<PAGE> 1
As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 333-41501
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
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Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies to:
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CHARLES C. PINCKNEY FRANK M. CONNER III WALTER G. MOELING, IV
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD POWELL, GOLDSTEIN, FRAZER & MURPHY
SOMERVILLE 601 PENNSYLVANIA AVENUE, N.W. SIXTEENTH FLOOR
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 191 PEACHTREE STREET, N.E.
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 ATLANTA, GEORGIA 30303
(205) 250-5000 (202) 508-3303 (404) 572-6600
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Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a),
shall determine.
<PAGE> 2
REGIONS FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
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<CAPTION>
CAPTION OR LOCATION IN
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
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1. Forepart of registration statement and outside front
cover page of prospectus.............................. Outside Front Cover of Proxy
Statement/Prospectus; Facing Page of
Registration Statement; Cross-Reference Sheet.
2. Inside front and outside back cover of prospectus..... Available Information; Documents
Incorporated by Reference; Table of
Contents.
3. Risk factors, ratio of earnings to fixed charges and
other information..................................... Summary; Comparative Market Prices and Dividends.
4. Terms of the transaction.............................. Summary; Description of the Transaction;
Effect of the Merger on Rights of
Stockholders; Description of Regions
Common Stock.
5. Pro forma financial information....................... Summary.
6. Material contacts with the company being acquired..... Summary; Description of the Transaction.
7. Additional information required for re-offering by
persons and parties deemed to be underwriters......... Not applicable.
8. Interest of named experts and counsel................. Opinions.
9. Disclosure of Commission position on indemnification
for Securities Act liabilities........................ Not Applicable (See Part II, Item 20).
10. Information with respect to S-3 registrants........... Documents Incorporated by Reference;
Summary; Business of Regions.
11. Incorporation of certain information by reference..... Documents Incorporated by Reference.
12. Information with respect to S-2 or S-3 registrants.... Not Applicable.
13. Incorporation of certain information by reference..... Not Applicable.
14. Information with respect to registrants other than S-2
or S-3 registrants.................................... Not Applicable.
15. Information with respect to S-3 companies............. Not Applicable.
16. Information with respect to S-2 or S-3 companies...... Not Applicable.
17. Information with respect to companies other than S-2
or S-3 companies...................................... GFC Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business of GFC; Voting Securities and
Principal Stockholders of GFC; Index
to GFC Financial Statements.
18. Information if proxies, consents, or authorizations
are to be solicited................................... Documents Incorporated by Reference; Summary;
The Special Meeting; Description of the
Transaction; Description of Regions Common Stock.
19. Information if proxies, consents, or authorizations
are not to be solicited or in an exchange offer....... Not Applicable.
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Dear Greenville Financial Corporation Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Greenville Financial Corporation ("GFC") to be held at The Embassy Suites Hotel,
670 Verdae Boulevard, Greenville, South Carolina, on February 5, 1998, at
12:00 noon, 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 GFC will
merge (the "Merger") with and into Regions, and Greenville National Bank (the
"Bank"), a wholly owned subsidiary of GFC, will become a wholly owned subsidiary
of Regions and will continue serving its current markets. Upon consummation of
the Merger, each share of GFC common stock issued and outstanding (except for
certain shares held by GFC, Regions, or their respective subsidiaries and shares
held by stockholders who perfect their dissenters' rights) will be converted
into 1.2 shares of Regions common stock.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and provides other specific information concerning the Special
Meeting. Please read these materials carefully and consider thoughtfully the
information set forth in them.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors of GFC has agreed to vote those GFC shares over which such member has
voting authority (other than in a fiduciary capacity) in favor of the Merger.
Consummation of the Merger is subject to certain conditions, including approval
of the Agreement by GFC stockholders and approval of the Merger by various
regulatory agencies.
Stockholders of GFC who perfect their dissenters' rights prior to the
proposed Merger and comply with applicable law will be entitled to receive the
fair value of their GFC shares in cash, as provided by applicable law.
It is important to understand that approval of the Agreement requires the
affirmative vote of at least two-thirds of the common stock of GFC entitled to
vote at the Special Meeting, not just two-thirds of the votes cast.
Consequently, a failure to vote will have the same effect as a vote against the
Agreement.
Accordingly, whether or not you plan to attend the Special Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Regions is a
significant step for GFC, 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,
O. Perry Earle, III
President and Chairman of the Board
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GREENVILLE FINANCIAL CORPORATION
290 SOUTH PLEASANTBURG DRIVE, GREENVILLE, SOUTH CAROLINA, 29607
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 5, 1998
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Greenville Financial Corporation ("GFC"), a bank holding company,
will be held at The Embassy Suites Hotel, 670 Verdae Boulevard, Greenville,
South Carolina, on February 5, 1998, at 12:00 noon, local time, for the
following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of September 4, 1997 (the "Agreement"), by and between GFC and Regions
Financial Corporation ("Regions") pursuant to which (i) Regions will acquire all
of the issued and outstanding common stock of GFC through the merger of GFC with
and into Regions (the "Merger"), (ii) each share of GFC common stock (except for
certain shares held by GFC, Regions, or their respective subsidiaries and shares
held by stockholders who perfect their dissenters' rights) will be converted
into 1.2 shares of Regions common stock, and (iii) each GFC 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 December 17, 1997,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of GFC 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.
The Board of Directors of GFC unanimously recommends that holders of GFC
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 GFC
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
Frank H. Gibbes, III
Corporate Secretary
December 23, 1997
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GREENVILLE FINANCIAL CORPORATION REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD FEBRUARY 5, 1998 (PAR VALUE $.625)
UP TO 1,100,127 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
Greenville Financial Corporation, a bank holding company organized and existing
under the laws of the state of South Carolina ("GFC") upon consummation of the
proposed merger (the "Merger") described herein, by which GFC will merge with
and into Regions pursuant to the terms of an Agreement and Plan of Merger, dated
as of September 4, 1997, by and between Regions and GFC (the "Agreement").
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) GFC will merge with and into Regions, (ii) each
outstanding share of the no par value common stock of GFC ("GFC Common Stock")
will be converted into 1.2 shares of Regions Common Stock, and (iii) each holder
of GFC 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 GFC will cease, and
Greenville National Bank, a wholly owned subsidiary of GFC (the "Bank"), will
become a wholly owned subsidiary of Regions and will continue in operation
serving its current markets. Regions anticipates combining the Bank with its
principal banking subsidiary some time in 1998. For a further description of the
terms of the Merger, see "Description of the Transaction."
This Prospectus also constitutes a Proxy Statement of GFC and is being
furnished to the stockholders of GFC in connection with the solicitation of
proxies by the Board of Directors of GFC for use at its special meeting of
stockholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on February 5, 1998, to consider and vote on a proposal to
approve the Agreement and related matters. This Proxy Statement/Prospectus and
the accompanying proxy card are first being mailed to stockholders of GFC on or
about December 23, 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 December 23, 1997.
<PAGE> 6
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements, and other information can be inspected
at the public reference facilities referred to above and at the regional offices
of the SEC at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. 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 GFC. 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 GFC 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 GFC was
supplied by GFC.
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, 1996;
2. Regions' Quarterly Reports on Form 10-Q for the three months ended
March 31, June 30, and September 30, 1997;
2
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3. Regions' Report of Form 10-C filed June 20, 1997; and
4. The description of Regions Common Stock under the heading "Item 1.
Capital Stock to be Registered" in the registration statement on Form 8-A
of Regions relating to Regions Common Stock and in any amendment or report
filed for the purpose of updating such description.
Regions' Annual Report on Form 10-K for the year ended December 31, 1996,
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 1996," "Financial Statements and Notes,"
and "Historical Financial Summary" are incorporated herein. Other portions of
the Annual Report to Stockholders are NOT incorporated herein and are not a part
of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
A copy of the audited financial statements of Regions included in Regions'
Annual Report on Form 10-K for the year ended December 31, 1996, accompanies
this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE (EXCEPT FOR THE EXHIBITS THERETO), FROM RONALD C.
JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION, P.O. BOX 1448,
MONTGOMERY, ALABAMA 36102 (TELEPHONE (205) 326-7090). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JANUARY 29, 1998.
3
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TABLE OF CONTENTS
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AVAILABLE INFORMATION......................................................2
DOCUMENTS INCORPORATED BY REFERENCE........................................2
SUMMARY....................................................................6
The Parties..............................................................6
Special Meeting of GFC Stockholders......................................7
Record Date; Vote Required...............................................7
The Merger; Exchange Ratio...............................................7
Dissenting Stockholders..................................................7
Reasons for the Merger; Recommendation of GFC's Board
of Directors............................................................8
Opinion of GFC's Financial Advisor.......................................8
Effective Date...........................................................8
Exchange of Stock Certificates...........................................8
Regulatory Approvals and Other Conditions................................9
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.............................10
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
Treatment of GFC Options................................................15
Background of and Reasons for the Merger................................16
Opinion of GFC's Financial Advisor......................................18
Effective Date of the Merger............................................23
Distribution of Regions Stock Certificates and
Payment for Fractional Shares.........................................23
Conditions to Consummation of the Merger................................24
Regulatory Approvals....................................................24
Waiver, Amendment, and Termination of the Agreement.....................25
Conduct of Business Pending the Merger..................................26
Management Following the Merger.........................................27
Interests of Certain Persons in the Merger..............................28
Dissenting Stockholders.................................................28
Certain Federal Income Tax Consequences of the Merger...................31
Accounting Treatment....................................................32
Expenses and Fees.......................................................32
Resales of Regions Common Stock.........................................32
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS............................32
Antitakeover Provisions Generally.......................................32
Authorized Capital Stock................................................33
Amendment of Certificate or Articles of Incorporation and Bylaws........34
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Classified Board of Directors and Absence of Cumulative Voting..........34
Removal of Directors....................................................35
Limitations on Director Liability.......................................35
Indemnification.........................................................35
Special Meetings of Stockholders........................................36
Actions by Stockholders Without a Meeting...............................36
Stockholder Nominations.................................................36
Mergers, Consolidations, and Sales of Assets Generally..................37
Business Combinations with Certain Persons..............................37
Dissenters' Rights......................................................38
Stockholders' Rights to Examine Books and Records.......................38
Dividends...............................................................39
COMPARATIVE MARKET PRICES AND DIVIDENDS...................................39
GFC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................41
BUSINESS OF GFC...........................................................42
General.................................................................42
Business and Properties.................................................42
Competition.............................................................42
Legal Proceedings.......................................................42
Management..............................................................42
Transactions with Management............................................44
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF GFC.......................44
BUSINESS OF REGIONS.......................................................45
General.................................................................45
Recent Developments.....................................................45
CERTAIN REGULATORY CONSIDERATIONS.........................................48
General.................................................................48
Payment of Dividends....................................................49
Capital Adequacy........................................................50
Support of Subsidiary Institutions......................................51
Prompt Corrective Action................................................51
FDIC Insurance Assessments..............................................52
DESCRIPTION OF REGIONS COMMON STOCK.......................................53
STOCKHOLDER PROPOSALS.....................................................53
EXPERTS...................................................................53
OPINIONS..................................................................54
INDEX TO GFC FINANCIAL STATEMENTS........................................F-1
APPENDIX A--Agreement and Plan of Merger.................................A-1
APPENDIX B--Opinion of The Carson-Medlin Company ........................B-1
APPENDIX C--Copy of Title 33, Chapter 13 of South
Carolina Statutes Annotated, relating to dissenters' rights ...........C-1
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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 "GFC" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
GFC. GFC is a bank holding company organized and existing under the laws
of the state of South Carolina, headquartered in Greenville, South Carolina. GFC
operates principally through the Bank, a national bank which is a wholly owned
subsidiary of GFC and which provides a range of commercial banking services
through its one office in Greenville, South Carolina. At September 30, 1997, GFC
had total consolidated assets of approximately $136.0 million, total
consolidated deposits of approximately $114.2 million, and total consolidated
stockholders' equity of approximately $10.1 million. GFC's office is located at
290 South Pleasantburg Drive, Greenville, South Carolina, 29607 and its
telephone number at such address is (864) 233-7989.
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 435 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee as of September 30, 1997. At that date,
Regions had total consolidated assets of approximately $22.2 billion, total
consolidated deposits of approximately $17.6 billion, and total consolidated
stockholders' equity of approximately $1.9 billion. Regions is the second
largest bank holding company headquartered in Alabama in terms of assets, based
on September 30, 1997 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, 1996, Regions has completed the acquisitions of nine
financial institutions, two of which are located in Florida, four in Georgia,
and three in Louisiana. In addition to the Merger, Regions has entered into
definitive agreements or letters of intent to acquire five financial
institutions, one of which is located in Georgia, one in Florida, one in
Louisiana, and two in South Carolina. For information with respect to the
completed and pending transactions, see "Documents Incorporated by Reference"
and "Business of Regions--Recent Developments."
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."
6
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SPECIAL MEETING OF GFC STOCKHOLDERS
The Special Meeting will be held at 12:00 noon, local time, on February 5,
1998, at The Embassy Suites Hotel, 670 Verdae Boulevard, Greenville, South
Carolina, for the purpose of considering and voting on a proposal to approve
the Agreement and to transact such other business as may properly come before
the meeting. See "The Special Meeting."
RECORD DATE; VOTE REQUIRED
Only holders of record of GFC Common Stock at the close of business on
December 17, 1997 (the "Record Date"), will be entitled to vote at the Special
Meeting. The affirmative vote of at least two-thirds of the GFC Common Stock
outstanding and entitled to vote at the Special Meeting will be required to
approve the Agreement, not just two-thirds of the votes cast. As of the Record
Date, there were 796,022 shares of GFC Common Stock outstanding and entitled to
be voted.
The directors and executive officers of GFC and their affiliates
beneficially owned, as of the Record Date, 251,921 shares (or approximately 32%
of the outstanding shares) of GFC Common Stock. Each member of the Board of
Directors of GFC has agreed to vote those GFC shares over which such member has
voting authority (other than in a fiduciary capacity) 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 GFC Common Stock. As of
that date, neither GFC nor Regions held any shares of GFC 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 GFC by Regions pursuant to
the Merger of GFC with and into Regions. On the Effective Date, each share of
GFC Common Stock then issued and outstanding (except for shares held by GFC,
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 approval) will be
converted into 1.2 shares of Regions Common Stock (the "Exchange Ratio"). No
fractional shares of Regions Common Stock will be issued. Rather, cash will be
paid in lieu of any fractional share interest to which any GFC 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 trading day immediately preceding the
Effective Date. See "Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of GFC 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 GFC Common Stock in cash in accordance
with the applicable provisions of the South Carolina Business Corporation Act
(the "South Carolina Act"). The procedures to be followed by dissenting
stockholders are summarized under "Description of the Transaction--Dissenters'
Rights," and the applicable provisions of the South Carolina Act are reproduced
as Appendix C.
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<PAGE> 12
REASONS FOR THE MERGER; RECOMMENDATION OF GFC'S BOARD OF DIRECTORS
GFC'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, GFC and its stockholders. Accordingly, GFC's Board unanimously
recommends that GFC's stockholders vote FOR approval of the Agreement. EACH
MEMBER OF THE BOARD OF DIRECTORS OF GFC HAS AGREED TO VOTE SUCH MEMBER'S SHARES
OF GFC COMMON STOCK IN FAVOR OF THE AGREEMENT. In approving the Agreement, GFC's
directors considered GFC's financial condition, the financial terms and the
income tax consequences of the Merger, the likelihood of the Merger being
approved by regulatory authorities without undue conditions or delay, and legal
advice concerning the proposed Merger, and the opinion of The Carson-Medlin
Company ("Carson Medlin") that, as of the date of its opinion, the consideration
to be received in the Merger was fair, from a financial point of view, to the
stockholders of GFC. See "Description of the Transaction--Background of and
Reasons for the Merger."
OPINION OF GFC'S FINANCIAL ADVISOR
Carson Medlin has rendered an opinion to GFC 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
consideration to be received in the Merger was fair, from a financial point of
view, to the stockholders of GFC. The opinion of Carson Medlin is attached as
Appendix B to this Proxy Statement/Prospectus. GFC 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 GFC'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 South Carolina Articles of Merger are
filed and become effective with, respectively, the Delaware Secretary of State
and the South Carolina Secretary of State. Unless otherwise agreed upon by
Regions and GFC, and subject to the conditions to the obligations of the parties
to effect the Merger, the parties will use their reasonable efforts to cause the
Effective Date to occur on the last day of the month in which the last of the
following events occurs: (i) the effective date (including the expiration of any
applicable waiting period) of the last consent of any federal or state
regulatory authority having authority over exempting or approving the Merger and
(ii) the date on which the Agreement is approved by the requisite vote of GFC
stockholders. The parties expect that all conditions to consummation of the
Merger will be satisfied so that the Merger can be consummated during the first
quarter of 1998, 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 GFC a form letter of transmittal, together with instructions for the exchange
of such stockholders' certificates representing shares of GFC Common Stock for
certificates representing shares of Regions Common Stock. GFC 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."
8
<PAGE> 13
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 Banking of the
state of South Carolina (the "South Carolina Commissioner"). Applications for
the requisite approvals have been filed with such agencies, each of which has
yet to issue its approval of the Merger. There can be no assurance that the
approvals of the South Carolina 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 GFC 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."
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
GFC 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 31,
1998, 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, GFC 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 GFC's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of GFC generally.
Those interests relate to, among other things, provisions in the Agreement
regarding indemnification and eligibility for certain Regions employee benefits,
and treatment of outstanding options to acquire GFC Common Stock. See
"Description of the Transaction--Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned on the receipt of an opinion of
counsel to the effect that, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the exchange in the Merger of GFC Common
Stock for Regions Common Stock will not give rise to gain or loss to GFC
stockholders, except to the extent of any cash received in lieu of fractional
share interests or as a result of the exercise of dissenters' rights. 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 and
cash received by dissenters. See "Description of the Transaction--Certain
Federal Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER CIRCUMSTANCES, EACH GFC
STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS).
9
<PAGE> 14
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, GFC stockholders, whose rights are governed by the
South Carolina Act and by GFC'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 GFC
stockholders in certain important respects, some of which constitute additional
antitakeover provisions provided for in Regions' governing documents. See
"Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. GFC 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 on the Nasdaq National Market and the last
reported quotation of the price of GFC Common Stock in the local
over-the-counter market, and (ii) the equivalent per share price (as explained
below) of GFC Common Stock. The indicated dates of August 20, 1997, and
December 19, 1997 represent, respectively, the last trading day immediately
preceding public announcement of the proposed acquisition of GFC by Regions and
the latest practicable date prior to the mailing of this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS GFC OF GFC
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
August 20, 1997 $ 35.06 $ 25.50 $ 42.07
December 19, 1997
</TABLE>
The equivalent per share price of GFC Common Stock at each specified date
represents the last sale price of a share of Regions Common Stock on such date
multiplied by the Exchange Ratio of 1.2. Stockholders are advised to obtain
current market quotations for Regions Common Stock and GFC Common Stock. No
assurance can be given as to the market price of Regions Common Stock at or
after the Effective Date.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and GFC, (ii) a pro forma combined basis per share of Regions Common
Stock, giving effect to the Merger, and (iii) an equivalent pro forma basis per
share of GFC Common Stock, giving effect to the Merger. The Regions and GFC pro
forma combined information and the GFC pro forma Merger equivalent information
give effect to the Merger on a pooling-of-interests accounting basis and assume
an Exchange Ratio of 1.2. 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.
10
<PAGE> 15
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
GFC, including the respective notes thereto. Historical information has been
adjusted to reflect a 2-for-1 stock split effected by Regions on June 13, 1997,
and a 2-for-1 stock split effected by GFC on June 18, 1996. See "Documents
Incorporated by Reference," and "--Selected Financial Data."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ --------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited) (Unaudited except Regions
and GFC historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical....................................... $ 1.62 $ 1.33 $ 1.85 $ 1.60 $ 1.55
GFC historical .......................................... 1.73 1.59 2.07 1.67 1.14
Regions and GFC pro forma combined(1).................... 1.62 1.85 1.60 1.55
GFC pro forma Merger equivalent(2)....................... 1.94 2.22 1.92 1.86
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical....................................... .60 .525 .70 .66 .60
GFC historical........................................... .78 .50 .50 .35 .25
GFC pro forma Merger equivalent(3)....................... .72 .63 .84 .79 .72
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical....................................... 13.58 12.43 12.76 11.69 10.63
GFC historical........................................... 12.68 10.68 11.47 10.06 8.25
Regions and GFC pro forma combined(1).................... 13.56
GFC pro forma Merger equivalent(2)....................... 16.27
</TABLE>
- --------------
(1) Represents the combined results of Regions and GFC as if the Merger were
consummated on January 1, 1994 (or September 30, 1997, in the case of Book
Value Per Share Data), and were accounted for as a pooling of interests.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of 1.2 shares of Regions Common Stock for each share of GFC Common Stock.
(3) Represents historical dividends declared per share by Regions multiplied by
the Exchange Ratio of 1.2 shares of Regions Common Stock for each share of
GFC Common Stock.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and GFC. The per share data have been adjusted to
reflect a 2-for-1 stock split effected by Regions on June 13, 1997, and a
2-for-1 stock split effected by GFC on June 18, 1996. The data should be read in
conjunction with the historical financial statements, related notes, and other
financial information concerning Regions and GFC incorporated by reference or
included herein. Interim unaudited data for the nine months ended September 30,
1997 and 1996 of Regions and GFC reflect, in the opinion of the respective
managements of Regions and GFC, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data. Results
for the nine months ended September 30, 1997, 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" and "Index to GFB Financial
Statements."
11
<PAGE> 16
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income ........ $ 1,217,085 $ 1,029,151 $ 1,386,122 $ 1,259,600 $ 991,693 $ 746,544 $ 737,094
Total interest expense ....... 603,046 508,573 685,656 635,336 436,157 296,195 324,420
Net interest income .......... 614,039 520,578 700,466 624,264 555,536 450,349 412,674
Provision for loan losses .... 31,449 21,734 29,041 30,271 20,580 24,695 39,367
Net interest income after
loan loss provision ....... 582,590 498,844 671,425 593,993 534,956 425,654 373,307
Total noninterest income
excluding security
gains (losses) ............ 189,852 162,759 217,624 187,830 171,705 169,318 147,943
Security gains (losses) ...... 541 259 3,115 (424) 344 831 2,417
Total noninterest expense .... 441,688 415,955 553,801 487,461 442,376 383,130 343,279
Income tax expense ........... 110,592 81,022 108,677 96,109 84,109 66,169 56,405
Net income ................... 220,703 164,885 229,686 197,829 180,520 146,504 123,983
PER SHARE DATA:
Net income ................... $ 1.62 $ 1.33 $ 1.85 $ 1.60 $ 1.55 $ 1.40 $ 1.21
Cash dividends ............... .60 .525 .70 .66 .60 .52 .46
Book value ................... 13.58 12.43 12.76 11.69 10.63 9.93 8.57
OTHER INFORMATION:
Average number of shares
outstanding .................. 136,526 123,960 124,272 123,340 116,412 104,306 102,384
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ................. $22,241,897 $18,731,424 $18,930,175 $16,851,774 $15,810,076 $13,163,161 $ 10,457,676
Securities ................... 4,386,163 4,005,675 3,870,595 3,863,781 3,346,291 2,993,417 2,255,732
Loans, net of
unearned income ........... 15,823,660 13,032,238 13,311,172 11,542,311 10,855,195 8,430,931 6,657,557
Total deposits ............... 17,623,742 15,186,950 15,048,336 13,497,612 12,575,593 11,025,376 8,923,801
Long-term debt ............... 402,627 447,959 447,269 632,019 599,476 525,820 151,460
Stockholders' equity ......... 1,851,493 1,554,740 1,598,726 1,429,253 1,286,322 1,106,361 886,116
PERFORMANCE RATIOS:
Return on average
assets(1)(6) .............. 1.41% 1.25% 1.29% 1.21% 1.27% 1.38% 1.29%
Return on average
stockholders'
equity(1)(6) .............. 16.26 14.83 15.19 14.29 15.26 15.76 15.04
Net interest margin .......... 4.30 4.29 4.27 4.21 4.37 4.77 4.85
Efficiency (2)(6) ............ 54.06 59.97 59.44 58.79 59.44 60.23 59.62
Dividend payout .............. 37.04 39.47 37.84 41.12 38.71 37.01 37.60
ASSET QUALITY RATIOS:
Net charge-offs to
average loans, net
of unearned income(1) ..... .22% .10% .15% .17% .19% .23% .36%
Problem assets to net
loans and other
real estate (3) ........... .69 .54 .56 .59 .75 1.12 1.29
Nonperforming assets
to net loans and
other real estate (4) ..... .81 .73 .76 .68 .80 1.28 1.39
Allowance for loan losses
to loans, net of
unearned income ........... 1.24 1.37 1.32 1.38 1.32 1.48 1.51
Allowance for loan
losses to nonperforming
assets (4) ................ 153.38 186.89 173.65 202.55 164.48 115.88 107.97
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders'
equity to average
assets .................... 8.66% 8.41% 8.49% 8.44% 8.35% 8.76% 8.60%
Average loans to
average deposits .......... 88.43 85.01 85.90 86.12 79.90 76.41 71.59
Tier 1 risk-based
capital (5) ............... 9.85 10.71 10.81 11.14 10.69 11.13 11.68
Total risk-based
capital (5) ............... 12.24 13.53 13.59 14.61 14.29 13.48 14.44
Tier 1 leverage (5) .......... 7.35 7.65 7.44 7.49 8.21 10.11 8.44
</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 capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%. The ratios for prior periods have not been restated to reflect
the combination with First National Bancorp effected March 1, 1996, and
accounted for as a pooling of interests, or any other pooling-of-interests
transactions.
(6) Ratios for 1996 excluding $19.0 million (after-tax) charged for SAIF
assessment and merger expenses are as follows: Return on average
stockholders' equity - 16.45%, Return on average total assets - 1.40%, and
Efficiency - 56.16%.
