or (ii) at a time when the
corporation's assets are exceeded by its liabilities, or when the net assets are
less than the aggregate amount payable on liquidation to any shares of Gulf
South common stock which have preferential rights in the event of liquidation.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." Gulf South 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 for the
indicated periods. Management of Gulf South is unaware of and the stockholder
records of Gulf South do not reflect any purchase and sale of Gulf South Common
Stock which occurred from January 1, 1995 through March 10, 1997. Gulf South has
not paid any dividends on Gulf South Common Stock during such period.
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
----------- DECLARED
HIGH LOW PER SHARE
---- --- ---------
1995
<S> <C> <C> <C>
First Quarter ................ $36.50 $31.63 $ .33
Second Quarter................ 37.44 34.50 .33
Third Quarter................. 41.25 37.00 .33
Fourth Quarter................ 44.88 39.63 .33
1996
First Quarter ................ 48.00 40.75 .35
Second Quarter ............... 48.38 42.25 .35
Third Quarter................. 48.63 43.63 .35
Fourth Quarter................ 53.75 48.77 .35
1997
First Quarter (through
March 10, 1997) ......... 60.75 51.38 .40
</TABLE>
35
<PAGE> 38
The last reported sale price of Regions Common Stock as reported on the
Nasdaq National Market was $60.56 on March 10, 1997, and was $47.88 on September
26, 1996, the last business day prior to public announcement of the proposed
Merger.
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 Regions Bank in Alabama.
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."
Gulf South stockholders are entitled to receive dividends as legally
declared by the Board of Directors. The ability of Gulf South to pay dividends
is largely dependent upon receipt of funds from the Bank in the form of
dividends. No dividends have been paid by Gulf South during the last three
fiscal years as Gulf South followed a policy of retaining earnings for the
purpose of increasing stockholder's equity and net worth. At this time, under
the Agreement with Regions, Gulf South is precluded from paying dividends.
36
<PAGE> 39
GULF SOUTH MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Gulf South derives virtually 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 balance outstanding during the period
and 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 effect
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 September 30, 1996.
<TABLE>
<CAPTION>
Repricing Within
----------------------------------
0-90 91-365 Over
Days Days 1 Year Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Earning Assets:
Loans ..................... $ 17,360 $ 4,904 $ 7,219 $ 29,483
Securities ................ 4,809 8,011 4,057 16,877
Funds Sold ................ 3,700 -- -- 3,700
--------- --------- --------- ---------
Total Earning Assets ........ 25,869 12,915 11,276 40,060
Interest Bearing Liabilities:
Interest bearing deposits ... 5,527 11,636 16,281 33,444
--------- --------- --------- ---------
Interest-sensitivity gap .... 20,342 1,279 (5,005) 16,616
--------- --------- --------- ---------
Cumulative gap at 9/30/96 ... 20,342 21,621 16,616
--------- --------- ---------
Cumulative gap at 12/31/95 .. 13,794 8,649 13,854
--------- --------- ---------
</TABLE>
37
<PAGE> 40
Gulf South has a positive gap for the 90 day and one year time periods
and a negative gap for the time period in excess of one year. On a cumulative
basis, Gulf South shows a positive gap in all time periods. A positive gap
implies that interest income would increase in a rising rate environment and
decrease in a falling rate environment.
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, federal funds purchased and
securities available for sale, represent other major sources of funding.
Liquidity has not been a problem, nor does management expect it will be as the
economy expands, given the Bank's current liquidity position.
The liquidity of the Bank remained relatively constant at September 30,
1996 as compared to September 30, 1995 whereas the liquidity of Gulf South
improved. The Bank showed loan to deposit ratios of 59.64% and 59.37%
respectively, cash and due from banks ratios as a percent of assets of 6.34% and
6.19% and available for sale securities ratios of 30.92% and 5.66%. Gulf South
had zero amount notes payable as of September 30, 1996 and $500,231 notes
payable as at September 30, 1995.
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 Ratio" of 4.0%, and a "Leverage Ratio" of at least
3.0% plus an additional cushion of 100 to 200 basis points. At September 30,
1996, the Bank's Tier 1 Capital and Total Capital ratios were 16.56% and 17.81%,
respectively. Also at such date, the Bank's Leverage Ratio was 9.94%.
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 Nine Months Periods
Ended September 30, 1996 and 1995
The following discussion and analysis of financial condition at
September 30, 1996 and 1995 and results of operations for the nine months ended
September 30, 1996 and 1995 is unaudited and should be read in conjunction with
the unaudited consolidated financial statements and notes of Gulf South for the
nine months ended September 30, 1996 and 1995. Results for the nine months
period ending September 30, 1996 are not necessarily indicative of full year
trends.
Overview
Gulf South reported a net income of $764,704 with earnings per share of
$1.96 for the first nine months of 1996 compared to a net income of $940,344 and
earnings per share of $2.41 for the first nine months of 1995. The reduced
income can primarily be attributed to a tax benefit that was available in 1995
but not available in 1996.
38
<PAGE> 41
Total consolidated assets amounted to $54,705,000 at September 30, 1996
compared to $54,328,000 as at September 30, 1995. This virtually unchanged
position reflects the neutral stance of the Bank due to its being in a merger
mode for the entire period.
Interest income for the period in 1996 was $3,417,000 compared to
$3,315,000 in 1995. This increase was due primarily to increased earnings in the
securities portfolio. Loans totalled $29,483,000 at September 30, 1996 compared
to $29,885,000 in 1995 and securities totalled $16,877,000 compared to
$15,582,000 for the comparable periods. Loan interest and fee income decreased
slightly from $2,521,000 to $2,511,000, whereas securities interest income rose
to $805,000 from $586,000.
Interest expense was essentially unchanged at $864,000 for the
comparable nine months periods with the net result being an overall increase in
net interest income from $2,450,00 to $2,553,000.
Non-interest expense declined from $2,259,000 to $1,990,000.
Contributing to this decline were savings in salaries and wages due to
reductions in staff and savings realized from the reduction in the FDIC
assessment rate.
Non performing loans are defined as non-accrual loans and restructured
loans where the deteriorated financial condition of the borrower results in a
below market yield. Non-performing loans were $497,456 at September 30, 1996 and
$267,738 at September 30, 1995. The increase of $229,718 was primarily
attributable to one government guaranteed loan relationship that was unpaid. The
reserve for loan losses at September 30, 1996 and 1995 were $442,786 and
$620,961 respectively and, in management's opinion, sufficient to absorb losses
in the existing portfolio.
Stockholders equity at September 30, 1996 was $5,380,783 compared to
$4,513,627 at September 30, 1995. This represents an increase of 19.21% and an
increase in book value of common share from $11.57 to $13.80, or 19.27%.
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 Gulf South's audited consolidated financial
statements for the years ended December 31, 1995 and 1994, and the notes thereto
included elsewhere herein.
Overview
Gulf South's net income for 1995 was $1,177,376 compared to $1,382,382
for 1994. The decrease in net income was primarily attributable to a net tax
benefit of $470,012 in 1994 compared to a tax expense of $392,464 in 1995. The
1994 tax benefit resulted from net operating loss carryforwards from prior year
losses. Income before taxes was $1,569,840 in 1995 and $912,370 in 1994.
Net interest income is the primary source of Gulf South's earnings and,
as stated above, is measured by the difference between interest income generated
from earning assets and the interest expense paid on deposits and borrowed
funds. Gulf South reported net interest income of approximately $3,282,000 in
1995 and $2,915,000 in 1994. Net interest margin is the net interest income as a
percentage of total interest-earning assets. Gulf South reported net interest
margins of 6.28% for 1995 and 6.13% for 1994.
Deposits grew 6.97% to $48,368,888 from $45,215,362 at December 31,
1995 and 1994 respectively. At year end 1995, 29.07% of deposits were
non-interest bearing compared to 27.91% at year end 1994. However, interest
bearing deposits increased to $34,309,685 from $32,593,889. This contributed to
increased interest expense in 1995 of $1,170,908 from $911,608 in 1994.
39
<PAGE> 42
Non-interest income increased to $1,175,467 in 1995 from $1,102,749 in
1994 and non-interest expense declined to $3,028,853 in 1995 from $3,089,764 in
1994. Salaries and employee benefits, which are a major part of non-interest
expenses rose in 1995 to $1,522,924 from $1,460,579 in 1994. Expenses related to
other real estate owned declined to $48,099 in 1995 from $320,152 in 1994. Other
non-interest expense increased $173,952 due to additional professional fees
associated with a proposed merger with another institution, which was not
consummated.
The provision for loan losses, which is charged to income from
operations, is based upon the changes in the loan portfolio, with the level of
reserve 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 the loans. The allowance for loan losses was $776,908
at December 31, 1994 and $540,884 at December 31, 1995. An analysis of the
activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Balance, beginning of year.................................. $ 776,908 $ 792,910
Provision (credit) for loan losses.......................... (140,786) 16,000
Loans charged off........................................... (212,486) (95,955)
Recoveries.................................................. 117,248 63,953
---------- ----------
Balance, end of year........................................ $ 540,884 $ 776,908
========== ==========
</TABLE>
It is management's opinion that the allowance for possible loan losses
is adequate to absorb potential losses in the existing portfolio.
Loans are reviewed on a regular basis and are placed on nonaccrual
status when, in the opinion of management, there are doubts as to the borrower's
ability to repay the principal or interest. Generally, loans are placed on a
nonaccrual status 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. Nonaccrual loans totalled $748,490 and $399,033
at December 31, 1995 and 1994, respectively. If interest on those loans had been
accrued, such additional interest income would have approximated $36,000 and
$40,000 for 1995 and 1994 respectively.
Financial Condition
Gulf South continued management's plan of controlled growth and of
strengthening its capital base. Assets grew during 1995 approximately $4,275,000
or 8.60% to $53,959,000 and capital increased $1,316,000 or 37.35% for the same
period.
Gulf South's loan portfolio, which is its main source of revenue,
consists primarily of commercial loans and lines of credit for various business
purposes, real estate loans, consumer installment loans, and credit card
advances. Generally, lending activity is concentrated in its market area of the
West Bank of Jefferson Parish. Loan demand remained constant with net loan
balances, defined as gross loans less allowance for loan losses and unearned
discount, being $31,052,000 as of December 31, 1995 and $30,224,000 at December
31, 1994. Of the loan portfolio, commercial loans totalled $10,168,000 or 32.12%
of total loans, real estate mortgage loans $17,326,000 or 54.73%, installment
loans $2,563,000 or 8.10%, and credit cards $1,154,000 or 3.65%.
Securities serve as a source of interest income for the Bank and also
as a means of meeting liquidity requirements. Securities available for sale at
December 31, 1995 totalled $16,223,000 whereas at December
40
<PAGE> 43
31, 1994 securities available for sale plus securities held to maturity totalled
$11,025,000. There were no sales of securities in either 1995 or 1994. The
overall increase in securities of $5,199,000 was primarily funded through the
investment of $3,154,000 in deposit growth during 1995, and a reduction of
$1,000,000 in federal funds sold. The increased securities held resulted in
securities interest income of $850,378 in 1995 compared to $436,928 in 1994.
At December 31, 1995, Gulf South had a balance of $326,261 remaining on
a long term note payable, compared to a balance of $731,452 at December 31,
1994. The note was entirely repaid in the second quarter of 1996.
As a result of prior year losses, Gulf South carried a deferred tax
asset account against which a full valuation allowance was recorded. At the
close of December 31, 1995 and 1994, the valuation reserve was adjusted to allow
the balance of the deferred tax asset account to reflect the portion of the
deferred tax asset that was more likely than not to be realized. The net
deferred tax asset account as of December 31, 1995 was $46,465 and at December
31, 1994 was $504,477.
41
<PAGE> 44
BUSINESS OF GULF SOUTH
Gulf South is a bank holding company organized under the laws of the
state of Louisiana with its principal executive office located in Gretna,
Louisiana. Gulf South operates principally through the Bank, which is a
state-chartered commercial bank and which provides a range of retail banking
services through two offices in Jefferson Parish. At September 30, 1996, Gulf
South had total consolidated assets of approximately $55 million, total
consolidated deposits of approximately $48 million, and total consolidated
stockholders' equity of approximately $5 million. Gulf South's principal
executive office is located at 313 Westbank Expressway, Gretna, Louisiana, 70053
and its telephone number at such address is (504) 361-7500.
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, drive-in banking facilities and access to 24-hour teller
machines through various networks.
As of September 30, 1996, the Bank had approximately 42 employees. The
parent company, Gulf South, 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
Gulf South 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 Gulf South. At September 30, 1996, there were
approximately 64 commercial bank branches, 10 savings bank branches, and 30
credit union branches competing in Jefferson Parish.
LEGAL PROCEEDINGS
Gulf South and the Bank are not parties to any material legal
proceedings other than ordinary routine litigation incidental to their business.
42
<PAGE> 45
MANAGEMENT
The following table presents information about the directors and
executive officers of Gulf South and the Bank:
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
PRESENT OCCUPATION POSITION AND DIRECTOR OR OWNED AT THE RECORD DATE
AND PRINCIPAL OFFICES HELD EXECUTIVE ------------------------
OCCUPATION FOR WITH GULF SOUTH OFFICER PERCENT OF
NAME AND AGE LAST FIVE YEARS AND BANK SINCE DIRECTLY INDIRECTLY CLASS
- -------------------------- --------------- -------------- ------ --------- ---------- -----
<S> <C> <C> <C> <C> <C>
Peter P. Brechtel, Jr (59) President, Brechtel Director-Gulf South 1977 30,019 1,806 8.16%
Energy Corporation Director-Bank
Max Gritzman (80) Retired Director-Gulf South 1981 24,653 6.32
Director-Bank
James J. Jackel (56) Executive Vice President Director and 1994 5,343 1.37
Gulf South Bank and Trust President-Gulf South
Director and Exec.
Vice President-Bank
Dean F. Gruder (64) President and CEO Director, Chairman 1994 14,000 3.59
Gulf South Bank and Trust CEO-Gulf South
Director, Chairman
CEO, President-Bank
Gerard E. Schexnayder (69) Owner, Quaid Insurance Director-Gulf South 1971 29,554 7.58
Agency Director-Bank
J.T. Simon, Jr. (49) Vice President, J.T. Director-Gulf South 1978 11,673 2.99
Simon's Enterprises Director-Bank
Frank L. Taulli, DDS (62) Dentist Director-Gulf South 1977 27,647 9,377 9.49
Director-Bank
</TABLE>
EMPLOYEE BENEFIT PLANS
Employees of the Bank have optional medical and dental insurance coverage
which is fully paid by the Bank in the case of single employees and partially
paid for family coverage. Life insurance and long term disability coverage at
Bank expense is provided for all employees. An optional Bank sponsored 401(k)
savings plan is provided with the Bank, at the discretion of the Board of
Directors, making matching contributions. A cafeteria plan offering employees
various coverages, all at employee expense, is also made available.
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 persons and company(s) in which they have a 10% or more
ownership interest as of September 30, 1996 were approximately $1,301,000.
43
<PAGE> 46
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF GULF SOUTH
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of Gulf South Common Stock, as of the Record
Date.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------- -------------------- -----
<S> <C> <C> <C>
Common Stock A.F. LaPeyronnie, Jr. 20,000 5.13 %
137 Willow Drive
Gretna, LA 70053
Common Stock Max Gritzman 24,653 (1) 6.32
1424 Transcontinental Drive
Metairie, LA 70001
Common Stock Larry C. Pieno 29,174 7.48
1320 Barataria Blvd.
Marrero, LA 70072
Common Stock Gerard E. Schexnayder 29,554 7.58
185 Willow Drive
Gretna, LA 70053
Common Stock Roger D. Linder 30,693 7.87
1800 Carol Sue Avenue
Suite 6-A
Gretna, LA 70056
Common Stock Peter P. Brechtel, Jr. 31,825 (2) 8.16
139 East Ruelle
Mandeville, LA 70471
Common Stock Frank L. Taulli 37,024 (3) 9.49
4900 Fourth Street
Marrero, LA 70072
</TABLE>
(1) Includes 1,000 shares in the name of Max Gritzman and 23,653 shares owned
jointly by Max and Mary Gritzman.
(2) Includes 30,019 shares in the name of Peter P. Brechtel, Jr., 300 shares
in the name of Susan B. Brechtel and 1,506 shares in the name of Pelican
Grocery, Inc. Profit Sharing Plan.
(3) Includes 27,647 shares in the name of Frank L. Taulli, DDS, 3,277 shares
owned jointly by Congetta R. Taulli, Dr. Frank Taulli and C. Bob Taulli,
3,050 shares in the name of Christopher Scott Taulli and 3,050 shares in
the name of Frank L. Taulli, Jr.
44
<PAGE> 47
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 373 banking offices located in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of September 30, 1996. At that date, Regions had
total consolidated assets of approximately $18.7 billion, total consolidated
deposits of approximately $15.2 billion and total consolidated stockholders'
equity of approximately $1.6 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 September 30, 1996 information:
<TABLE>
<CAPTION>
NUMBER OF TOTAL TOTAL
BANKING OFFICES ASSETS DEPOSITS
--------------- ------ --------
(In thousands)
<S> <C> <C> <C>
Alabama........... 181 $11,557,055 $ 8,467,873
Florida........... 36 1,194,596 1,083,748
Georgia........... 75 3,529,206 3,039,924
Louisiana......... 57 2,209,689 1,819,863
Tennessee......... 24 482,520 431,734
</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
1996 Operating Results. For the fourth quarter ended December 31, 1996,
Regions reported net income of $64.8 million (or $1.04 per share), representing
a 48% increase in net income (and a 46% increase on a per share basis) over the
same period of 1995. For the twelve months ended December 31, 1996, Regions
reported net income of $229.7 million or $3.70 per share, representing a 15%
increase on a per-share basis in net income over 1995. The return on average
total assets for 1996 was 1.3%, and the return on average stockholders' equity
was 15.2%. At December 31, 1996, the ratio of stockholders' equity to total
assets was 8.5%. As of December 31, 1996, Regions had total consolidated assets
of approximately $18.9 billion, total
45
<PAGE> 48
consolidated deposits of approximately $15.0 billion, and total consolidated
stockholders' equity of approximately $1.6 billion.
Acquisitions. The following table presents certain information concerning
Regions' acquisition activity since December 31, 1995:
<TABLE>
<CAPTION>
CONSIDERATION
-------------
APPROXIMATE
----------- ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ---------- ----- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Transactions completed prior to September 30, 1996:
- --------------------------------------------------
The Enterprise National Bank of Atlanta, $ 54 $ 9 Cash Purchase
located in Atlanta, Georgia
Metro Financial Corporation, located in Atlanta, 210 31 Regions Purchase
Georgia Common
Stock
First National Bancorp, located in Gainesville, 3,199 728 Regions Pooling
Georgia Common of
Stock Interests
First Federal Bank of Northwest Georgia, Federal 94 17 Regions Pooling
Savings Bank, located in Cedartown, Georgia Common of
Stock Interests
First Gwinnett Bancshares, Inc., located in 68 15 Regions Purchase
Norcross, Georgia Common
Stock
Delta Bank & Trust Company, located in Belle 191 38 Regions Purchase
Chasse, Louisiana Common
Stock
American Bancshares of Houma, Inc., located in 89 18 Regions Purchase
Houma, Louisiana Common
Stock
Rockdale Community Bank, located in Conyers, 47 12 Regions Purchase
Georgia Common
Stock
Transactions pending as of September 30, 1996:
- ---------------------------------------------
Allied Bankshares, Inc., located in Thomson, 569 158 Regions Pooling
Georgia (the "Allied Acquisition")(2) Common of
Stock Interests
Florida First Bancorp, Inc., located in Panama 294 40 Cash Purchase
City, Florida (the "Florida First Acquisition")(3)
West Carroll Bancshares, Inc., located in 125 32 Regions Pooling
Oak Grove, Louisiana (the "West Carroll Acquisition") Common of
Stock Interests
Gulf South 55 9 Regions Purchase
Common
Stock
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION> CONSIDERATION
-------------
APPROXIMATE
----------- ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ---------- ----- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Transactions announced since September 30, 1996:
- -----------------------------------------------
First Bankshares, Inc., located in $ 106 $ 19 Regions Pooling
East Point, Georgia Common of
Stock Interests
First Mercantile National Bank, located in 145 21 Cash Purchase
Longwood, Florida
SB&T Corporation, located in Smyrna, 152 26 Regions Pooling
Georgia Common of
Stock Interests
The New Iberia Bancorp, Inc., located in New 299 65 Regions Pooling
Iberia, Louisiana Common of
Stock Interests
</TABLE>
- ---------------
(1) Calculated as of the date of completion of the transaction, or as of the
date of announcement of the transaction in the case of pending acquisitions.
(2) Completed on January 31, 1997.
(3) Completed on January 25, 1997.
Consummation of 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.
If the four transactions pending as of September 30, 1996, including the
Merger, had been consummated on that date, based on September 30, 1996 pro forma
financial information, Regions' total consolidated assets would have increased
by approximately $1.0 billion to approximately $19.7 billion; its total
consolidated deposits would have increased by approximately $845 million to
approximately $16.0 billion; and its total consolidated stockholders' equity
would have increased by approximately $82 million to approximately $1.6 billion.
See "Documents Incorporated by Reference" and "Summary Pro Forma Financial Data"
and the related pro forma financial information in Regions' Current Report on
Form 8-K dated November 20, 1996. The pro forma effects of the four transactions
announced since September 30, 1996, would not have a material effect on Regions'
consolidated financial position or on the pro forma financial information set
forth or incorporated by reference in this Proxy Statement/Prospectus.
Proposed Stock Split. Subject to stockholder approval, Regions intends to
effect a 2 for 1 stock split on June 1, 1997.
47
<PAGE> 50
SUMMARY PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect, as
appropriate, to the Merger, the Allied Acquisition, the Florida First
Acquisition, and the West Carroll Acquisition, as of the dates and for the
periods indicated and pursuant to the accounting bases described below. The
unaudited pro forma financial data are presented for informational purposes only
and are not necessarily indicative of the combined financial position or results
of operation which actually would have occurred if the transactions had been
consummated at the date and for the periods indicated or which may be obtained
in the future. The information should be read in conjunction with the unaudited
pro forma financial information included in Regions' Current Report on Form 8-K
dated November 20, 1996.
SELECTED PRO FORMA COMBINED DATA FOR REGIONS AND GULF SOUTH
The following unaudited pro forma combined data give effect to the Merger
as of the date or at the beginning of the periods indicated, assuming such
acquisition is treated as a purchase.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1996
----
(In thousands
except per
share data)
<S> <C>
Balance Sheet Data:
Total assets................................................................................. $18,780,937
Securities................................................................................... 4,013,488
Loans, net of unearned income ............................................................... 13,061,721
Total deposits............................................................................... 15,235,593
Other borrowed money......................................................................... 470,924
Stockholders' equity......................................................................... 1,554,740
Book value per common share ................................................................. 24.86
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
---- ----
(In thousands except per share data)
<S> <C> <C>
Income Statement Data:
Total interest income ................................ $ 1,032,123 $ 1,263,469
Total interest expense ............................... 509,437 636,507
----------- -----------
Net interest income .................................. 522,686 626,962
Provision for loan losses ............................ 21,896 30,130
----------- -----------
Net interest income after loan loss
provision ........................................... 500,790 596,832
Total noninterest income ............................. 163,795 188,581
Total noninterest expense ............................ 418,099 490,695
Income tax expense ................................... 81,279 96,297
----------- -----------
Net income ........................................... $ 165,207 $ 198,421
=========== ===========
Net income per share ................................. $ 2.67 $ 3.22
Average common shares outstanding ..................... 61,980 61,670
</TABLE>
SELECTED PRO FORMA COMBINED DATA FOR REGIONS, GULF SOUTH, AND CERTAIN
TRANSACTIONS
The following unaudited pro forma combined data as of September 30, 1996,
and for the nine months ended September 30, 1996, and for each of the three
years in the period ended December 31, 1995, give effect to (i) the Florida
First Acquisition and the Merger, assuming such acquisitions are accounted for
as purchases, and (ii) the Allied Acquisition and the West Carroll Acquisition,
assuming such transactions are treated as poolings of interests for accounting
purposes, as if all such transactions had been consummated on September 30,
1996, in the case of the data included under "Balance Sheet Data," and at the
beginning of the indicated periods in the case of the data included under
"Income Statement Data," except that the income statement data for the
transactions accounted for as purchases are reflected as if such transactions
had been consummated on January 1, 1995, and are not included for the years
ended December 31, 1994 and 1993.
49
<PAGE> 52
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1996
----
(In thousands
except per
share data)
Balance Sheet Data:
<S> <C>
Total assets ............................................................................... $19,739,998
Securities ................................................................................. 4,265,955
Loans, net of unearned income ............................................................... 13,619,290
Total deposits ............................................................................. 16,032,050
Other borrowed money ....................................................................... 536,273
Stockholders' equity ....................................................................... 1,636,724
Book value per common share ................................................................. 24.89
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
(In thousands except per share data)
<S> <C> <C> <C> <C>
Income Statement Data:
Total interest income ........................... $ 1,087,556 $ 1,335,811 $ 1,034,842 $ 785,994
Total interest expense .......................... 537,200 672,520 452,555 311,486
----------- ----------- ----------- -----------
Net interest income ............................. 550,356 663,291 582,287 474,508
Provision for loan losses ....................... 22,981 31,090 21,039 25,064
----------- ----------- ----------- -----------
Net interest income after loan loss
provision ..................................... 527,375 632,201 561,248 449,444
Total noninterest income ........................ 170,468 197,335 177,904 176,077
Total noninterest expense ....................... 442,212 518,164 461,704 399,543
Income tax expense .............................. 84,483 102,047 87,608 69,993
----------- ----------- ----------- -----------
Net income ...................................... $ 171,148 $ 209,325 $ 189,840 $ 155,985
=========== =========== =========== ===========
Net income per share ............................ $ 2.63 $ 3.23 $ 3.10 $ 2.83
=========== =========== =========== ===========
Average common shares outstanding ................ 65,181 64,869 61,244 55,125
</TABLE>
50
<PAGE> 53
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 Gulf South. 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 Gulf South are both bank holding companies registered with the
Federal Reserve under the BHC Act. As such, Regions and Gulf South 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 Gulf South 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 Gulf South from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or
51
<PAGE> 54
indirect control of any company engaged in any activities other than those
activities determined by the Federal Reserve to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of 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 Gulf South 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 Gulf South (the FDIC and the
applicable state authority in the case of state-chartered nonmember banks and
the OTS in the case of federally chartered thrift institutions) 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 Gulf South are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and Gulf South, 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 Gulf South,
as well as by Regions and Gulf South 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.
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."
52
<PAGE> 55
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 September 30, 1996, under dividend restrictions imposed under federal
and state laws, the subsidiary depository institutions of Regions and Gulf
South, without obtaining governmental approvals, could declare aggregate
dividends to Regions and Gulf South of approximately $219 million and $2 million
respectively.
The payment of dividends by Regions and Gulf South 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, Gulf South, 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 Gulf South 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 September 30, 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
13.53% and 10.71%, respectively, and Gulf South's consolidated Total Capital and
Tier 1 Capital Ratios were 17.81% and 16.56%, 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 Gulf South's respective Leverage Ratios at September 30,
1996, were 7.57% and 9.94%. 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 Gulf South'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 September 30,
1996. Neither Regions, Gulf South, nor any of their
53
<PAGE> 56
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, recently adopted final regulations requiring regulators to
consider interest rate risk (when the interest rate sensitivity of an
institution's assets does not match the sensitivity of its liabilities or its
off-balance-sheet position) in the evaluation of a bank's capital adequacy. The
bank regulatory agencies have concurrently proposed a methodology for evaluating
interest rate risk which 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 Gulf South 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 Gulf South 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
54
<PAGE> 57
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the final agency 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 September 30, 1996, all of the subsidiary depository institutions of
Regions and Gulf South had the requisite capital levels to qualify as well
capitalized.
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a 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
risk-based assessment system, which went into effect on January 1, 1994, 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
55
<PAGE> 58
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,
there are nine assessment risk classifications (i.e., combinations of capital
groups and supervisory subgroups) to which different assessment rates are
applied. Assessment rates for 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
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning in 1996, the deposit insurance premiums for 92% of all BIF members in
the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. 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.
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, in July 1995, the FDIC, the
Treasury Department, and the OTS released statements outlining a proposed plan
to recapitalize the SAIF, the principal feature of which was a special one-time
assessment on depository institutions holding SAIF-insured deposits, which was
intended to recapitalize the SAIF at a reserve ratio of 1.25%. This proposal
contemplated elimination of the disparity between the assessment rates on BIF
and SAIF deposits following recapitalization of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds Act of
1996 (the "Funds Act") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC has implemented a special one-time assessment of approximately
65.7 basis points (0.657%) on a depository institution's SAIF-insured deposits
held as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions). Regions recorded a charge
against earnings for the special assessment in the quarter ended September 30,
1996 in the pre-tax amount of approximately $21.0 million. Gulf South was not
affected by the special assessment.
In addition, the FDIC has proposed a revision in the SAIF assessment rate
schedule which would effect, as of October 1, 1996 (i) a widening in the
assessment rate spread among institutions in the different capital and risk
assessment categories, (ii) an overall reduction of the assessment rate range
assessable on SAIF deposits of from 0 to 27 basis points, and (iii) a special
interim assessment rate range for the last quarter of 1996 of from 18 to 27
basis points on institutions subject to FICO assessments. Effective January 1,
1997, FICO assessments will be imposed on both BIF- and SAIF-insured deposits in
annual amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF-insured institutions
will share the FICO interest costs at equal rates currently estimated 2.43 basis
points. Regions anticipates that the net effect of the decrease in the premium
assessment rate on SAIF deposits will result in a reduction in its total deposit
insurance premium assessments for the years 1997 through 1999, assuming no
further changes in announced premium assessment rates.
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.
56
<PAGE> 59
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 120,000,000 shares of Regions Common Stock,
of which 62,810,998 shares were issued, including 260,000 treasury shares, at
September 30, 1996. No other class of stock is authorized. Subject to
stockholder approval, Regions intends to effect a 2 for 1 stock split on June 1,
1997.
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 September 30, 1996, under
such requirements and guidelines, Regions' subsidiary institutions had $219
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 have been 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.