12
<PAGE> 17
Selected Historical Financial Data of GFC
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income........... $ 8,128 $ 7,397 $ 10,082 $ 8,267 $ 5,912 $ 4,756 $ 4,969
Total interest expense ......... 3,896 3,654 4,950 3,952 2,499 1,866 2,254
Net interest income............. 4,232 3,743 5,132 4,315 3,413 2,890 2,714
Provision for loan losses....... 269 280 373 278 241 306 400
Net interest income after
loan loss provision........... 3,963 3,463 4,759 4,037 3,171 2,584 2,314
Total noninterest income
excluding security gains
(losses)...................... 553 484 563 500 366 358 320
Security gains (losses)......... -- -- -- (83) (14) -- --
Total noninterest expense....... 2,109 1,949 2,594 2,431 2,155 1,928 1,753
Income tax expense.............. 867 700 960 689 487 377 327
Net income...................... $ 1,540 $ 1,298 $ 1,767 $ 1,334 $ 881 $ 637 $ 555
PER SHARE DATA:
Net income...................... $ 1.73 $ 1.59 $ 2.07 $ 1.67 $ 1.14 $ .86 $ .74
Cash dividends.................. .78 .50 .50 .35 .25 .13 .10
Book value...................... 12.68 10.68 11.47 10.06 8.25 7.74 7.04
OTHER INFORMATION:
Average number of shares
outstanding................... 795,451 776,022 776,022 758,772 741,247 725,338 723,704
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets.................... $ 136,044 $125,669 $ 138,216 $ 123,408 $ 95,592 $ 80,761 $ 70,837
Securities held to maturity..... 20,519 20,668 22,864 20,785 20,856 22,954 17,138
Securities available for sale... 25,943 25,586 29,377 25,964 15,172 -- --
Loans, net of unearned income... 78,830 69,404 71,876 61,765 46,343 40,343 38,552
Total deposits.................. 114,218 105,087 116,424 106,638 84,161 72,010 65,295
Long-term debt.................. 10,774 11,289 11,836 8,349 4,706 2,579 --
Stockholders' equity............ 10,095 8,436 9,058 7,665 6,232 5,630 5,098
PERFORMANCE RATIOS:
Return on average assets (1).... 1.53% 1.39% 1.35% 1.22% 1.00% .84% .81%
Return on average stockholders'
equity (1).................... 22.05 21.50 21.14 19.20 14.86 11.87 11.43
Net interest margin (1)......... 4.36 3.82 3.84 3.75 3.96 3.91 4.07
Efficiency (2).................. 44.06 45.54 45.55 48.80 52.26 54.30 52.60
Dividend payout................. 45.09 31.45 24.15 20.96 21.93 15.12 13.51
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income (1).... .15% .10% .11% .07% .28% .21% .91%
Problem assets to net loans and
other real estate (3)......... -- .16 .16 .07 .05 .38 .34
Nonperforming assets to net loans
and other real estate (4)..... .73 .18 .25 .25 .20 .41 .34
Allowance for loan losses to loans,
net of unearned income........ 1.83 1.69 1.76 1.59 1.61 1.59 1.10
Allowance for loan losses to
nonperforming assets (4)...... 255.00 701.00 716.00 646.00 821.00 394.00 328.00
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets................ 7.08% 6.42% 6.39% 6.35% 6.73% 7.08% 7.07%
Average loans to average
deposits...................... 67.59 61.02 60.94 57.58 56.41 58.20 61.00
Tier 1 risk-based capital (5)... 11.16 9.77 9.66 9.94 10.12 10.05 10.21
Total risk-based capital (5).... 12.42 11.02 10.91 11.25 11.32 11.35 11.45
Tier 1 leverage (5)............. 7.37 6.79 6.71 6.36 6.52 6.97 7.10
</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 capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%.
13
<PAGE> 18
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of GFC
Common Stock in connection with the solicitation by the GFC Board of Directors
of proxies for use at the Special Meeting, at which GFC stockholders will be
asked to vote upon a proposal to approve the Agreement. The Special Meeting will
be held at 12:00 noon, local time, on February 5, 1998, at The Embassy Suites
Hotel, 670 Verdae Boulevard, Greenville, South Carolina.
GFC stockholders are requested promptly to sign, date, and return the
accompanying proxy card to GFC in the enclosed postage-paid, addressed envelope.
A stockholder's failure to return a properly executed proxy card or to vote at
the Special Meeting will have the same effect as a vote against the Agreement.
Any GFC 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
GFC a signed proxy card bearing a later date, provided that such notice or proxy
card is actually received by GFC 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 Greenville Financial Corporation, 290
South Pleasantburg Drive, Greenville, South Carolina, 29607, Attention: Frank H.
Gibbes, III, 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 GFC 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, GFC 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
GFC, 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.
GFC stockholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
GFC's Board of Directors has established the close of business on December
17, 1997, as the Record Date for determining the GFC stockholders entitled to
notice of and to vote at the Special Meeting. Only GFC stockholders of record as
of the Record Date will be entitled to vote at the Special Meeting. The
affirmative vote of the holders of at least two-thirds of the GFC Common Stock
outstanding and entitled to vote at the Special Meeting is required in order to
approve the Agreement. Therefore, an abstention or failure to return a properly
executed proxy card will have the same effect as a vote against the Agreement,
as will a broker's submitting a proxy card without exercising discretionary
voting authority with respect to the Agreement. As of the Record Date, there
were approximately 325 holders of 796,022 shares of GFC 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 GFC to beneficially own more than
5.0% of the outstanding shares of GFC Common Stock as of the Record Date, see
"Voting Securities and Principal Stockholders of GFC."
The presence, in person or by proxy, of a majority of the outstanding
shares of GFC Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Special Meeting. For these
14
<PAGE> 19
purposes, shares of GFC Common Stock that are present, or represented by proxy,
at the Special Meeting will be counted for quorum purposes regardless of whether
the holder of the shares or proxy fails to vote on the Agreement or whether a
broker with discretionary authority fails to exercise its discretionary voting
authority with respect to the Agreement. Once a quorum is established, approval
of the Agreement requires the affirmative vote of the holders of at least
two-thirds of the GFC Common Stock outstanding and entitled to vote at the
Special Meeting.
The directors and executive officers of GFC and their affiliates
beneficially owned, as of the Record Date, 251,921 shares (or approximately 32%
of the outstanding shares) of GFC Common Stock. The directors and executive
officers of Regions and their affiliates beneficially owned, as of the Record
Date, no shares of GFC Common Stock. As of that date, no subsidiary of either
GFC or Regions held any shares of GFC 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 GFC Common Stock (excluding any shares held by GFC, 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) issued and outstanding at the Effective
Date will be converted into 1.2 shares of Regions Common Stock. Each share of
Regions Common Stock outstanding immediately prior to the Effective Date will
remain outstanding and unchanged as a result of the Merger.
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, Regions will make a cash
payment equal to the fractional part of a share which a GFC 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 trading day prior to the Effective Date.
TREATMENT OF GFC OPTIONS
The Agreement provides that all rights with respect to GFC Common Stock
pursuant to stock options granted by GFC under its stock option plan which are
outstanding at the Effective Date, whether or not then exercisable, will be
converted into and will become rights with respect to Regions Common Stock, and
Regions will assume each of such options in accordance with the terms of the
plan under which it was issued and the agreement by which it is evidenced. After
the Effective Date, those options will become options to purchase Regions Common
Stock, with the exercise price and number of shares of Regions Common Stock
purchasable thereunder adjusted to reflect the Exchange Ratio. The executive
officers or directors of GFC that as of the date of this Proxy
Statement/Prospectus hold outstanding options are Robert M. Austell, O. Perry
Earle, III, Richard H. Furman, Paula S. King, and R. Arthur Seaver, Jr., who
hold exercisable options to purchase 120,750 shares of GFC Common Stock in the
aggregate.
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BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. GFC has routinely, on an annual basis, prepared a
five year financial forecast which has been based on GFC's long range strategic
plan. The forecast included projections of earnings per share and book value per
share on which different price earnings multiples and book value multiples could
be applied to determine a reasonable market value for GFC stock. As part of the
Board's consideration of market price performance, including marketability of
its shares, Carson Medlin, an investment banking firm with offices in Raleigh,
North Carolina, and Tampa, Florida, was contacted in 1995 to provide the Board
with general information and advice. The Carson Medlin Company included GFC
stock and financial performance data in its quarterly Southeastern Independent
Bank Review and also produced research reports on GFC as of year-end 1995 and
1996. It was apparent from the Carson Medlin engagements, as well as reference
to other financial publications, that in spite of strong financial performance
by GFC, the price earnings multiple and book value multiples on GFC stock were
significantly lower than many independent banks whose financial performance was
not as strong as that of GFC. This situation raised the question of how to
achieve a better market value and marketability for GFC's stock. The option of
merging with a larger financial institution with a more marketable stock was
typically recognized as a strategy that would maximize stockholder value.
On January 16, 1997, Mr. Medlin of Carson Medlin wrote to Mr. Earle,
President and Chairman of the Board of GFC, that due to rising bank stock
prices, increasing bank merger activity, the cycle for bank stocks, and
structural changes in the banking industry, the then-current circumstances
indicated that conditions were right to achieve a merger of GFC on very
favorable terms.
On February 21, 1997, Mr. Earle responded to Mr. Medlin that he had
discussed Mr. Medlin's letter with Mr. Austell, Executive Vice President and
Director of GFC, and that they agreed it might be educational and desirable to
test the market, if it could be done discreetly and without making any merger
commitments by GFC.
On April 29, 1997, Mr. Medlin met with Rick Horsley, Vice Chairman, Bill
Jordan, Executive Vice President, and John Welch, Senior Accounting Officer of
Regions in Birmingham, to discuss Regions' acquisition interest in GFC.
On July 30, 1997, Mr. Medlin and Mr. Earle met in Birmingham with Mr.
Horsley and Mr. Jordan of Regions to discuss the major considerations of a
possible merger.
On August 12, 1997, Mr. Medlin received a letter of intent from Regions
describing a merger at an exchange ratio of 1.20 Regions shares for each of
GFC's shares and options, a market value of $38.1 million or $41.55 per share.
During the period of August 12, 1997 to August 14, 1997 each member of the
Board was informed individually of the merger offer. On August 19, 1997 the
Board met to consider the offer. Included in the Board's consideration was an
analysis of the offer by Mr. Medlin of Carson Medlin. On August 20, 1997, the
Board held a special meeting to continue its consideration of the merger offer.
In attendance was legal counsel from the Atlanta law firm of Powell, Goldstein,
Frazer and Murphy, LLP. At that meeting the Board voted unanimously to accept
the offer and execute the letter of intent. Subsequently, the Agreement was
executed on behalf of GFC as of September 4, 1997.
GFC's Reasons for the Merger. In approving the Merger, the directors of GFC
considered a number of factors. Without assigning any relative or specific
weights to the factors, the GFC Board of Directors considered the following
material factors:
(a) the information presented to the directors by the management of GFC
concerning the business, operations, earnings, asset quality, and financial
condition of GFC and Regions, on an historical and prospective basis;
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(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
GFC Common Stock;
(c) the nonfinancial terms of the Merger, including the greater liquidity
of Regions Common Stock compared to GFC Common Stock and the treatment of the
Merger as a tax-free exchange of GFC 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 alternatives to the Merger, including remaining as an independent
bank holding company;
(f) the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected combinations
with the terms of the proposed transaction with Regions;
(g) the competition and regulatory environment for financial institutions
generally;
(h) Regions' ability to provide comprehensive financial services through
the Bank to its market;
(i) the opinion rendered by GFC's financial advisor to the effect that,
from a financial point of view, the exchange of GFC Common Stock for Regions
Common Stock on the terms and conditions set forth in the Agreement is fair to
the holders of GFC Common Stock;
(j) the compatibility of the corporate cultures of both organizations and
the effect of the Merger on GFC's employees and clients.
The terms of the Merger were the result of arms-length negotiations between
representatives of GFC and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of GFC
unanimously approved the Merger as being in the best interests of GFC and its
stockholders. Each member of the Board of Directors of GFC has agreed to vote
such member's shares in favor of the Merger.
GFC'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT GFC 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 GFC 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
GFC operates, including existing competition, history of the market areas with
respect to financial institutions, and average demand for credit, on an
historical and prospective basis, and (iii) the results of Regions' due
diligence review of GFC; 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.
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OPINION OF GFC'S FINANCIAL ADVISOR
The Board of Directors of GFC retained Carson Medlin to serve as its
financial advisor with respect to a proposed transaction which would lead to the
acquisition of GFC or the purchase of substantially all of the stock or assets
of GFC. As part of its engagement, Carson Medlin agreed to render its opinion as
to the fairness, from a financial point of view, of the consideration to be
received by GFC's stockholders. Carson Medlin is a National Association of
Securities Dealers, Inc. member investment banking firm which specializes in the
securities of southeastern United States financial institutions. As part of its
investment banking activities, Carson Medlin is regularly engaged in the
valuation of southeastern United States financial institutions and transactions
relating to their securities, including mergers and acquisitions. Carson Medlin
will be compensated for its services. No limitations were imposed by GFC on
Carson Medlin with respect to the investigations made or procedures followed by
Carson Medlin in rendering its opinion.
A representative of Carson Medlin attended the meetings of GFC's Board held
on August 19 and 20, 1997, at which meetings the terms of the proposed Merger
were discussed and considered. At those meetings, Carson Medlin delivered a
preliminary verbal opinion to GFC's Board that the consideration to be received
by the stockholders of GFC as a result of the Merger is fair from a financial
point of view. Carson Medlin subsequently confirmed such opinion in writing as
of the date of this Proxy Statement/Prospectus. The full text of Carson Medlin's
written opinion dated the date of this Proxy Statement/Prospectus 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 of and limitations on the review undertaken by Carson Medlin
in connection therewith. Carson Medlin's opinion is addressed to GFC's Board
only, and the opinion does not constitute a recommendation to any GFC
stockholder as to how such stockholder should vote at the GFC Special Meeting to
consider the Merger or as to any other matter. The summary of the opinion of
Carson Medlin set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion attached as Appendix B.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of GFC or Regions, nor was
it furnished with any such appraisals. Carson Medlin assumed that the financial
forecasts reviewed by it have been reasonably prepared on a basis reflecting the
best currently available judgments and estimates of the managements of GFC and
Regions, and that such projected financial results will be realized in the
amounts and at the times contemplated thereby. Carson Medlin is not expert in
the evaluation of loan portfolios, underperforming or nonperforming assets, net
charge-offs of such assets or the adequacy of allowances for losses with respect
thereto; has not reviewed any individual credit files; and has assumed that the
loan loss allowances for each of GFC and Regions are in the aggregate adequate
to cover such losses. Carson Medlin assumed that the Merger will be recorded as
a pooling of interests under generally accepted accounting principles. Carson
Medlin's opinion is necessarily based on economic, market and other conditions
as in effect on the date of its analysis, and on information made available to
it dated as of various earlier dates.
In connection with rendering its opinion, Carson Medlin performed a variety
of financial analyses. The preparation of a financial fairness opinion of this
nature 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, is not readily susceptible to partial
analysis or summary description. Carson Medlin believes that its analyses must
be considered together as a whole and that selecting portions of such analyses
and the facts considered therein, without considering all other factors and
analyses, could create an incomplete view of the analyses and the process
underlying Carson Medlin's opinion. In its analyses, Carson Medlin made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of GFC and
Regions and which may not be realized. Any estimates contained in Carson
Medlin's analyses are not necessarily predictive of future results or values,
which may be significantly more or less favorable than such estimates. Estimates
of values of companies do not purport to be appraisals or necessarily reflect
the prices at which such companies or their securities may
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actually be sold. None of the analyses performed by Carson Medlin was assigned a
greater significance by Carson Medlin than any other.
In connection with rendering its opinion dated the date hereof, Carson
Medlin reviewed (i) the Agreement; (ii) the annual reports to stockholders of
GFC, including audited financial statements, for the five years ended December
31, 1996; (iii) the Proxy Statement of GFC, dated February 3, 1997, prepared for
the annual meeting of the stockholders of GFC held on March 12, 1997; (iv) the
Uniform Bank Performance Report for Greenville National Bank as of June 30,
1997; (v) the Call Report for Greenville National Bank as of September 30, 1997;
(vi) the annual reports to stockholders of Regions, including audited financial
statements, for the five years ended December 31, 1996; (vii) the Proxy
Statement of Regions dated April 1, 1997 for the annual meeting of the
stockholders of Regions held on May 14, 1997; (viii) unaudited interim financial
statements of GFC and Regions for the nine months ended September 30, 1997; (ix)
the Report on Form 10-Q of Regions, dated September 30, 1997 (x) a preliminary
copy of the Proxy Statement/Prospectus prepared in connection with a special
meeting of the shareholders of GFC to consider the Merger; and (xi) certain
other financial and operating information with respect to the business,
operations and prospects of GFC and Regions.
Carson Medlin also (i) held discussions with members of the senior
management of GFC and Regions regarding their respective historical and current
business operations, financial conditions and future prospects; (ii) reviewed
the historical market prices and trading activity for the common stocks of GFC
and Regions and compared them with those of certain publicly traded companies
which it deemed to be relevant; (iii) compared the results of operations of GFC
and Regions with those of certain publicly traded companies which it deemed to
be relevant; (iv) compared the proposed financial terms of the Merger with the
financial terms, to the extent publicly available, of certain other recent
business combinations of commercial banking organizations; (v) analyzed the pro
forma financial impact of the Merger on Regions; and (vi) conducted such other
studies, analyses, inquiries and examinations as Carson Medlin deemed
appropriate.
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.
Summary of Transaction Consideration. Carson Medlin reviewed the terms of
the proposed transaction, including the Exchange Ratio and the aggregate
transaction value. Carson Medlin reviewed the implied value of the consideration
offered based upon the $38.125 per share closing price of Regions' Common Stock
on November 6, 1997 which showed that the implied value of the proposed
transaction was approximately $45.75 per share of GFC Common Stock, representing
a 79% premium to the last reported trade of GFC Common Stock prior to the public
announcement of the Merger (August 21, 1997), or a total transaction value of
approximately $41.9 million (including outstanding options to acquire GFC Common
Stock). Carson Medlin calculated that as of November 6, 1997 the aggregate
transaction value represented 375% of GFC's stated book value at September 30,
1997, adjusted pro forma for the conversion of stock options and 20.9 times
GFC's September 30, 1997 trailing twelve months earnings, a 32.8% premium on
GFC's September 30, 1997 core deposits (defined as the aggregate transaction
value minus stated book value, as a percentage of core deposits) and 30.8% of
the total assets of GFC at September 30, 1997.
Comparable Transaction Analysis. Carson Medlin reviewed certain information
relating to 22 selected southeastern bank and thrift mergers announced between
March 1996 and September 1997 in which the acquired institutions had total
assets of from $38 million to $1.4 billion (the "Comparable Transactions"). The
Comparable Transactions are (acquiree/acquiror): Enterprise National
Bank/Compass Bancshares, Inc.; Fort Brooke Bancorporation/The Colonial
BancGroup, Inc.; Citi-Bancshares, Inc./Huntington Bancshares Incorporated; Bank
of Winter Park/Huntington Bancshares Incorporated; Dadeland Bancshares, Inc./The
Colonial BancGroup, Inc.; South Florida Banking Corporation/The Colonial
BancGroup, Inc.; Rockdale Community Bank/Regions Financial Corporation; First
Bankshares/Regions Financial Corporation; SB&T Corporation/Regions Financial
Corporation; Bank Corp. of Georgia/Century South Banks, Inc.; Citizens
Gwinnett Bankshares, Inc./Premier Bancshares, Inc.; First Community Bank/Centura
Banks, Inc.; FirstSouth
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Bank/Centura Banks, Inc.; Salem Trust Bank/CCB Financial Corporation; Old North
State Bank/LSB Bancshares, Inc.; Bank of Mecklenburg/Triangle Bancorp, Inc.;
Carolina State Bank/First Charter Corporation; American Federal Bank, FSB/CCB
Financial Corporation; W.B.T. Holding Co./First Commercial Corporation; Hanover
Bank/MainStreet BankGroup, Inc.; First Patriot Bankshares/United Bankshares,
Inc.; and George Mason Bankshares, Inc./United Bankshares, Inc. Carson Medlin
considered, among other factors, the earnings, capital level, asset size and
quality of assets of the acquired financial institutions. Carson Medlin compared
the transaction prices to the then recently reported annual earnings, stated
book values, total assets and core deposits.
On the basis of the Comparable Transactions, Carson Medlin calculated a
range of purchase prices as a percentage of stated book value for the Comparable
Transactions from a low of 195.1% to a high of 343.6%, with a mean of 258.4%.
These transactions indicated a range of values for GFC from $19.7 million to
$34.7 million, with a mean of $26.1 million. The aggregate consideration implied
by the terms of the Merger is approximately $41.9 million, which is above the
high end of the range for the Comparable Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions from a low of 10.6 times to a high of
29.8 times, with a mean of 20.1 times. These transactions indicated a range of
values for GFC from $21.3 million to $59.9 million, with a mean of $40.4 million
(based on GFC's trailing twelve months earnings of $2,009,000). The aggregate
consideration implied by the terms of the Merger is approximately $41.9 million
or 20.9 times trailing twelve months earnings, which is above the average for
the Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 11.3% to a high of 31.8%,
with a mean of 19.2%. The premium on GFC's core deposits implied by the terms of
the Agreement is 32.8%, which is above the high end of the range for the
Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 15.7%
to a high of 31.8%, with a mean of 22.4%. The aggregate consideration as a
percentage of total assets implied by the terms of the Agreement is
approximately 30.8%, which is at the high end of the range for the Comparable
Transactions.
Industry Comparative Analysis. In connection with rendering its opinion,
Carson Medlin compared selected operating results of GFC to those of 49
publicly-traded community commercial banks in Alabama, Florida, Georgia, North
Carolina, South Carolina, Virginia and West Virginia (the "SIBR Banks") as
contained in the Southeastern Independent Bank Review(tm), a proprietary
research publication prepared by Carson Medlin quarterly since 1991. The SIBR
Banks range in asset size from approximately $103 million to $2.4 billion and in
stockholders' equity from approximately $10.9 million to $235 million. Carson
Medlin considers this group of financial institutions more comparable to GFC
than larger, more widely traded regional financial institutions. Carson Medlin
compared, among other factors, the profitability, capitalization, and asset
quality of GFC to those of the SIBR Banks. Carson Medlin noted that for the six
months ended June 30, 1997: (i) GFC had a return on average assets (ROA) of
1.43% compared to 1.24% on average for the SIBR Banks; (ii) GFC had a return on
average equity (ROE) of 21.2% compared to 12.5% on average for the SIBR Banks;
(iii) GFC had common equity to total assets of 6.96% compared to 9.69% on
average for the SIBR Banks; and (iv) GFC's nonperforming assets ratio (defined
as loans 90 days past due, nonaccrual loans and other real estate to total loans
net of unearned income and other real estate) was 0.51% compared to 0.97% on
average for the SIBR Banks. Carson Medlin also noted that for the year ended
December 31, 1996: (i) GFC's ROA was 1.35% compared to 1.23% on average for the
SIBR Banks; (ii) GFC's ROE was 21.1% compared to 12.6% on average for the SIBR
Banks; (iii) GFC had common equity to total assets of 6.56% compared to 9.62% on
average for the SIBR Banks; and (iv) GFC's nonperforming assets ratio was 0.23%
compared to 1.02% on average for the SIBR Banks. This comparison indicated that
GFC's financial performance was generally better than that of the SIBR Banks for
most of the factors considered.
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Carson Medlin also compared selected operating results of Regions to those
of 8 other publicly-traded southeastern United States mid-size regional bank
holding companies with assets between $4.6 and $29.8 billion (the "Peer Banks").
The Peer Banks include: AmSouth Bancorporation, The Colonial BancGroup, Inc.,
Compass Bancshares, Inc., First American Corporation, First Tennessee National
Corporation, National Commerce Bancorporation, SouthTrust Corporation, and Union
Planters Corporation. Carson Medlin considers this group of southeastern
financial institutions comparable to Regions as to financial characteristics,
stock price performance and stock trading volume. Carson Medlin compared
selected balance sheet data, asset quality, capitalization, and profitability
ratios at or for the nine months ended September 30, 1997 and stock market data
as of November 6, 1997. This comparison showed, among other things, that (i)
Regions' net interest margin was 4.30% compared to a mean of 4.17% and a median
of 4.10% for the Peer Banks; (ii) Regions' efficiency ratio (defined as
noninterest expense divided by the sum of noninterest income and taxable
equivalent net interest income before provision for loan losses) was 54.1%
compared to a mean of 56.8% and a median of 56.1% for the Peer Banks; (iii)
Regions' ROA was 1.41% compared to a mean of 1.34% and a median of 1.33% for the
Peer Banks; (iv) Regions' ROE was 16.3% compared to a mean of 17.5% and a median
of 17.0% for the Peer Banks; (v) Regions' stockholders' equity to total assets
was 8.32% compared to a mean of 7.65% and a median of 7.39% for the Peer Banks;
(vi) Regions' nonperforming assets to total assets were 0.49% compared to a mean
of 0.39% and a median of 0.35% for the Peer Banks; (vii) Regions' loan loss
reserve to nonperforming assets was 180% compared to a mean of 272% and a median
of 233% for the Peer Banks; and (viii) at November 6, 1997, Regions' market
capitalization was $5.2 billion compared to the Peer Banks which ranged from a
low of $1.3 billion to a high of $5.1 billion. This comparison indicated that
Regions' financial performance is higher than the Peer Banks by some measures
and lower than the Peer Banks by some measures.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to GFC, Regions or the contemplated
Merger. Accordingly, evaluating the results of these analyses necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of GFC and Regions and other factors
that could affect the value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) is not, in
itself, a meaningful method of using comparable industry or transaction data.
Contribution Analysis. Carson Medlin reviewed the relative contributions in
terms of various balance sheet items, net income and market capitalization to be
made by GFC and Regions to the combined institution based on (i) balance sheet
data at September 30, 1997 and (ii) income statement data for the nine months
ended September 30, 1997. The income statement and balance sheet components
analyzed included total assets, total loans, total deposits, stockholders'
equity, and net income. This analysis showed that, while GFC stockholders and
optionholders would own approximately 0.78% of the aggregate outstanding shares
and options of the combined institution based on the Exchange Ratio, GFC is
contributing 0.61% of total assets, 0.50% of total loans (net of unearned
income), 0.64% of total deposits, 0.54% of stockholders' equity, and 0.69% of
annual net income. This analysis indicates that GFC's ownership (by stockholders
and optionholders) of Regions, after completion of the Merger, will be higher
than GFC's relative contribution for various balance sheet and income statement
items.
Present Value Analysis. Carson Medlin calculated the present value of GFC's
Common Stock assuming that GFC remains an independent bank. For purposes of this
analysis, Carson Medlin utilized certain projections of GFC's future earnings
through the year 2002. The analysis assumes that GFC would pay a dividend in
1998 and each year thereafter equal to 20% of projected net income and would be
acquired at the end of 2002 at a purchase price of 280% of projected book value.
The present value of the annual dividends plus the merger consideration at the
end of 2002 was then calculated using discount rates of 13% to 15% per annum.
These rates were selected to reflect the rates that investors in securities such
as the Common Stock of GFC would likely require in order to be competitive with
alternative investments with similar characteristics. On the basis of these
assumptions, Carson Medlin calculated that the present value of GFC as an
independent bank ranged from $36.7 million to 39.9 million. The aggregate
consideration implied by the terms of the Agreement is approximately $41.9
million which is above the high end of the range of the
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calculated present value were GFC to remain independent through 2002. Carson
Medlin considered the present value analysis because it is a widely used
valuation methodology, but noted that the results of such methodology are highly
dependent upon the numerous assumptions that must be made, including earnings
growth rates, dividend payout rates, terminal values and discount rates.
Stock Trading History. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for Regions' Common Stock from December 1992 to
November 1997. Carson Medlin also compared the price performance of Regions'
Common Stock during this period to the Dow Jones Southeastern U.S. Banks Index
and the Dow Jones Equity Market Index and evaluated recent trading patterns and
price performance of Regions Common Stock relative to the eight Peer Banks.
This analysis showed that for the five-year period ending November 7, 1997,
the total return (annualized) for Regions' Common Stock (all cash distributions
and dividends reinvested on the ex-dividend date) was 22.54% compared to 25.84%
for the Dow Jones Southeastern U.S. Banks Index and 19.68% for the Dow Jones
Equity Market Index. For the twelve-month period ending November 7, 1997, the
total return for Regions' Common Stock was 51.26% compared to 34.60% for the Dow
Jones Southeastern U.S. Banks Index and 25.76% for the Dow Jones Equity Market
Index.