Proposals with respect to Regions' 1998 annual meeting of stockholders may be
submitted until the date specified in Regions' 1997 annual meeting proxy
statement.
EXPERTS
The consolidated financial statements and the supplemental consolidated
financial statements of Regions incorporated by reference in or appearing as an
exhibit to Regions' 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.
The consolidated financial statements of Gulf South as of December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
included in this Proxy Statement/Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such firm, given upon 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 March 10,
1997, attorneys in the law firm of Lange, Simpson, Robinson & Somerville owned
an aggregate of 118,745 shares of Regions Common Stock.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird, Atlanta, Georgia.
57
<PAGE> 60
INDEX TO GULF SOUTH FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT................................................................................... F-2
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Consolidated Statements of Condition as of
December 31, 1995 and 1994............................................................................... F-3
Consolidated Statements of Income............................................................................ F-4
Consolidated Statements of Stockholders' Equity.............................................................. F-5
Consolidated Statements of Cash Flows........................................................................ F-6
Notes to Consolidated Financial Statements................................................................... F-7
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Consolidated Statement of Condition
as of September 30, 1996 (Unaudited).....................................................................F-19
Consolidated Statements of Income (Unaudited)................................................................F-20
Consolidated Statements of Cash Flows (Unaudited)............................................................F-21
Notes to Unaudited Consolidated Interim
Financial Statements.....................................................................................F-22
</TABLE>
F-1
<PAGE> 61
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Gulf South Bancshares, Inc.
Gretna, Louisiana
We have audited the accompanying consolidated statements of condition of Gulf
South Bancshares, Inc. and Subsidiary (the Company) as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Gulf South Bancshares, Inc. and
Subsidiary at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 9, 1996
F-2
<PAGE> 62
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31,
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and due from banks .................................................... $ 3,477,125 $ 3,565,825
Federal funds sold ......................................................... 1,300,000 2,300,000
------------- -------------
Cash and cash equivalents ............................................ 4,777,125 5,865,825
Securities available-for-sale at fair value (amortized
cost of $16,081,959 and $2,491,733 at December 31, 1995
and 1994) ................................................................ 16,223,187 2,423,012
Securities held-to-maturity (estimated market value of
$8,285,360 at December 31, 1994) ......................................... -- 8,601,663
Loans, net of unearned discount ............................................ 31,592,814 31,000,907
Less allowance for loan losses ............................................. (540,884) (776,908)
------------- -------------
Net loans ............................................................ 31,051,930 30,223,999
Premises and equipment, net ................................................ 1,029,603 1,084,276
Other real estate owned .................................................... -- 325,399
Accrued interest receivable ................................................ 448,129 346,464
Other assets ............................................................... 429,093 813,404
------------- -------------
$ 53,959,067 $ 49,684,042
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ..................................................... $ 14,059,203 $ 12,621,473
Interest bearing ......................................................... 34,309,685 32,593,889
------------- -------------
Total deposits ....................................................... 48,368,888 45,215,362
Note payable ............................................................... 326,261 731,452
Accrued interest and other liabilities ..................................... 424,327 213,580
------------- -------------
Total liabilities .................................................... 49,119,476 46,160,394
------------- -------------
Commitments and contingencies (Note 11) .................................... -- --
Stockholders' equity:
Common stock - authorized 1,000,000 shares of
$1 par value; 394,433
shares issued and 390,000
shares outstanding in 1995 and 1994, respectively ...................... 394,433 394,433
Capital surplus .......................................................... 2,728,323 2,728,323
Unrealized gain (loss) on securities available-for-sale,
net of taxes ........................................................... 93,211 (45,356)
Accumulated earnings ..................................................... 1,700,093 522,717
Less treasury stock - at cost (4,433 shares) ............................. (76,469) (76,469)
------------- -------------
Total stockholders' equity ........................................... 4,839,591 3,523,648
------------- -------------
$ 53,959,067 $ 49,684,042
============= =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 63
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans ............................... $ 3,352,651 $ 3,255,713 $ 3,299,395
Interest on investment securities ........................ 850,378 436,928 317,880
Interest on federal funds sold ........................... 250,319 134,352 68,256
------------ ------------ ------------
Total interest income ................................ 4,453,348 3,826,993 3,685,531
------------ ------------ ------------
INTEREST EXPENSE:
Interest on deposits ..................................... 1,114,499 835,765 845,989
Interest on note payable ................................. 56,409 75,843 57,188
------------ ------------ ------------
Total interest expense ............................... 1,170,908 911,608 903,177
------------ ------------ ------------
NET INTEREST INCOME ........................................ 3,282,440 2,915,385 2,782,354
PROVISION (CREDIT) FOR LOAN
LOSSES ................................................... (140,786) 16,000 434,680
------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION (CREDIT) FOR LOAN
LOSSES ................................................... 3,423,226 2,899,385 2,347,674
------------ ------------ ------------
NON-INTEREST INCOME:
Service fees on deposit accounts ......................... 818,547 814,362 854,972
Other service charges and fees ........................... 114,288 91,485 74,895
Other .................................................... 242,632 196,902 257,145
------------ ------------ ------------
Total non-interest income ............................ 1,175,467 1,102,749 1,187,012
------------ ------------ ------------
NON-INTEREST EXPENSE:
Salaries and employee benefits ........................... 1,522,924 1,460,579 1,345,609
Net occupancy expense .................................... 266,178 273,972 241,649
Equipment rentals, depreciation and
maintenance ............................................ 269,661 287,022 259,686
Expenses related to other real estate
owned .................................................. 48,099 320,152 93,288
Other .................................................... 921,991 748,039 800,319
------------ ------------ ------------
Total non-interest expense ........................... 3,028,853 3,089,764 2,740,551
------------ ------------ ------------
INCOME BEFORE INCOME TAXES ................................. 1,569,840 912,370 794,135
INCOME TAX BENEFIT (EXPENSE) ............................... (392,464) 470,012 --
------------ ------------ ------------
NET INCOME ................................................. $ 1,177,376 $ 1,382,382 $ 794,135
============ ============ ============
NET INCOME PER COMMON SHARE ................................ $ 3.02 $ 3.57 $ 2.13
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 64
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Unrealized
Gain
(Loss) on
Common Securities Accumulated Total
Stock Capital Available- Earnings Treasury Stockholders'
Shares Amount Surplus for-Sale (Deficit) Stock Equity
------ ------ ------- -------- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 ......... 329,920 $329,920 $2,566,169 $ -- $(1,653,800) $(76,469) $ 1,165,820
Sale of 60,153 shares of stock ... 60,513 60,513 136,154 -- -- -- 196,667
Change in unrealized gain
(loss) on securities available-
for-sale, net of taxes ......... -- -- -- 3,048 -- -- 3,048
Net income ....................... -- -- -- -- 794,135 -- 794,135
------- -------- ---------- --------- ----------- -------- -----------
BALANCE, December 31, 1993 ....... 390,433 390,433 2,702,323 3,048 (859,665) (76,469) 2,159,670
Sale of 4,000 shares of stock .... 4,000 4,000 26,000 -- -- -- 30,000
Change in unrealized gain
(loss) on securities available-
for-sale, net of taxes ........ -- -- -- (48,404) -- -- --
(48,404)
Net income ....................... -- -- -- -- 1,382,382 -- 1,382,382
------- -------- ---------- --------- ----------- -------- -----------
BALANCE, December 31, 1994 ....... 394,433 394,433 2,728,323 (45,356) 522,717 (76,469) 3,523,648
Change in unrealized gain
(loss) on securities available-
for-sale, net of taxes ........ -- -- -- 138,567 -- -- 138,567
Net income ....................... -- -- -- -- 1,177,376 -- 1,177,376
------- -------- ---------- --------- ----------- -------- -----------
BALANCE, December 31, 1995 ....... 394,433 $394,433 $2,728,323 $ 93,211 $ 1,700,093 $(76,469 $ 4,839,591
======= ======== ========== ========= =========== ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 65
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................. $ 1,177,376 $ 1,382,382 $ 794,135
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 162,904 138,781 135,809
Provision for losses on other real estate ............ 48,688 264,000 168,686
Provision (credit) for loan losses ................... (140,786) 16,000 434,680
Net gain (losses) on sales of other real estate ...... 3,048 (2,606) (121,854)
Amortization/accretion of investment premiums
and discounts - net ................................ 28,151 12,036 (13,275)
Net gain on sale of investment securities ............ -- -- (156,754)
Net gain on sale of premises and equipment ........... -- -- (5,411)
Change in accrued interest receivable ................ (101,665) (61,050) 38,738
Change in other assets ............................... 384,311 (395,554) (128,337)
Change in accrued interest and other liabilities ..... 139,365 (536) 7,099
------------ ----------- ------------
Net cash provided by operating activities .................. 1,701,392 1,353,453 1,153,516
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
available-for-sale securities .......................... 1,500,000 2,000,000 13,604,027
Purchases of available-for-sale securities ............... (3,000,059) (1,993,489) (11,557,219)
Proceeds from maturities of held-to-maturity
securities ............................................. 6,512,778 1,049,533 --
Purchases of held-to-maturity securities ................. (10,029,433) (4,969,112) --
Loan originations net of repayment ....................... (898,393) 1,183,779 493,027
Payments received on loans previously charged off ........ 117,248 63,953 102,038
Proceeds from sales of other real estate ................. 367,663 271,841 161,474
Proceeds from sales of premises and equipment ............ 30,601 -- 112,774
Purchases of premises and equipment ...................... (138,832) (132,209) (48,525)
------------ ----------- ------------
Net cash (used in) provided by investing activities .. (5,538,427) (2,525,704) 2,867,596
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits ................................... 3,153,526 1,805,109 (5,007,401)
Repayments of note payable ............................... (405,191) (70,106) (92,836)
Proceeds from issuance of common stock ................... -- 30,000 196,667
------------ ----------- ------------
Net cash provided by (used in) financing activities .. 2,748,335 1,765,003 (4,903,570)
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ......................................... (1,088,700) 592,752 (882,458)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ...................................... 5,865,825 5,273,073 6,155,531
------------ ----------- ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ............................................ $ 4,777,125 $ 5,865,825 $ 5,273,073
============ =========== ============
SUPPLEMENTAL INFORMATION:
Interest paid ............................................ $ 989,844 $ 917,655 $ 918,626
============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 66
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Gulf South Bancshares, Inc. and Subsidiary (Company)
conform to generally accepted accounting principles and the prevailing
practices within the banking industry. A summary of the Company's significant
accounting policies is as follows.
Description of Business - Gulf South Bancshares, Inc. (Bancshares) is a bank
holding company headquartered in Gretna, Louisiana operating in Louisiana,
through its wholly-owned subsidiary, Gulf South Bank and Trust Company (Bank).
The Bank is community oriented and focuses primarily on offering commercial and
consumer loan and deposit services to individuals and small to middle market
businesses.
Principles of Consolidation - The consolidated financial statements of the
Company include the accounts of Bancshares and the Bank. Significant
intercompany transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities - Securities are being accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities. SFAS No. 115 requires the
classification of securities into one of three categories: trading,
available-for-sale, or held-to-maturity.
Management determines the appropriate classification of securities at the time
of purchase and re-evaluates this classification periodically. Trading account
securities are held for resale in anticipation of short-term market movements.
Securities are classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity. Securities not
classified as held-to-maturity or trading are classified as available-for-sale.
The Company had no trading account securities at December 31, 1995 and 1994.
Held-to-maturity securities are stated at amortized cost. Available-for-sale
securities are stated at market value, with unrealized gains and losses, net of
income taxes, reported as a separate component of stockholders' equity until
realized. On November 29, 1995, as permitted by "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" issued by the Financial Accounting Standards Board, the Company
reclassed securities with a book value of $12,090,167 and unrealized gains of
$73,957 from securities held-to-maturity to securities available-for-sale.
The amortized cost of securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed
F-7
<PAGE> 67
securities, over the estimated life of the security. Amortization, accretion
and accruing interest are included in interest income on securities. Realized
gains and losses, and declines in value judged to be other than temporary, are
included in net securities gains and losses. Gains and losses on the sale of
securities available-for-sale are determined using the specific-identification
method.
Loans - Loans are stated at the principal amount outstanding, net of unearned
discount and allowance for loan losses. Unearned discount relates principally
to consumer installment loans. Interest on loans is credited to operations
based on the principal amount outstanding using methods which approximate the
interest method. Fees, net of origination costs, if applicable, are deferred
and amortized over the life of the loan.
When the payment of principal or interest on a loan is delinquent for 90 days,
or earlier in some cases, the loan is placed on non-accrual status, unless the
loan is in the process of collection and the underlying collateral fully
supports the carrying value of the loan. If the decision is made to continue
accruing interest on the loan, periodic reviews are made to confirm the
appropriateness of the accruing status of the loan.
The Company considers a loan to be impaired when, based upon current
information and events, it believes it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. The Company's impaired loans include troubled debt
restructurings, and performing and non-performing major loans in which full
payment of principal or interest is not expected. Non-major homogenous loans,
which are evaluated on an overall basis, generally include all loans under
$500,000. The Company calculates a reserve required for impaired loans based on
the present value of expected future cash flows discounted at the loan's
effective interest rate, or at the loan's observable market price or the fair
value of its collateral. Generally, loans of all types which become 90 days
delinquent are in the process of collection through repossession, foreclosure
or have been deemed currently uncollectible. Loans deemed currently
uncollectible are charged-off against the reserve account. As a matter of
policy, loans are placed on a non-accrual status where doubt exists as to
collectability.
When a loan is placed on non-accrual status, interest accrued during the
current year prior to the judgment of uncollectibility is charged to
operations. Interest accrued during prior periods is charged to the allowance
for loan losses. Generally, any payments received on non-accrual loans are
applied first to outstanding loan amounts and next to the recovery of
charged-off loan amounts. Any excess is treated as recovery of lost interest.
Allowance for Loan Losses - The allowance for loan losses is a valuation
allowance available for losses incurred on loans. All losses are charged to the
allowance for loan losses when the loss actually occurs or when a determination
is made that a loss is likely to occur. Recoveries are credited to the
allowance at the time of recovery.
Periodically during the year, management estimates the likely level of future
losses to determine whether the allowance for loan losses is adequate to absorb
reasonably anticipated losses in the existing portfolio. Based on these
estimates, an amount is charged to the provision for loan losses and credited
to the allowance for loan losses in order to adjust the allowance to a level
determined to be adequate to absorb future losses.
Management's judgment as to the level of future losses on existing loans
involves the consideration of current and anticipated economic conditions and
their potential effects on specific borrowers, an
F-8
<PAGE> 68
evaluation of the existing relationships among loans, potential loan losses and
the present level of the allowance, results of examinations of the loan
portfolio by regulatory agencies, and management's internal review of the loan
portfolio. In determining the collectibility of certain loans, management also
considers the fair value of any underlying collateral.
It should be understood that estimates of future loan losses involve an
exercise of judgment. While it is possible that in particular periods the Bank
may sustain losses which are substantial relative to the allowance for loan
losses, it is the judgment of management that the allowance for loan losses
reflected in the consolidated statements of condition is adequate to absorb
probable losses in the existing loan portfolio.
Premises and Equipment - Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the respective assets. Leasehold
improvements are amortized on the straight-line method over the shorter of the
estimated useful lives of the improvements or the terms of the related leases.
Other Real Estate - Properties acquired through foreclosures or deed taken in
lieu of foreclosure are recorded at fair value at time of foreclosure, net of
disposal cost. Write-downs from cost to fair value at the time of foreclosure
are charged to the allowance for loan losses. Subsequent write-downs and gains
or losses recognized on the sale of such properties are included in the
consolidated statement of income. Determinations of fair value are based on
periodic appraisals, which are subject to significant fluctuations as economic
conditions change.
Income Taxes - Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of non-taxable income such as
interest on state and municipal securities) and deferred taxes on temporary
differences between the amount of taxable income and between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
Deferred taxes on temporary differences are calculated at the currently enacted
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Net Income per Common Share - Net income per share is based on the weighted
average number of shares outstanding which amounted to 390,000, 387,655 and
372,032 for 1995, 1994 and 1993, respectively.
Statements of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, interest bearing
deposits in banks and federal funds sold. Generally, federal funds sold are
purchased and sold for one day periods.
2. CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. "Cash and due from banks" in the consolidated statement of
condition included amounts so restricted of $25,000 at December 31, 1995 and
1994, respectively.
F-9
<PAGE> 69
3. SECURITIES
The amortized cost and market values of securities classified as
available-for-sale at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U. S. Treasury securities and
obligations of U.S. government
agencies $ 16,081,959 $ 165,364 $ 24,136 $ 16,223,187
============= ========== ========= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U. S. Treasury securities and
obligations of U.S. government
agencies $ 2,491,733 $ - $ 68,721 $ 2,423,012
============ ====== ========= ============
</TABLE>
The amortized cost and market value of securities available-for-sale at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
Due in one year or less $ 9,082,526 $ 9,103,544
Due after one year through five years 5,999,433 6,101,034
Due after five years through ten years 1,000,000 1,018,609
------------ ------------
$ 16,081,959 $ 16,223,187
============ ============
</TABLE>
F-10
<PAGE> 70
The amortized cost and market value of securities held-to-maturity as of
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U. S. Treasury securities and
obligations of U.S. government
agencies $8,601,663 $ 8,435 $ 324,738 $8,285,360
========== ========== ========== ==========
</TABLE>
Market value for securities is determined from quoted prices or quoted prices
of similar securities of comparable risk and maturity where no quoted market
price exists. Management does not anticipate a requirement to sell at a loss
any of the Bank's investment securities for liquidity or other operating
purposes.
There were no sales of securities during 1995 and 1994. Proceeds from the sale
of securities during 1993 were $3,514,850. A net gain of $156,754 was realized
on these sales in 1993.
Securities with carrying values of $475,537 and $1,088,606 at December 31, 1995
and 1994, respectively, were pledged to secure public deposits and for other
purposes required or permitted by law.
4. LOANS
The Bank's lending activities are concentrated in southeastern Louisiana.
Collateral requirements on loans are determined based on the borrower's
financial strength and the nature and amount of the requested credit. A
significant portion of the Bank's loan portfolio is collateralized by real
estate, the value of which is subject to significant fluctuations as economic
conditions change.
F-11
<PAGE> 71
The loan portfolio consisted of the following loans at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial $ 10,168,161 $ 9,822,149
Real estate construction 302,787 281,948
Real estate mortgage 17,325,826 17,678,078
Installment 2,563,271 2,318,806
Credit cards 1,153,738 871,956
Other 145,777 143,345
------------ ------------
Total 31,659,560 31,116,282
Less unearned discount (66,746) (115,375)
------------ ------------
31,592,814 31,000,907
Less allowance for loan losses (540,884) (776,908)
------------ ------------
Loans, net $ 31,051,930 $ 30,223,999
============ ============
</TABLE>
An analysis of the activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance, beginning of year $ 776,908 $ 792,910 $ 1,084,911
Provision (credit) for loan losses (140,786) 16,000 434,680
Loans charged off (212,486) (95,955) (828,719)
Recoveries 117,248 63,953 102,038
--------- --------- -----------
Balance, end of year $ 540,884 $ 776,908 $ 792,910
========= ========= ===========
</TABLE>
Loans on which the accrual of interest had been discontinued amounted to
$748,490 and $399,033 at December 31, 1995 and 1994, respectively. If interest
on those loans had been accrued, such additional interest income would have
approximated $36,000, $40,000 and $41,000 for 1995, 1994 and 1993,
respectively.
As of December 31, 1995 and 1994, loans outstanding to directors, officers, and
their affiliates were $1,684,077 and $1,535,634, respectively. In the opinion
of management, all transactions entered into between the Bank and such related
parties have been made on the same terms and conditions as similar transactions
with unaffiliated persons.
A total of $94,000, $90,000 and $195,375 were transferred from loans to other
real estate in 1995, 1994 and 1993, respectively.
F-12
<PAGE> 72
The Company's impaired loans amounted to approximately 1.5% of total loans at
December 31, 1995 and the related reserve was $119,000. No interest income was
recognized on these loans during the current fiscal year. Interest income
foregone on said loans amount to approximately $16,140 for the year ended
December 31, 1995.
5. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 393,844 $ 393,844
Building and leasehold improvements 1,210,389 1,202,668
Furniture and equipment 1,147,423 1,165,626
------------ ------------
Total 2,751,656 2,762,138
Less accumulated depreciation and amortization (1,722,053) (1,677,862)
------------ ------------
Premises and equipment, net $ 1,029,603 $ 1,084,276
============ ============
</TABLE>
Premises and equipment having a net book value of approximately $102,000 were
sold during 1993 in connection with management's decision to close a branch
banking location. A gain of $111,480 was realized upon the sale which amount is
included in gains on other real estate sales.
6. DEPOSITS
Deposits at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Demand $ 14,059,203 $ 12,621,473
NOW and super NOW 6,511,449 6,047,488
Money market demand accounts 4,737,112 5,895,067
Savings 9,296,820 9,241,402
Time 13,764,304 11,409,932
------------ ------------
Total $ 48,368,888 $ 45,215,362
============ ============
</TABLE>
F-13
<PAGE> 73
Included in interest bearing deposits are $1,708,000 and $1,703,000 of
certificates of deposit in amounts of $100,000 or more at December 31, 1995 and
1994, respectively. The Bank has no brokered deposits and there are no major
concentrations of deposits.
7. NOTE PAYABLE
Note payable consist of a 9.3% note to a bank, payable in monthly installments
of $11,800, including interest, due in September of 1998. The note is secured
by shares of the Bank's common stock and the guarantee of certain directors.
The note matures as follows:
<TABLE>
<S> <C>
1996 $ 141,600
1997 141,600
1998 43,061
----------
$ 326,261
==========
</TABLE>
8. INCOME TAXES
Because of the uncertainties facing the Bank at December 31, 1993 as described
in Note 12, management was unable to conclude that the net deferred tax asset
was more likely than not to be utilized and consequently recorded a full
valuation allowance at that time. At December 31, 1995 and 1994, management
concluded that a portion of the net deferred tax asset is more likely than not
to be realized. Accordingly, at each year end the valuation allowance was
adjusted to a level which reflects the portion of the deferred tax asset more
likely than not to be realized.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at
December 31, 1995 and 1994 are as follows:
F-14
<PAGE> 74
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 234,132 $ 419,992
Allowance for loan losses not currently deductible -- 62,913
Other real estate writedowns -- 278,915
Unrealized loss on securities -- 23,365
Other 31,916 86,240
------------ ------------
266,048 871,425
Deferred tax liabilities:
Tax over book depreciation (101,599) (108,865)
Unrealized gain on securities (48,018) --
------------ ------------
(149,617) (108,865)
------------ ------------
Net deferred tax asset before valuation allowance 116,431 762,560
Less valuation allowance (69,966) (258,083)
------------ ------------
Net $ 46,465 $ 504,477
============ ============
</TABLE>
The components of the provision for federal income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Current expense $ 6,733 $ 11,101 $ --
--------- --------- -----------
Deferred expense:
Deferred income tax expense 575,364 302,992 261,785
Reduction of income taxes arising from
reduction in valuation reserve (189,633) (784,105) (261,785)
--------- --------- -----------
385,731 (481,113) --
--------- --------- -----------
$ 392,464 $(470,012) $ --
========= ========= ===========
</TABLE>
The provision for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate on operations primarily due to
differences resulting from capitalized acquisition fees. Deferred taxes arise
from temporary differences between items of income or expense reported for
financial reporting purposes and those reported for income tax purposes. These
F-15
<PAGE> 75
differences relate primarily to depreciation, provision for loan losses and
writedowns of other real estate owned.
As of December 31, 1995, the consolidated group had net operating loss
carryforwards of approximately $483,000 for income tax purposes expiring in
2007.
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to various 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. Those instruments involve, to varying degrees,
elements of credit risk in excess of the amounts recognized in the consolidated
statement of condition.
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 amount of those
instruments. The Bank uses the same credit policies in making these commitments
and conditional obligations as it does for recorded loans.
As of December 31, 1995 and 1994, the Bank has made various commitments to
extend credit totalling approximately $2,557,000 and $1,954,000, respectively.
Additionally, unfunded letters of credit totalling $676,000 and $361,000 was
outstanding as of December 31, 1995 and 1994, respectively. Bank management
does not anticipate any material loss as a result of these transactions.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to its customers.
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 fully drawn upon, the total commitment amounts disclosed above do
not necessarily represent future cash requirements.
10. PENSION BENEFITS
The Bank maintains a defined contribution plan (the Plan) for all employees.
The Plan is qualified under Section 401(k) of the Internal Revenue Code.
Contributions to the Plan by the Bank are discretionary and determined by the
Board of Directors. For the years ended December 31, 1995, 1994 and 1993, the
Bank contributed $24,000, $9,300 and $-0-, respectively. The Bank pays expenses
associated with the Plan.
11. COMMITMENTS AND CONTINGENCIES
Non-cancelable future operating lease commitments amounted to $22,500 at
December 31, 1995. Rent expense under all non-cancelable operating lease
obligations aggregated $50,217, $55,815 and $57,960 in 1995, 1994 and 1993,
respectively.
F-16
<PAGE> 76
In the course of conducting its business, the Company becomes involved as a
defendant or plaintiff in various lawsuits. Management, after reviewing these
suits with outside counsel, believes that the aggregate liabilities, if any,
would not be material to the financial statements.
12. REGULATORY MATTERS
On July 12, 1994, the Bank entered into a Memorandum of Understanding with the
FDIC. The terms of the Memorandum stipulated certain capital requirements which
the Bank had to meet and contained restrictions on the payment of dividends to
Bancshares. On April 26, 1995, the Memorandum of Understanding was terminated
by the FDIC.
The Company and its bank subsidiary are required to maintain certain minimum
capital levels. At December 31, 1995, the Company and its bank were in
compliance with their respective statutory minimum capital requirements.
Following is a summary of the actual capital levels at December 31, 1995:
<TABLE>
<CAPTION>
RISKED BASED TIER 1
CAPITAL RATIOS LEVERAGE
--------------------- --------
TOTAL Tier 1 Ratio
<S> <C> <C> <C>
Bank 16.19 % 14.94 % 8.81 %
Company 16.01 % 14.75 % 8.72 %
</TABLE>
Risk based capital requirements are intended to make regulatory capital more
sensitive to risk elements of the Company. Currently, the Company and its bank
subsidiary must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to
total assets) of at least 3.0% based upon the regulators latest composite
rating of the institutions.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required each federal banking agency to implement prompt corrective actions for
institutions that it regulates. The rules provide that an institution is "well
capitalized" if its total risk-based capital ratio is 10% or greater, its Tier
1 risk-based capital ratio is 6% or greater, its leverage is 5% or greater and
the institution is not subject to a capital directive. Under this regulation,
the Company and its subsidiary bank are deemed to be "well capitalized" as of
December 31, 1995, based upon the most recent notifications from their
regulators. There are no conditions or events that management believes would
change their classifications.
13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash, Due from Banks and Federal Funds Sold - For those short-term instruments,
the carrying amount is a reasonable estimate of fair value.
F-17
<PAGE> 77
Securities - For securities, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
Loans - The fair value of loans is estimated by discounting the future cash
flows 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 demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
Note Payable - For this note, the carrying value is a reasonable estimate of
fair value.
Commitments - The fair value of commitments to extend credit was not
significant.
The estimated fair values of the Company's financial instruments are as follows
at December 31, 1995:
<TABLE>
<CAPTION>
1995
-----------------------------------------
CARRYING Fair
AMOUNT Value
Financial assets:
<S> <C> <C>
Cash, due from banks and federal funds sold $ 4,777,000 $ 4,777,000
Securities available-for-sale 16,223,000 16,223,000
Loans 31,593,000 31,428,000
Less: reserve for loan losses (541,000) (541,000)
------------ ------------
Loans, net of reserve 31,052,000 30,887,000
------------ ------------
Financial liabilities:
Deposits $ 48,369,000 $ 48,526,000
Note payable 326,000 326,000
</TABLE>
14. PENDING MERGER
On September 23, 1996, the Company entered into an agreement to merge with
another institution. The agreement calls for the shareholders to receive .4817
of a share of Regions common stock for each share of Gulf South common stock.
If all approvals and conditions are met, it is expected that the transaction
will close in the first half of 1996.
F-18
<PAGE> 78
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
September 30,
ASSETS 1996
(Unaudited)
<S> <C>
Cash and due from banks ..................................................... $ 3,503,238
Federal funds sold .......................................................... 3,700,000
--------------
Cash and cash equivalents ............................................. 7,203,238
Securities available-for-sale at fair value (amortized cost of $16,574,373 at
September 30, 1996 and $16,081,959 and $2,491,733 at December 31, 1995
and 1994) ................................................................. 16,376,946
Securities held-to-maturity (estimated market value of
$500,313 at September 30, 1996 and $8,285,360
at December 31, 1994) ..................................................... 500,000
Loans, net of unearned discount ............................................. 29,483,262
Less allowance for loan losses .............................................. (442,786)
--------------
Net loans ............................................................. 29,040,476
Premises and equipment, net ................................................. 921,360
Other real estate owned ..................................................... --
Accrued interest receivable ................................................. 431,575
Other assets ................................................................ 231,474
--------------
$ 54,705,069
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing ...................................................... $ 14,742,430
Interest bearing .......................................................... 33,653,383
--------------
Total deposits ........................................................ 48,395,813
Note payable ................................................................ --
Accrued interest and other liabilities ...................................... 928,473
--------------
Total liabilities ..................................................... 49,324,286
--------------
Commitments and contingencies (Note 11) ..................................... --
Stockholders' equity:
Common stock - authorized 1,000,000 shares of
$1 par value; 394,433 shares issued and 390,000
shares outstanding in 1996, 1995 and 1994,
respectively ............................................................ 394,433
Capital surplus ........................................................... 2,728,323
Unrealized gain (loss) on securities available-for-sale,
net of taxes ............................................................ (130,301)
Accumulated earnings ...................................................... 2,464,797
Less treasury stock - at cost (4,433 shares) .............................. (76,469)
--------------
Total stockholders' equity ............................................ 5,380,783
--------------
$ 54,705,069
==============
</TABLE>
See notes to consolidated interim financial statements.