During the four quarters ending September 30, 1997, the ratio of stock
price to trailing 12 months earnings per share for the Peer Banks was: a low of
14.3 times, a high of 19.8 times, and a mean of 16.8 times. For the same
periods, Regions' price to earnings ratio ranged from a low of 14.2 times to a
high of 18.5 times with a mean of 16.0 times. Regions' Common Stock has traded
on average at a lower price to earnings ratio than the Peer Banks.
During the four quarters ending September 30, 1997, the stock price as a
percentage of book value for the Peer Banks was: a low of 223%, a high of 312%,
and a mean of 260%. For the same periods, Regions' price to book ratio ranged
from a low of 208% to a high of 277% with a mean of 237%. Regions' Common Stock
has traded on average at a lower price to book value basis compared to the
Peer Banks.
Carson Medlin also compared the recent trading volume in Regions' Common
Stock, which trades on the NASDAQ National Market, to that of the Peer Banks.
During the four quarters ending September 30, 1997, the quarter end monthly
trading volume as a percentage of outstanding shares of the Peer Banks ranged
from a low of 4.9% to a high of 7.3% with a mean of 5.6%. Regions' quarter end
monthly trading volume to outstanding shares ranged from a low of 2.5% to a high
of 6.6% with a mean of 3.9%. Carson Medlin considers Regions' Common Stock to be
liquid and marketable.
Carson Medlin also examined recent trading prices and volumes of GFC's
Common Stock, to the extent available. GFC's Common Stock is listed on the
National Association of Securities Dealer Electronic Bulletin Board. GFC's
Common Stock trades infrequently and, while the information obtained is believed
to be reliable, actual trade prices and volume could not be confirmed. Carson
Medlin placed little weight on the market price of GFC's Common Stock in its
analysis.
Stockholder Claims Analysis. Carson Medlin compared the ownership of one
share of GFC Common Stock to the ownership of 1.2 shares of Regions' Common
Stock (as implied by the terms of the Merger Agreement) from the perspective of
claims on various balance sheet and income statement variables. Carson Medlin
found that GFC stockholders would have had a claim to $2.57 per GFC
fully-diluted share of projected pro forma 1997 earnings after consummation of
the Merger versus $2.39 without the Merger and $2.79 per GFC fully-diluted share
of projected pro forma 1998 earnings versus $2.84 without. GFC stockholders
would have had a claim to $190.03 per GFC fully-diluted share in September 30,
1997 total assets compared to $148.39 without the Merger. GFC stockholders would
have had a claim to $16.84 in September 30, 1997 pro forma book value per
fully-diluted GFC share compared to $12.22 before the Merger. At a price of
$38.125 per share for Regions' Common Stock, the implied value of the proposed
transaction is $45.75 per GFC share compared to a reported $25.50 before the
Merger. Furthermore, GFC's stockholders
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would be expected, assuming continuation of Regions' recent dividend rate, to
receive cash dividends at the annual rate of $0.96 per GFC share after the
Merger versus $0.78 per GFC share prior to the Merger. In view of this generally
favorable stockholder claims comparison, Carson Medlin concluded that 1.2 shares
of Regions' Common Stock is likely to be worth more than one share of GFC Common
Stock at the date of consummation of the Merger.
Other Analyses. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Regions. In addition, Carson Medlin
performed a dilution analyses and such other analyses and comparisons that it
deemed appropriate.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and were evaluated as of the date
of the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the assets or liabilities of GFC or
Regions could materially affect the assumptions used in preparing the opinion.
For its services as independent financial advisor to GFC in connection with
identifying possible combinations that would result in the acquisition of GFC or
the purchase of substantially all of the stock or assets of GFC and including
the rendering of its opinion as to the fairness, from a financial point of view,
of the consideration to be received by GFC's stockholders, GFC agreed to pay
Carson Medlin a fee based on the value of the transaction ultimately entered
into by GFC. The fee to be paid to Carson Medlin will equal 1 1/4% of the first
forty million dollars of the value of the transaction and 3% of any amount in
excess of forty million dollars based on the total value of the consideration
received in the Merger including Regions Common Stock and options. The value of
Regions Common Stock for purposes of determining the fee to be paid to Carson
Medlin is based on the average closing price of Regions Common Stock for the 15
days prior to the consummation of the Merger.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Delaware Certificate of Merger and the South Carolina Articles of Merger
relating to the Merger are filed and declared effective with, respectively, the
Delaware Secretary of State and the South Carolina Secretary of State. Unless
otherwise agreed upon by Regions and GFC, and subject to the conditions to the
obligations of the parties to effect the Merger, the parties will use their
reasonable efforts to cause the Effective Date to occur on the last day of the
month in which the last of the following events occur: (i) the effective date
(including the expiration of any applicable waiting period) of the last consent
of any federal or state regulatory authority having authority over exempting or
approving the Merger and (ii) the date on which the Agreement is approved by the
requisite vote of GFC stockholders.
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 GFC anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the first quarter of 1998. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or GFC generally may terminate the
Agreement if the Merger is not consummated by May 31, 1998, 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 GFC a form letter of
transmittal, together with instructions for the exchange of such stockholders'
certificates representing shares of GFC Common Stock for certificates
representing shares of Regions Common Stock.
GFC 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 GFC Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to each holder of GFC
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, GFC 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 GFC Common Stock
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has been converted, regardless of whether such stockholders have surrendered
their GFC 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 GFC 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 GFC will be closed at the effective time of the
Merger and after the Effective Date, there will be no transfers of shares of GFC
Common Stock on GFC's stock transfer books. If certificates representing shares
of GFC 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 South Carolina Commissioner,
and the expiration of all applicable waiting periods associated with such
approvals, without any conditions or restrictions that would, in the reasonable
good faith judgment of Regions' Board of Directors, so materially adversely
impact the economic benefits of the transactions contemplated by the Agreement
as to render inadvisable the consummation of the Merger;
(b) the approval of the Agreement by the holders of requisite number of
shares of GFC Common Stock;
(c) the absence of any action by any court or governmental or regulatory
authority of competent jurisdiction restricting, prohibiting, or making illegal
the 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 GFC Common Stock for Regions Common
Stock will not give rise to recognition of gain or loss to GFC 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 GFC 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;
(ii) as of the Effective Date, the accuracy of certain representations and
warranties and the compliance in all material respects with the agreements and
covenants of each party; and (iii) the delivery of a letter from Regions'
independent auditors to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
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.
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Regions and GFC 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 South Carolina
Commissioner. In the evaluation, the South Carolina Commissioner will take into
account considerations similar to those applied by the Federal Reserve.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Regions and GFC
approved by their respective Boards of Directors; provided, however, that after
approval by the GFC stockholders, no amendment that pursuant to the South
Carolina Act requires further approval of the GFC stockholders, including
decreasing the consideration to be received by GFC stockholders, may be made
without the further approval of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by GFC
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final, nonappealable
denial of any required consent of any regulatory authority, 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 GFC Common Stock shall not have approved the
Agreement;
(c) by mutual agreement of the Boards of Directors of Regions and GFC;
(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 31, 1998, 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.
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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 GFC and Regions generally has agreed to operate its business only
in the usual, regular, and ordinary course, to preserve intact its business
organizations and assets and maintain its rights and franchises, and to take no
action which would materially adversely affect the ability of either party to
obtain any consents required for the Merger or to perform its covenants and
agreements under the Agreement in all material respects and to consummate the
Merger. The foregoing shall not prevent Regions or any subsidiary of Regions
from discontinuing or disposing of any of its assets or business, or from
acquiring or agreeing to acquire any other entity or any assets thereof, if such
action is, in the judgment of Regions, desirable in the conduct of the business
of Regions and its subsidiaries. In addition, the Agreement includes certain
other restrictions applicable to the conduct of the business of either GFC or
Regions prior to consummation of the Merger, as described below.
GFC. GFC 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. Generally, GFC has agreed that it will not:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of GFC or the Bank;
(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money in excess of an aggregate
of $100,000 (for GFC and the Bank on a consolidated basis) except in the
ordinary course of the business of GFC and the Bank consistent with past
practices (which shall include creation of deposit liabilities, purchases of
federal funds, advances from the Federal Home Loan Bank or the Federal Reserve
Bank, and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose, or suffer the imposition, on any share of stock
held by GFC or the Bank of any lien or permit any such lien to exist;
(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 GFC or the Bank, or declare or pay any dividend or make any
other distribution in respect of GFC Common Stock; provided that GFC may (to the
extent legally able to do so), but shall not be obligated to, declare and pay
regular annual cash dividends on the GFC Common Stock at an amount not to exceed
35% of GFC's net income after taxes, in no event to exceed $.98 per share;
(d) except pursuant to the exercise of stock options outstanding as of the
date of the Agreement and pursuant to the terms thereof in existence on the date
of the Agreement, 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
GFC Common Stock or any other capital stock of GFC or the Bank, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock;
(e) adjust, split, combine, or reclassify any capital stock of GFC or the
Bank or issue or authorize the issuance of any other securities in respect of or
in substitution for shares of GFC Common Stock or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber any shares of capital stock of the
Bank or any Assets having in the aggregate a book value in excess of $100,000,
other than in the ordinary course of business for reasonable and adequate
consideration;
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(f) acquire direct or indirect control over, or invest in equity securities
of, any entity, other than in connection with foreclosures in the ordinary
course of business, or acquisitions of control by GFC in its fiduciary capacity;
(g) grant any increase in compensation or benefits to the employees or
officers of GFC or the Bank except as previously disclosed to Regions or as
required by law; pay any bonus except pursuant to the provisions of any
applicable program or plan adopted by its Board of Directors prior to the date
of the Agreement and previously disclosed to Regions; enter into or amend any
severance agreements with officers of GFC or the Bank except as previously
disclosed to Regions; grant any increase in fees or other increases in
compensation or other benefits to directors of GFC or the Bank;
(h) enter into or amend any employment contract between GFC or the Bank and
any person (unless such amendment is required by law) that GFC or the Bank 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
Date;
(i) except as previously disclosed to Regions, adopt any new employee
benefit plan or program of GFC or the Bank or make any material change in or to
any existing employee benefit plans or programs of GFC or the Bank 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;
(j) make any significant change in any accounting methods, principles, or
practices or systems of internal accounting controls, except as may be necessary
to conform to changes in regulatory accounting requirements or generally
accepted accounting principles ("GAAP");
(k) with certain exceptions, commence or settle any litigation for money
damages in excess of $25,000; or
(l) except in the ordinary course of business, enter into or terminate any
material contract or make any change in any material lease or contract.
In addition, GFC has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. GFC 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, GFC 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 agreed, until the earlier of the Effective Date or
termination of the Agreement, not to amend its certificate of incorporation or
bylaws in any manner which is adverse to, and discriminates against, the holders
of GFC Common Stock, without the prior written consent of GFC.
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." Regions anticipates combining the Bank with its principal banking
subsidiary some time in 1998. Regions anticipates that the present officers and
directors of the Bank would continue in their respective capacities for the
Bank. O. Perry Earle, III and Robert M. Austell have each executed employment
agreements with Regions to become effective upon consummation of the Merger.
Mr. Earle's employment agreement provides that Mr. Earle will serve as Chairman
of the Board of Directors of the Bank until January 1, 2003, and Chief Executive
Officer of the Bank until January 1, 2000. Mr. Austell's employment agreement
provides that he will serve as President of the Bank until January 1, 2001.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will, and will cause GFC to,
indemnify each person entitled to indemnification from GFC or the Bank,as the
case may be, to the full extent permitted by South Carolina law and by GFC's
Articles of Incorporation or Bylaws or the rights otherwise 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 GFC 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 similarly
situated officers and employees. For purposes of participation and vesting (but
not benefit accrual) under such employee benefit plans, service with GFC 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 GFC
to honor all employment, severance, consulting, and other compensation contracts
previously disclosed to Regions between GFC 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 GFC's benefit plans.
As described above under " -- Treatment of GFC Options," the Agreement also
provides that all rights with respect to GFC Common Stock pursuant to stock
options granted by GFC under its stock option and other stock-based compensation
plans which are outstanding at the Effective Date, whether or not then
exercisable, will be converted into and will become rights with respect to
Regions Common Stock, and Regions will assume each of such options in accordance
with its terms.
As of the Record Date, directors and executive officers of GFC owned 500
shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 13 of the South Carolina Act, if the
Merger is consummated, any holder of GFC Common Stock who (i) gives to GFC,
prior to the vote at the Special Meeting with respect to the approval of the
Agreement, written notice of such holder's intent to demand payment for such
holder's shares, and (ii) does not vote in person in favor thereof, shall be
entitled to receive, upon compliance with the statutory requirements summarized
below, the fair value of such holder's shares as of the Effective Date,
excluding any appreciation or depreciation in anticipation of the Merger.
A stockholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies GFC in writing of the name and address of each person on
whose behalf such holder asserts dissenters' rights. The rights of such a
partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different stockholders. A beneficial stockholder asserting dissenters' rights to
shares held on such holder's behalf shall notify GFC in writing of the name and
address of the record stockholder of the shares, if known.
The written objection requirement referred to above will not be satisfied
under the South Carolina statutory provisions by merely voting against approval
of the Agreement by proxy or in person at the Special Meeting. In addition to
not voting in person in favor of the Agreement, a stockholder wishing to
preserve the right to dissent and seek appraisal must give a separate written
notice of such holder's intent to demand payment for such holder's shares if the
Merger is effected, as hereinabove provided.
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Any written objection to the Agreement satisfying the requirements
discussed above should be addressed as follows: Greenville Financial
Corporation, 290 South Pleasantburg Drive, Greenville, South Carolina, 29607,
Attention: Corporate Secretary.
If the Merger is authorized at the Special Meeting, GFC must deliver a
written dissenters' notice (the "Dissenters' Notice") to all holders of GFC
Common Stock who satisfied the foregoing requirements. The Dissenters' Notice
must be sent within ten days after the Effective Date and must (i) state where
the demand for payment must be sent and where certificates for shares of GFC
Common Stock must be deposited, (ii) inform holders of uncertificated shares to
what extent transfer of these shares will be restricted after the demand for
payment is received, (iii) supply a form for demanding payment that includes the
date of the first announcement to news media or to stockholders of the terms of
the Merger and requires that the person asserting dissenters' rights certify
whether or not such person, or if a nominee asserting dissenters' rights on
behalf of a beneficial stockholder, the beneficial stockholder acquired
beneficial ownership of the shares before that date, (iv) set a date by which
GFC must receive the demand for payment (which date may not be fewer than 30 nor
more than 60 days after the Dissenters' Notice is delivered), (v) set a date by
which certificates for certificated shares must be deposited, which may not be
earlier than 20 days after the demand date, and (vi) be accompanied by a copy of
Chapter 13 of the South Carolina Act.
A stockholder of record who receives the Dissenters' Notice must demand
payment, certify whether such holder (or the beneficial stockholder on whose
behalf such holder is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the Dissenters' Notice, and
deposit such holder's certificates in accordance with the Dissenters' Notice.
Such stockholder will retain all other rights of a stockholder until those
rights are canceled or modified by the consummation of the Merger. A stockholder
who does not comply substantially with the requirements that such holder demand
payment and deposit such holder's share certificates where required, each by the
date set in the Dissenters' Notice, is not entitled to payment for such holder's
shares under Chapter 13.
Except as described below, the surviving corporation resulting from the
Merger must, within ten days of the receipt of a payment demand, pay to each
dissenting stockholder who complied with the payment demand and deposit
requirements described above the amount the surviving corporation estimates to
be the fair value of such holder's shares, plus accrued interest from the
Effective Date. Such payment must be accompanied by (i) certain recent GFC
financial statements, (ii) the surviving corporation's estimate of the fair
value of the shares and an explanation how the fair value was calculated, (iii)
an explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand additional payment under Section 33-13-280 of the
South Carolina Act, and (v) a copy of Chapter 13 of the South Carolina Act.
The surviving corporation may elect to withhold such payment from a
dissenter as to any shares of which such dissenter (or the beneficial owner on
whose behalf such dissenter is asserting dissenters' rights) was not the
beneficial owner on the date set forth in the Dissenters' Notice as the date of
the first announcement to news media or to stockholders of the terms of the
proposed Merger, unless the beneficial ownership of the shares devolved upon him
by operation of law from a person who was the beneficial owner on the date of
the first announcement. To the extent the surviving corporation elects so to
withhold payment, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to accept it in
full satisfaction of such dissenter's demand. The surviving corporation shall
send with its offer a statement of its estimate of the fair value of the shares,
an explanation of how the fair value and interest were calculated, and a
statement of the dissenter's right to demand additional payment under Section
33-13-280.
Section 33-13-280 of the South Carolina Act provides that a dissenting
stockholder may notify the surviving corporation in writing of such holder's own
estimate of the fair value or such holder's shares and the interest due, and may
demand payment of such holder's estimate (less any payment already received), if
(i) such holder believes that the amount offered by the surviving corporation is
less than the fair value of such holder's shares or that the interest due has
been calculated incorrectly, or (ii) the surviving corporation fails
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to make payment under Section 33-13-250 or to offer payment under Section
33-13-270 within sixty days after the date set for demanding payment. A
dissenting stockholder waives such holder's right to demand payment under
Section 33-13-280 unless such holder notifies the surviving corporation of such
holder's demand in writing within 30 days after the surviving corporation makes
or offers payment for such holder's shares.
If a demand for payment under Section 33-13-280 remains unsettled, the
surviving corporation must commence a proceeding in the Circuit Court of
Greenville County, South Carolina, within 60 days after receiving the demand for
additional payment and must petition the court to determine the fair value of
the shares and accrued interest. If the surviving corporation does not commence
the proceeding within those 60 days, it is required to pay each dissenting
stockholder whose demand remains unsettled, the amount demanded. The surviving
corporation is required to make all dissenting stockholders whose demands remain
unsettled parties to the proceeding and to serve a copy of the petition upon
each dissenting stockholder. The court may appoint appraisers to receive
evidence and to recommend a decision on fair value. Each dissenter made a party
to the proceeding is entitled to judgment for the amount, if any, by which the
court finds the fair value of such dissenter's shares, plus interest, exceeds
the amount paid by the surviving corporation.
The court in an appraisal proceeding commenced under the foregoing
provision must determine the costs of the proceeding, excluding fees and
expenses of attorneys and experts for the respective parties, and must assess
those costs against the surviving corporation, except that the court may assess
the costs against all or some of the dissenting stockholders to the extent the
court finds they acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 33-13-280. The court also may assess the fees
and expenses of attorneys and experts for the respective parties against the
surviving corporation if the court finds the surviving corporation did not
substantially comply with the requirements of specified provisions of Chapter 13
of the South Carolina Act, or against either the surviving corporation or a
dissenting stockholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by Chapter
13 of the South Carolina Act.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the surviving corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
In a proceeding commenced by dissenters to enforce the liability under
Section 33-13-300(a) of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
surviving corporation and in favor of the dissenters.
The foregoing is a summary of the material rights of a dissenting
stockholder of GFC, but is qualified in its entirety by reference to Chapter 13
of the South Carolina Act, included in Appendix C to this Proxy
Statement/Prospectus. Any GFC stockholder who intends to dissent from approval
of the Agreement should carefully review the text of such provisions and should
also consult with such holder's attorney. No further notice of the events giving
rise to dissenters' rights or any steps associated therewith will be furnished
to GFC stockholders, except as indicated above or otherwise required by law.
Any dissenting GFC stockholder who perfects such holder's right to be paid
the value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes.
See "Certain Federal Income Tax Consequences of the Merger."
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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, consummation of the Merger
is conditioned upon receipt by Regions and GFC of an opinion from Alston & Bird,
special counsel to Regions, concerning certain federal income tax consequences
of the proposed Merger under federal income tax law. Based upon representations
made by Regions and GFC, it is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Delaware
GCL and the South Carolina Act, the Merger will be a reorganization within the
meaning of Section 368(a) of the Code. GFC and Regions will each be "a party to
a reorganization" within the meaning of Section 368(b) of the Code.
(b) The stockholders of GFC will recognize no gain or loss upon the
exchange of their GFC Common Stock solely for shares of Regions Common Stock.
(c) The aggregate tax basis of the Regions Common Stock received by the
GFC stockholders in the Merger will, in each instance, be the same as the
aggregate tax basis of the GFC 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 GFC
stockholders will, in each instance, include the period during which the GFC
Common Stock surrendered in exchange therefor was held, provided that the GFC
Common Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to GFC 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 as provided in Section 302(a) of the Code.
(f) Where solely cash is received by a GFC stockholder in exchange for GFC
Common Stock pursuant to the exercise of dissenters' rights, such cash will be
treated as having been received in redemption of such holder's GFC Common Stock,
subject to the provisions and limitations of Section 302 of the Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. GFC 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, LOCAL, OR FOREIGN
LAW.
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ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests as that term is used pursuant to GAAP, for accounting and financial
reporting purposes. Under the pooling-of-interests method of accounting, assets,
liabilities, and equity of the acquired company are carried forward to the
combined entity at their stated amounts. See "Summary--Comparative Per Share
Data."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that Regions
will bear and pay the filing fees and printing costs in connection with this
Proxy Statement/Prospectus.
RESALES OF THE REGIONS COMMON STOCK
The Regions Common Stock to be issued to GFC 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, GFC (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.
The following persons have 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: Robert M. Austell, O.
Perry Earle, III, Frank H. Gibbes, III, H. Neel Hipp, Jr., Julian G. Hunt,
Gerald W. King, David A. Merline, and Betsy S. Terry.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of GFC Common Stock will be exchanging
their shares of a South Carolina corporation governed by the South Carolina Act
and GFC'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 GFC stockholders and those
of Regions stockholders. The differences deemed material by GFC 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 South Carolina Act and
the Delaware GCL as well as to Regions' Certificate and Bylaws and GFC's
Articles and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of Regions' Certificate and Bylaws described below under the
headings, "--Authorized Capital Stock," "--Amendment of Certificate of
Incorporation and Bylaws," "--Classified Board of Directors and Absence of
Cumulative Voting," "--Removal of Directors," "--Limitations on Director
Liability," "--Special Meetings of Stockholders," "--Actions by Stockholders
Without a Meeting," "--Stockholder Nominations and Proposals," and "--Mergers,
Consolidations, and Sales of Assets Generally," and the
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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.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 240,000,000
shares of Regions Common Stock, of which 136,820,461 shares were issued,
including 500,000 treasury shares as of September 30, 1997, and 5,000,000 shares
of preferred stock, none of which are outstanding. Regions' Board of Directors
may authorize the issuance of additional shares of Regions Common Stock or
preferred 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 capital 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. Regions has committed not to
issue shares of preferred stock for any anti-takeover purpose, including any
purpose to make a change in control of Regions more costly or difficult.
GFC. GFC's authorized capital stock consists of 2,000,000 shares of GFC
Common Stock, which is the only class of capital stock authorized and of which
796,022 shares were issued and outstanding as of the Record Date.
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Pursuant to the South Carolina Act, GFC's Board of Directors may authorize
the issuance of additional shares of GFC Common Stock without further action by
GFC's stockholders. GFC's Articles, as amended, do not provide the stockholders
of GFC with preemptive rights to purchase or subscribe to any unissued
authorized shares of GFC 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.
GFC. The South Carolina Act generally provides that a South Carolina
corporation's articles of incorporation may be amended by the affirmative vote
of at least two-thirds of the shares entitled to vote thereon, except that
articles of incorporation may provide for a higher or lower voting requirement,
but not less than a majority of the shares outstanding and entitled to vote.
GFC's Articles provide that those provisions in the Articles restricting certain
business combinations with a major stockholder may be amended only by the
affirmative vote of at least 80% of the outstanding voting shares and at least
80% of the voting shares held by stockholders other than a major stockholder.
Otherwise the Articles do not specify a higher or lower voting requirement for
amendment of the Articles than provided by the South Carolina Act.
The Articles also provide that the Board of Directors has the power to
adopt, alter, amend, or repeal the Bylaws, subject to the power the stockholders
to alter, amend, or repeal the Bylaws and to adopt new Bylaws. Under the South
Carolina Act the Bylaws may be adopted, altered, amended, or repealed by a
majority vote of the board of directors or the stockholders, as the case may be.
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
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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.
GFC. GFC's Articles generally provide for a classified board of directors
with three classes, 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.
GFC. Pursuant to GFC's Bylaws, a director may be removed only for cause at
a meeting of stockholders with respect to which notice of the purpose to remove
one or more directors has been given, by the affirmative vote of the holders of
a majority of the outstanding shares of GFC voting stock. The Bylaws define
"cause" to be limited to fraudulent or dishonest acts, or gross abuse of
authority, and further provide that cause may be established only after written
notice of specific charges and opportunity to meet and refute such charges.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of such director's duties, if the action is among
those as to which liability is limited. This provision may reduce the likelihood
of stockholder derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duties, even though such action, if successful, might have
benefitted Regions and its stockholders. The SEC has taken the position that
similar provisions added to other corporations' certificates of incorporation
would not protect those corporations' directors from liability for violations of
the federal securities laws.
GFC. The South Carolina Act provides that a director is not liable for any
action taken, or any failure to take any action, if such director performed the
duties of a director in compliance with the South Carolina Act.
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
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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.
GFC. GFC's Articles in conjunction with the South Carolina Act 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.
GFC. Under GFC's Bylaws, a special meeting of GFC stockholders may be
called at any time by the President, the Chairman of the Board, a majority of
the Board of Directors, or the holders of not less than 10% of the shares of GFC
Common Stock entitled to vote at such meeting.
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.
GFC. Under the South Carolina Act any action requiring or permitting
stockholder approval may be approved without a meeting by written consent of all
the stockholders entitled to vote on 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.
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GFC. GFC's Articles and Bylaws do not include any provisions governing or
restricting stockholder nominations and proposals.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Certificate generally requires the affirmative vote of the
holders of at least 75% of the outstanding voting stock of Regions to effect (i)
any merger or consolidation with or into any other corporation, or (ii) any sale
or lease of any substantial part of the assets of Regions to any party that
beneficially owns 5.0% or more of the outstanding shares of Regions voting
stock, unless the transaction was approved by Regions' Board of Directors before
the other party became a 5.0% beneficial owner or is approved by 75% or more of
the Board of Directors after the party becomes such a 5.0% beneficial owner. In
addition, the Delaware GCL generally requires the approval of a majority of the
outstanding voting stock of Regions to effect (i) any merger or consolidation
with or into any other corporation, (ii) any sale, lease, or exchange of all or
substantially all of Regions property and assets, or (iii) the dissolution of
Regions. However, pursuant to the Delaware GCL, Regions may enter into a merger
transaction without stockholder approval if (i) Regions is the surviving
corporation, (ii) the agreement of merger does not amend in any respect Regions'
Certificate, (iii) each share of Regions stock outstanding immediately prior to
the effective date of the merger is to be an identical outstanding or treasury
share of Regions after the effective date of the merger, and (iv) either no
shares of Regions Common Stock and no shares, securities, or obligations
convertible into such stock are to be issued or delivered under the plan of
merger, or the authorized unissued shares or the treasury shares of Regions
Common Stock to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities, or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of Regions Common Stock outstanding immediately prior to the effective
date of the merger.