F-19
<PAGE> 79
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans ............................... $ 2,510,615 $ 2,520,764
Interest on investment securities ........................ 805,047 585,726
Interest on federal funds sold ........................... 100,971 208,016
----------- -----------
Total interest income ................................ 3,416,633 3,314,506
----------- -----------
INTEREST EXPENSE:
Interest on deposits ..................................... 853,703 819,643
Interest on note payable ................................. 9,845 44,479
----------- -----------
Total interest expense ............................... 863,548 864,122
----------- -----------
NET INTEREST INCOME ........................................ 2,553,085 2,450,384
PROVISION (CREDIT) FOR LOAN
LOSSES ................................................... 162,000 (80,786)
----------- -----------
NET INTEREST INCOME AFTER
PROVISION (CREDIT) FOR LOAN
LOSSES ................................................... 2,391,085 2,531,170
----------- -----------
NON-INTEREST INCOME:
Service fees on deposit accounts ......................... 532,556 609,754
Other service charges and fees ........................... 93,690 94,857
Other .................................................... 151,192 181,434
----------- -----------
Total non-interest income ............................ 777,438 886,045
----------- -----------
NON-INTEREST EXPENSE:
Salaries and employee benefits ........................... 1,022,021 1,173,915
Net occupancy expense .................................... 199,435 165,206
Equipment rentals, depreciation and
maintenance ............................................ 202,752 205,117
Expenses related to other real estate
owned .................................................. -- 59,799
Other .................................................... 566,011 654,587
----------- -----------
Total non-interest expense ........................... 1,990,219 2,258,624
----------- -----------
INCOME BEFORE INCOME TAXES ................................. 1,178,304 1,158,591
INCOME TAX BENEFIT (EXPENSE) ............................... (413,600) (218,247)
----------- -----------
NET INCOME ................................................. $ 764,704 $ 940,344
=========== ===========
NET INCOME PER COMMON SHARE ................................ $ 1.96 $ 2.41
=========== ===========
</TABLE>
See notes to consolidated interim financial statements.
F-20
<PAGE> 80
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................... $ 764,704 $ 940,344
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 121,156 122,927
Provision for losses on other real estate ............ -- 36,516
Provision (credit) for loan losses ................... 162,000 (80,786)
Net gain (losses) on sales of other real estate ...... -- --
Amortization/accretion of investment premiums
and discounts - net ................................ (2,656) (9,195)
Net gain on sale of investment securities ............ (200) --
Net gain on sale of premises and equipment ........... -- --
Change in accrued interest receivable ................ 16,554 (106,076)
Change in other assets ............................... 197,619 536,281
Change in accrued interest and other liabilities ..... 504,146 5,790
----------- -----------
Net cash provided by operating activities ............ 1,763,323 1,445,801
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
available-for-sale securities .......................... 4,007,786 794,240
Purchases of available-for-sale securities ............... (4,500,000) (2,000,000)
Proceeds from maturities of held-to-maturity
securities ............................................. -- 2,552,412
Purchases of held-to-maturity securities ................. (497,344) (6,029,492)
Loan originations net of repayment ....................... 1,947,552 1,231,795
Payments received on loans previously charged off ........ 17,045 87,200
Proceeds from sales of other real estate ................. -- 194,883
Proceeds from sales of premises and equipment ............ 20,563 30,601
Purchases of premises and equipment ...................... (33,476) (116,925)
----------- -----------
Net cash (used in) provided by investing activities .. 962,126 (3,255,286)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits ................................... 26,925 3,879,055
Repayments of note payable ............................... (326,261) (231,221)
Proceeds from issuance of common stock ................... -- --
----------- -----------
Net cash provided by (used in) financing activities .. (299,336) 3,647,834
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ......................................... 2,426,113 1,838,349
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ...................................... 4,777,125 5,865,825
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ............................................ $ 7,203,238 $ 7,704,174
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid ............................................ $ 761,154 $ 760,811
=========== ===========
</TABLE>
See notes to consolidated interim financial statements.
F-21
<PAGE> 81
GULF SOUTH BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1. UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form S4 and Rule 10-01 of Regulation
S-X. 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.
2. PENDING MERGER
On September 23, 1996, the Company entered into an agreement to merge with
another institution. The agreement calls for the shareholders to receive .4817
of a share of Regions common stock for each share of Gulf South common stock.
If all approvals and conditions are met, it is expected that the transaction
will close in the first half of 1996.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
GULF SOUTH BANCSHARES, INC.
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF SEPTEMBER 23, 1996
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties............................................................. A-4
Preamble............................................................ A-4
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER....................... A-4
1.1 Merger...................................................... A-4
1.2 Time and Place of Closing................................... A-4
1.3 Effective Time.............................................. A-4
ARTICLE 2 -- TERMS OF MERGER........................................ A-5
2.1 Certificate of Incorporation................................ A-5
2.2 Bylaws...................................................... A-5
2.3 Directors and Officers...................................... A-5
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................ A-5
3.1 Conversion of Shares........................................ A-5
3.2 Anti-Dilution Provisions.................................... A-5
3.3 Shares Held by Gulf South or Regions........................ A-5
3.4 Dissenting Stockholders..................................... A-5
3.5 Fractional Shares........................................... A-6
ARTICLE 4 -- EXCHANGE OF SHARES..................................... A-6
4.1 Exchange Procedures......................................... A-6
4.2 Rights of Former Gulf South Stockholders.................... A-6
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF GULF SOUTH........... A-7
5.1 Organization, Standing, and Power........................... A-7
5.2 Authority; No Breach By Agreement........................... A-7
5.3 Capital Stock............................................... A-8
5.4 Gulf South Subsidiaries..................................... A-8
5.5 Financial Statements........................................ A-9
5.6 Absence of Undisclosed Liabilities.......................... A-9
5.7 Absence of Certain Changes or Events........................ A-9
5.8 Tax Matters................................................. A-9
5.9 Assets...................................................... A-10
5.10 Environmental Matters....................................... A-10
5.11 Compliance With Laws........................................ A-11
5.12 Employee Benefit Plans...................................... A-11
5.13 Material Contracts.......................................... A-12
5.14 Legal Proceedings........................................... A-13
5.15 Statements True and Correct................................. A-13
5.16 Tax and Regulatory Matters.................................. A-14
5.17 State Takeover Laws......................................... A-14
5.18 Directors' Agreements....................................... A-14
5.19 Charter Provisions.......................................... A-14
5.20 Derivatives Contracts.......................................
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-15
6.4 SEC Filings; Financial Statements........................... A-15
6.5 Absence of Undisclosed Liabilities.......................... A-15
6.6 Absence of Certain Changes or Events........................ A-16
6.7 Compliance With Laws........................................ A-16
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
6.8 Legal Proceedings........................................... A-16
6.9 Statements True and Correct................................. A-16
6.10 Tax and Regulatory Matters.................................. A-17
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION............... A-17
7.1 Affirmative Covenants of Gulf South......................... A-17
7.2 Negative Covenants of Gulf South............................ A-17
7.3 Covenants of Regions........................................ A-19
7.4 Adverse Changes in Condition................................ A-19
7.5 Reports..................................................... A-19
ARTICLE 8 -- ADDITIONAL AGREEMENTS.................................. A-20
Registration Statement; Proxy Statement; Stockholder
8.1 Approval.................................................... A-20
8.2 Exchange Listing............................................ A-20
8.3 Applications................................................ A-20
8.4 Filings with State Offices.................................. A-20
8.5 Agreement as to Efforts to Consummate....................... A-20
8.6 Investigation and Confidentiality........................... A-20
8.7 Press Releases.............................................. A-21
8.8 Certain Actions............................................. A-21
8.9 Tax Treatment............................................... A-21
8.10 State Takeover Laws......................................... A-21
8.11 Charter Provisions.......................................... A-22
8.12 Agreement of Affiliates..................................... A-22
8.13 Employee Benefits and Contracts............................. A-22
8.14 Indemnification............................................. A-22
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE...... A-23
9.1 Conditions to Obligations of Each Party..................... A-23
9.2 Conditions to Obligations of Regions........................ A-24
9.3 Conditions to Obligations of Gulf South..................... A-25
ARTICLE 10 -- TERMINATION........................................... A-25
10.1 Termination................................................. A-25
10.2 Effect of Termination....................................... A-25
10.3 Non-Survival of Representations and Covenants............... A-26
ARTICLE 11 -- MISCELLANEOUS......................................... A-26
11.1 Definitions................................................. A-26
11.2 Expenses.................................................... A-32
11.3 Brokers and Finders......................................... A-32
11.4 Entire Agreement............................................ A-32
11.5 Amendments.................................................. A-32
11.6 Waivers..................................................... A-32
11.7 Assignment.................................................. A-33
11.8 Notices..................................................... A-33
11.9 Governing Law............................................... A-33
11.10 Counterparts................................................ A-33
11.11 Captions.................................................... A-33
11.12 Interpretations............................................. A-33
11.13 Enforcement of Agreement.................................... A-34
11.14 Severability................................................ A-34
Signatures.......................................................... A-34
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of September 23, 1996, by and between GULF SOUTH BANCSHARES, INC. ("Gulf
South"), a corporation organized and existing under the laws of the State of
Louisiana, with its principal office located in Gretna, Louisiana; 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 Gulf South and Regions are of the opinion that
the transactions described herein are in the best interests of the parties and
their respective stockholders. This Agreement provides for the acquisition of
Gulf South by Regions pursuant to the merger of Gulf South into and with
Regions. At the effective time of such merger, the outstanding shares of the
capital stock of Gulf South shall be converted into shares of the common stock
of Regions (except as provided herein). As a result, stockholders of Gulf South
shall become stockholders of Regions and each of the subsidiaries of Gulf South
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 stockholders of Gulf South, the Board of Governors of
the Federal Reserve System, and the appropriate state regulatory authorities and
the satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties to this Agreement that the merger for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code and that the exchange of Gulf South
common stock, to the extent exchanged for Regions common stock, will not give
rise to gain or loss to the holders of Gulf South common stock with respect to
such exchange. Simultaneously with the execution and delivery of this Agreement,
as a condition and inducement to Regions' willingness to consummate the
transactions contemplated by this Agreement, each of Gulf South's directors and
executive officers will execute and deliver to Regions an agreement (a "Support
Agreement"), in substantially the form of Exhibit 1.
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, Gulf South shall be merged into and with Regions in accordance
with the provisions of Section 12:115 of the LBCL 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 resulting from 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 Gulf South and Regions.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M.,
Central Daylight Time, on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than 9:00 A.M.,
Central Daylight Time), or at such other time as the Parties, acting through
their duly authorized 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 Louisiana
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Louisiana 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 duly
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the
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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 any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the stockholders of Gulf South 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 Gulf South Common Stock (excluding shares held by
Gulf South 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 .4817 of a share of Regions Common
Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. 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 Gulf South or Regions. Each of the shares of Gulf South
Common Stock held by any Gulf South 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 Dissenting Stockholders. Any holder of shares of Gulf South Common
Stock who perfects such holder's dissenters' rights of appraisal in accordance
with and as contemplated by Part XIII of the LBCL 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 stockholder
unless and until such dissenting stockholder has complied with the applicable
provisions of the LBCL, including the provisions of Section 131 thereof relating
to the deposit in escrow, endorsement, and transfer of the certificate or
certificates
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representing the shares for which payment is being made. In the event that a
dissenting stockholder of Gulf South fails to perfect, or effectively withdraws
or loses, his right to appraisal and of payment for his shares, such Person
shall not have the right to receive payment in cash for his shares and, instead,
as of the Effective Time the shares of Gulf South Common Stock held by such
Person shall be converted into and exchanged for that number of shares of
Regions Common Stock determined under Section 3.1 of this Agreement and the
delivery of certificates representing such Regions Common Stock and any
dividends or other distributions in respect thereof to which such holder may be
entitled shall be governed by Section 4.1 of this Agreement.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Gulf South Common Stock exchanged pursuant
to the Merger, 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. The market value of one share of Regions Common Stock at
the Effective Time shall be the closing 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 selected by Regions) on the last trading day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a stockholder in respect of any fractional
shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause the exchange agent selected by Regions (the "Exchange
Agent") to mail to the former stockholders of Gulf South appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Gulf South
Common Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent). After the Effective Time, each holder of shares of Gulf South
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement or as to which dissenters' rights of appraisal have been perfected and
not withdrawn or forfeited under Section 131 of the LBCL and as contemplated by
Section 3.4 of this Agreement) issued and outstanding at the Effective Time,
promptly upon the surrender of the certificate or certificates representing such
shares to the Exchange Agent, shall receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends and other distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement and, to the extent
required by Section 3.5 of this Agreement, cash in lieu of any fractional share
of Regions Common Stock to which such holder otherwise would be entitled
(without interest). Until so surrendered, each outstanding certificate of Gulf
South Common Stock shall be deemed for all purposes, other than as provided
below with respect to the payment of dividends or other distributions payable to
the holders of shares of Regions Common Stock, to represent the consideration
into which the number of shares of Gulf South Common Stock represented thereby
prior to the Effective Time shall have been converted. Regions shall not be
obligated to deliver the certificate or certificates representing the shares of
Regions Common Stock or any cash payments to which any former holder of Gulf
South Common Stock is entitled as a result of the Merger, or any dividends or
distributions in respect of shares of Regions Common Stock, until such holder
surrenders such holder's certificate or certificates representing the shares of
Gulf South Common Stock for exchange as provided in this Section 4.1, or
otherwise complies with the procedures of the Exchange Agent with respect to
lost, stolen, or destroyed certificates. The certificate or certificates of Gulf
South Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may require. Any other provision of this Agreement notwithstanding, neither
Regions, Gulf South, nor the Exchange Agent shall be liable to a holder of Gulf
South 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 Gulf South Stockholders. At the Effective Time, the
stock transfer books of Gulf South shall be closed as to holders of Gulf South
Common Stock immediately prior to the Effective Time and no transfer of Gulf
South Common Stock by any such holder shall thereafter be made or recognized.
Until
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surrendered for exchange in accordance with the provisions of Section 4.1 of
this Agreement, each certificate theretofore representing shares of Gulf South
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement or as to which dissenters' rights of appraisal have been perfected and
not withdrawn or forfeited under Section 131 of the LBCL as to which the holder
thereof has perfected dissenters' rights of appraisal as contemplated by Section
3.4 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 3.5 of this Agreement in exchange therefor, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by Gulf South in respect of such shares of Gulf South Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. To the extent permitted by Law, former stockholders of
record of Gulf South shall be entitled to vote after the Effective Time at any
meeting of Regions stockholders the number of whole shares of Regions Common
Stock into which their respective shares of Gulf South Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing Gulf South 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 Gulf South 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 Gulf South Common Stock certificate, both the Regions Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest), and any undelivered dividends and 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 GULF SOUTH
Except as set forth in the referenced section of the Gulf South Disclosure
Memorandum, Gulf South hereby represents and warrants to Regions that:
5.1 Organization, Standing, and Power. Gulf South is a corporation duly
organized and validly existing, and in good standing under the Laws of the State
of Louisiana, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its material Assets. Gulf South
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 Gulf South.
5.2 Authority; No Breach By Agreement. (a) Gulf South 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 Gulf South, subject to the approval of this Agreement by the required
vote of the outstanding shares of Gulf South Common Stock, which is the only
stockholder vote required for approval of this Agreement and consummation of the
Merger by Gulf South. Subject to such requisite stockholder approval, this
Agreement represents a legal, valid, and binding obligation of Gulf South,
enforceable against Gulf South in accordance with its terms (except in all cases
as such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and (ii) application of,
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and limitations on the application of, equitable principles and remedies,
including limitations on the availability of the equitable remedy of specific
performance or injunctive relief).
(b) Neither the execution and delivery of this Agreement by Gulf South, nor
the consummation by Gulf South of the transactions contemplated hereby, nor
compliance by Gulf South with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Gulf South'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 Gulf South Company under, any Contract or Permit of any Gulf South
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 Gulf South, 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 Gulf South Company or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or both with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Gulf South, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by Gulf South of the Merger and the other transactions
contemplated in this Agreement.
5.3 Capital Stock. The authorized capital stock of Gulf South consists of
1,000,000 shares of Gulf South Common Stock, of which 390,000 shares are issued
and outstanding as of the date of this Agreement and not more than 390,000
shares will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of capital stock of Gulf South are duly and validly
issued and outstanding and are fully paid and nonassessable under the LBCL. To
the Knowledge of Gulf South, none of the outstanding shares of capital stock of
Gulf South has been issued in violation of any preemptive rights of the current
or past stockholders of Gulf South. Except as set forth above, there are no
shares of capital stock or other equity securities of Gulf South outstanding and
no outstanding Rights relating to the capital stock of Gulf South.
5.4 Gulf South Subsidiaries. Gulf South has disclosed in Section 5.4 of
the Gulf South Disclosure Memorandum all of the Gulf South Subsidiaries as of
the date of this Agreement. Gulf South or one of its Subsidiaries owns all of
the issued and outstanding shares of capital stock of each Gulf South
Subsidiary. No equity securities of any Gulf South Subsidiary are or may become
required to be issued (other than to another Gulf South Company) by reason of
any Rights, and there are no Contracts by which any Gulf South Subsidiary is
bound to issue (other than to another Gulf South Company) additional shares of
its capital stock or Rights or by which any Gulf South Company is or may be
bound to transfer any shares of the capital stock of any Gulf South Subsidiary
(other than to another Gulf South Company). There are no Contracts relating to
the rights of any Gulf South Company to vote or to dispose of any shares of the
capital stock of any Gulf South Subsidiary. All of the shares of capital stock
of each Gulf South Subsidiary held by a Gulf South Company are authorized,
validly issued, fully paid, and nonassessable (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) under the applicable
corporation or banking Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Gulf South Company free and clear
of any Lien. Each Gulf South Subsidiary is either a bank, 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 Gulf South Subsidiary is duly qualified or licensed to transact business as
a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Gulf South. Each Gulf South Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
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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. Gulf South has included in Section 5.5 of the
Gulf South Disclosure Memorandum copies of all Gulf South Financial Statements
for periods ended prior to the date hereof and will deliver to Regions copies of
all Gulf South Financial Statements prepared subsequent to the date hereof. The
Gulf South Financial Statements (as of the dates thereof and for the periods
covered thereby) present or will present, as the case may be, fairly the
consolidated financial position of the Gulf South Companies as of the dates
indicated and the consolidated results of operations, changes in stockholders'
equity, and cash flows of the Gulf South Companies for the periods indicated, in
accordance with GAAP (subject to any exceptions as to consistency specified
therein or as may be indicated in the notes thereto or, in the case of interim
financial statements, to normal recurring year-end adjustments that are not
material in amount or effect and to the absence from interim financial
statements of any footnote disclosures).
5.6 Absence of Undisclosed Liabilities. No Gulf South Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Gulf South, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Gulf South as
of June 30, 1996 included in the Gulf South Financial Statements or reflected in
the notes thereto. No Gulf South Company has incurred or paid any Liability
since June 30, 1996, except for such Liabilities incurred or paid in the
ordinary course of business consistent with past business practice or incurred
in connection with the process leading up to the execution and consummation of
this Agreement and which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Gulf South.
5.7 Absence of Certain Changes or Events. Since June 30, 1996, except as
disclosed in the Gulf South Financial Statements delivered prior to the date of
this Agreement, to the Knowledge of Gulf South, (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 Gulf South, and
(ii) the Gulf South 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 Gulf South provided in
Article 7 of this Agreement, other than conducting the process that has led up
to the execution and consummation of this Agreement.
5.8 Tax Matters. (a) All Tax returns required to be filed by or on behalf
of any of the Gulf South 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, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file or untimely filings, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect on
Gulf South and all returns filed are complete and accurate in all material
respects. All Taxes shown on filed returns have been paid. There is no audit
examination, deficiency, refund Litigation, or penalties due or owed with
respect to any Taxes that is reasonably likely to result in a determination that
would have a Material Adverse Effect on Gulf South, except as reserved against
in the Gulf South Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) None of the Gulf South Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Gulf South Companies for the period or periods through and including the date of
the respective Gulf South Financial Statements has been made and is reflected on
such Gulf South Financial Statements.
(d) Deferred Taxes of the Gulf South Companies have been adequately
provided for in the Gulf South Financial Statements.
(e) Each of the Gulf South Companies is in compliance with, and its records
contain the information and documents (including properly completed IRS Forms
W-9) necessary to comply with, in all material respects, applicable information
reporting and Tax withholding requirements under federal, state, and local
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Tax Laws, and such records identify the accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(f) None of the Gulf South Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Liens with respect to Taxes upon any of the assets of the
Gulf South Companies.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Gulf South Companies that occurred during or after
any Taxable Period in which the Gulf South Companies incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1995.
(i) No Gulf South Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(j) All material elections with respect to Taxes affecting the Gulf South
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the Gulf South Disclosure Memorandum. After the date
hereof, no election with respect to Taxes will be made without the prior written
consent of Regions, which consent will not be unreasonably withheld.
(k) No Gulf South Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
5.9 Assets. The Gulf South Companies have good and marketable title, free
and clear of all Liens, to all of their respective owned Assets. All material
tangible properties used in the businesses of the Gulf South Companies are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with Gulf South's past practices. All
Assets which are material to Gulf South's business on a consolidated basis, held
under leases or subleases by any of the Gulf South Companies, are held under
valid Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other 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 proceedings may be brought), and each such
Contract is in full force and effect. The Gulf South Companies currently
maintain insurance similar in amounts, scope, and coverage to that maintained by
other peer banking organizations. None of the Gulf South Companies has received
notice from any insurance carrier that (i) such insurance will be canceled or
that coverage thereunder will be reduced or eliminated, or (ii) premium costs
with respect to such policies of insurance will be substantially increased.
There are presently no claims pending under such policies of insurance and no
notices have been given by any Gulf South Company under such policies. The
Assets of the Gulf South Companies include all Assets required to operate the
business of the Gulf South Companies as presently conducted.
5.10 Environmental Matters. (a) To the Knowledge of Gulf South, each Gulf
South 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 Gulf South.
(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any Gulf South Company
or any of its Loan Properties or Participation Facilities (or any Gulf South
Company in respect of any such Loan Property or Participation Facility) 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 Gulf South 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
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aggregate, a Material Adverse Effect on Gulf South, and to the Knowledge of Gulf
South, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of Gulf South, 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 Gulf South.
5.11 Compliance with Laws. Each Gulf South 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, 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 Gulf South. None
of the Gulf South 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 Gulf South; 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 Gulf South 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 Gulf South, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Gulf South, or (iii) requiring any
Gulf South Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any material
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.12 Employee Benefit Plans. (a) Gulf South has disclosed in Section 5.12
of the Gulf South Disclosure Memorandum, and has delivered or made available to
Regions prior to the execution of this Agreement, copies in each case of all
written pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements, or
agreements, all medical, vision, dental, or other written health plans, all life
insurance plans, and all other written employee benefit plans or fringe benefit
plans, including written "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to, by any Gulf South Company or Affiliate thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Gulf South Benefit
Plans"). Any of the Gulf South 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 "Gulf South ERISA Plan." Each Gulf South 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 "Gulf South Pension Plan." No Gulf South
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) To the Knowledge of Gulf South, all Gulf South 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 Gulf
South. Each Gulf South ERISA Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and Gulf South is not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. No Gulf South Company has engaged in a transaction with
respect to any Gulf South Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any Gulf South Company
to a tax or penalty imposed by either Section 4975 of the Internal Revenue Code
or Section 502(i) of ERISA that, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Gulf South.
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(c) No Gulf South Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan equals or exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Gulf South Pension Plan, (ii) no change in the
actuarial assumptions with respect to any Gulf South Pension Plan, and (iii) no
increase in benefits under any Gulf South 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 Gulf South or
materially adversely affect the funding status of any such plan. Neither any
Gulf South Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any Gulf South
Company, or the single-employer plan of any entity which is considered one
employer with Gulf South 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 Gulf South
Company has provided, or is required to provide, security to an Gulf South
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 Gulf South Company with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Gulf South 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 Gulf South Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) No Gulf South Company has any Liability for retiree health and life
benefits under any of the Gulf South Benefit Plans and there are no restrictions
on the rights of such Gulf South Company to amend or terminate any such Plan
without incurring any Liability thereunder.
(f) 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 Gulf South
Company from any Gulf South Company under any Gulf South Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Gulf South
Benefit Plan, or (iii), except as disclosed in the Gulf South Disclosure
Memorandum, result in any acceleration of the time of payment or vesting of any
such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Gulf South 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 Gulf South Financial Statements to the extent
required by and in accordance with GAAP.
5.13 Material Contracts. Except as reflected in the Gulf South Financial
Statements, none of the Gulf South 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 Gulf South Company or the guarantee by any Gulf South 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), and (iii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by Gulf South with the
SEC if Gulf South were required to file a Form 10-K with the
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SEC as of the date of this Agreement (together with all Contracts referred to in
Section 5.8 and this Section 5.13 of this Agreement, the "Gulf South
Contracts"). With respect to each Gulf South Contract: (i) the Contract is in
full force and effect; (ii) no Gulf South Company is in Default thereunder,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Gulf South; (iii) no Gulf South
Company has repudiated or waived any material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of Gulf South,
in Default in any respect, other than Defaults which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Gulf
South, or has repudiated or waived any material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of any Gulf South
Company for money borrowed is prepayable at any time by such Gulf South Company
without penalty or premium.
5.14 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Gulf South, 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 Gulf South 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 Gulf
South, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Gulf South
Company that is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Gulf South. Section 5.14 of the Gulf South Disclosure
Memorandum includes a summary report of all Litigation as of the date of this
Agreement to which any Gulf South Company is a party as a defendant or
cross-defendant and where the maximum exposure is estimated to be $50,000 or
more.
5.15 Statements True and Correct. Since January 1, 1992, or the date of
organization if later, each Gulf South Company has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Regulatory Authorities (except,
in the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Gulf South). At the time of filing (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing):
(i) each report and other document, including financial statements, exhibits,
and schedules thereto, filed by an Gulf South Company with any Regulatory
Authority complied in all material respects with all applicable Laws, and (ii)
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. The statements,
certificates, instruments, or other writings, taken as a whole, furnished or to
be furnished by any Gulf South Company or any Affiliate thereof to Regions
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein, do not and will not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the information supplied or to be supplied by any Gulf South Company or any
Affiliate thereof for inclusion in the Registration Statement to be filed by
Regions with the SEC will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated thereunder or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any Gulf South Company or
any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Gulf
South stockholders in connection with the Stockholders' Meeting, and any other
documents to be filed by an Gulf South Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the stockholders of
Gulf South, be false or misleading with respect to any material fact, or contain
any misstatement of material fact, or omit to state any material fact required
to be stated thereunder or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Stockholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated
thereunder or necessary to correct any material statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any Gulf South Company or any
Affiliate thereof is responsible for
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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.
5.16 Tax and Regulatory Matters. Except as specifically contemplated by
this Agreement, no Gulf South 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 treatment or
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement. To the Knowledge of Gulf South there exists no fact, circumstance, or
reason why the requisite Consents referred to in Section 9.1(b) of this
Agreement cannot be received in a timely manner without imposition of any
condition of the type described in the last sentence of such Section 9.1(b).
5.17 State Takeover Laws. To the extent applicable, each Gulf South
Company has taken all necessary action to exempt the transactions contemplated
by this Agreement from Sections 132 et. seq. and 135 et. seq. of the LBCL and
any comparable provisions of the Articles of Incorporation of Gulf South.
5.18 Directors' Agreements. Each of the directors of Gulf South has
executed and delivered to Regions a Support Agreement.
5.19 Charter Provisions. Each Gulf South Company has taken all action so
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws, or other governing instruments of any Gulf South Company or restrict or
impair the ability of Regions or any of its Subsidiaries to vote, or otherwise
to exercise the rights of a stockholder with respect to, shares of any Gulf
South Company that may be directly or indirectly acquired or controlled by it.
5.20 Derivatives Contracts. Neither Gulf South nor any of its Subsidiaries
is a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial contract, or any
other interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative contract (including various
combinations thereof) and which might reasonably be expected to have a Material
Adverse Effect on Gulf South.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to Gulf South 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).
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(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, or both, with respect to
any employee benefit plans, or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions, no notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Regions of the Merger and the other
transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Regions consists of
120,000,000 shares of Regions Common Stock, of which 60,880,449 shares were
issued and outstanding as of July 31, 1996. All of the issued and outstanding
shares of Regions Common Stock are, and all of the shares of Regions Common
Stock to be issued in exchange for shares of Gulf South 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 Gulf South Common Stock upon consummation of the Merger
will be, issued in violation of any preemptive rights of the current or past
stockholders of Regions.
6.4 SEC Filings; Financial Statements. (a) Regions has filed and made
available to Gulf South all forms, reports, and documents required to be filed
by Regions with the SEC since December 31, 1992, other than registration
statements on Forms S-4 and S-8 (collectively, the "Regions SEC Reports"). The
Regions SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Regions SEC Reports or necessary in
order to make the statements in such Regions SEC Reports, in light of the
circumstances under which they were made, not misleading.
(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented or will fairly present the consolidated financial
position of Regions and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
6.5 Absence of Undisclosed Liabilities. Except as disclosed in Section 6.5
of the Regions Disclosure Memorandum, and to the Knowledge of Regions, 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, 1996, included in the Regions Financial
Statements or reflected in the notes thereto. Except as disclosed in Section 6.5
of the
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Regions Disclosure Memorandum, no Regions Company has incurred or paid any
Liability since June 30, 1996, 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, 1996, except as
disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, or in Section 6.6 of the Regions 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 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, 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, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, or (iii) requiring any
Regions Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any material
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 are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions.