GFC. The South Carolina Act provides that certain categories of corporate
transactions, including mergers, consolidations, share exchanges, and sale of
all or substantially all of a corporation's assets, must be approved by the
board of directors and recommended to the stockholders by the board of
directors, and approved by the holders of at least two-thirds of the
corporation's voting stock. A corporation's articles of incorporation may
provide for a higher or lower voting requirement, but not less than a majority
of the voting stock. The Articles to not provide for a higher or lower voting
requirement except with respect to certain business combinations with a major
stockholder. See "--Business Combinations with Certain Persons."
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),
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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.
GFC. The Articles provide that certain business combination transactions
with a major stockholder may not be consummated unless approved by the
affirmative vote of at least 80% of the outstanding voting shares and at least
80% of the voting shares held by stockholders other than a major stockholder.
Absent such provision, the South Carolina Act would require approval of at least
two-thirds of a corporation's voting stock. The Merger is not subject to such
provision in the Articles because Regions is not a major stockholder of GFC.
DISSENTERS' RIGHTS
Regions. The rights 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.
GFC. The rights of dissenting stockholders under South Carolina law are
generally similar to those afforded under the Delaware GCL. The applicable
provisions of the South Carolina Act are included in this Proxy
Statement/Prospectus and Appendix C, and are summarized under the caption
"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.
GFC. Pursuant to the South Carolina Act, upon written notice of a demand
to inspect corporate records, a stockholder is entitled to inspect specified
corporate records, including articles of incorporation and bylaws, minutes of
stockholder meetings and certain resolutions adopted at director meetings for
the preceding 10 years, stockholder list, stockholder communications, list of
directors and officers, and annual report to the department of revenue and
taxation. A holder of at least 1% of the outstanding stock is entitled to
examine tax returns. Upon written demonstration of a proper purpose, a
stockholder may be entitled to inspect other specified corporate records,
including accounting and stockholder records.
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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."
GFC. Pursuant to the South Carolina Act, a board of directors may from
time to time make distributions to its stockholders, subject to restrictions in
its articles of incorporation, provided that no distribution may be made if,
after giving it effect, (i) the corporation would not be able to pay its debts
as they become due in the usual course of business, or (ii) the corporation's
total assets would be less than its total liabilities plus (unless the articles
of incorporation permit otherwise) the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." GFC 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,
the high and low prices for GFC Common Stock and the cash dividends declared per
share of Regions Common Stock and GFC Common Stock for the indicated periods.
The prices indicated for GFC are based on prices quoted for GFC Common Stock on
the local over-the-counter market; however, for the indicated period there has
been only a very limited number of transactions and all such transactions have
involved limited numbers of shares in GFC Common Stock in the indicated periods,
and no assurance can be given that the indicated prices represent the actual
market value of the GFC Common Stock. The amounts indicated have been adjusted
to reflect a 2-for-1 stock split effected by Regions on June 13, 1997, and a
2-for-1 stock split effected by GFC on June 18, 1996.
39
<PAGE> 44
<TABLE>
<CAPTION>
REGIONS GFC
PRICE RANGE CASH DIVIDENDS PRICE RANGE CASH DIVIDENDS
DECLARED DECLARED
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter ................$ 18.25 $ 15.82 $ .165 $ 9.50 $ 8.75 $ --
Second Quarter................ 18.72 17.25 .165 10.00 8.75 .35
Third Quarter................. 20.63 18.50 .165 11.00 10.00 --
Fourth Quarter................ 22.44 19.82 .165 12.25 11.00 --
1996
First Quarter ................ 24.00 20.38 .175 14.50 12.25 --
Second Quarter ............... 24.19 21.13 .175 16.50 14.50 .50
Third Quarter................. 24.32 21.82 .175 21.00 17.00 --
Fourth Quarter................ 26.88 24.38 .175 25.00 21.00 --
1997
First Quarter................. 30.94 25.69 .20 25.50 25.00 --
Second Quarter................ 33.25 27.38 .20 25.50 24.75 .78
Third Quarter................. 39.13 32.06 .20 32.00 25.50 --
Fourth Quarter (through
December 19, 1997) ........
</TABLE>
On December 19, 1997, the last reported sale price of Regions Common Stock
as reported on the Nasdaq National Market, and the most recent quoted price of
GFC Common Stock on the local over-the-counter market, were $_______ and
$_______, respectively. On August 20, 1997, the last business day prior to
public announcement of the proposed Merger, the last reported sale price of
Regions Common Stock as reported on the Nasdaq National Market, and the last
reported price of GFC Common Stock, were $35.06 and $25.50, respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971. Although
Regions currently intends to continue to pay quarterly cash dividends on the
Regions Common Stock, there can be no assurance that Regions' dividend policy
will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly 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."
GFC's dividend policy is to pay an annual dividend equal to approximately
35% of the prior year's after-tax earnings of the company.
40
<PAGE> 45
GFC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Greenville Financial Corporation derives all of its income from the
Bank, its wholly-owned subsidiary.
The largest component of the Bank's results of operations is net
interest income. Net interest income represents the excess of interest and fees
on loans, investments and federal funds sold, less interest expense on deposits
and borrowings. Service charges and other fee income are also a major part of
the Bank's income. Expenses such as salaries and benefits, occupancy cost,
marketing cost, and the loan loss provision also affect net income.
INTEREST RATE SENSITIVITY
The relationship between rate-sensitive earning assets and
rate-sensitive interest bearing liabilities within given maturity ranges (known
as interest rate sensitivity) can have an impact on the stability of the Bank's
net interest income. Gap analysis is one method of assessing interest rate
sensitivity. Under this method, the difference is referred to as the asset
funding gap if earning assets exceed interest-sensitive liabilities, or the
liability funding gap if interest-sensitive liabilities exceed earning assets.
The Bank's Management and Board of Directors monitor interest rate
sensitivity by comparing actual dollar changes in net interest income to
budgeted goals. The following analysis indicates the rate sensitivity of
earning assets and interest-bearing liabilities at September 30, 1997.
INTEREST RATE SENSITIVITY ANALYSIS
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
---------------Repricing Within ---------------
0-90 Days 91-365 Days Over 1 year Total
(in thousands)
<S> <C> <C> <C> <C>
EARNING ASSETS:
Loans $57,785 $ 3,515 $18,997 $ 80,297
Securities and interest- 223 7,475 39,764 47,462
bearing time deposits with
other banks
Federal funds sold 729 -- -- 729
------- ------- ------- --------
Total earning assets 58,737 10,990 58,761 128,488
</TABLE>
41
<PAGE> 46
INTEREST-BEARING LIABILITIES:
<TABLE>
<S> <C> <C> <C> <C>
Interest-bearing deposits 63,082 35,772 15,364 114,218
Interest on FHLB notes -- -- 10,774 10,774
-------- -------- ------- --------
Total interest-bearing
liabilities 63,082 35,772 26,138 124,992
Interest-sensitivity gap $ (4,345) $(24,782) $32,623 $ 3,496
======== ======== ======= ========
Cumulative gap at
September 30, 1997 $ (4,345) $(29,127) $ 3,496
======== ======= =======
Cumulative gap at
December 31, 1996 $ 4,411 $(26,273) $10,884
======== ======= =======
</TABLE>
LIQUIDITY
The Bank manages liquidity to insure that there is sufficient cash
flow to satisfy demands for credit, deposit withdrawals, and other needs.
Traditional sources of liquidity include asset maturities and growth in core
deposits. Federal funds purchased and investment securities available for sale
represent other major sources of funding. The Bank has available from
correspondent banks, federal funds lines of credit totalling $6,000,000.
Liquidity has not been a problem, nor does management expect that it will be,
given the Bank's current liquidity position. The loan to asset ratio at
September 30, 1997 and 1996, was 59 % and 56 %, respectively.
CAPITAL RESOURCES
The Bank's capital is subject to regulatory requirements. Regulatory
agencies measure capital adequacy within a framework that makes capital
requirements sensitive to the risk profiles of individual banks. The Bank is
required to maintain, at a minimum, 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, 1997, the
Bank's Total Capital and Tier 1 Capital ratios were 12.42 % and 11.16 %,
respectively. The Bank's Leverage Ratio was 7.37 %. Accordingly, the Bank has
the capital levels to qualify as a "well capitalized" financial institution
under the prompt corrective action regulations.
<PAGE> 47
COMPARISON OF NINE MONTH AND THREE MONTH PERIODS ENDED SEPTEMBER 30,
1997 AND 1996
Net income for the quarter ended September 30, 1997 increased 25 % to
$565,000 over the same quarter of 1996. For the nine month period ended
September 30, 1997, net income increased 19 % to $1,540,000 over the same
period in 1996.
Net income growth in both the third quarter and first nine months of
the year can be attributed primarily to a more profitable asset allocation,
specifically more growth in outstanding loans, which is the Bank's highest
earning asset. Additionally, fee income was significantly higher. Net interest
income increased 13 % and fee income increased 14 % over the nine month period
ended September 30, 1996, while overhead expenses increased only 8 % for the
same period.
Compared to September 30, 1996, total assets as of September 30, 1997
increased $10,375,000 or 8 % to $136,044,000. Net loans, which represent 58 %
of assets, increased 14 %. At September 30, 1997, the reserve for loan losses
was 1.83 % of outstanding loans and liquid assets represented 39 % of total
assets.
DISCUSSION OF CHANGES IN FINANCIAL POSITION
COMPARISON OF DECEMBER 31, 1996 AND DECEMBER 31, 1995
Total assets increased $14,808,000, or 12 % from $123,408,000 at
December 31, 1995 to $138,216,000 at December 31, 1996.
The largest single asset category, net loans, increased $10,111,000,
or 16 % from December 31, 1995, resulting in total loans, net of the loan loss
allowance, of $71,876,000 at December 31, 1996. Strong increases were noted in
commercial loans and residential mortgage loans.
Loans are reviewed on a regular basis and are placed on nonaccrual
status when, in the opinion of management, the collection of additional
interest is doubtful. Generally, this occurs when either principal or interest
is 90 or more days past due. Interest accrued and unpaid at the time a loan is
placed on nonaccrual status is charged against interest income. Subsequent
payments are either applied to the outstanding principal balance or recorded as
interest income, depending on the assessment of the ultimate collectibility of
the loan. Real estate acquired by the Bank as a result of foreclosure is
classified as other real estate owned until such time as it is sold. When such
property is acquired, it is recorded at the lower of unpaid principal balance
of the
<PAGE> 48
related loan or its fair market value less estimated cost to sell. Any
writedown of the property subsequent to acquisiton is charged to operations.
The following table presents information concerning loans with risk
elements. Risk elements include (1) loans accounted for on a nonaccrual basis,
(2) accruing loans which are contractually past due 90 days or more as to
principal or interest payment, (3) loans not included above which are troubled
debt restructuring and (4) real estate acquired through foreclosure or
repossession.
NONPERFORMING ASSETS (IN THOUSANDS):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Loans accounted for on
a nonaccrual
basis $ 31 $ 9 $114 $ 17 $24 $155 $133
Accruing loans which are
contractually past due 90
days or more as to prin-
cipal or interest pay-
ments 552 21 38 138 70 60 56
Restructured loans (exclusive
of nonaccrual loans and
loans past due 90 days
or more) -- -- -- -- -- -- --
Real estate acquired through
foreclosure or repos-
session -- -- -- -- -- -- --
---- --- ---- ---- --- ---- ----
Total $583 $30 $152 $155 $94 $215 $189
==== === ==== ==== === ==== ====
</TABLE>
In making loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, and in the case of a secured loan, the quality of the security of the
loan. It is management's policy to maintain adequate allowances for estimated
losses on loans and real estate acquired. Such allowances are based on, among
other things, estimates of the historical loan loss experience, evaluation of
economic conditions in general and in various sectors of the
<PAGE> 49
Bank's client base, and periodic reviews of loan portfolio quality by Bank
management. Specific allowances will be provided for individual loans where
management considers the ultimate collection questionable after reviewing the
current status of loans which are contractually past due and considering the
net realizable value of the loan or guarantees, if applicable.
The following analysis sets forth information with respect to the
Bank's loan loss experience and loan loss allowance for the periods indicated.
ANALYSIS OF LOAN LOSS EXPERIENCE (IN THOUSANDS):
<TABLE>
<CAPTION>
September 30 Year ended December 31,
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Allowance for possible loan losses:
Balance, beginning of year $1,287 $ 998 $ 998 $ 761 $ 652
Loans charged off:
Real estate -- -- -- -- --
Consumer 97 18 18 7 --
Commercial -- 69 69 73 202
------ ------ ------ ----- ----
Total 97 87 87 80 202
Recoveries:
Real estate -- -- -- 31 --
Consumer 8 -- -- 8 --
Commercial -- 2 3 -- 70
------ ------ ------ ----- ----
Total 8 2 3 39 70
Net loans charged off (recovered):
Real estate -- -- -- (31) --
Consumer 89 18 18 (1) --
Commercial -- 67 66 73 132
------ ------ ------ ----- ----
Total 89 85 84 41 132
Provision charged to expense 269 280 373 278 241
------ ------ ------ ----- ----
Balance at end of period $1,467 $1,193 $1,287 $ 998 $761
====== ====== ====== ===== ====
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C. <C> <C> <C>
Net charge-offs (recoveries)
as percent of average loans
outstanding during the
period (1) .15% .10% .11% .07% .28%
===== ====== ===== ===== =====
</TABLE>
(1) Interim periods are annualized
The Company's securities portfolio increased to $52,241,000 at
December 31, 1996, an increase of 12 % from December 31, 1995. The Bank
classifies U. S. Treasuries and U. S. Government Agencies as available for sale
and all other investments as held to maturity. Growth over 1995 was primarily
due to purchases in the U. S. Agencies and Collateralized Mortgage Obligations
categories.
In keeping with the Bank's plan to offer longer term fixed rate loans
to clients, the Bank continued participation in the Federal Home Loan Bank's
(FHLB) match funded loan program. This participation, which required that FHLB
stock be owned in proportion to advances obtained through the FHLB, resulted in
an increase of $359,000 in FHLB capital stock. FHLB capital stock was
$1,278,000 at December 31, 1996, an increase of 39 % over the December 31, 1995
level.
Other assets increased to $413,000 at December 31, 1996, a 165 %
increase over $156,000 at December 31, 1995. This change was primarily due to
an increase in deferred tax benefits associated with tax and financial
reporting temporary timing differences.
Total deposits increased $9,786,000 , or 9 %. The increase resulted
primarily from a deposit promotion in the interest-bearing checking account
category of deposits.
Notes payable to Federal Home Loan Bank increased 42 % to $11,836,000
at December 31, 1996. The proceeds of these notes were used to assist the Bank
in providing longer term fixed rate loans to clients.
Shareholders' equity increased $1,393,000 from December 31, 1995 to
December 31, 1996. In 1996, additions to shareholders' equity included net
income for the period of $1,767,000 and the exercise of stock options in the
amount of $159,000 pursuant to the Company's stock option plan. Partially
offsetting these additions, were the declaration and payment of a cash dividend
of $394,000 and a net decrease of $141,000 in unrealized holding gain on
securities available for sale.
<PAGE> 51
DISCUSSION OF RESULTS OF OPERATIONS
COMPARISON OF PERIODS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
For the year ended December 31, 1996, the Company recorded net income
of $1,767,000, an increase of 32 % over prior year's earnings of $1,334,000.
This favorable increase in net income was due primarily to an increase in net
interest income, a substantial decrease in the FDIC insurance assessment and
management's containment of overhead costs.
INTEREST INCOME, INTEREST EXPENSE AND NET INTEREST INCOME
Net interest income, the amount by which interest earned on assets
exceeds the amount of interest expense on interest-bearing deposits and other
funds, is the largest component of the Company's income.
Net interest income increased $817,000, or 19 % to $5,132,000 for the
year ended December 31, 1996. This improvement resulted from more profitable
allocation of excess funds into the higher earning assets of loans and
securities. Interest income on loans increased 20 % from $5,701,000 to
$6,840,000 while interest income on securities increased 32 % to $3,081,000 in
1996. The average yield, including fees, on loans for 1996 was 10.06 % compared
to 10.38 % in 1995, while the average yield on securities was 6.23 % in 1996
compared to 5.64 % in 1995.
Interest expense on deposits increased 20 % to $4,227,000 in 1996
compared to $3,527,000 in 1995. This increase results primarily from the
Company's 1996 promotion on interest-bearing deposits. The average cost of
interest-bearing deposits was 3.79 % in 1996 compared to 3.69 % in 1995.
Interest expense on notes payable to Federal Home Loan Bank increased
to $703,000, or 83 % in 1996 due to the Company's increased utilization of the
FHLB loan program.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for possible loan losses for the year ended December 31,
1996 was $373,000 compared to $278,000 in 1995, a 34 % increase. At December
31, 1996, the Company's allowance for loan losses was 1.76 % of outstanding
loans. For 1996, the Company's net loan losses as a percentage of outstanding
loans at December 31, 1996 was .11 %, compared to .07 % of outstanding loans at
December 31, 1995. Nonperforming loans were .25 % of the loan portfolio in 1996
and in 1995.
<PAGE> 52
NONINTEREST INCOME
Noninterest income increased 35 % in 1996 to $563,000. There were no
losses on sale of securities in 1996 compared to losses of $83,000 in 1995.
Additionally, other income increased 76 % over 1995 primarily due to an
increase of $36,000 in fees on brokered loans.
NONINTEREST EXPENSES
Total noninterest expense increased $163,000, or only 7 % in 1996. This
modest increase reflects a 98 %, or $ $95,000 reduction in the Bank's FDIC
insurance assessment and management's continued emphasis in keeping overhead
costs down. The two largest components of noninterest expense include salaries
and employee benefits, which increased 10 % in 1996, and occupancy expense,
which increased 27 % in 1996, due primarily to an increase in depreciation
expense on furniture and equipment.
INCOME TAXES
As a result of the 35 % increase in taxable income in 1996, the
Company incurred income tax expense of $960,000 compared to income tax expense
of $689,000 in 1995. Tax rates were 35.2 % and 34.1 % in 1996 and 1995,
respectively.
COMPARISON OF PERIODS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
The Company's consolidated net income for the year ended December 31,
1995 was $1,334,000, a 51 % increase over 1994 net income of $881,000.
Contributing to the increase were an increase in the loan portfolio and
associated interest income, a reduction in the FDIC insurance assessment and
aggressive overhead management.
INTEREST INCOME, INTEREST EXPENSE AND NET INTEREST INCOME
The Company's net interest income increased 26 % to $4,315,000 for the
year ended December 31, 1995 compared to $3,413,000 for the year ended December
31, 1994. Total interest income increased $2,355,000 or 40 % to $8,267,000 in
1995 compared to $5,912,000 in 1994. The increase was attributed to a 40 %
increase in loan income and a 41 % increase in securities interest income.
Average yields on loans and securities were 10.37 % and 5.64 %, respectively in
1995 compared to 9.26 % and 5.62 % in, respectively 1994.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for possible loan losses was $278,000 in 1995 compared
to $241,000 in 1994, a 15 % increase. At December 31, 1995, the allowance for
loan losses was 1.59 % of outstanding loans compared to 1.61 % in 1994. Net
loan losses as a percentage of outstanding loans at December 31, 1995 were .07%
compared to .28 % at
<PAGE> 53
December 31, 1994. Nonperforming loans at December 31, 1995 were .25 % of
outstanding loans and at December 31, 1994, nonperforming loans were .20 % of
outstanding loans.
NONINTEREST INCOME
Noninterest income increased 19 %, or $65,000 in 1995. Although
service charge income in 1995 was 33 % above the 1994 level, loss on sale of
securities available for sale increased $69,000 in 1995. Proceeds from the sale
of these securities were reinvested in higher yielding securities. Interest
income on the reinvested funds more than offset these losses within the first
six months of investment.
NONINTEREST EXPENSES
Noninterest expenses increased $276,000, or 13 % in 1995. This modest
increase resulted from a 43 % decrease in the FDIC insurance premium and
minimal increase in salaries and employee benefits, occupancy expense and other
overhead due to continued management of overhead costs.
INCOME TAXES
As a result of the 51 % increase in net income in 1995, the Company
incurred income tax expense of $689,000 in 1995 compared to $487,000 in 1994.
Tax rates were 34.1 % and 35.6 % in 1995 and 1994, respectively.
<PAGE> 54
BUSINESS OF GFC
GENERAL
GFC is a bank holding company organized under the laws of the state of
South Carolina with its executive office located in Greenville, South Carolina.
GFC operates principally through the Bank, which is a national bank and which
provides a range of retail banking services through its one office in
Greenville, South Carolina. At September 30, 1997, GFC had total consolidated
assets of approximately $136.0 million, total consolidated deposits of
approximately $114.2 million, and total consolidated stockholders' equity of
approximately $10.1 million. GFC's office is located at 290 South Pleasantburg
Drive, Greenville, South Carolina, 29607 and its telephone number at such
address is (864) 233-7989.
BUSINESS AND PROPERTIES
GFC acts as the bank holding company for the Bank. The Bank accepts
customary types of demand and time deposits, makes installment and commercial
loans and offers deposit services and retirement accounts to its customers.
The Bank operates one office in Greenville which includes a drive-up
facility.
COMPETITION
GFC 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 GFC. At September 30, 1997, there were approximately
105 commercial bank branches, 20 savings bank branches, and 15 credit union
branches competing in Greenville County.
LEGAL PROCEEDINGS
GFC and the Bank are not parties to any material legal proceedings other
than ordinary routine litigation incidental to their business.
MANAGEMENT
The following table presents information about the directors and executive
officers of GFC and the Bank. Unless otherwise indicated, each person has sole
voting and investment powers over the indicated shares. Information relating to
beneficial ownership of the GFC is based upon "beneficial ownership" concepts
set forth in rules promulgated under the Exchange Act. Under such rules a person
is deemed to be a "beneficial owner" of a security if that person has or shares
"voting power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose or to
direct the disposition of such security. Under the rules, more than one person
may be deemed to be a beneficial owner of the same securities. A person is also
deemed to be a beneficial owner of any security of which that person has the
right to acquire beneficial ownership within 60 days from the record date. The
footnotes to the table indicate how many shares each person has the right to
acquire within 60 days of December 17, 1997. The shares of GFC which are
issuable to a person listed below upon exercise of the vested portion of the
outstanding options are assumed to be outstanding for the purpose of determining
the percentage of shares beneficially owned by that person.
42
<PAGE> 55
<TABLE>
<CAPTION>
PRESENT OCCUPATION POSITION AND DIRECTOR OR NUMBER OF SHARES
AND PRINCIPAL OFFICES HELD EXECUTIVE BENEFICIALLY OWNED
OCCUPATION FOR WITH GFC OFFICER AT THE RECORD DATE
NAME LAST FIVE YEARS AND BANK SINCE AND PERCENT OF CLASS
- --------------------- --------------- -------- ----- --------------------
<S> <C> <C> <C> <C> <C>
Robert M. Austell Banker Executive Vice President, 1984 50,250 (1) 6.0%
and Asst. Secretary-Bank
and GFC
O. Perry Earle, III Banker President and Director- 1984 110,250 (2) 13.4
Bank and GFC
Lewis J. Frampton Banker Executive Officer-Bank 1990 2,324 .3
Richard H. Furman Banker Sr. Vice President- 1989 17,250 (3) 2.1
Bank, Vice President-GFC
Frank H. Gibbes, III Attorney Director and Secretary- 1984 1,250 .2
Bank and GFC
Fred Gilmer Banker Executive Officer-Bank 1994 2,498 .3
H. Neel Hipp, Jr. Senior Officer Director-Bank and GFC 1984 13,874 (4) 1.7
Insurance Company
Julian G. Hunt Owner, Employee Director-Bank and GFC 1987 31,625 (5) 4.0
Benefits Firm
Gerald W. King Physician Director-Bank and GFC 1984 1,250 (6) .2
Paula S. King Banker Sr. Vice President and 1992 10,000 (7) 1.2
Controller-Bank,
Treasurer-GFC
David A. Merline Attorney Director-Bank and GFC 1987 1,500 .2
R. Arthur Seaver, Jr. Banker Sr. Vice President-Bank 1992 8,100 (8) 1.0
Vice President-GFC
Betsy S. Terry Community Volunteer Director-Bank and GFC 1987 1,750 .2
</TABLE>
- ---------
(1) Consists of 6,500 shares held directly by Mr. Austell and 43,750 shares
subject to options.
(2) Consists of 87,500 shares held directly by Mr. Earle and 22,750 shares
subject to options.
(3) Consists of 1,625 shares held directly by Mr. Furman and 15,625 shares
subject to options.
(4) Consists of 8,875 shares held directly by Mr. Hipp and 5,000 shares held by
H. Neel Hipp, Jr. Family Trust.
(5) Consists of 27,250 shares held directly by Mr. Hunt and 4,375 shares held
in a retirement account for Mr. Hunt's benefit.
(6) Consists of 1,250 shares held by First Union National Bank as trustee for
Trust Hematology and Oncology for the benefit of Gerald W. King.
(7) Consists of 10,000 shares subject to options.
(8) Consists of 1,100 shares held directly by Mr. Seaver and 7,000 shares
subject to options.
43
<PAGE> 56
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, 1997, were approximately $1,661,000.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF GFC
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of GFC Common Stock, as of the Record Date.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS (1)
- -------------- ------------------- ------------------------ ----------
<S> <C> <C> <C>
Common Stock O. Perry Earle, III 110,250 13.4 %
601 Coachman Drive
Fountain Inn, South Carolina
29644-9571
Common Stock Robert M. Austell 50,250 6.0
645 McDaniel Avenue
Greenville, South Carolina
29605
</TABLE>
- -------
(1) Includes options exercisable within 60 days from the Record Date. The shares
of GFC Common Stock which are issuable to the person listed upon exercise of the
vested portion of the outstanding options are assumed to be outstanding for the
purpose of determining the percentage of shares beneficially owned by that
person.
44
<PAGE> 57
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 435 banking offices located in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of September 30, 1997. At that date, Regions had
total consolidated assets of approximately $22.2 billion, total consolidated
deposits of approximately $17.6 billion and total consolidated stockholders'
equity of approximately $1.9 billion. Regions has banking operations 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.
The following table presents information about Regions' banking operations
in the states in which its subsidiary depository institutions operate, based on
September 30, 1997 information:
<TABLE>
<CAPTION>
Number of Total Total
Banking Offices Assets Deposits
--------------- ------ --------
(In millions)
<S> <C> <C> <C>
Alabama.......... 183 $8,869 $7,990
Florida.......... 45 1,593 1,498
Georgia.......... 107 3,998 3,489
Louisiana........ 75 2,295 2,167
Tennessee........ 25 526 458
Unallocated(1)... 4,171 2,000
</TABLE>
(1) Represents indirect mortgage loans, indirect auto loans, or credit card
loans of $2.5 billion, $1.5 billion, and $171 million, respectively and
negotiable certificates of deposit and certain trust and other deposits, which
in the aggregate approximate $2 billion.
Regions was organized under the laws of the state of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. In 1994, the
name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation. Regions' principal executive offices are located at 417 North 20th
Street, Birmingham, Alabama 35203, and its telephone number at such address is
(205) 326-7100.
Regions continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business combinations
involving cash, debt, or equity securities can be expected. Any future business
combination or series of business combinations that Regions might undertake may
be material, in terms of assets acquired or liabilities assumed, to Regions'
financial condition. Recent business combinations in the banking industry have
typically involved the payment of a premium over book and market values. This
practice could result in dilution of book value and net income per share for the
acquirer.
Additional information about Regions and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Available Information" and "Documents Incorporated by Reference."
RECENT DEVELOPMENTS
Recent Acquisitions. Since December 31, 1996, Regions has completed the
acquisitions of nine financial institutions (the "Recently Completed
Acquisitions"), certain aspects of which transactions are set forth in the
following table:
45
<PAGE> 58
<TABLE>
<CAPTION>
CONSIDERATION
-------------
APPROXIMATE
-----------
ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ------------- -------- ---- ---------
(In millions)
<S> <C> <C>
Florida First Bancorp, Inc., located in Panama $ 297 $ 40 Cash Purchase
City, Florida
Allied Bankshares, Inc., located in Thomson, 569 158 Regions Pooling
Georgia Common of
Stock Interests
West Carroll Bancshares, Inc., located in 127 37 Regions Pooling
Oak Grove, Louisiana Common of
Stock Interests
Gulf South Bancshares, Inc., located in Gretna, 55 10 Regions Pooling
Louisiana Common of
Stock Interests
First Mercantile National Bank, located in Longwood, 157 18 Cash Purchase
Florida
The New Iberia Bancorp, Inc., located in New Iberia, 313 65 Regions Pooling
Louisiana Common of
Stock Interests
First Bankshares, Inc., located in Hapeville, 127 20 Regions Pooling
Georgia Common of
Stock Interests
SB&T Corporation, located in Smyrna, 148 33 Regions Pooling
Georgia Common of
Stock Interests
GF Bancshares, Inc., located in Griffin, 97 19 Regions Purchase
Georgia --------- ------ Common
Stock
Totals $ 1,890 $ 400
========= ======
</TABLE>
- ---------------
(1) Calculated as of the date of consummation.
Other Pending Acquisitions. As of the date of this Proxy
Statement/Prospectus, Regions has pending five acquisitions in addition to
GFC, certain aspects of which transactions are set forth below:
46
<PAGE> 59
<TABLE>
<CAPTION>
CONSIDERATION
-------------
APPROXIMATE
-----------
ACCOUNTING
INSTITUTION ASSET SIZE VALUE(1) TYPE TREATMENT
----------- ---------- -------- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
PALFED, Inc., located in Aiken, South Carolina $ 665 $ 145 Regions Pooling
Common of
Stock Interests
First United Bancorporation, located in Anderson, South 292 80 Regions Pooling
Carolina Common of
Stock Interests
St. Mary Holding Corporation, located in Franklin, 113 31 Regions Pooling
Louisiana Common of
Stock Interests
Key Florida Bancorp, Inc., located in Bradenton, Florida 212 39 Regions Pooling
Common of
Stock Interests
First State Corporation, located in Albany, Georgia 540 161 Regions Pooling
Common of
Stock Interests
--------- ---
Totals $ 1,664 410
========= ===
</TABLE>
- ---------------
(1) Calculated as of the date of announcement of the transaction.
Consummation of the Other Pending Acquisitions is subject to the approval
of certain regulatory agencies, and of the stockholders of the institutions to
be acquired. Moreover, the closing of each transaction is subject to various
contractual conditions precedent. No assurance can be given that the conditions
precedent to consummating the transactions will be satisfied in a manner that
will result in their consummation.
If the Other Pending Acquisitions and Merger had been consummated on
September 30, 1997, Regions' total consolidated assets would have increased by
approximately $2.1 billion to approximately $24.3 billion; its total
consolidated deposits would have increased by approximately $1.8 million to
approximately $19.4 billion; and its total consolidated stockholders' equity
would have increased by approximately $171 million to approximately $2.0
billion.
47
<PAGE> 60
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 GFC. Additional information
is available in Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. See "Documents Incorporated by Reference."
GENERAL
Regions and GFC are both bank holding companies registered with the Federal
Reserve under the BHC Act. As such, Regions and GFC 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 had the
ability to "opt out" and prohibit interstate branching altogether. None of the
states in which the banking subsidiaries of Regions or GFC are located has
"opted out." Accordingly, Regions has the ability to consolidate all of its bank
subsidiaries into a single bank with interstate branches
The BHC Act generally prohibits Regions and GFC from engaging in activities
other than banking or managing or controlling banks or other permissible
subsidiaries and from acquiring or retaining direct or indirect control of any
company engaged in any activities other than those activities determined by the
Federal Reserve to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Federal Reserve must consider whether
48
<PAGE> 61
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 GFC 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 GFC (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 GFC are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and GFC, 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 GFC, as well as by Regions and
GFC 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." 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, 1997, under dividend restrictions imposed under federal
and state laws, the subsidiary depository institutions of Regions and GFC,
without obtaining governmental approvals, could declare
49
<PAGE> 62
aggregate dividends to Regions and GFC of approximately $138 million and $10
million respectively.
The payment of dividends by Regions and GFC 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, GFC, 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 GFC 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, 1997, Regions' consolidated Total Capital Ratio and its Tier 1
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
12.24% and 9.85%, respectively, and GFC's consolidated Total Capital and Tier 1
Capital Ratios were 12.42% and 11.16%, 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 GFC's respective Leverage Ratios at September 30, 1997,
were 7.35% and 7.37%. 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 GFC'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, 1997. Neither
Regions, GFC, nor any of their subsidiary depository institutions has been
advised by any federal banking agency of any specific minimum capital ratio
requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
50
<PAGE> 63
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 Reserve, the Comptroller of the Currency, 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' methodology for evaluating interest rate risk requires
banks with excessive interest rate risk exposure to hold additional amounts of
capital against such exposures. The OTS also includes 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 GFC 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 GFC may not be inclined to
provide it. In addition, any capital loans by a bank holding company to any of
its banking subsidiaries are subordinate in right of payment to deposits and to
certain other indebtedness of such banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company, but is subordinate to claims of
depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of Regions are subject to these
cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking or thrift affiliates, and a potential loss of
Regions' respective investments in such other subsidiary depository
institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized") and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a 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.
51
<PAGE> 64
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, 1997, all of the subsidiary depository institutions of
Regions and GFC 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 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.
Pursuant to the Deposit Insurance Funds Act of 1996, the FDIC has
implemented a special one-time assessment of approximately 65.7 basis points
(0.657%) on a depository institution's deposits insured by the
52
<PAGE> 65
Savings Association Insurance Fund ("SAIF") held as of March 31, 1995 (or
approximately 52.6 basis points on SAIF deposits acquired by banks in certain
qualifying transactions), and adopted revisions to the assessment rate schedules
that would generally eliminate the disparity between assessment rates applicable
to the deposits insured by the Bank Insurance Fund ("BIF") and the SAIF. The
revisions in the assessment rate schedules reduced assessment rates on
SAIF-insured deposits and would generally equalize BIF and SAIF assessment rates
by January, 2000. 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 as
compared to prior years, assuming no further changes in announced premium
assessment rates. 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.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 240,000,000 shares of Regions Common Stock,
of which 136,820,461 shares were issued, including 500,000 treasury shares, at
September 30, 1997, and 5,000,000 shares of preferred stock, none of which are
outstanding. No other class of stock is authorized.
Holders of Regions Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. The ability of Regions to pay dividends is affected by the ability of
its subsidiary institutions to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At September 30, 1997, under
such requirements and guidelines, Regions' subsidiary institutions had $138
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 1998. 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, 1997, for
consideration by Regions for possible inclusion in such proxy materials.
Proposals with respect to Regions' 1999 annual meeting of stockholders may be
submitted until the date specified in Regions' 1998 annual meeting proxy
statement.
EXPERTS
The consolidated financial statements of Regions, incorporated by reference
in this Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, for the periods indicated in their report thereon which is
included in the Annual Report to Stockholders which is incorporated by reference
in Regions' Annual Report on Form 10-K for the year ended December 31, 1996. The
financial statements audited by Ernst & Young LLP have been incorporated herein
by reference in reliance on their report given on their authority as experts in
accounting and auditing.
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<PAGE> 66
The consolidated financial statements of GFC, included in this Registration
Statement, have been audited by Elliott, Davis & Company L.L.P., independent
auditors, for the periods indicated in their report thereon which is included
herein. The financial statements audited by Elliott, Davis & Company L.L.P. have
been included herein in reliance on their report given on their authority as
experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville LLP,
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 December 19, 1997, attorneys in the law firm of Lange, Simpson,
Robinson & Somerville LLP owned an aggregate of 237,382 shares of Regions Common
Stock.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird LLP, Atlanta, Georgia.
54
<PAGE> 67
INDEX TO GFC FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Greenville Financial Corporation and Subsidiary
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of
December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the Years
Ended December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Consolidated Statements of Financial Condition
as of September 30, 1997 and 1996 (Unaudited). . . . . . . . . . . . . . . . . . . . . . . . F-19
Consolidated Statements of Income for the Three Months and
Nine Months Ended September 30, 1997 and 1996 (Unaudited) . . . . . . . . . . . . . . . . . F-20
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 (Unaudited) . . . . . . . . . . . . . . . . . F-21
Notes to Unaudited Consolidated Interim Financial Statements . . . . . . . . . . . . . . . . . F-22
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors and Shareholders
GREENVILLE FINANCIAL CORPORATION
Greenville, South Carolina
We have audited the accompanying consolidated balance sheets of
GREENVILLE FINANCIAL CORPORATION AND SUBSIDIARY as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of GREENVILLE
FINANCIAL CORPORATION AND SUBSIDIARY as of December 31, 1996 and 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Elliott, Davis & Company, LLP
January 10, 1997
F-2
<PAGE> 69
GREENVILLE FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks $ 4,159,185 $ 3,709,600
Federal funds sold 4,908,856 7,770,056
Interest-bearing time deposits with other banks 1,000,000 100,000
Securities - Note 2
Available for sale 29,377,310 25,964,457
Held to maturity
(market value $22,630,000 and $20,805,000) 22,863,904 20,785,393
Loans - net - Note 3 71,876,190 61,765,377
Property - at cost, less accumulated
depreciation - Note 4 1,232,065 1,171,535
Accrued interest receivable 1,107,812 1,066,407
Federal Home Loan Bank (FHLB)
capital stock - Note 5 1,278,200 919,500
Other assets 412,563 155,616
------------- -------------
TOTAL $ 138,216,085 $ 123,407,941
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits - Note 9 $ 116,424,298 $ 106,637,919
Notes payable to Federal Home Loan
Bank (FHLB) - Note 10 11,836,000 8,349,000
Accrued interest payable 410,989 463,891
Accrued expenses and other liabilities 486,785 291,688
------------- -------------
Total liabilities 129,158,072 115,742,498
------------- -------------
Commitments - Note 12
Shareholders' Equity - Notes 8, 14, and 15
Common stock - no par value,
authorized 2,000,000 shares, issued
790,022 and 381,011 shares 3,213,082 3,053,657
Retained earnings 5,861,359 4,487,495
Unrealized holding gain (loss) on securities
available for sale (16,428) 124,291
------------- -------------
Total shareholders' equity 9,058,013 7,665,443
------------- -------------
TOTAL $ 138,216,085 $ 123,407,941
============= =============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
F-3
<PAGE> 70
GREENVILLE FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $ 6,840,074 $ 5,700,790 $ 4,078,245
Investment securities 3,081,498 2,336,222 1,658,822
Federal funds sold 159,909 229,873 174,937
----------- ----------- -----------
Total interest income 10,081,481 8,266,885 5,912,004
----------- ----------- -----------
INTEREST EXPENSE
Deposits 4,226,875 3,526,838 2,241,850
Notes payable FHLB 703,025 383,706 256,750
Federal Funds purchased 19,753 41,317 886
----------- ----------- -----------
Total interest expense 4,949,653 3,951,861 2,499,486
----------- ----------- -----------
NET INTEREST INCOME 5,131,828 4,315,024 3,412,518
Provision for Possible Loan Losses 373,198 278,195 241,200
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,758,630 4,036,829 3,171,318
NONINTEREST INCOME
Service charges 468,119 446,121 335,035
Loss on sale of securities available for sale -- (82,898) (14,458)
Other 94,660 53,869 31,096
----------- ----------- -----------
562,779 417,092 351,673
----------- ----------- -----------
Subtotal 5,321,409 4,453,921 3,522,991
----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 1,633,677 1,479,676 1,260,338
Occupancy, office and equipment 229,016 180,071 146,354
Data processing 99,781 100,884 116,128
Insurance 22,347 121,295 187,594
Postage and supplies 124,101 114,461 102,048
Other 484,873 434,158 342,343
----------- ----------- -----------
Total noninterest expense 2,593,795 2,430,545 2,154,805
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,727,614 2,023,376 1,368,186
PROVISION FOR INCOME TAXES-Note 6 960,239 689,151 487,046
----------- ----------- -----------
NET INCOME $ 1,767,375 $ 1,334,225 $ 881,140
=========== =========== ===========
Net Income Per Common and Common Equivalent
Shares Outstanding - Note 14 $ 2.07 $ 1.67 $ 1.14
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
F-4
<PAGE> 71
GREENVILLE FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1996, 1995 and 1994
Unrealized
Holding Gain
(Loss) on
Securities Total
Common Retained Available Shareholders'
Shares Stock Earnings For Sale Equity
------ ----- -------- -------- ------
<S> <C> <C> <C> <C> <C>
1994
Balance, January 1, 1994, as originally reported 363,486 $ 2,904,281 $ 2,725,542 $ 27,347 $ 5,657,170
Shares issued from the 2 for 1 stock split-Note 14 363,486 -- -- -- --
------- ----------- ----------- ----------- -----------
Balance, January 1, 1994, as restated 726,972 2,904,281 2,725,542 27,347 5,657,170
Net income -- -- 881,140 -- 881,140
Cash dividend -- -- (189,381) -- (189,381)
Net change in unrealized holding loss
on securities available for sale, net
of taxes of $136,407 -- -- -- (231,688) (231,688)
Stock exercised pursuant to stock option plan 32,000 138,750 -- -- 138,750
Purchase and retirement of common stock (3,450) (24,474) -- -- (24,474)
------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 755,522 3,018,557 3,417,301 (204,341) 6,231,517
1995
Net income -- -- 1,334,225 -- 1,334,225
Cash dividend -- -- (264,031) -- (264,031)
Net change in unrealized holding loss
on securities available for sale, net
of taxes of $203,100 -- -- -- 328,632 328,632
Stock exercised pursuant to stock option plan 6,500 35,100 -- -- 35,100
------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 762,022 3,053,657 4,487,495 124,291 7,665,443
1996
Net income -- -- 1,767,375 -- 1,767,375
Cash dividend -- -- (393,511) -- (393,511)
Net change in unrealized holding gain on securities
available for sale, net of taxes of $74,003 -- -- -- (140,719) (140,719)
Stock exercised pursuant to stock option plan 28,000 159,425 -- -- 159,425
------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 790,022 $ 3,213,082 $ 5,861,359 $ (16,428) $ 9,058,013
======= =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
F-5
<PAGE> 72
GREENVILLE FINANCIAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,767,375 $ 1,334,225 $ 881,140
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 126,028 98,449 97,653
Loss on sale of securities available for sale -- 82,898 14,458
Gain on sale of property (7,241) -- (5,000)
Provision for possible loan losses 373,198 278,195 241,200
Deferred income tax benefit (110,461) (126,249) (45,050)
Increase in accrued interest receivable (41,405) (336,717) (231,623)
Increase in FHLB capital stock (358,700) (414,500) --
(Increase) decrease in other assets (256,948) 190,615 (330,958)
Increase (decrease) in accrued interest payable (52,902) 240,261 36,261
Increase (decrease)in accrued expenses and other liabilities 305,558 148,609 (139,706)
------------ ------------ ------------
Net cash provided by operating activities 1,744,502 1,495,786 518,375
------------ ------------ ------------
INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale -- 9,998,221 2,993,285
Proceeds from the maturity of securities held to maturity 5,271,678 4,665,983 2,995,188
Proceeds from the maturity of securities available for sale 12,923,717 4,500,000 1,500,000
Purchase of securities held to maturity (7,350,189) (27,286,348) (7,880,842)
Purchase of securities available for sale (16,477,288) (2,339,661) (12,900,900)
Net decrease (increase) in federal funds sold 2,861,200 (1,336,420) 2,066,364
Net (increase) decrease in interest-bearing time
deposits with other banks (900,000) 1,000,000 3,100,000
Net increase in loans (10,484,011) (15,700,904) (6,241,301)
Capital expenditures for property (186,558) (151,273) (83,114)
Proceeds from sale of property 7,241 -- 5,000
------------ ------------ ------------
Net cash used for investing activities (14,334,210) (26,650,402) (14,446,320)
------------ ------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 9,786,379 22,476,168 12,150,894
Increase in notes payable to FHLB 3,487,000 3,643,000 2,127,000
Proceeds from exercise of stock options 159,425 35,100 138,750
Purchases and retirement of common stock -- -- (24,474)
------------ ------------ ------------
Cash dividends paid (393,511) (264,031) (189,381)
------------ ------------ ------------
Net cash provided by financing activities 13,039,293 25,890,237 14,202,789
------------ ------------ ------------
NET INCREASE IN CASH AND DUE FROM BANKS 449,585 735,621 274,844
------------ ------------ ------------
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 3,709,600 2,973,979 2,699,135
------------ ------------ ------------
CASH AND DUE FROM BANKS, END OF YEAR $ 4,159,185 $ 3,709,600 $ 2,973,979
============ ============ ============
CASH PAID FOR
Interest $ 4,279,777 $ 3,711,600 $ 2,463,225
============ ============ ============
Income Taxes $ 998,147 $ 878,962 $ 656,411
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
F-6
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
The consolidated financial statements include the accounts of Greenville
Financial Corporation ("the Company") and its wholly-owned subsidiary,
Greenville National Bank ("the Bank"). All significant intercompany
balances and transactions have been eliminated. The Bank operates under a
national bank charter and provides full banking services to clients. The
Bank is subject to regulation by the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Corporation. The Company is
subject to regulation of the Federal Reserve Board.
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 amount of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
CONCENTRATIONS OF CREDIT RISK
The Company, through its subsidiary, makes loans to individuals and small
businesses located primarily in upstate South Carolina for various
personal and commercial purposes. The Company has a diversified loan
portfolio and the borrowers' ability to repay their loans is not dependent
upon any specific economic sector.
SECURITIES
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." Shareholders' equity has been restated in the
consolidated statement of changes in shareholders' equity to reflect the
effect of a change in an accounting principle. Adoption of the standard
had no effect on net income for 1995.
Debt securities are classified upon purchase as available for sale, held
to maturity or trading. Such assets classified as available for sale are
carried at market value. Unrealized holding gains or losses are reported
as a component of shareholders' equity net of deferred income taxes.
Securities classified as held to maturity are carried at cost, adjusted
for the amortization of premiums and the accretion of discounts. In order
to qualify as held to maturity, the Company must have the ability to hold
the securities to maturity. The Company has no trading securities. Gains
or losses on disposition of securities are based on the difference between
the net proceeds and the adjusted carrying amount of the securities sold,
using the specific identification method.
LOANS
Interest on loans is accrued and taken into income based upon the interest
method. The recognition of interest income is discontinued when, in
management's judgment, the interest is not collectible in the normal
course of business.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses charged to operating expense is the
estimated amount necessary to maintain the allowance at a level considered
adequate to provide for possible loan losses based on management's
evaluation of the loan portfolio, as well as prevailing and anticipated
economic conditions. Delinquent loans are charged against the allowance at
the time they are determined to be losses. Subsequent recoveries are
credited to the allowance. Management considers the year end allowance
appropriate and adequate to cover possible losses in the loan portfolio;
however, management's judgment is based upon a number of assumptions about
future events, which are believed to be reasonable, but which may or may
not prove valid. Thus, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that
additional increases in the allowance for loan losses will not be
required.
F-7
(Continued)
<PAGE> 74
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
The Company accounts for impaired loans in accordance with SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." This standard requires
that all creditors value loans at the loan's fair value if it is probable
that the creditor will be unable to collect all amounts due according to
the terms of the loan agreement. Fair value may be determined based upon
the present value of expected cash flows, market price of the loan, if
available, or value of the underlying collateral. Expected cash flows are
required to be discounted at the loan's effective interest rate. SFAS No.
114 was amended by SFAS No. 118 to allow a creditor to use existing
methods for recognizing interest income on an impaired loan and by
requiring additional disclosures about how a creditor recognizes interest
income on an impaired loan. When the ultimate collectibility of an
impaired loan's principal is in doubt, wholly or partially, all cash
receipts are applied to principal. When this doubt does not exist, cash
receipts are applied under the contractual terms of the loan agreement
first to principal then to interest income. Once the recorded principal
balance has been reduced to zero, future cash receipts are applied to
interest income, to the extent that any interest has been foregone.
Further cash receipts are recorded as recoveries of any amounts previously
charged off.
A loan is also considered impaired if its terms are modified in a troubled
debt restructuring. For these accruing impaired loans, cash receipts are
typically applied to principal and interest receivable in accordance with
the terms of the restructured loan agreement. Interest income is
recognized on these loans using the accrual method of accounting. As of
December 31, 1996 and 1995, the Company had no impaired loans.
NON-PERFORMING ASSETS
Non-performing assets include real estate acquired through foreclosure or
deed taken in lieu of foreclosure, and loans on non-accrual status. Loans
are placed on non-accrual status when, in the opinion of management, the
collection of additional interest is questionable. Thereafter no interest
is taken into income unless received in cash or until such time as the
borrower demonstrates the ability to pay principal and interest.
PROPERTY
Property is stated at cost less accumulated depreciation. Depreciation is
calculated on the straight-line method over the estimated useful lives of
the related assets. Maintenance, repairs and minor replacements are
expensed when incurred.
INCOME TAXES
Provision for income taxes includes deferred taxes on temporary
differences between the recognition of certain income and expense items
for tax and financial statement purposes. Income taxes are computed on the
liability method as prescribed in SFAS No. 109, "Accounting for Income
Taxes."
Valuation allowances are established to reduce deferred tax assets if it
is determined to be "more likely than not" that all or some portion of the
potential deferred tax asset will not be realized.
ADVERTISING EXPENSE
Advertising, promotional, and other business development costs are
generally expensed as incurred. External costs incurred in producing media
advertising are expensed the first time the advertising takes place.
External cost relating to direct mailing costs are expensed in the period
in which the direct mailings are sent. Advertising, promotional, and other
business development costs of 114,554 and 103,231 were included in the
Company's results of operations for 1996 and 1995 respectively.
STATEMENTS OF CASH FLOWS
In accordance with the provisions of SFAS No. 95, "Statement of Cash
Flows", cash and due from banks includes currency and coin and collection
items which are readily convertible to cash.
RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting standards that have been issued by the Financial Accounting
Standards Board that do not require adoption until a future date will have
no material impact on the financial statements upon adoption.
F-8
<PAGE> 75
NOTE 2 - SECURITIES
The composition and maturities of securities are as follows as of
December 31 (amounts in thousands):
<TABLE>
<CAPTION>
1996
--------------------------------
UNREALIZED HOLDING
AMORTIZED ------------------ MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury securities due:
Within one year $ 3,006 $ 24 $ -- $ 3,030
------- ------- ------- -------
U.S. Government Agencies due:
Within one year 500 -- -- 500
After one but within five years 23,905 48 92 23,861
After five but within six years 1,989 -- 3 1,986
------- ------- ------- -------
Total U.S. Government Agencies 26,394 48 95 26,347
------- ------- ------- -------
Total securities available for sale $29,400 $ 72 $ 95 $29,377
======= ======= ======= =======
SECURITIES HELD TO MATURITY
Collateralized mortgage obligations secured by
U.S. Government sponsored
agencies due:
Within one year $ 236 $ -- $ -- $ 236
After one but within five years 3,142 1 38 3,105
After five but within ten years 1,619 -- 6 1,613
After ten years 14,121 5 199 13,927
------- ------- ------- -------
Total collateralized mortgage obligations 19,118 6 243 18,881
------- ------- ------- -------
State, county and municipal securities due:
Within one year 251 -- -- 251
------- ------- ------- -------
Corporate Bonds due:
Within one year 1,444 3 -- 1,447
After one but within five years 2,031 9 9 2,031
------- ------- ------- -------
Total corporate bonds 3,475 12 9 3,478
------- ------- ------- -------
U. S. Treasury Mutual Funds due:
Within one year 20 -- -- 20
------- ------- ------- -------
Total securities held to maturity $22,864 $ 18 $ 252 $22,630
======= ======= ======= =======
1995
----------------------------------------
SECURITIES AVAILABLE FOR SALE
U. S. Treasury securities due:
Within one year $ 3,497 $ 10 $ -- $ 3,507
After one but within five years 3,021 75 -- 3,096
------- ------- ------- -------
Total U.S. Treasury securities 6,518 85 -- 6,603
------- ------- ------- -------
U.S. Government Agencies due:
Within one year 3,343 9 5 3,347
After one but within five years 15,908 174 68 16,014
------- ------- ------- -------
Total U.S. Government Agencies 19,251 183 73 19,361
------- ------- ------- -------
Total securities available for sale $25,769 $ 268 $ 73 $25,964
======= ======= ======= =======
SECURITIES HELD TO MATURITY
Collateralized mortgage obligations secured by
U.S. Government sponsored
agencies due:
Within one year $ 220 $ -- $ 1 $ 219
After one but within five years 14,304 51 113 14,242
After five but within eleven years 1,773 8 -- 1,781
------- ------- ------- -------
Total collateralized mortgage obligations 16,297 59 114 16,242
------- ------- ------- -------
State, county and municipal securities due:
Within one year 750 -- 1 749
After one but within five years 257 -- 1 256
------- ------- ------- -------
Total state, county and municipal
securities 1,007 -- 2 1,005
------- ------- ------- -------
Corporate Bonds due:
After one but within five years 3,461 79 2 3,538
------- ------- ------- -------
U. S. Treasury Mutual Funds due:
Within one year 20 -- -- 20
------- ------- ------- -------
Total securities held to maturity $20,785 $ 138 $ 118 $20,805
======= ======= ======= =======
</TABLE>
(Continued)
F-9
<PAGE> 76
NOTE 2 - SECURITIES, Continued
On December 7, 1995, the Bank transferred certain securities from
the held to maturity classification to the available for sale classification.
These securities had an amortized cost of $22,812,700 and an unrealized gain of
$155,430 on the date of transfer. This one-time reassessment of securities was
done in compliance with the "Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities," issued by the
Financial Accounting Standards Board.
Investment securities with an approximate market value of
$22,457,000 at December 31, 1996 and $16,569,000 at December 31, 1995 were
pledged to secure public deposits, advances from the Federal Home Loan Bank and
for other purposes.
NOTE 3 - LOANS
The Bank's loan portfolio at December 31, is summarized below:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Loans other than mortgage
Commercial $ 26,035,320 $ 23,023,007
Personal 5,086,091 3,915,360
Mortgage
Commercial 11,870,128 10,661,260
Residential 22,234,878 18,709,873
Construction 7,937,065 6,453,578
------------ ------------
Gross loans 73,163,482 62,763,078
Less allowance for possible loan losses 1,287,292 997,701
------------ ------------
Net loans $ 71,876,190 $ 61,765,377
============ ============
</TABLE>
Changes in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 997,701 $ 760,631 $ 651,585
Provision charged to operations 373,198 278,195 241,200
Loans charged off (86,294) (80,346) (201,657)
Recoveries on loans previously charged off 2,687 39,221 69,503
------------ ------------ ------------
Balance, end of year $ 1,287,292 $ 997,701 $ 760,631
============ ============ ============
</TABLE>
Variable-rate loans comprise approximately sixty-nine percent of
gross loans. At December 31, 1996 and 1995, loans included $114,403 and $42,345,
respectively, on which interest was not being accrued.