6.9 Statements True and Correct. Since January 1, 1992, or the date of
organization if later, each Regions Company has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions). At the time of filing (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing):
(i) 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 (ii) 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. The statements,
certificates, instruments, or other writings, taken as a whole, furnished or to
be furnished by any Regions Company or any Affiliate thereof to Gulf South
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein, do not and
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will not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Regions Company or any Affiliate
thereof for inclusion in the Registration Statement to be filed by Regions with
the SEC, will, when the Registration Statement becomes effective, be false or
misleading with respect to any material fact, or contain any untrue statement of
a material fact, or omit to state any material fact required to be stated
thereunder or necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any Regions Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to Gulf
South stockholders in connection with the Stockholders' Meeting, and any other
documents to be filed by any Regions Company or any Affiliate thereof with the
SEC or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the stockholders of
Gulf South, be false or misleading with respect to any material fact, or contain
any misstatement of a material fact or, omit to state any material fact required
to be stated thereunder or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement, or any amendment thereof or supplement thereto, at the time
of the Stockholders' Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated
thereunder or necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Stockholders' Meeting. All
documents that any Regions Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.10 Tax and Regulatory Matters. Except as specifically contemplated by
this Agreement, no Regions 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 treatment as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge of
Regions, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without imposition of any condition of the type described in the
last sentence of such Section 9.1(b).
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Gulf South. Unless the prior written consent
of the duly authorized officer of Regions shall have been obtained, and except
as otherwise expressly contemplated herein, Gulf South shall and shall cause
each of its Subsidiaries to, from the date of this Agreement until the Effective
Time or termination of this Agreement, (i) operate its business only in the
usual, regular, and ordinary course, (ii) preserve intact in all material
respects its business organization and Assets and maintain its rights and
franchises, and (iii) take no action which would (x) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentences of Sections 9.1(b) and 9.1(c) of this
Agreement, or (y) materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of Gulf South. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
Gulf South 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 duly authorized officer of
Regions, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any Gulf South Company; or
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(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of an Gulf South Company to another
Gulf South Company) in excess of an aggregate amount outstanding at any
time of $150,000 (for the Gulf South Companies on a consolidated basis)
except in the ordinary course of the business of Gulf South, or such
Subsidiary, consistent with past practices (which shall include, for Gulf
South, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank, whether
or not Gulf South has previously received any such advances, overnight
borrowings to meet temporary liquidity needs, and entry into repurchase
agreements fully secured by U.S. Government or agency securities), or
impose, or suffer the imposition on any Asset of any Gulf South 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, Liens
to secure debt obligations or other obligations for borrowed money
permitted under this paragraph (b), and Liens in effect as of the date
hereof that are disclosed in the Gulf South 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 Gulf South Company, or declare or pay any dividend
or make any other distribution in respect of Gulf South's capital stock,
provided that Gulf South may (to the extent legally and contractually
permitted to do so), but shall not be obligated to, declare and pay annual
cash dividends on the shares of Gulf South Common Stock at a rate, and with
usual and regular record and payment dates, in accordance with past
practice disclosed in Section 7.2(c) of the Gulf South Disclosure
Memorandum and such dates may not be changed without the prior written
consent of Regions; 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, 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 Gulf South Common Stock or any other capital stock
of any Gulf South Company, or any Rights to acquire such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
Gulf South Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Gulf South Common
Stock, or sell, lease, mortgage, or otherwise dispose of or otherwise
encumber any shares of capital stock of any Gulf South Subsidiary (unless
any such shares of stock are sold or otherwise transferred to another Gulf
South Company) or any Asset having a book value in excess of $50,000 other
than in the ordinary course of business for reasonable and adequate
consideration and other than dispositions in the ordinary course of
business of (i) investment securities, (ii) loans, including dispositions
thereof through loan participation agreements, and (iii) other real estate
owned by any Gulf South Company; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in each case have maturities of five
years or less, 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 Gulf South 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 Gulf South Company, except in accordance with past practice
or previously approved by the Board of Directors of Gulf South, in each
case as disclosed in Section 7.2(g) of the Gulf South Disclosure Memorandum
or as required by Law; except as disclosed in Section 7.2(g) of the Gulf
South Disclosure Memorandum, pay any severance or termination pay or any
bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement and disclosed in Section 7.2(g) of the
Gulf South Disclosure Memorandum; and enter into or amend any severance
agreements with officers of any Gulf South Company; grant any increase in
fees or other increases in compensation or other benefits to directors of
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any Gulf South Company except in accordance with past practice disclosed in
Section 7.2(g) of the Gulf South Disclosure Memorandum; or 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 Gulf South
Company and any Person (unless such amendment is required by Law) that the
Gulf South 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 Gulf South Company or
make any material change in or to any existing employee benefit plans of
any Gulf South 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 material Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any Gulf
South Company for money damages in excess of $100,000 or imposing material
restrictions upon the operations of any Gulf South Company; or
(l) modify, amend, or terminate any material Contract or waive,
release, compromise, or assign any material rights or claims.
7.3 Covenants of Regions. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that it shall and shall cause each of its Subsidiaries to
(x) 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, (y) take no action which would (i)
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
Sections 9.1(b) and 9.1(c) of this Agreement, or (ii) materially adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement; provided, that the foregoing shall not prevent any Regions
Company from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of Regions, desirable in the conduct of the business
of Regions and its Subsidiaries, and (z) not amend the Certificate of
Incorporation or Bylaws of Regions, in each case, in any manner which is adverse
to, and discriminates against, the holders of Gulf South Common Stock.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flow for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material. As of the
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of
material fact or omit to state a material fact required to be
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stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Stockholder Approval. As soon
as reasonably practicable after execution of this Agreement, Regions shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act 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. Gulf South shall furnish
all information concerning it and the holders of its capital stock as Regions
may reasonably request in connection with such action. Gulf South shall call a
Stockholders' 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 Stockholders' Meeting, (i) Gulf South
shall mail the Proxy Statement to its stockholders, (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
Gulf South shall recommend (subject to compliance with their fiduciary duties as
advised by counsel) to its stockholders the approval of this Agreement, and (iv)
the Board of Directors and officers of Gulf South shall (subject to compliance
with their fiduciary duties as advised by counsel) use their reasonable efforts
to obtain such stockholders' approval.
8.2 Exchange Listing. Regions shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of Regions Common Stock to be issued to the holders of Gulf
South Common Stock pursuant to the Merger.
8.3 Applications. Regions shall promptly prepare and file, and Gulf South
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 Louisiana
Certificate of Merger with the Secretary of State of the State of Louisiana 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 shall not interfere unreasonably with normal operations. Gulf South
shall cooperate with Regions in obtaining, at Regions' election and expense,
environmental audits of any or all of the properties owned or
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occupied by Gulf South. No investigation by a Party shall affect the
representations and warranties of the other Party.
(b) Each Party shall, and shall cause its Representatives to, maintain the
confidentiality of all written, oral, and other confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions ("Confidential Information") and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. Each Party shall maintain the
confidentiality of all Confidential Information obtained in connection with this
Agreement or the transactions contemplated hereby unless (i) such information
becomes publicly available through no fault of such Party, or was, is, or
becomes available to that Party from a source other than the other Party or its
Representatives, which source was itself not bound by a confidentiality
agreement with, or other contractual, legal, or fiduciary obligation of
confidentiality with respect to that information, or (ii) the furnishing or use
of such information is required by proper judicial, administrative, or other
legal proceeding, provided that the other Party is promptly notified in writing
of such request, unless such notification is not, in the opinion of counsel,
permitted by Law. Each Party and its Representatives will hold and maintain all
Confidential Information in confidence and will not disclose to any third party
or permit any third party access to any Confidential Information or the
substance thereof provided that a Party may disclose Confidential Information to
such of its Representatives who need to know such information in connection with
the transactions contemplated hereby. If this Agreement is terminated prior to
the Effective Time, each Party shall promptly return or certify the destruction
of all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
8.7 Press Releases. Prior to the Effective Time, Gulf South 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 to the extent necessary to comply with the
fiduciary duties or other legal obligations as advised by counsel of Gulf
South's Board of Directors, no Gulf South Company nor any Affiliate thereof nor
any Representative retained by any Gulf South Company shall: (i) directly or
indirectly solicit any Acquisition Proposal from any Person; (ii) furnish any
non-public information that it is not legally obligated to furnish to any
person; or (iii) negotiate with respect to, or enter into any Contract with
respect to, any Acquisition Proposal, but Gulf South may communicate information
about such an Acquisition Proposal to its stockholders if and to the extent that
it or its directors are required to do so in order to comply with its or their
legal obligations as advised by counsel. Gulf South shall promptly notify
Regions orally and in writing in the event that it receives any inquiry or
proposal relating to any such transaction. Gulf South 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 subject to legal
obligations and fiduciary duties as aforesaid.
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 for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
8.10 State Takeover Laws. Each Gulf South Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of Sections 132 et seq. of the
LBCL.
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8.11 Charter Provisions. Each Gulf South Company shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby or thereby do not
and will not result in the grant of any rights to any Person under the Articles
of Incorporation, Bylaws, or other governing instruments of any Gulf South
Company or restrict or impair the ability of Regions or any of its Subsidiaries
to vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of any Gulf South Company that may be directly or indirectly acquired or
controlled by it.
8.12 Agreement of Affiliates. Gulf South has disclosed in Section 8.12 of
the Gulf South Disclosure Memorandum each Person whom it reasonably believes is
an "affiliate" of Gulf South for purposes of Rule 145 under the 1933 Act. Gulf
South shall use its reasonable efforts to cause each such Person to deliver to
Regions not later than 30 days prior to the Effective Time a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Gulf South 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 Gulf South pursuant to this Agreement to enforce the provisions
of this Section 8.12. 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.
8.13 Employee Benefits and Contracts. Following the Effective Time,
Regions shall provide generally to officers and employees of the Gulf South
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 8.13), 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 Gulf
South should be treated as service under Regions' qualified defined benefit
plans, (ii) service under any qualified defined contribution plans of Gulf South
shall be treated as service under Regions' qualified defined contribution plans,
and (iii) service under any other employee benefit plans of Gulf South shall be
treated as service under any similar employee benefit plans maintained by
Regions. Regions also shall cause Gulf South and its Subsidiaries to honor on
terms reasonably agreed upon by the Parties all employment, severance,
consulting, and other compensation Contracts disclosed in Section 8.13 of the
Gulf South Disclosure Memorandum to Regions between any Gulf South 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 Gulf South Benefit Plans.
8.14 Indemnification. (a) For a period of six years after the Effective
Time, Regions shall, and shall cause the Surviving Corporation to, indemnify,
defend, and hold harmless the present and former directors, officers, employees,
and agents of each of the Gulf South 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 Louisiana Law and by Gulf South's
Articles of Incorporation and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
Litigation, provided, however, that the indemnification provided by this Section
8.14(a) shall not apply to any claim against an Indemnified Party if such
Indemnified Party knew of the existence of the claim and failed to make a good
faith effort to require Gulf South to notify its director and officer liability
insurance carrier of the existence of such claim prior to the Effective Time.
Without limiting the foregoing, in any case in which approval is required to
effectuate any indemnification, the determination of any such approval shall be
made, at the election of the Indemnified Party, by independent counsel mutually
agreed upon between Regions and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, 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 Gulf South
shall have the
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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 Gulf South elects not to assume
such defense or counsel for the Indemnified Parties advises in writing that
there are material substantive issues which raise conflicts of interest between
Regions or Gulf South and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Regions or Gulf South shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that (i) Regions shall
be obligated pursuant to this paragraph (b) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties
will cooperate (to the extent reasonably appropriate under the circumstances) 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 Regions shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to 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) Stockholder Approval. The stockholders of Gulf South 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
transactions contemplated by this Agreement that, had such condition or
requirement been known, Regions would not, in its reasonable judgment, have
entered into this Agreement.
(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 that, had such condition or requirement been known, Regions would
not, in its reasonable judgment, have entered into this Agreement.
(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
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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 subject to official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion of
Alston & Bird, special counsel to Regions, in form reasonably satisfactory
to the Parties (the "Tax Opinion"), to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and (ii) the exchange in the Merger of Gulf South
Common Stock for Regions Common Stock will not give rise to gain or loss to
the stockholders of Gulf South with respect to such exchange (except to the
extent of any cash received). In rendering such Tax Opinion, such special
counsel for Regions shall be entitled to rely upon representations of
officers of Gulf South and Regions reasonably satisfactory in form and
substance to such counsel.
9.2 Conditions to Obligations of Regions. The obligations of Regions to
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 Gulf South
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 Gulf South 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 Gulf South set
forth in Sections 5.16, 5.17, and 5.19 of this Agreement shall be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Gulf South set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.16, 5.17, and 5.19) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Material Adverse Effect on Gulf
South; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of Gulf South
or to a matter being "known" by Gulf South shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Gulf South 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. Gulf South shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized 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
Gulf South's Board of Directors and stockholders 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
Simon, Peragine, Smith & Redfearn, counsel to Gulf South, dated as of the
Effective Time, in form reasonably satisfactory to Regions, as to the
matters set forth in Exhibit 3.
(e) Affiliates Agreements. Regions shall have received from each
affiliate of Gulf South the affiliate letter referred to in Section 8.12 of
this Agreement.
(f) Claims Letters. Each of the directors and officers of Gulf South
shall have executed and delivered to Regions letters in substantially the
form of Exhibit 4.
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9.3 Conditions to Obligations of Gulf South. The obligations of Gulf South
to consummate the Merger and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by Gulf
South 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 (including the representations and
warranties set forth in Sections 6.3 and 6.10) such that the aggregate
effect of such inaccuracies has, 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" or to the "Knowledge"
of Regions or to a matter being "known" by Regions 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.
(c) Certificates. Regions shall have delivered to Gulf South (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized 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 Gulf South and its counsel shall request.
(d) Opinion of Counsel. Gulf South shall have received an opinion of
Lange, Simpson, Robinson & Somerville, counsel to Regions, dated as of the
Effective Time, in form reasonably acceptable to Gulf South, 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 stockholders of Gulf
South, 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 Gulf South; 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 Gulf South and Section
9.3(a) of this Agreement in the case of Regions or in material breach of
any covenant or other agreement contained in this Agreement) in the event
of an inaccuracy of any representation or warranty of the other Party
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
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of Gulf South and
Section 9.3(a) of this Agreement in the case of Regions; or
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(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 Gulf South 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 (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
stockholders of Gulf South fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the LBCL at the
Stockholders' Meeting where the transactions were presented to such
stockholders 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 May 15, 1997, except that a Party
that has breached the obligation to consummate the Closing and has failed
to cure such breach may not terminate under this subsection; or
(f) By the Board of Directors of either Party in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger, other than the conditions in Section 9.2(a) in the case of Gulf
South or 9.3(a) in the case of Regions, 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, within ten days of receipt
of the Gulf South Disclosure Memorandum, without any Liability in the event
that the review of any of the disclosures contained in the Gulf South
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, and neither Party shall have any
claim or legal right to redress, whether for breach of contract or otherwise, as
a result of a breach of any representation, warranty, covenant, or condition of
this Agreement, except that (i) the provisions of this Section 10.2 and Article
11 and Section 8.6(b) of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Section 10.1(b), 10.1(c), or
10.1(f) of this Agreement shall not relieve the breaching Party from Liability
for an uncured willful and knowing breach of a representation, warranty,
material covenant, or material agreement giving rise to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 of this Agreement and Sections 8.12 and 8.14 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.
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"Affiliate" of a Person shall mean any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person.
"Agreement" shall mean this Agreement and Plan of Reorganization,
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.
"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, plan, practice, restriction, understanding 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 where, in any
such event, such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"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 relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"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.
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"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.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Gulf South Benefit Plans" shall have the meaning set forth in Section
5.12 of this Agreement.