In the normal course of business, the Bank has made loans to certain
directors, officers, employees and their affiliates under terms consistent with
the Bank's normal lending policies. The unpaid principal balances of such loans
totaled approximately $1,575,000 at December 31, 1996 and $1,681,000 at December
31, 1995. During 1996, approximately $702,000 of new loans were made and
payments totaled approximately $808,000.
F-10
<PAGE> 77
NOTE 4 - PROPERTY
Property at December 31, is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Building $ 570,889 $ 565,750
Land 289,653 289,653
Furniture, fixtures and equipment 1,120,282 997,802
Automobiles 45,215 40,989
Construction in progress 36,005 --
---------- -----------
Total 2,062,044 1,894,194
Less accumulated depreciation 829,979 722,659
---------- -----------
Net property $1,232,065 $1,171,535
========== ==========
</TABLE>
Depreciation totaling $126,028, $98,449 and $97,653 was charged to
operations for the years ended December 31, 1996, 1995, and 1994 respectively.
The estimated useful lives for computing depreciation are forty years for
buildings, five to ten years for furniture and equipment and five years for
automobiles.
NOTE 5 - FEDERAL HOME LOAN BANK CAPITAL STOCK
The Bank, as a member institution of the Federal Home Loan Bank of
Atlanta, is required to own capital stock in the FHLB of Atlanta based generally
upon the balance of residential mortgage loans and FHLB advances. FHLB capital
stock is pledged along with securities to secure FHLB advances. No ready market
exists for this stock and it has no quoted market value. However, redemption of
this stock has historically been at par value. Dividends received on FHLB stock
amounted to $82,915, $48,933 and $33,670 in 1996, 1995, and 1994 respectively.
NOTE 6 - INCOME TAXES
A summary of the provision for income taxes is presented below and
includes tax deferrals which arise from temporary differences in the recognition
of certain revenue and expense items for tax and financial reporting purposes.
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income taxes currently payable
Federal $ 995,000 $ 757,000 $ 491,536
State 75,700 58,400 40,560
----------- ----------- -----------
1,070,700 815,400 532,096
----------- ----------- -----------
Deferred tax benefit
Loan losses (110,400) (68,740) (37,100)
Cash basis accounting -- (26,700) (26,700)
Depreciation 9,400 (2,900) 4,500
Other (9,461) (27,909) 14,250
----------- ----------- -----------
(110,461) (126,249) (45,050)
----------- ----------- -----------
Provision for income taxes $ 960,239 $ 689,151 $ 487,046
=========== =========== ===========
</TABLE>
(Continued)
F-11
<PAGE> 78
NOTE 6 - INCOME TAXES, Continued
Net deferred income tax assets totaling approximately $206,800 and
$31,800 are included in other assets at December 31, 1996 and 1995,
respectively. The sources and cumulative tax effects of each is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Unrealized holding loss (gain) on
securities available for sale $ 7,310 $ (66,693)
Depreciation (192,000) (182,600)
Loan losses 391,490 281,093
--------- ---------
206,800 31,800
Valuation allowance -- --
--------- ---------
$ 206,800 $ 31,800
========= =========
</TABLE>
NOTE 7 - RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the
Federal Reserve Bank based upon a percentage of deposits. The average amounts of
these reserve balances for the years ended December 31, 1996 and 1995 were
approximately $530,000 and $357,000, respectively.
NOTE 8 - STOCK OPTION COMPENSATION PLAN
The Company has a stock option compensation plan through which the
Board of Directors may grant stock options to officers and employees to purchase
common stock of the Company at prices not less than 100 percent of the fair
market value on the date of grant. The outstanding options become exercisable 25
percent annually commencing one year from date of grant and expire ten years
from the date of grant. The Company applies Accounting Principles Board (APB)
Opinion 25 and related Interpretations in accounting for the plan. Accordingly,
no compensation cost has been charged to operations. Had compensation cost for
the plan been determined based on the fair value at the grant dates for awards
under the plan consistent with the accounting method available under SFAS No.
123, "Accounting for Stock - Based Compensation", the Company's net income and
net income per common and common equivalent shares would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Net income
As reported $ 1,767,375 $ 1,334,225
Pro forma 1,750,734 1,334,225
Net income per common and common equivalent shares
As reported $ 2.07 $ 1.67
Pro forma 2.05 1.67
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black -Scholes option - pricing model with the following weighted -
average assumptions for grants in 1996 and 1995: dividend yield of 4 percent,
expected volatility of 13 percent, risk-free interest rate of 6.5 percent and
expected lives of 5 and 10 years.
(Continued)
F-12
<PAGE> 79
NOTE 8 - STOCK OPTION COMPENSATION PLAN, Continued
A summary of the status of the plan as of December 31, 1996 and
1995, and changes during the years ending on those dates is presented below (all
shares have been adjusted for the 2 for 1 stock split in 1996):
<TABLE>
<CAPTION>
1996 1995
------------------------ -----------------------------
Weighted- Weighted-
average average
Shares exercise price Shares exercise price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 138,750 $ 7.48 98,750 $ 7.10
Granted 8,000 12.50 46,500 8.75
Exercised (28,000) 6.85 (6,500) 10.80
Forfeited or expired -- -- -- --
-------- --------
Outstanding at end of year 118,750 7.96 138,750 7.48
======== ========
Options exercisable at year-end 74,375 84,813
Weighted - average fair value of options
granted during the year $ 2.06 $ 1.43
Shares available for grant 7,750
</TABLE>
The following table summarizes information at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------- ------------------------
Weighted-
average Weighted- Weighted-
Range of remaining average average
exercise Number contractual exercise Number exercise
prices outstanding life price exercisable price
- ---------- ----------- ------------ ---------- ----------- ----------
<C> <C> <C> <C> <C> <C>
$ 5.60 to $7.00 64,250 3.7 years $ 6.83 62,750 $6.83
8.75 46,500 8.1 8.75 11,625 8.75
12.50 8,000 9.1 12.50 - -
------- ------
118,750 74,375
======= ======
</TABLE>
NOTE 9 - DEPOSITS
Deposits at December 31, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Demand (noninterest-bearing) $ 12,661,272 $ 11,987,741
Demand (interest-bearing) and savings 61,373,732 52,666,550
Time
$100,000 and over 13,398,691 13,070,648
Under $100,000 28,990,603 28,912,980
------------ -----------
Total $116,424,298 $106,637,919
============ ============
</TABLE>
At December 31, 1996 and 1995 the average of time deposits of
$100,000 or more was approximately $133,000 and $128,000, respectively.
Scheduled maturities of time deposits at December 31, 1996 are $40,233,141 in
1997, $1,855,601 in 1998 and $300,552 in 1999.
F-13
<PAGE> 80
NOTE 10 - NOTES PAYABLE TO FEDERAL HOME LOAN BANK
At December 31, 1996 and 1995 the Bank had various notes payable
totaling $11,836,000 and $8,349,000, respectively, to the Federal Home Loan
Bank. The proceeds of these notes were used to assist the Bank in providing
longer term loans to its clients. Additional borrowings under similar terms are
available by pledging additional collateral and purchasing additional stock in
the FHLB. Interest rates on these borrowings ranged from 5.15 percent to 8.11
percent. The notes are collateralized by investment securities.
Minimum required principal payments at December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1998 $ 788,000
1999 1,516,000
2000 3,783,000
2001 3,384,000
2002 and thereafter 2,365,000
-----------
$11,836,000
===========
</TABLE>
NOTE 11 - UNUSED LINES OF CREDIT
At December 31, 1996, the Bank had unused short-term lines of
credit to purchase Federal Funds totaling $6,000,000 from unrelated banks. These
lines of credit are available on a one to seven day basis for general corporate
purposes of the Bank. All of the lenders have reserved the right to withdraw
these lines at their option.
NOTE 12 - FINANCIAL INSTRUMENTS AND COMMITMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include available credit on credit lines,
commitments to extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the statements of financial position. The contract
amounts of those instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
<TABLE>
<CAPTION>
Financial instruments whose contract amounts Contract
represent credit risk at December 31, 1996: Amount
-----------
<S> <C>
Commitments to extend credit $23,391,202
===========
Standby letters of credit $ 378,997
===========
</TABLE>
Commitments to extend credit are agreements to lend as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation.
The Bank has entered into a construction contract for the expansion
of its building. The contract, amounting to approximately $650,000, will be
completed during 1997.
The Company is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel, believes
that the liabilities, if any, arising from such litigation and claims will not
be material to the Company's financial positon.
F-14
<PAGE> 81
NOTE 13 - EMPLOYEE BENEFIT PLAN
The Bank maintains the Greenville National Bank 401(k) Profit Sharing
Plan for all eligible employees. Upon ongoing approval of the Board of
Directors, the Bank matches employee contributions equal to twenty-five percent
of such contributions subject to certain adjustments and limitations. For the
years ended December 31, 1996, 1995 and 1994 contributions to the plan of
$111,796, $79,702, and $57,108 respectively, were charged to operations.
NOTE 14 - COMMON STOCK AND EARNINGS PER SHARE
Primary earnings per share amounts are computed based on the weighted
average number of shares outstanding plus the shares that would be outstanding
assuming exercise of dilutive stock options, all of which are considered to be
common stock equivalents. The number of shares that would be issued from the
exercise of stock options has been reduced by the number of shares that could
have been purchased from the proceeds at the average market price of the
Company's stock. On June 18, 1996, the Board of Directors approved a 2 for 1
stock split which was distributed August 9, 1996. All share and per share
amounts have been adjusted to reflect the stock split. Weighted average common
and common equivalent shares with their dilutive effect were computed as
follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Average common shares outstanding 787,522 756,606
Average common share equivalents 67,291 39,834
------- -------
Totals 854,813 796,440
======= =======
</TABLE>
NOTE 15 - RESTRICTION ON DIVIDENDS
The ability of the Company to pay cash dividends is dependent upon
receiving cash in the form of dividends from the Bank. Federal banking
regulations restrict the amount of dividends that can be paid and such dividends
are payable only from the retained earnings of the Bank. At December 31, 1996
the Bank's retained earnings were $6,232,285.
NOTE 16 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital to risk-weighted assets, and of
Tier I capital to average assets. Management believes, as of December 31, 1996,
that the Bank meets all capital adequacy requirements to which it is subject.
(Continued)
F-15
<PAGE> 82
NOTE 16 - REGULATORY MATTERS, Continued
As of December 31, 1996, the most recent notification from the
Office of the Comptroller of the Currency categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. There
are no conditions or events since that notification that management believes
have changed the institution's category. The Bank's actual capital amounts and
ratios and minimum regulatory amounts and ratios are presented as follows:
<TABLE>
<CAPTION>
To be well capitalized
For capital under prompt corrective
adequacy purposes action provisions
----------------- -----------------------
Actual Minimum Minimum
------------------- ------------------ ----------------------
Amount Ratio Amount Ratio Amount Ratio
-------- ------ --------- ------- --------- -----------
(AMOUNTS IN $000)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital (to risk
weighted assets) $10,138 10.91% $ 7,434 8.0% $ 9,293 10.0%
Tier I Capital (to risk
weighted assets) 8,975 9.66 3,717 4.0 5,576 6.0
Tier I Capital (to average
assets) 8,975 6.71 5,353 4.0 6,691 5.0
AS OF DECEMBER 31, 1995
Total Capital (to risk
weighted assets) 8,452 11.25 6,010 8.0 7,513 10.0
Tier I Capital (to risk
weighted assets) 7,454 9.94 3,005 4.0 4,508 6.0
Tier I Capital (to average
assets) 7,454 6.36 4,688 4.0 5,860 5.0
</TABLE>
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of fair value information, whether or not recognized in the
statement of financial position, when it is practical to estimate the fair
value. SFAS 107 defines a financial instrument as cash, evidence of an ownership
interest in an entity or contractual obligations which require the exchange of
cash or other financial instruments. Certain items are specifically excluded
from the disclosure requirements, including the company's common stock, property
and other assets and liabilities.
Fair value approximates book value for the following financial
instruments due to the short-term nature of the instrument: cash and due from
banks, federal funds sold and interest-bearing time deposits with other banks.
Fair value for variable rate loans that reprice frequently and for
loans that mature in less than one year is based on the carrying value. Fair
value for mortgage loans, personal loans and all other loans (primarily
commercial) is based on the discounted present value of the estimated future
cash flows. Discount rates used in these computations approximate the rates
currently offered for similar loans of comparable terms and credit quality.
(Continued)
F-16
<PAGE> 83
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued
Fair value for demand deposit accounts and interest-bearing accounts
with no fixed maturity date is equal to the carrying value. Certificate of
deposit accounts maturing within one year are valued at their carrying value.
Certificate of deposit accounts maturing after one year are estimated by
discounting cash flows from expected maturities using current interest rates on
similar instruments.
Fair value for long-term debt is based on discounted cash flows
using the Company's current incremental borrowing rate. Investment securities
are valued using quoted market prices. Fair value for the Company's
off-balance-sheet financial instruments is based on the discounted present value
of the estimated future cash flows. Discount rates used in these computations
approximate rates currently offered for similar loans of comparable terms and
credit quality.
The Company has used management's best estimate of fair value based
on the above assumptions. Thus, the fair values presented may not be the amounts
which could be realized in an immediate sale or settlement of the instrument. In
addition, any income taxes or other expenses which would be incurred in an
actual sale or settlement are not taken into consideration in the fair values
presented.
The estimated fair values of the Company's fiancial instruments are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1996 1995
-------------------------------- -------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks $ 4,159,185 $ 4,159,185 $ 3,709,600 $ 3,709,600
Federal funds sold 4,908,856 4,908,856 7,770,056 7,770,056
Interest-bearing time deposits 1,000,000 1,000,000 100,000 100,000
Securities available for sale 29,377,310 29,377,310 25,964,457 25,964,457
Securities held to maturity 22,863,904 22,630,000 20,785,393 20,805,000
Loans receivable 73,163,482 72,543,074 62,763,078 62,275,046
FINANCIAL LIABILITIES:
Deposit liabilities 116,424,298 116,291,698 106,637,919 106,644,081
Notes payable to Federal Home Loan Bank 11,836,000 11,719,273 8,349,000 8,380,776
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
Commitments to extend credit 23,391,202 23,311,015 16,710,958 16,343,000
Standby letters of credit 378,977 378,977 202,283 202,283
</TABLE>
NOTE 18 - CONDENSED FINANCIAL INFORMATION
Following is condensed financial information of Greenville Financial
Corporation (parent company only):
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash $ 90,689 $ 74,650
Investment in bank subsidiary 8,958,476 7,578,407
Organization costs - net 8,848 12,386
---------- ----------
$9,058,013 $7,665,443
========== ==========
</TABLE>
(Continued)
F-17
<PAGE> 84
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------------
1996 1995 1994
----------- ---------- ---------
<S> <C> <C> <C>
INCOME
Dividends - Bank subsidiary $ 250,000 $ 264,031 110,000
Other income - - $ 1,123
----------- ----------- ----------
250,000 264,031 111,123
EXPENSE
Amortization 3,413 3,137 3,539
----------- ----------- ----------
Income before undistributed net income of bank subsidiary 246,587 260,894 107,584
EQUITY IN UNDISTRIBUTED NET INCOME OF BANK SUBSIDIARY 1,520,788 1,073,331 773,556
----------- ----------- ----------
Net income $ 1,767,375 $ 1,334,225 881,140
=========== =========== ==========
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended
December 31,
--------------------------------------
1996 1995 1994
----------- ----------- ---------
OPERATING ACTIVITIES
Net income $ 1,767,375 $ 1,334,225 881,140
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed net income of bank subsidiary (1,520,788) (1,073,331) (773,556)
Amortization 3,413 3,137 3,539
Other 125 402 -
----------- ----------- ---------
Net cash provided by operating activities 250,125 264,433 111,123
----------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 159,425 35,100 138,750
Treasury stock purchases - - (24,474)
Dividends paid (393,511) (264,433) (189,381)
----------- ----------- ---------
Net cash used for financing activities (234,086) (229,333) (75,105)
----------- ----------- ---------
Change in cash 16,039 35,100 36,018
CASH AT BEGINNING OF YEAR 74,650 39,550 3,532
----------- ----------- ---------
CASH AT END OF YEAR $ 90,689 $ 74,650 39,550
=========== =========== =========
</TABLE>
F-18
<PAGE> 85
GREENVILLE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CONDITION (UNAUDITED)
SEPTEMBER 30, 1997 AND 1996
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,753 $ 4,124
Federal funds sold 729 1,317
Interest-bearing time deposits with other banks 1,000 1,000
Securities
Available for sale 25,943 25,586
Held to maturity
(market value $20,439 and $19,797) 20,519 20,668
Loans - net 78,830 69,404
Property - at cost, less accumulated
depreciation 1,734 1,247
Accrued interest receivable 1,044 912
Federal Home Loan Bank (FHLB)
capital stock 1,278 1,219
Other assets 214 192
--------- ---------
TOTAL $ 136,044 $ 125,669
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 114,218 $ 105,087
Notes payable to Federal Home Loan
Bank (FHLB) 10,774 11,289
Accrued interest payable 415 391
Accrued expenses and other liabilities 542 466
--------- ---------
Total liabilities 125,949 117,233
--------- ---------
Commitments
Shareholders' Equity
Common stock - no par value, authorized
2,000,000 shares, issued 796,022 and
360,386 shares 3,247 3,213
Retained earnings 6,839 5,372
Unrealized holding gain (loss) on securities
available for sale 9 (149)
--------- ---------
Total shareholders' equity 10,095 8,436
--------- ---------
TOTAL $ 136,044 $ 125,669
========= =========
</TABLE>
F-19
<PAGE> 86
GREENVILLE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fees) $2,006 $1,747 $5,715 $5,004
Investment securities 758 757 2,371 2,286
Federal Funds Sold 16 46 42 107
------ ------ ------ ------
Total interest income 2,780 2,550 8,128 7,397
------ ------ ------ ------
INTEREST EXPENSE
Deposits 1,079 1,020 3,264 3,131
Notes payable FHLB 191 190 587 504
Federal Funds purchased 12 6 45 19
------ ------ ------ ------
Total interest expense 1,282 1,216 3,896 3,654
------ ------ ------ ------
NET INTEREST INCOME 1,498 1,334 4,232 3,743
Provision for Possible Loan Losses 90 93 269 280
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,408 1,241 3,963 3,463
NONINTEREST INCOME
Service charges 99 85 305 251
Loss on sale of securities available for sale -- -- -- --
Other 70 30 248 233
------ ------ ------ ------
169 115 553 484
------ ------ ------ ------
Subtotal 1,577 1,356 4,516 3,947
------ ------ ------ ------
NONINTEREST EXPENSES
Salaries and employee benefits 456 405 1,401 1,242
Occupancy, office and equipment 54 64 164 172
Data processing 31 18 99 55
Insurance 7 5 20 18
Postage and supplies 24 32 82 96
Other 122 136 343 366
------ ------ ------ ------
Total noninterest expense 694 660 2,109 1,949
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 883 696 2,407 1,998
PROVISION FOR INCOME TAXES 318 244 867 700
------ ------ ------ ------
NET INCOME $ 565 $ 452 $1,540 $1,298
====== ====== ====== ======
Net Income Per Common and Common Equivalent
Shares Outstanding $ 0.64 $ 0.51 $ 1.73 $ 1.59
====== ====== ====== ======
</TABLE>
F-20
<PAGE> 87
GREENVILLE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(In thousands)
<TABLE>
<CAPTION>
Nine months ended September 30
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,540 $ 1,298
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 106 85
Loss on sale of securities available for sale --
Gain on sale of property --
Provision for possible loan losses 269 280
Deferred income tax benefit 238 --
(Increase) decrease in accrued interest receivable 64 154
Increase in FHLB capital stock -- (307)
(Increase) decrease in other assets 11 (36)
Increase (decrease) in accrued interest payable 4 (73)
Increase (decrease)in accrued expenses and other liabilities 55 174
-------- --------
Net cash provided by operating activities 2,287 1,575
-------- --------
INVESTING ACTIVITIES
Proceeds from the sale of securities available for sale 1,438
Proceeds from the maturity of securities held to maturity 2,354 7,467
Proceeds from the maturity of securities available for sale 9,500 16,855
Purchase of securities held to maturity -- (7,350)
Purchase of securities available for sale (7,479) (16,761)
Net decrease (increase) in federal funds sold 4,180 6,453
Net (increase) decrease in interest-bearing time
deposits with other banks -- (900)
Net increase in loans (7,223) (7,919)
Capital expenditures for property (608) (160)
-------- --------
Net cash used for investing activities 2,162 (2,315)
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in deposits (2,206) (1,551)
Increase (decrease) in notes payable to FHLB (1,062) 2,940
Proceeds from exercise of stock options 34 159
Cash dividends paid (621) (394)
-------- --------
Net cash provided by financing activities (3,855) 1,154
-------- --------
NET INCREASE IN CASH AND DUE FROM BANKS 594 414
-------- --------
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 4,159 3,710
-------- --------
CASH AND DUE FROM BANKS, END OF YEAR $ 4,753 $ 4,124
======== ========
CASH PAID FOR
Interest $ 3,892 $ 3,728
======== ========
Income Taxes $ 828 $ 749
======== ========
</TABLE>
F-21
<PAGE> 88
GREENVILLE FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed by Greenville Financial Corporation
and the methods of applying principles conform with generally accepted
accounting principles consistently applied and generally practiced
within the banking industry
The consolidated financial statements include the accounts of
Greenville Financial Corporation and its wholly-owned subsidiary,
Greenville National Bank. All significant intercompany transactions and
balances have been eliminated in consolidation.
The accompanying Unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the entire year. For
further information, refer to the consolidated financial statements and
notes thereto of Greenville Financial Corporation and subsidiary for
the three years ended December 31, 1996, included elsewhere herein.
PROPOSED MERGER
On September 4, 1997, the Company entered into an agreement and plan of
reorganization with Regions Financial Corporation, a bank holding
company with its principal office in Birmingham, Alabama, pursuant to
which the Company will merge with and into Regions. The proposed merger
is subject to various conditions, including approval by the
shareholders of the Company and by certain regulatory agencies. The
agreement contemplates that the shareholders of the Company will
receive approximately 1.2 shares of Regions common stock for each share
of Greenville Financial Corporation stock, subject to adjustment under
certain circumstances.
ACCOUNTING CONSIDERATIONS
In June, 1996, Financial Accounting Standards Board ("FASB") issued
SFAS No. 125 which provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control. SFAS No. 125 distinguishes transfers
of financial assets that are sales from transfers that are secured
borrowings. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996, and is to be applied prospectively. The Company
anticipates that adoption of this standard will not have a material
effect on earnings per share.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share" which is effective for annual
and interim periods ending after December 15, 1997. It supersedes the
presentation of primary earnings per share with a presentation of basic
earnings per share which does not consider the effect of common stock
equivalents. The computation of diluted earnings per share, which gives
effect to all dilutive potential common shares that were outstanding
during the period, is consistent with the computation of fully diluted
earnings per share per Accounting Principles Board Opinion No. 15. The
adoption of this standard is not expected to have a material effect on
the Company's earnings per share.
F-22
<PAGE> 89
In June, 1997, FASB issued SFAS No. 130 "Reporting Comprehensive
Income" which is effective for annual and interim periods ending after
December 15, 1997. This statement requires that all items that are
required to be recognized under accounting standards as comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements.
In June, 1997, FASB issued SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information" which is effective for annual
and interim periods ending after December 15, 1997. This statement
establishes standards for the method that public entities report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about product and
services, geographical areas and major customers. The adoption of this
standard is not expected to have a material effect on the Company's
financial reporting.
F-23
<PAGE> 90
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
GREENVILLE FINANCIAL CORPORATION
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF SEPTEMBER 4, 1997
A-1
<PAGE> 91
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties............................................................. A-5
Preamble............................................................ A-5
ARTICLE ONE -- TRANSACTIONS AND TERMS OF MERGER..................... A-5
1.1 Merger...................................................... A-5
1.2 Time and Place of Closing................................... A-5
1.3 Effective Time.............................................. A-5
ARTICLE TWO -- TERMS OF MERGER...................................... A-6
2.1 Certificate of Incorporation................................ A-6
2.2 Bylaws...................................................... A-6
2.3 Directors and Officers...................................... A-6
ARTICLE THREE -- MANNER OF CONVERTING SHARES........................ A-6
3.1 Conversion of Shares........................................ A-6
3.2 Anti-Dilution Provisions.................................... A-6
3.3 Shares Held by GFC or Regions............................... A-6
3.4 Dissenting Stockholders..................................... A-6
3.5 Fractional Shares........................................... A-7
3.6 Conversion of Stock Options; Restricted Stock............... A-7
ARTICLE FOUR -- EXCHANGE OF SHARES.................................. A-7
4.1 Exchange Procedures......................................... A-7
4.2 Rights of Former GFC Stockholders........................... A-8
ARTICLE FIVE -- REPRESENTATIONS AND WARRANTIES OF GFC............... A-8
5.1 Organization, Standing, and Power........................... A-8
5.2 Authority; No Breach By Agreement........................... A-9
5.3 Capital Stock............................................... A-9
5.4 GFC Subsidiaries............................................ A-9
5.5 Financial Statements........................................ A-10
5.6 Absence of Undisclosed Liabilities.......................... A-10
5.7 Absence of Certain Changes or Events........................ A-10
5.8 Tax Matters................................................. A-10
5.9 Assets...................................................... A-11
5.10 Environmental Matters....................................... A-11
5.11 Compliance With Laws........................................ A-12
5.12 Labor Relations............................................. A-13
5.13 Employee Benefit Plans...................................... A-13
5.14 Material Contracts.......................................... A-14
5.15 Legal Proceedings........................................... A-15
5.16 Statements True and Correct................................. A-15
5.17 Accounting, Tax, and Regulatory Matters..................... A-15
5.18 Articles of Incorporation Provisions........................ A-15
5.19 Support Agreements.......................................... A-15
5.20 Derivatives Contracts....................................... A-15
5.21 Year 2000................................................... A-16
ARTICLE SIX -- REPRESENTATIONS AND WARRANTIES OF REGIONS............ A-16
6.1 Organization, Standing, and Power........................... A-16
6.2 Authority; No Breach by Agreement........................... A-16
6.3 Capital Stock............................................... A-16
6.4 SEC Filings; Financial Statements........................... A-17
6.5 Absence of Undisclosed Liabilities.......................... A-17
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
6.6 Absence of Certain Changes or Events........................ A-17
6.7 Compliance With Laws........................................ A-17
6.8 Legal Proceedings........................................... A-18
6.9 Statements True and Correct................................. A-18
6.10 Accounting, Tax, and Regulatory Matters..................... A-18
ARTICLE SEVEN -- CONDUCT OF BUSINESS PENDING CONSUMMATION........... A-19
7.1 Covenants of Both Parties................................... A-19
7.2 Covenants of GFC............................................ A-19
7.3 Covenants of Regions........................................ A-20
7.4 Adverse Changes in Condition................................ A-20
7.5 Reports..................................................... A-20
ARTICLE EIGHT -- ADDITIONAL AGREEMENTS.............................. A-21
8.1 Registration Statement; Proxy Statement; Stockholder
Approval.................................................... A-21
8.2 Nasdaq/NMS Listing.......................................... A-21
8.3 Applications................................................ A-21
8.4 Agreement as to Efforts to Consummate....................... A-21
8.5 Investigation and Confidentiality........................... A-21
8.6 Press Releases.............................................. A-22
8.7 Certain Actions............................................. A-22
8.8 Tax Matters................................................. A-22
8.9 Agreement of Affiliates..................................... A-22
8.10 Employee Benefits and Contracts............................. A-23
8.11 Indemnification............................................. A-23
8.12 Articles of Incorporation Provisions........................ A-24
ARTICLE NINE -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE... A-24
9.1 Conditions to Obligations of Each Party..................... A-24
9.2 Conditions to Obligations of Regions........................ A-25
9.3 Conditions to Obligations of GFC............................ A-25
ARTICLE TEN -- TERMINATION.......................................... A-26
10.1 Termination................................................. A-26
10.2 Effect of Termination....................................... A-27
10.3 Non-Survival of Representations and Covenants............... A-27
ARTICLE ELEVEN -- MISCELLANEOUS..................................... A-27
11.1 Definitions................................................. A-27
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-32
11.8 Notices..................................................... A-33
11.9 Governing Law............................................... A-33
11.10 Counterparts................................................ A-33
11.11 Captions.................................................... A-33
11.12 Severability................................................ A-33
Signatures.......................................................... A-34
</TABLE>
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LIST OF EXHIBITS
<TABLE>
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EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1. Form of Support Agreement. (sec. 11.1).
2. Form of Affiliate Agreement. (sec. 8.9).
3. Form of Claims Letter. (sec. 9.2).
4. Form of Opinion Letter of GFC's Counsel. (sec. 9.2).
5. Form of Opinion Letter of Regions' Counsel. (sec. 9.3).
</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 4, 1997, by and between GREENVILLE FINANCIAL CORPORATION
("GFC"), a corporation organized and existing under the laws of the State of
South Carolina, with its principal office located in Greenville, South Carolina,
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 GFC 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 GFC by
Regions pursuant to the merger of GFC into and with Regions. At the effective
time of such merger, the outstanding shares of the capital stock of GFC shall be
converted into shares of the common stock of Regions (except as provided
herein). As a result, stockholders of GFC shall become stockholders of Regions
and the subsidiary of GFC 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 GFC, the Board of
Governors of the Federal Reserve System, and the appropriate state regulatory
authorities and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the merger
(i) for federal income tax purposes shall qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code and (ii) for
accounting purposes shall be accounted for as a "pooling of interests."
As a condition and inducement to Regions' willingness to consummate the
transactions contemplated by this Agreement, prior to the execution of this
Agreement, each of GFC's directors will execute and deliver to Regions an
agreement (a "Support Agreement"), in substantially the form of Exhibit 1 to
this Agreement.
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, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE ONE
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, GFC shall be merged into and with Regions in accordance with the
provisions of Section 252 of the DGCL and with the effect provided in Section
259 of the DGCL and in accordance with Section 33-11-107 of the SCBCA with the
effect provided in Section 33-11-106 of the SCBCA (the "Merger"). Regions shall
be the Surviving Corporation of the Merger and shall continue to be governed by
the Laws of the State of Delaware. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the Boards
of Directors of GFC and Regions.
1.2 Time and Place of Closing. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their duly authorized officers, may mutually agree. The place of
Closing shall be at the offices of Regions, 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 South Carolina
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of South Carolina 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
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writing by the duly authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the last day of
the month in which occurs the last to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent of any
Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the date on which the stockholders of GFC approve this
Agreement to the extent such approval is required by applicable Law.
ARTICLE TWO
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 THREE
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 GFC Common Stock (excluding shares held by GFC or any of
its Subsidiaries or by Regions or any of its Subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted)
issued and outstanding at the Effective Time shall be converted into 1.2 shares
of Regions Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event GFC changes the number of
shares of GFC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock, the Exchange Ratio shall be proportionately adjusted. In
the event Regions changes the number of shares of Regions Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by GFC or Regions. Each of the shares of GFC Common Stock
held by any GFC 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 GFC Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Sections 13-13-101, et seq. of the SCBCA shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision
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of Law; provided, however, 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 SCBCA and surrendered to GFC the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting stockholder of GFC fails to
perfect, or effectively withdraws or loses, such holder's right to appraisal and
of payment for such holder's shares, Regions shall issue and deliver the
consideration to which such holder of shares of GFC Common Stock is entitled
under this Article Three (without interest) upon surrender by such holder of the
certificate or certificates representing shares of GFC Common Stock held by such
holder. GFC will establish an escrow account with an amount sufficient to
satisfy the maximum aggregate payment that may be required to be paid to
dissenting stockholders. Upon satisfaction of all claims of dissenting
stockholders, the remaining escrowed amount, reduced by payment of the fees and
expenses of the escrow agent, will be returned to GFC.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of GFC Common Stock exchanged pursuant to the
Merger, or of options to purchase shares of GFC Common Stock, who would
otherwise have been entitled to receive a fraction of a share of Regions Common
Stock (after taking into account all certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Regions Common Stock multiplied by the market
value of one share of Regions Common Stock at the Effective Time, in the case of
shares exchanged pursuant to the Merger, or the date of exercise, in the case of
options. The market value of one share of Regions Common Stock at the Effective
Time or the date of exercise, as the case may be, shall be the last sale price
of such common stock on the Nasdaq/NMS (as reported by The Wall Street Journal
or, if not reported thereby, any other authoritative source) on the last trading
day preceding the Effective Time, in the case of shares exchanged pursuant to
the Merger, and the date of exercise, in the case of options. No such holder
will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.6 Conversion of Stock Options; Restricted Stock. (a) At the Effective
Time, all rights with respect to GFC Common Stock pursuant to stock options or
stock appreciation rights ("GFC Options") granted by GFC under the GFC Stock
Plans, which are outstanding at the Effective Time, whether or not exercisable,
shall be converted into and become rights with respect to Regions Common Stock,
and Regions shall assume each GFC Option, in accordance with the terms of the
GFC Stock Plan and stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each GFC Option assumed by Regions may be
exercised solely for shares of Regions Common Stock (or cash in the case of
stock appreciation rights), (ii) the number of shares of Regions Common Stock
subject to such GFC Option shall be equal to the number of shares of GFC Common
Stock subject to such GFC Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, and (iii) the per share exercise price under
each such GFC Option shall be adjusted by dividing the per share exercise price
under each such GFC Option by the Exchange Ratio and rounding down to the
nearest cent. It is intended that the foregoing assumption shall be undertaken
in a manner that will not constitute a "modification" as defined in Section 424
of the Internal Revenue Code, as to any stock option which is an "incentive
stock option." GFC agrees to take all necessary steps to effectuate the
foregoing provisions of this Section 3.6.
(b) All restrictions or limitations on transfer with respect to GFC Common
Stock awarded under the GFC Stock Plans or any other plan, program, or
arrangement of any GFC Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Regions Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE FOUR
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Regions shall
cause the exchange agent selected by Regions (the "Exchange Agent") to mail to
the former stockholders of GFC appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of GFC Common Stock shall pass,
only upon proper delivery of
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such certificates to the Exchange Agent). After the Effective Time, each holder
of shares of GFC Common Stock (other than shares to be canceled pursuant to
Section 3.3 of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.5 of this Agreement, each holder of shares of GFC
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares, cash
in lieu of any fractional share of Regions Common Stock to which such holder may
be otherwise entitled (without interest). Regions shall not be obligated to
deliver the consideration to which any former holder of GFC Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of GFC Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of GFC
Common Stock so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither Regions,
GFC, nor the Exchange Agent shall be liable to a holder of GFC 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 GFC Stockholders. At the Effective Time, the stock
transfer books of GFC shall be closed as to holders of GFC Common Stock
immediately prior to the Effective Time, and no transfer of GFC Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of GFC Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement or 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. To the extent
permitted by Law, former stockholders of record of GFC 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 GFC
Common Stock are converted, regardless of whether such holders have exchanged
their certificates representing GFC Common Stock for certificates representing
Regions Common Stock in accordance with the provisions of this Agreement.
Whenever a dividend or other distribution is declared by Regions on the Regions
Common Stock, the record date for which is at or after the Effective Time, the
declaration shall include dividends or other distributions on all shares of
Regions Common Stock issuable pursuant to this Agreement, 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 GFC 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
GFC Common Stock certificate, both the Regions Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF GFC
GFC hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. GFC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
South Carolina, and has the corporate power and authority to carry on its
business as now conducted and to own, lease, and operate its Assets. GFC 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 GFC.
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5.2 Authority; No Breach by Agreement. (a) GFC has the corporate power and
authority necessary to execute, deliver, and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby, subject to the
approval of this Agreement by the holders of a two-thirds of the outstanding
shares of GFC Common Stock. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been or will be duly and validly authorized by all
necessary corporate action in respect thereof on the part of GFC, subject to the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of GFC Common Stock. Subject to such requisite approval, this Agreement
represents a legal, valid, and binding obligation of GFC, enforceable against
GFC in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by GFC, nor the
consummation by GFC of the transactions contemplated hereby, nor compliance by
GFC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of GFC's Articles of Incorporation or Bylaws, or (ii)
except as disclosed in Section 5.2(b) of the GFC Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any GFC Company under, any
Contract or Permit of any GFC Company, 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 GFC Company or any of their respective 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 with respect to any employee benefit plans,
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 GFC, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by GFC of the Merger
and the other transactions contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of GFC consists of
2,000,000 shares of GFC Common Stock, of which 796,022 shares are issued and
outstanding as of the date of this Agreement and not more than 916,772 shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of GFC Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of GFC Common Stock has been issued in violation of any preemptive rights of the
current or past stockholders of GFC. GFC has reserved 250,000 shares of GFC
Common Stock for issuance under the GFC Stock Plans, pursuant to which options
to purchase not more than 120,750 shares of GFC Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement, there are no
shares of capital stock or other equity securities of GFC outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of GFC or
contracts, commitments, understandings, or arrangements by which GFC is or may
be bound to issue additional shares of GFC capital stock or options, warrants,
or rights to purchase or acquire any additional shares of its capital stock.
5.4 GFC Subsidiaries. GFC has disclosed in Section 5.4 of the GFC
Disclosure Memorandum all of the GFC Subsidiaries as of the date of this
Agreement. Except as disclosed, GFC or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each GFC Subsidiary. No equity
securities of any GFC Subsidiary are or may become required to be issued (other
than to a GFC Company) by reason of any options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of any such Subsidiary, and there are no Contracts by which any GFC
Subsidiary is bound to issue (other than to a GFC
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Company) additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any GFC Company is or may be bound to transfer any shares of the capital stock
of any GFC Subsidiary (other than to a GFC Company). There are no Contracts
relating to the rights of any GFC Company to vote or to dispose of any shares of
the capital stock of any GFC Subsidiary. All of the shares of capital stock of
each GFC Subsidiary held by a GFC Company are duly authorized, validly issued,
and 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 Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the GFC Company free and clear of any Lien. Each GFC Subsidiary is a
corporation, and is duly organized, validly existing, and 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 GFC 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 GFC. Each GFC Subsidiary that is
a depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits in
which are insured by the Bank Insurance Fund or the Savings Association
Insurance Fund, as appropriate.
5.5 Financial Statements. GFC has disclosed in Section 5.5 of the GFC
Disclosure Memorandum, and has delivered to Regions copies of, all GFC Financial
Statements prepared for periods ended prior to the date hereof and will deliver
to Regions copies of all GFC Financial Statements prepared subsequent to the
date hereof. The GFC Financial Statements (as of the dates thereof and for the
periods covered thereby) (i) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the GFC Companies, which are
or will be, as the case may be, complete and correct and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, and (ii) present or will present, as the case may be, fairly the
consolidated financial position of the GFC Companies as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity, and
cash flows of the GFC 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).
5.6 Absence of Undisclosed Liabilities. No GFC Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on GFC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of GFC as of June 30, 1997 included in the
GFC Financial Statements or reflected in the notes thereto. No GFC Company has
incurred or paid any Liability since June 30, 1997, 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 GFC.
5.7 Absence of Certain Changes or Events. Since June 30, 1997, except as
disclosed in the GFC Financial Statements, (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 GFC, and (ii) the
GFC 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 GFC provided in Article Seven of this
Agreement.
5.8 Tax Matters. (a) All Tax returns required to be filed by or on behalf
of any of the GFC 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, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time to the Knowledge of GFC, and
all returns filed are complete and accurate to the Knowledge of GFC. All Taxes
shown on filed returns have been paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on GFC, except to
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the extent reserved against in the GFC Financial Statements dated 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 GFC Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable Taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for any of the
GFC Companies for the period or periods through and including the date of the
respective GFC Financial Statements has been made and is reflected on such GFC
Financial Statements.
(d) Deferred Taxes of the GFC Companies have been adequately provided for
in the GFC Financial Statements.
(e) Each of the GFC Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on GFC.
(f) None of the GFC 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
GFC Companies.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the GFC Companies that occurred during or after any
Taxable Period in which the GFC Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1994.
(i) No GFC 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 GFC
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the GFC 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 GFC 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. Except as disclosed or reserved against in the GFC Financial
Statements, the GFC Companies have good and marketable title, free and clear of
all Liens, to all of their respective Assets that are material to the business
of the GFC Companies. All material tangible properties used in the businesses of
the GFC Companies are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business consistent with GFC's past
practices. All Assets which are material to the business of the GFC Companies,
which are held under leases or subleases by any of the GFC 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.
5.10 Environmental Matters. (a) To the Knowledge of GFC, each GFC Company,
its Participation Facilities, and its Loan Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GFC.
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(b) To the Knowledge of GFC, there is no Litigation pending or threatened
before any court, governmental agency, or authority, or other forum in which any
GFC Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may be named as a defendant (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 (as defined below) or
oil, whether or not occurring at, on, under, or involving a site owned, leased,
or operated by any GFC Company or any of its Participation Facilities, except
for such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on GFC.
(c) To the Knowledge of GFC, there is no Litigation pending or threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or GFC in respect of such Loan Property) 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 or oil, whether or not occurring at, on, under, or
involving a Loan Property, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on GFC.
(d) To the Knowledge of GFC, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GFC.
(e) To the Knowledge of GFC, during the period of (i) any GFC Company's
ownership or operation of any of their respective current properties, (ii) any
GFC Company's participation in the management of any Participation Facility, or,
(iii) any GFC Company's holding of a security interest in a Loan Property, there
have been no releases of Hazardous Material or oil in, on, under, or affecting
such properties, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on GFC. Prior to the period of
(i) any GFC Company's ownership or operation of any of their respective current
properties, (ii) any GFC Company's participation in the management of any
Participation Facility, or (iii) any GFC Company's holding of a security
interest in a Loan Property, to the Knowledge of GFC, there were no releases of
Hazardous Material or oil in, on, under, or affecting any such property,
Participation Facility, or Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
GFC.
5.11 Compliance With Laws. Each GFC Company has in effect all Permits
necessary for it to own, lease, or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GFC, 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 GFC. Except as disclosed in Section 5.11
of the GFC Disclosure Memorandum, none of the GFC 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 GFC; 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 GFC Company is not in
compliance with any of the material Laws or material 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 GFC, (ii) threatening to revoke any
material Permits the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on GFC, or
(iii) requiring any GFC Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its
management, or the payment of dividends.
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5.12 Labor Relations. No GFC Company is the subject of any Litigation
asserting that it or any other GFC Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other GFC Company to bargain with any
labor organization as to wages or conditions of employment, nor is any GFC
Company a party to or bound by any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization, nor
is there any strike or other labor dispute involving any GFC Company, pending or
threatened, or to its Knowledge, is there any activity involving any GFC
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans. (a) GFC has disclosed in Section 5.13 of the
GFC Disclosure Memorandum, and has delivered or made available to Regions prior
to the execution of this Agreement correct and complete copies in each case of,
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including, without limitation, "employee
benefit plans" as that term is defined in Section 3(3) of ERISA maintained by,
sponsored in whole or in part by, or contributed to by any GFC Company 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 "GFC Benefit Plans"). Any of the
GFC Benefit Plans which is an "employee welfare benefit plan," as that term is
defined in Section 3(l) of ERISA, or an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "GFC ERISA
Plan." Any GFC ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code or Section 3(35) of ERISA) is
referred to herein as a "GFC Pension Plan." On or after September 26, 1980,
neither GFC nor any GFC Company has had an "obligation to contribute" (as
defined in ERISA Section 4212) to a "multiemployer plan" (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)). The only "employee pension benefit plan," as
defined in Section 3(2) of ERISA, ever maintained by any GFC Company that was
intended to qualify under Section 401(a) of the Internal Revenue Code, is the
Greenville National Bank 401(k) Profit Sharing Plan.
(b) GFC has delivered or made available to Regions prior to the execution
of this Agreement correct and complete copies of the following documents: (i)
all trust agreements or other funding arrangements for such GFC Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such GFC Benefit Plans or amendments, all determination letters, rulings,
opinion letters, information letters, or advisory opinions issued by the
Internal Revenue Service, the United States Department of Labor, or the Pension
Benefit Guaranty Corporation after December 31, 1974, (iii) annual reports or
returns, audited or unaudited financial statements, actuarial valuations and
reports, and summary annual reports prepared for any GFC Benefit Plan with
respect to the most recent three plan years, and (iv) the most recent summary
plan descriptions and any material modifications thereto.
(c) All GFC 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 GFC. Each GFC 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
GFC is not aware of any circumstances which will or could result in revocation
of any such favorable determination letter. Each trust created under any GFC
ERISA Plan has been determined to be exempt from Tax under Section 501(a) of the
Internal Revenue Code and GFC is not aware of any circumstance which will or
could result in revocation of such exemption. With respect to each GFC Benefit
Plan, except as disclosed in Section 5.13(c) of the GFC Disclosure Memorandum,
to the Knowledge of GFC, no event has occurred which will or could give rise to
a loss of any intended Tax consequences under the Internal Revenue Code or to
any Tax under Section 511 of the Internal Revenue Code. There is no material
pending or threatened Litigation relating to any GFC ERISA Plan. No GFC Company
has engaged in a transaction with respect to any GFC Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject any GFC Company to a tax or penalty
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imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on GFC.
(d) No GFC Pension Plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the
assets of any such plan exceeds the plan's "benefit liabilities," as that term
is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any GFC Pension Plan, (ii) no change in the actuarial assumptions with respect
to any GFC Pension Plan, and (iii) no increase in benefits under any GFC 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 GFC or materially adversely affect the funding status of any such
plan. Neither any GFC Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
GFC Company, or the single-employer plan of any entity which is considered one
employer with GFC 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 GFC Company
has provided, or is required to provide, security to a GFC Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
(e) No liability under Title IV of ERISA has been or is expected to be
incurred by any GFC Company with respect to any defined benefit plan currently
or formerly maintained by any of them or by any ERISA Affiliate).
(f) No GFC Company has any obligations for retiree health and retiree life
benefits under any of the GFC Benefit Plans.
(g) Except as set forth in Section 5.13(g) of the GFC Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any employee of
any GFC Company from any GFC Company under any GFC Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any GFC Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit.
(h) No oral or written representation or communication with respect to any
aspect of the GFC Benefit Plans has been made to employees of any of the GFC
Companies prior to the date hereof which is not in accordance with the written
or otherwise preexisting terms and provisions of such plans. All GFC Benefit
Plan documents and annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports, and summary plan
descriptions issued with respect to the GFC Benefit Plans are correct and
complete and there have been no changes in the information set forth therein.
5.14 Material Contracts. Except as disclosed in the Section 5.14 of the
GFC Disclosure Memorandum, none of the GFC 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 GFC Company or the guarantee by any
GFC 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, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contracts between or among GFC Companies; and (iv) any other Contract or
amendment thereto that would be required to be filed as an exhibit to a Form
10-K filed by GFC with the Securities and Exchange Commission (the "SEC") as of
the date of this Agreement if GFC were required to file a Form 10-K with the SEC
(together with all Contracts referred to in Sections 5.9 and 5.13(a) of this
Agreement, the "GFC Contracts"). None of the GFC Companies is in Default under
any GFC Contract which, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect on GFC.
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5.15 Legal Proceedings. Except to the extent specifically reserved against
in the GFC Financial Statements dated prior to the date of this Agreement, there
is no Litigation instituted or pending, or, to the Knowledge of GFC, 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
GFC 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 GFC, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any GFC Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on GFC.
5.16 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any GFC Company or any
Affiliate thereof to Regions pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
GFC 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 GFC Company or any Affiliate thereof for inclusion in the Proxy Statement to
be mailed to GFC's stockholders in connection with the Stockholders' Meeting,
and any other documents to be filed by a GFC 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 GFC, 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 GFC Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.17 Accounting, Tax, and Regulatory Matters. No GFC Company or any
Affiliate thereof has taken any action, or agreed to take any action, or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or treatment as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement. To the Knowledge of GFC, 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 second sentence
of such Section 9.1(b).
5.18 Articles of Incorporation Provisions. Each GFC 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 (other than a Regions
Company) under the Articles of Incorporation, Bylaws, or other governing
instruments of any GFC Company or restrict or impair the ability of Regions to
vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of any GFC Company that may be acquired or controlled by it.
5.19 Support Agreements. Each of the directors of GFC has executed and
delivered to Regions an agreement in substantially the form of Exhibit 1 to this
Agreement.
5.20 Derivatives Contracts. Neither GFC 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
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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).
5.21 Year 2000. Except as disclosed in Section 5.22 of the GFC Disclosure
Memorandum, GFC represents and warrants that all computer software necessary for
the conduct of its business (the "Software") is designed to be used prior to,
during, and after the calendar year 2000 A.D., and that the Software will
operate during each such time period without error relating to the year 2000,
specifically including any error relating to, or the product of, date data which
represents or references different centuries or more than one century. GFC
further represents and warrants that the Software accepts, calculates, sorts,
extracts and otherwise processes date inputs and date values, and returns and
displays date values, in a consistent manner regardless of the dates used,
whether before, on, or after January 1, 2000.
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to GFC 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 Assets. Regions is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 Authority; No Breach by Agreement. (a) Regions has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Regions' Certificate of Incorporation
or Bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
Regions Company under, any Contract or Permit of any Regions Company, 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 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 with respect to any employee benefit plans
and other than Consents, filings, or notifications which, if not obtained or
made, is 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
240,000,000 shares of Regions Common Stock, of which 136,722,928 shares were
issued and outstanding and no shares were held as treasury
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shares as of June 30, 1997. 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 GFC 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 GFC 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 all forms,
reports, and documents required to be filed by Regions with the SEC since
December 31, 1993, 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. 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, 1997 included in the Regions Financial Statements or reflected in the
notes thereto. No Regions Company has incurred or paid any Liability since June
30, 1997, 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, 1997, except as
disclosed in the Regions Financial Statements filed with the SEC after such date
and prior to the date of this Agreement, 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.
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 Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, and there has 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. None of the Regions
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 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 material Laws or material Orders which
such
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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 are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, or
(iii) requiring any Regions Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its
management, or the payment of dividends.
6.8 Legal Proceedings. Except to the extent specifically reserved against
in the Regions Financial Statements dated prior to the date of this Agreement,
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. No statement, certificate, instrument, or
other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to GFC pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. 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 GFC's 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 GFC, 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
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 Accounting, Tax, and Regulatory Matters. 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
pooling-of-interests accounting 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 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 second sentence of such
Section 9.1(b).
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ARTICLE SEVEN
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Covenants of Both Parties. Unless the prior written consent of the
other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to (i) operate its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organizations and Assets and maintain its
rights and franchises, and (iii) take no action which would materially adversely
affect the ability of any Party to (a) obtain any Consents required for the
transactions contemplated hereby, or (b) perform its covenants and agreements
under this Agreement in all material respects and to consummate the Merger;
provided, that the foregoing shall not prevent any Regions Company from
discontinuing or disposing of any of its Assets or business, or from acquiring
or agreeing to acquire any other Person or any Assets thereof, if such action
is, in the judgment of Regions, desirable in the conduct of the business of
Regions and its Subsidiaries.
7.2 Covenants of GFC. Except as specifically contemplated or permitted by
this Agreement, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, GFC 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 a duly authorized officer of Regions:
(a) Amend the Articles of Incorporation, Bylaws, or other governing
instruments of any GFC Company; or
(b) Incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a GFC Company to another GFC Company) in excess of an
aggregate of $100,000 (for the GFC Companies on a consolidated basis)
except in the ordinary course of the business of GFC Companies consistent
with past practices (which shall include, for GFC, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Home
Loan Bank or the Federal Reserve Bank, and entry into repurchase agreements
fully secured by U.S. government or agency securities), or, except as
disclosed in Section 7.2(b) of the GFC Disclosure Memorandum, forgive any
such indebtedness of any Person to any GFC Company (in excess of an
aggregate of $50,000), or impose, or suffer the imposition, on any share of
stock held by any GFC Company of any Lien or permit any such Lien to exist;
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 GFC Company, or declare or pay any dividend or
make any other distribution in respect of any GFC Common Stock; provided
that GFC may (to the extent legally able to do so), but shall not be
obligated to, declare and pay regular annual cash dividends on the GFC
Common Stock at an amount not to exceed 35% of GFC's net income after
taxes, and in no event may such an amount per share of GFC Common Stock
exceed $.98 and with the usual and regular record and payment dates as
disclosed in Section 7.2(c) of the GFC Disclosure Memorandum; or
(d) Except 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 GFC Common Stock or any other capital stock of any GFC Company,
or any stock appreciation rights, or any option, warrant, conversion, or
other right to acquire any such stock, or any security convertible into any
such stock; or
(e) Adjust, split, combine, or reclassify any capital stock of any GFC
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of GFC Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any GFC Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another GFC Company) or any Assets having
in the aggregate a book value in excess of $100,000 other than in the
ordinary course of business for reasonable and adequate consideration; or
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(f) Acquire direct or indirect control over, or invest in equity
securities of, any Person, other than in connection with (i) foreclosures
in the ordinary course of business, or (ii) acquisitions of control by GFC
in its fiduciary capacity; or
(g) Grant any increase in compensation or benefits to the employees or
officers of any GFC Company except as disclosed in Section 7.2(g) of the
GFC Disclosure Memorandum or as required by Law; pay any bonus except
pursuant to the provisions of any applicable program or plan adopted by its
Board of Directors prior to the date of this Agreement and disclosed in
Section 7.2(g) of the GFC Disclosure Memorandum; enter into or amend any
severance agreements with officers of any GFC Company except as disclosed
in Section 7.2(g) of the GFC Disclosure Memorandum; grant any increase in
fees or other increases in compensation or other benefits to directors of
any GFC Company; or
(h) Enter into or amend any employment Contract between any GFC
Company and any Person (unless such amendment is required by Law) that the
GFC 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) Except as disclosed in Section 7.2(i) of the GFC Disclosure
Memorandum, adopt any new employee benefit plan or program of any GFC
Company or make any material change in or to any existing employee benefit
plans or programs of any GFC 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 accounting methods, principles,
or practices or systems of internal accounting controls, except as may be
necessary to conform to changes in regulatory accounting requirements or
GAAP; or
(k) Commence or settle any Litigation other than in accordance with
past practice; provided that, except to the extent specifically reserved
against in the GFC Financial Statements dated prior to the date of this
Agreement, no GFC Company shall settle any Litigation involving any
Liability of any GFC Company for money damages in excess of $25,000
(exclusive of insurance proceeds) or restrictions upon the operations of
any GFC Company; or
(l) Except in the ordinary course of business, enter into or terminate
any material Contract or make any change in any material lease or Contract,
other than renewals of leases and Contracts without material adverse
changes of terms or as disclosed pursuant to Sections 7.2(g), (h), or (i)
of the GFC Disclosure Memorandum.