"Gulf South Common Stock" shall mean the $1.00 par value common stock
of Gulf South.
"Gulf South Companies" shall mean, collectively, Gulf South and all
Gulf South Subsidiaries.
"Gulf South Contracts" shall have the meaning set forth in Section
5.13.
"Gulf South Disclosure Memorandum" shall mean the written information
entitled "Gulf South Bancshares, Inc. Disclosure Memorandum" delivered
within 20 days of the date of this Agreement to Regions describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
"Gulf South ERISA Plan" shall have the meaning set forth in Section
5.12(a) of this Agreement.
"Gulf South Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Gulf
South as of June 30, 1996, and as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) for the six
months ended June 30, 1996, and for each of the three years ended December
31, 1995, 1994, and 1993, included in the Gulf South Disclosure Memorandum,
and (ii) the consolidated balance sheets of Gulf South (including related
notes and schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to periods ended subsequent to June 30,
1996.
"Gulf South Pension Plan" shall have the meaning set forth in Section
5.12(a) of this Agreement.
"Gulf South Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of Gulf South disclosed in Section
3.5(b) of the Gulf South Disclosure Memorandum.
"Gulf South Subsidiaries" shall mean the Subsidiaries of Gulf South,
which shall include the Gulf South Subsidiaries described in Section 5.4 of
this Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Gulf South in the future and owned
by Gulf South at the Effective Time.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"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.
"Indemnified Party" shall have the meaning set forth in Section 8.14
of this Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
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"Knowledge" as used with respect to a Person shall mean the actual
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.
"LBCL" shall mean the Louisiana Business Corporation Law.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute, or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property or
other Taxes not yet due and payable, (ii) such imperfections of title and
encumbrances, if any, as do not materially detract from the value or
interfere with the present use of any of such Party's Assets, (iii) for
depository institution Subsidiaries of a Party, pledges to secure deposits,
and other Liens incurred in the ordinary course of the banking business,
and (iv) Liens that arise by operation of Law with respect to Liabilities
that are not delinquent or are being contested in good faith.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative, or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information about a potential claim
relating to or affecting a Party, its business, its Assets (including
Contracts related to it), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"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, (d) circumstances
affecting regional bank holding companies generally, and (e) the Merger and
compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall mean the merger of Gulf South into and with Regions
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
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"Nasdaq NMS" shall mean the National Market Service of Nasdaq or other
principal exchange on which Regions Common Stock is listed or quoted at the
relevant time.
"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.
"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 Gulf South or Regions, and "Parties" shall
mean both Gulf South 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 Gulf South to
solicit the approval of its stockholders 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 Gulf South Common
Stock.
"Regions Common Stock" shall mean the $0.625 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 Gulf South describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"Regions Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of June 30, 1996, and the restated consolidated statements of
condition (including related notes and schedules, if any) of Regions as of
December 31, 1995 and 1994, the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) for the six months ended June 30, 1996 and the related
restated statements of income, changes in stockholders' equity, and cash
flows (including related notes and schedules, if any) for each of the three
years ended December 31, 1995, 1994, and 1993, as filed by Regions in SEC
Documents and reflecting the acquisition of First National Bancorp
accounted for as a pooling of interests and (ii) the consolidated
statements of condition of Regions (including related notes and schedules,
if any) and related statements of income, changes in stockholders' 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,
1996.
"Regions Subsidiaries" shall mean the Subsidiaries of Regions, which
shall include any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Regions in the future and owned by
Regions at the Effective Time.
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"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 stockholders of Gulf South in connection with the
transactions contemplated by this Agreement and which shall include the
Proxy Statement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision
(including its predecessor, the Federal Home Loan Bank Board), the Office
of the Comptroller of the Currency, Federal Deposit Insurance Corporation,
all state regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, the NYSE, the NASD, and the SEC.
"Representatives" means with respect to any Party its directors,
officers, employees, agents, advisors, attorneys, accountants, and other
representatives.
"Rights" shall mean all arrangements, calls, commitments, contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
Gulf South to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments or postponements 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.
"Support Agreement" shall mean the various support agreements, each in
substantially the form of Exhibit 1.
"Surviving Corporation" shall mean Regions as the Surviving
Corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, foreign government or subdivision or agency thereof,
including any interest, penalties or additions 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."
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11.2 Expenses. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and fees
and expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, 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 and knowing 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, except as set forth in its Disclosure Memorandum, 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 Gulf South or Regions, each of
Gulf South 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, other than the
confidentiality agreement between the Parties, which shall remain in effect.
Except as contemplated by Articles 3 and 4 of this Agreement and Sections 8.12
and 8.14 of this Agreement, nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, that after any
approval by the holders of Gulf South Common Stock, there shall be made no
amendment that pursuant to the LBCL requires further approval by such
stockholders without the further approval of such stockholders.
11.6 Waivers. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, vice chairman, or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Gulf South, to waive or extend the time for the
compliance or fulfillment by Gulf South 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
except that any unfulfilled conditions shall be deemed to have been waived at
the Effective Time.
(b) Prior to or at the Effective Time, Gulf South, 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 Gulf South 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 Gulf South except that any unfulfilled
conditions shall be deemed to have been waived at the Effective Time.
(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
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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>
Gulf South: Gulf South Bancshares, Inc.
313 Westbank Expressway
Gretna, Louisiana 70053
Telecopy Number: (504) 361-7507
Attention: Dean F. Gruder
President and Chief Executive Officer
Copy to Counsel: Simon, Peragine, Smith & Redfearn
1100 Poydras Street
Suite 3000
New Orleans, Louisiana 70163-3000
Telecopy Number: (504) 564-2999
Attention: Thomas R. Blum
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
Louisiana 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 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and
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<PAGE> 115
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of the Parties.
11.13 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.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: GULF SOUTH BANCSHARES, INC.
By: /s/ JAMES J. JACKEL By: /s/ DEAN F. GRUDER
------------------------------------------------- -------------------------------------------------
James J. Jackel Dean F. Gruder
President Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
REGIONS FINANCIAL CORPORATION
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ CARL E. JONES, JR.
------------------------------------------------- -------------------------------------------------
Samuel E. Upchurch, Jr. Carl E. Jones, Jr.
General Counsel and Corporate Secretary Regional President
[CORPORATE SEAL]
</TABLE>
A-34
<PAGE> 116
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 Form of Directors' Agreement. (sec. 5.18).
Form of agreement of affiliates of Gulf South.
2 (sec.sec. 8.12, 9.2(e)).
Matters as to which Simon, Peragine, Smith & Redfearn will
3 opine. (sec. 9.2(d)).
4 Form of Claims Letter. (sec. 9.2(f)).
Matters as to which Lange, Simpson, Robinson & Somerville
5 will opine. (sec. 9.3(d)).
</TABLE>
A-35
<PAGE> 117
APPENDIX B
January 2, 1997
The Board of Directors
Gulf South Bancshares, Inc.
313 W. Bank Expressway
Gretna, LA 70053
Dear Members of the Board:
Gulf South Bancshares, Inc., Gretna, Louisiana ("Gulf") and Regions
Financial Corporation, Birmingham, Alabama ("Regions") have entered into an
Agreement providing for the acquisition of Gulf by Regions. The terms of the
Acquisition are set forth in the Agreement and Plan of Reorganization dated
September 23, 1996.
The terms of the Acquisition provide that, with the possible exception of
those shares as to which dissenter's rights may be perfected, each common share
of Gulf will be converted into 0.4817 shares of common stock of Regions.
You have asked our opinion as to whether the proposed transaction pursuant
to the terms of the Acquisition are fair to the respective shareholders of Gulf
from a financial point of view.
In rendering our opinion, we have evaluated the consolidated financial
statements of Gulf available to us from published sources. In addition, we have,
among other things: (a) to the extent deemed relevant, analyzed selected public
information of certain other financial institutions and compared Gulf and
Regions from a financial point of view to the other financial institutions; (b)
considered the historical market price of the common stock of Gulf and Regions;
(c) compared the terms of the Acquisition with the terms of certain other
comparable transactions to the extent information concerning such acquisitions
was publicly available, (d) reviewed the Agreement and Plan of Reorganization
and related documents; and (e) made such other analyses and examinations as we
deemed necessary. We also met with various senior officers of Gulf and Regions
to discuss the foregoing as well as other matters that may be relevant.
We have not independently verified the financial and other information
concerning Gulf, or Regions or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such information;
however, we have no reason to believe that such information is not accurate and
complete. Our conclusion is rendered on the basis of securities market
conditions prevailing as of the date hereof and on the conditions and prospects,
financial and otherwise, of Gulf and Regions as they exist and are known to us
as of June 30, 1996.
We have acted as financial advisor to Gulf in connection with the
Acquisition and will receive from Gulf a fee for our services, a significant
portion of which is contingent upon the consummation of the Acquisition.
It is understood that this opinion may be included in its entirety in any
communication by Gulf or the Board of Directors to the stockholders of Gulf. The
opinion may not, however, be summarized, excerpted from or otherwise publicly
referred to without our prior written consent.
Based on the foregoing, and subject to the limitations described above, we
are of the opinion that the terms of the Acquisition are fair to the
shareholders of Gulf from a financial point of view.
Very truly yours,
Baxter Fentriss and Company
B-1
<PAGE> 118
APPENDIX C
LOUISIANA STATUTES ANNOTATED-REVISED STATUTES 12:131
SEC. 131. RIGHTS OF A SHAREHOLDER DISSENTING FROM CERTAIN CORPORATE ACTIONS
A. Except as provided in subsection B of this section, if a corporation
has, by vote of its shareholders, authorized a sale, lease or exchange of all of
its assets, or has, by vote of its shareholders, become a party to a merger or
consolidation, then, unless such authorization or action shall have been given
or approved by at least eighty per cent of the total voting power, a shareholder
who voted against such corporate action shall have the right to dissent. If a
corporation has become a party to a merger pursuant to R.S. 12:112(H), the
shareholders of any subsidiaries party to the merger shall have the right to
dissent without regard to the proportion of the voting power which approved the
merger and despite the fact that the merger was not approved by vote of the
shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist in the
case of:
(1) A sale pursuant to an order of a court having jurisdiction in the
premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance
with their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at the
record date fixed to determine shareholders entitled to receive notice of
and to vote at the meeting of shareholders at which a merger or
consolidation was acted on, were listed on a national securities exchange,
unless the articles of the corporation issuing such stock provide otherwise
or the shares of such shareholders were not converted by the merger or
consolidation solely into shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than eighty
per cent of the total voting power, and the merger, consolidation or sale, lease
or exchange of assets authorized thereby be effected, the corporation shall
promptly thereafter give written notice thereof, by registered mail, to each
shareholder who filed such written objection to, and voted his shares against,
such action, at such shareholder's last address on the corporation's records.
Each such shareholder may, within twenty days after the mailing of such notice
to him, but not thereafter, file with the corporation a demand in writing for
the fair cash value of his shares as of the day before such vote was taken;
provided that he state in such demand the value demanded, and a post office
address to which the reply of the corporation may be sent, and at the same time
deposit in escrow in a chartered bank or trust company located in the parish of
the registered office of the corporation, the certificates representing his
shares, duly endorsed and transferred to the corporation upon the sole condition
that said certificates shall be delivered to the corporation upon payment of the
value of the shares determined in accordance with the provisions of this
section. With his demand the shareholder shall deliver to the corporation, the
written acknowledgment of such bank or trust company that it so holds his
certificates of stock. Unless the objection, demand and acknowledgment aforesaid
be made and delivered by the shareholder within the period above limited, he
shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken. In the case of a merger pursuant to R.S. 12:112(H), the
dissenting shareholder need not file an objection with the corporation nor vote
against the merger, but need only file with the corporation, within twenty days
after a copy of the merger certificate was mailed to him, a demand in writing
for the cash value of his shares as of the day before the certificate was filed
with the secretary of state, state in such demand the value demanded and a post
office address to which the corporation's reply may be sent, deposit the
certificates representing his shares in escrow as hereinabove provided, and
deliver to the corporation with his demand the acknowledgment of the escrow bank
or trust company as hereinabove prescribed.
D. If the corporation does not agree to the value so stated and demanded,
or does not agree that a payment is due, it shall, within twenty days after
receipt of such demand and acknowledgment, notify in writing the shareholder, at
the designated post office address, of its disagreement, and shall state in such
notice
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<PAGE> 119
the value it will agree to pay if any payment should be held to be due;
otherwise it shall be liable for, and shall pay to the dissatisfied shareholder,
the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether any
payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the case may be, in the district court of the
parish in which the corporation or the merged or consolidated corporation, as
the case may be, has its registered office, praying the court to fix and decree
the fair cash value of the dissatisfied shareholder's shares as of the day
before such corporate action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due, and, if so, such cash value, and render judgment
accordingly. Any shareholder entitled to file such suit may, within such
sixty-day period but not thereafter, intervene as a plaintiff in such suit filed
by another shareholder, and recover therein judgment against the corporation for
the fair cash value of his shares. No order or decree shall be made by the court
staying the proposed corporate action, and any such corporate action may be
carried to completion notwithstanding any such suit. Failure of the shareholder
to bring suit, or to intervene in such a suit, within sixty days after receipt
of notice of disagreement by the corporation shall conclusively bind the
shareholder (1) by the corporation's statement that no payment is due, or (2) if
the corporation does not contend that no payment is due, to accept the value of
his shares as fixed by the corporation in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as the
case may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against such
shareholder.
H. Upon filing a demand for the value of his shares, the shareholder shall
cease to have any of the rights of a shareholder except the rights accorded by
this section. Such a demand may be withdrawn by the shareholder at any time
before the corporation gives notice of disagreement, as provided in subsection D
of this section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares, his share certificates shall be returned to him (and, on his request,
new certificates shall be issued to him in exchange for the old ones endorsed to
the corporation), and he shall be reinstated to all his rights as a shareholder
as of the filing of his demand for value, including any intervening preemptive
rights, and the right to payment of any intervening dividend or other
distribution, or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
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<PAGE> 120
GULF SOUTH BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints James Jackel, with full power of
substitution, as Proxy to represent and to vote as designated below, all the
shares of common stock of Gulf South Bancshares, Inc. (the "Company") held of
record by the undersigned on March 10, 1997, at the Special Meeting of
Stockholders (the "Special Meeting") to be held on April 10, 1997, or any
adjournments thereof.
1. Proposal to approve the Agreement and Plan of Merger, dated as of September
23, 1996 (the "Agreement"), by and between the Company and Regions Financial
Corporation ("Regions") pursuant to which the Company will merge with and
into Regions and each share of the Company's common stock (except for
certain shares held by the Company or Regions) will be converted into .4817
shares of Regions common stock, and under such other terms and conditions as
are set forth in the Agreement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder, and in the discretion of the person named
as Proxy on all other matters which may properly come before the Special Meeting
or any adjournment thereof. If no direction is made, this proxy will be voted in
favor of Proposal 1.
This Proxy revokes all prior proxies with respect to the Special Meeting and
may be revoked prior to its exercise.
Dated: , 1997
------------------
------------------------------
(Print Name of Stockholder)
------------------------------
(Signature of Stockholder)
------------------------------
(Print Name of Stockholder)
------------------------------
(Signature of Stockholder)
Please date and sign exactly
as name appears on your stock
certificate. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