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 will not, without the prior written consent of a
duly authorized officer of GFC 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 GFC 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) is reasonably likely to 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 GFC shall deliver to Regions copies of all
such reports filed by GFC promptly after the same are filed. If financial
statements are contained in any such reports filed with appropriate Regulatory
Authorities, 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 flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to normal recurring year-
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end adjustments that are not material). As of their 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 a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to a Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE EIGHT
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Stockholder Approval. As soon
as reasonably practicable after the execution of this Agreement, Regions shall
file the Registration Statement with the SEC, provided GFC has provided, on a
reasonably timely basis, all information concerning GFC necessary for inclusion
in the Registration Statement, and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act as soon as
reasonably practicable after the filing thereof 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. GFC shall promptly furnish all information concerning it and the holders
of its capital stock as Regions may reasonably request in connection with such
action. GFC shall call a Stockholders' Meeting, to be held within forty-five
(45) days after the Registration Statement is declared effective by the SEC, for
the purpose of voting upon approval of (i) this Agreement and (ii) such other
related matters as it deems appropriate. In connection with the Stockholders'
Meeting, (i) GFC shall mail the Proxy Statement to all of 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 GFC shall recommend (subject to compliance with their
fiduciary duties as advised in writing by counsel to such Board) to its
stockholders the approval of this Agreement, and (iv) the Board of Directors and
officers of GFC shall use their reasonable efforts to obtain such stockholders'
approval (subject to compliance with their fiduciary duties as advised in
writing by counsel to such Board).
8.2 Nasdaq/NMS Listing. Regions shall file with the NASD a notification
for the listing on the Nasdaq/NMS relating to the proposed issuance of the
shares of Regions Common Stock to be issued to the holders of GFC Common Stock
pursuant to the Merger.
8.3 Applications. As soon as reasonably practicable after execution of
this Agreement, Regions shall prepare and file, and GFC shall cooperate in the
preparation and, where appropriate, filing of, applications with all Regulatory
Authorities having jurisdiction over the transactions contemplated by this
Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. Regions shall use all reasonable
efforts to obtain the requisite Consents of all Regulatory Authorities as soon
as reasonably practicable after the filing of the appropriate applications.
8.4 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, without limitation, 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
applicable to such Party referred to in Article Nine of 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.
8.5 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party will 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
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and, after the 30th day after execution of this Agreement, shall not interfere
unreasonably with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) GFC shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
acquisition transaction with GFC to preserve the confidentiality of the
information relating to GFC provided to such parties.
8.6 Press Releases. Prior to the Effective Time, GFC 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, however, that nothing in this Section
8.6 shall be deemed to prohibit any Party from making any disclosure which its
counsel advises as necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no GFC Company nor any Affiliate thereof nor
any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any GFC Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of GFC's Board of Directors as
advised in writing by counsel to such Board of Directors, no GFC Company or any
Affiliate or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, and shall direct
and use its reasonable efforts to cause all of its Representatives not to engage
in any of the foregoing, but GFC may communicate information about such an
Acquisition Proposal to its stockholders if and to the extent that it is
required to do so in order to comply with its legal obligations. GFC shall
promptly notify Regions orally and in writing in the event that it receives any
inquiry or proposal relating to any such transaction. GFC shall immediately
cease and cause to be terminated as of the date of this Agreement any existing
activities, discussions, or negotiations with any Persons conducted heretofore
with respect to any of the foregoing.
8.8 Tax Matters. The Parties agree to use their reasonable efforts to
obtain written opinions of Alston & Bird to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) the exchange in the Merger of GFC Common Stock for Regions
Common Stock will not give rise to gain or loss to the stockholders of GFC with
respect to such exchange (except to the extent of any cash received), and (iii)
each of GFC and Regions will be a party to that reorganization within the
meaning of Section 368(b) of the Internal Revenue Code ("Tax Opinions"). In
rendering such Tax Opinions, counsel shall be entitled to rely upon
representations of officers of GFC and Regions reasonably satisfactory in form
and substance to such counsel. 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.
8.9 Agreement of Affiliates. GFC has disclosed in Section 8.9 of the GFC
Disclosure Memorandum each Person whom it reasonably believes is an "affiliate"
of GFC for purposes of Rule 145 under the 1933 Act. GFC 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 GFC 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 until such time as financial results covering at least 30 days of
combined operations of Regions
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and GFC have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Shares of Regions Common Stock
issued to such affiliates of GFC in exchange for shares of GFC Common Stock
shall not be transferable until such time as financial results covering at least
30 days of combined operations of Regions and GFC have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section 8.9 (and Regions shall be entitled to
place restrictive legends upon certificates for shares of Regions Common Stock
issued to affiliates of GFC pursuant to this Agreement to enforce the provisions
of this Section 8.9). 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.
8.10 Employee Benefits and Contracts. Following the Effective Time,
Regions shall provide generally to officers and employees of the GFC 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 8.10), 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 GFC
should be treated as service under Regions' qualified defined benefit plans,
(ii) service under any qualified defined contribution plans of GFC shall be
treated as service under Regions' qualified defined contribution plans, and
(iii) service under any other employee benefit plans of GFC shall be treated as
service under any similar employee benefit plans maintained by Regions. Regions
also shall cause GFC and its Subsidiaries to honor all employment, severance,
consulting, and other compensation Contracts disclosed in Section 8.10 of the
GFC Disclosure Memorandum to Regions between any GFC 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 GFC Benefit Plans.
8.11 Indemnification. (a) Subject to the conditions set forth in paragraph
(b) below, for a period of six (6) years after the Effective Time, Regions
shall, and shall cause GFC to, indemnify, defend, and hold harmless each person
entitled to indemnification from a GFC Company (each, an "Indemnified Party")
against all Liabilities arising out of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the full extent permitted by South Carolina
Law and GFC's Articles of Incorporation and Bylaws, in each case as in effect on
the date hereof, including provisions relating to advances of expenses incurred
in the defense of any Litigation. Without limiting the foregoing, in any case in
which approval by the GFC is required to effectuate any indemnification, Regions
shall cause the GFC to direct, at the election of the Indemnified Party, that
the determination of any such approval shall be made by independent counsel
mutually agreed upon between Regions and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a), 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 GFC shall have the right to assume the
defense thereof and Regions shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Parties in connection with the defense thereof, except that
if Regions or GFC elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between Regions or GFC and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Regions or GFC
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Regions shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) Regions shall not be liable for any settlement effected without its prior
written consent; and provided further that GFC shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine,
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and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
8.12 Articles of Incorporation Provisions. Each GFC 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 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 GFC 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
GFC Company that may be directly or indirectly acquired or controlled by it.
ARTICLE NINE
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approval. The stockholders of GFC 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 so obtained which is necessary to consummate the
transactions as contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable good faith judgment of the Board of
Directors of Regions would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so as to
render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
all other 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 obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of Regions would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(f) Nasdaq/NMS Listing. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the
Nasdaq/NMS.
(g) Tax Matters. Each Party shall have received a copy of the Tax
Opinions referred to in Section 8.8 of this Agreement. Each Party shall
have delivered to the other a Certificate, dated as of the
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date of the Tax Opinion, signed by its duly authorized officers, to the
effect that, to the best knowledge and belief of such officers, the
statement of facts and representations made on behalf of the management of
such Party, presented to the legal counsel delivering the Tax Opinions were
at the date of such presentation, true, correct, and complete, and are on
the date of such Certificate, to the extent contemplated by the
presentation, true, correct, and complete, as though such presentation had
been made on the date of such Certificate.
9.2 Conditions to Obligations of Regions. The obligations of Regions to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Regions pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of GFC 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 GFC 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 GFC set forth in Sections 5.17 and 5.18
of this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of GFC
set forth in this Agreement (including the representations and warranties
set forth in Sections 5.3, 5.17 and 5.18) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on GFC; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of GFC 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. GFC shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, 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
GFC'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) Claims Letters. Each of the directors and officers of GFC shall
have executed and delivered to Regions letters in substantially the form of
Exhibit 3 to this Agreement.
(e) Legal Opinion. Regions shall have received a written opinion,
dated as of the Effective Time, of counsel to GFC, in substantially the
form of Exhibit 4 to this Agreement.
(f) Affiliate Agreements. Regions shall have received from each
affiliate of GFC the affiliates agreement referred to in Section 8.9 of
this Agreement.
(g) Pooling Letter. Regions shall have received a letter from Ernst &
Young, LLP, dated as of the Effective Time, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance
with this Agreement.
9.3 Conditions to Obligations of GFC. The obligations of GFC to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by GFC 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
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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" 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 GFC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that, to the best knowledge of such
officers, after due inquiry, 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
and stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, as
appropriate, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as GFC and its counsel shall request.
(d) Legal Opinion. GFC shall have received a written opinion, dated
as of the Effective Time, of counsel to Regions, in substantially the form
of Exhibit 5 to this Agreement.
ARTICLE TEN
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of GFC,
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 GFC; 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 GFC 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 an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within thirty (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 GFC and Section 9.3(a) of this
Agreement in the case of Regions; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of GFC 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 thirty (30) days after the
giving of written notice to the breaching Party of such breach; or
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(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 GFC fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the Laws of the State of
South Carolina at the GFC Stockholders' Meeting where the transactions were
presented to such stockholders for approval and voted upon; or
(e) By the Board of Directors of GFC or by the Board of Directors of
Regions in the event that the Merger shall not have been consummated by May
31, 1998, in each case only if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of
this Agreement by the Party electing to terminate pursuant to this Section
10.1(e); or
(f) By the Board of Directors of either Party (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 GFC and Section 9.3(a) in
the case of Regions or in material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement)
cannot be satisfied or fulfilled by the date specified in Section 10.1(e)
of this Agreement as the date after which such Party may terminate this
Agreement; or
(g) By the Board of Directors of Regions, at any time prior to the
30th day after execution of this Agreement without any Liability in the
event that the review of the Assets, business, financial condition, and
results of operations of GFC undertaken by Regions during such time period
or any of the disclosures contained in the GFC Disclosure Memorandum causes
the Board of Directors of Regions to determine, in its reasonable good
faith judgment, that a fact or circumstance of which Regions is not aware
as of the date of this Agreement exists which materially and adversely
impacts the economic benefit 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 of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article Eleven and Section 8.5(b) of this Agreement shall survive any
such termination, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c),
or 10.1(f) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination. Each of the Support Agreements
shall be governed by its own terms as to its 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 Two, Three, Four, and Eleven and Sections 8.9, and 8.11 of this
Agreement.
ARTICLE ELEVEN
MISCELLANEOUS
11.1 Definitions. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person, (ii) any officer,
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director, partner, employer, or direct or indirect beneficial owner of any
ten percent (10%) or greater equity or voting interest of such Person, or
(iii) any other Person for which a Person described in clause (ii) acts in
any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
each of the Support Agreements and the other 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.
"Business Combination" shall mean an acquisition of, merger or
combination with, share exchange involving any class of voting stock of,
sale of more than fifty percent (50%) of the consolidated assets by, or
other business combination involving, or tender offer for or sale or
issuance of any equity securities involving an acquisition by a third-party
of more than fifty percent (50%) of the voting stock of, GFC, other than
the formation of a newly organized holding company for GFC in which the
shares of GFC Common Stock are exchanged for shares of the holding company
on a basis that does not cause the respective beneficial interests of each
stockholder to change or transactions with a Regions Company.
"Closing" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"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 notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit.
"DGCL" shall mean the Delaware General Corporation Law.
"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 which are administered,
interpreted, or enforced by the United States Environmental Protection
Agency and state and local agencies with jurisdiction over pollution or
protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Plan" shall have the meaning provided in Section 5.13 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(c) of
this Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof,
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and may be referred to in this Agreement and any other related instrument
or document without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GFC Benefit Plans" shall have the meaning set forth in Section 5.13
of this Agreement.
"GFC Common Stock" shall mean the no par value common stock of GFC.
"GFC Companies" shall mean, collectively, GFC and all GFC
Subsidiaries.
"GFC Disclosure Memorandum" shall mean the written information
entitled "GFC Disclosure Memorandum" delivered by the 14th day following
execution 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.
"GFC Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of GFC as of June
30, 1997, and as of December 31, 1996 and 1995, and 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,
1997, and for each of the three fiscal years ended December 31, 1996, 1995,
and 1994, included in the GFC Disclosure Memorandum, and (ii) the
consolidated balance sheets of GFC (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, 1997.
"GFC Subsidiaries" shall mean the Subsidiaries of GFC, which shall
include the GFC Subsidiaries described in Section 5.4 of this Agreement and
any corporation, bank, savings association, or other organization acquired
as a Subsidiary of GFC in the future and owned by GFC at the Effective
Time.
"Hazardous Material" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et seq., or
any similar federal, state, or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean the knowledge
after due inquiry of the chairman, president, chief financial officer,
chief accounting officer, chief credit officer, general counsel, any
assistant or deputy general counsel, or any senior or executive vice
president of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting, or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including, without limitation, 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,
without limitation, costs of investigation, collection, and defense),
claim, deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute, or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institutions, pledges to
secure deposits
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and other Liens incurred in the ordinary course of the banking business,
and (iii) Liens which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"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, 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, individually or 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 effect" 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 their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall mean the merger of GFC with and into Regions referred
to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq/NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"Party" shall mean either GFC or Regions and "Parties" shall mean both
GFC 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.
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"Proxy Statement" shall mean the proxy statement used by GFC to
solicit the approval of its stockholders of the transactions contemplated
by this Agreement and shall include the prospectus of Regions relating to
the shares of Regions Common Stock to be issued to the stockholders of GFC.
"Regions Common Stock" shall mean the $.625 par value common stock of
Regions.
"Regions Companies" shall mean, collectively, Regions and all Regions
Subsidiaries.
"Regions Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of June 30, 1997, and the restated consolidated statements of
condition (including related notes and schedules, if any) of Regions as of
December 31, 1996 and 1995, the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) for the nine months ended June 30, 1997 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, 1996, 1995, and 1994, 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,
1997.
"Regions Subsidiaries" shall mean the Subsidiaries of Regions.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by Regions under the
1933 Act in connection with the transactions contemplated by this
Agreement.
"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,
the Office of the Comptroller of the Currency, the FDIC, all state
regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"SCBCA" shall mean the South Carolina Business Corporation Act.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration statements
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
GFC to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiary" or collectively "Subsidiaries" shall mean all those
corporations, banks, associations, or other entities of which the entity in
question owns or controls fifty percent (50%) or more of the outstanding
equity securities either directly or through an unbroken chain of entities
as to each of which fifty percent (50%) or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided,
however, 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 Agreements" shall mean the various Support Agreements, each
in substantially the form of Exhibit 1 to this Agreement.
"Surviving Corporation" shall mean Regions as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
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assessments, charges, fares, or impositions, of any nature whatsoever,
including interest, penalties, and additions imposed thereon or with
respect thereto.
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that Regions shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby except for the fees payable by GFC to The Carson-Medlin Company. In the
event of a claim by any other broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
GFC or Regions, each of GFC and Regions, as the case may be, agrees to indemnify
and hold the other Party harmless of and from any Liability in respect of any
such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to, or shall, 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, other than as
provided in Sections 8.9 and 8.11 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, however, that after
any such approval by the holders of GFC Common Stock, there shall be made no
amendment decreasing the consideration to be received by GFC 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 GFC, to waive or extend the time for the
compliance or fulfillment by GFC of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of Regions under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Regions.
(b) Prior to or at the Effective Time, GFC, 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 their obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of GFC 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 GFC.
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
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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 received:
<TABLE>
<S> <C>
GFC: GREENVILLE FINANCIAL CORPORATION
290 South Pleasantburg Drive
Greenville, South Carolina 29607
Telecopy Number: (864) 235-6636
Attention: O. Perry Earle, III
President and Chairman of the Board
Copy to Counsel: GIBBES, GALLIVAN, WHITE AND BOYD, P.A.
330 East Coffee Street
Greenville, South Carolina 29603
Telecopy Number: (864) 271-7502
Attention: Frank H. Gibbes, III
POWELL, GOLDSTEIN, FRAZER & MURPHY
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy Number: (404) 572-5958
Attention: Walter G. Moeling, IV
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 South
Carolina 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 one 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 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
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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: GREENVILLE FINANCIAL CORPORATION
By: /s/ FRANK H. GIBBES, III By: /s/ O. PERRY EARLE, III
------------------------------------------------ ------------------------------------------------
Frank H. Gibbes, III O. Perry Earle, III
Corporate Secretary President and Chairman of the Board
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ WILLIAM E. JORDAN
------------------------------------------------ ------------------------------------------------
Samuel E. Upchurch, Jr. William E. Jordan
Corporate Secretary Regional President
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
January , 1998
Board of Directors
Greenville Financial Corporation
290 South Pleasantburg Drive
Greenville, South Carolina 29607
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the shareholders of Greenville
Financial Corporation ("GFC") under the terms of a certain Agreement and Plan of
Merger dated as of September 4, 1997 (the "Agreement"), by and between GFC and
Regions Financial Corporation ("Regions") pursuant to which GFC will merge with
and into Regions (the "Merger"). Under the terms of the Agreement, each of the
outstanding shares of GFC common stock shall be converted into the right to
receive 1.2 shares of Regions common stock. The foregoing summary of the Merger
is qualified in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in North Carolina and the Southeast and the major
commercial banks operating in that market. We have been retained by GFC in a
financial advisory capacity to render our opinion hereunder, for which we will
receive compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of GFC and Regions. We have reviewed:
(i) the Agreement; (ii) the annual reports to stockholders of GFC, including
audited financial statements, for the five years ended December 31, 1996; (iii)
the Proxy Statement of GFC, dated February 3, 1997, prepared for the annual
meeting of the stockholders of GFC held on March 12, 1997; (iv) the Uniform Bank
Performance Report for Greenville National Bank as of June 30, 1997; (v) the
Call Report for Greenville National Bank as of September 30, 1997; (vi) the
annual reports to stockholders of Regions, including audited financial
statements, for the five years ended December 31, 1996; (vii) the Proxy
Statement of Regions dated April 1, 1997 for the annual meeting of the
stockholders of Regions held on May 14, 1997; (viii) unaudited interim financial
statements of GFC and Regions for the nine months ended September 30, 1997; (ix)
the Report of Form 10-Q of Regions, dated September 30, 1997 (x) a preliminary
copy of the Proxy Statement/Prospectus prepared in connection with a special
meeting of the shareholders of GFC to consider the Merger; and (xi) certain
other financial and operating information with respect to the business,
operations and prospects of GFC and Regions. We also: (i) held discussions with
members of the senior management of GFC and Regions regarding their respective
historical and current business operations, financial conditions and future
prospects; (ii) reviewed the historical market prices and trading activity for
the common stocks of GFC and Regions and compared them with those of certain
publicly traded companies which we deemed to be relevant; (iii) compared the
results of operations of GFC and Regions with those of certain banking companies
which we deemed to be relevant; (iv) compared the proposed financial terms of
the Merger with the financial terms, to the extent publicly available, of
certain other recent business combinations of commercial banking organizations;
(v) analyzed the pro forma financial impact of the Merger on Regions; and (vi)
conducted such other studies, analyses, inquiries and examinations as we deemed
appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
GFC or Regions. The opinion we express herein is necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.
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Board of Directors
Greenville Financial Corporation
January , 1998
Page 2
Based upon the foregoing, it is our opinion that the consideration provided
for in the Agreement is fair, from a financial point of view, to the
stockholders of Greenville Financial Corporation.
Very truly yours,
THE CARSON MEDLIN COMPANY
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APPENDIX C
CODE OF LAWS OF SOUTH CAROLINA 1976 ANNOTATED
TITLE 33. CORPORATIONS, PARTNERSHIPS AND ASSOCIATIONS
CHAPTER 13. DISSENTERS' RIGHTS
ARTICLE 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right when
and in the manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable. The value of the
shares is to be determined by techniques that are accepted generally in the
financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 33-13-102. RIGHT TO DISSENT.
A shareholder is entitled to dissent from, and obtain payment of the fair
value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
33-11-103 or the articles of incorporation and the shareholder is entitled
to vote on the merger or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 33-11-104 or 33-11-108 or if the
corporation is a parent that is merged with its subsidiary under Section
33-11-108;
(2) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale must be distributed to
the shareholders within one year after the date of sale;
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(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Section 33-6-104; or
(5) the approval of a control share acquisition under Article 1 of
Chapter 2 of Title 35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
SEC. 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if he dissents with respect to all shares of which he is
the beneficial shareholder or over which he has power to direct the vote. A
beneficial shareholder asserting dissenters' rights to shares held on his behalf
shall notify the corporation in writing of the name and address of the record
shareholder of the shares, if known to him.
SEC. 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Section 33-13-102
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 33-13-220.
SEC. 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) must give to the corporation before the
vote is taken written notice of his intent to demand payment for his shares if
the proposed action is effectuated and (2) must not vote his shares in favor of
the proposed action. A vote in favor of the proposed action cast by the holder
of a proxy solicited by the corporation shall not disqualify a shareholder from
demanding payment for his shares under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this chapter.
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SEC. 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days after
the corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates
for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of
the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he or, if he is a nominee
asserting dissenters' rights on behalf of a beneficial shareholder, the
beneficial shareholder acquired beneficial ownership of the shares before
that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days after
the date the subsection (a) notice is delivered and set a date by which
certificates for certificated shares must be deposited, which may not be
earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SEC. 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section 33-13-220
must demand payment, certify whether he (or the beneficial shareholder on whose
behalf he is asserting dissenters' rights) acquired beneficial ownership of the
shares before the date set forth in the dissenters' notice pursuant to Section
33-13-220(b)(3), and deposit his certificates in accordance with the terms of
the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements
that he demand payment and deposit his share certificates where required, each
by the date set in the dissenters' notice, is not entitled to payment for his
shares under this chapter.
SEC. 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section
33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
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(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the
shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional payment
under Section 33-13-280; and
(5) a copy of this chapter.
SEC. 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
SEC. 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section 33-13-
250 from a dissenter as to any shares of which he (or the beneficial owner on
whose behalf he is asserting dissenters' rights) was not the beneficial owner on
the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action, unless the beneficial ownership of the shares devolved upon
him by operation of law from a person who was the beneficial owner on the date
of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
SEC. 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due and demand payment of
his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer under Section 33-13-270 and demand payment of the fair value
of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
offered under Section 33-13-270 is less than the fair value of his shares
or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to
offer payment under Section 33-13-270 within sixty days after the date set
for demanding payment; or
(3) corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
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(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
SEC. 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this State,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this State, it shall commence the proceeding in
the county in this State where the principal office (or, if none in this State,
the registered office) of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section 33-13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under
Section 33-13-300(a) of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
corporation and in favor of the dissenters.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the Company
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
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the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
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venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
The Company has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity result in liability, or to the
Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on inside
information, illegal payments, dishonesty, accounting of securities profits in
violation of Section 16(b) of the Securities Exchange Act of 1934 and acts
within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of May 29, 1997, by and
between Greenville Financial Corporation and Regions Financial
Corporation -- included as Appendix A to the Proxy
Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation --
incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 333-37361
4.2 -- By-laws of Regions Financial Corporation -- incorporated by
reference from S-4 Registration Statement of Regions Financial
Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Elliott Davis & Co.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included
in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- included in Exhibit 8.
23.5 -- Consent of The Carson Medlin Company
24. -- Power of Attorney -- the manually signed power of attorney is set
forth in the signature page of the registration statement.
99. -- Form of Proxy.
</TABLE>
II-3
<PAGE> 134
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Birmingham,
State of Alabama on this the 19th day of December, 1997.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
/s/ Richard D. Horsley
BY: --------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -------------------------- ------------------------------ ------------
* J. Stanley Mackin
- -------------------------- Chairman of the Board and December 19, 1997
J. Stanley Mackin Chief Executive Officer and
Director
* Richard D. Horsley
- -------------------------- Vice Chairman of the Board and December 19, 1997
Richard D. Horsley Executive Financial Officer
and Director
* Robert P. Houston
- -------------------------- Executive Vice President and December 19, 1997
Robert P. Houston Comptroller
* Sheila S. Blair
- -------------------------- Director December 19, 1997
Sheila S. Blair
II-5
<PAGE> 136
- -------------------------- Director
William B. Boles, Sr.
* James B. Boone, Jr.
- -------------------------- Director December 19, 1997
James B. Boone, Jr.
* Albert P. Brewer
- -------------------------- Director December 19, 1997
Albert P. Brewer
* James S.M. French
- -------------------------- Director December 19, 1997
James S.M. French
* Carl E. Jones, Jr.
- -------------------------- President and Chief Operating December 19, 1997
Carl E. Jones, Jr. Officer and Director
* Olin B. King
- -------------------------- Director December 19, 1997
Olin B. King
* Henry E. Simpson
- -------------------------- Director December 19, 1997
Henry E. Simpson
- -------------------------- Director
Lee J. Styslinger, Jr.
* Robert J. Williams
- -------------------------- Director December 19, 1997
Robert J. Williams
* By /s/ Richard D. Horsley as attorney-in-fact December 19, 1997
pursuant to a power of attorney.
II-6
<PAGE> 137
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of May 29, 1997, by and
between Greenville Financial Corporation and Regions Financial
Corporation -- included as Appendix A to the Proxy
Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation --
incorporated by reference from S-4 Registration Statement of
Regions Financial Corporation, file no. 333-37361
4.2 -- By-laws of Regions Financial Corporation -- incorporated by
reference from S-4 Registration Statement of Regions Financial
Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Elliott Davis & Co.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included
in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- included in Exhibit 8.
23.5 -- Consent of The Carson Medlin Company.
24. -- Power of Attorney -- the manually signed power of attorney is set
forth in the signature page of the registration statement.
99. -- Form of Proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
December 3, 1997
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with Greenville Financial Corporation
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of Greenville Financial
Corporation ("GFC") with and into Regions (the "Merger") and in connection with
the registration of shares of common stock of Regions, par value $.625 per
share ("Regions Common Stock"), on Form S-4 under the Securities Act of 1933.
The Merger provides for issuance of shares of common stock of Regions, par
value $.625 per share, to the stockholders of GFC upon consummation of the
Merger. The maximum number of shares of Regions to be issued in the Merger is
estimated to be 1,100,127.
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission, as such registration
statement has been amended to date. We have examined and are familiar with the
records relating to the organization of Regions and the documents and records
as we have deemed relevant for purposes of rendering this opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such
conditions capable of being waived, and upon consummation of the Merger, the
shares of Regions Common Stock issued pursuant to the Merger will be duly
authorized, validly issued and outstanding, fully paid and non-assessable, with
no personal liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
/s/ Lange, Simpson, Robinson & Somerville LLP
<PAGE> 1
EXHIBIT 8
ALSTON & BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
Philip C. Cook Direct Dial (404) 881-7000
December 4, 1997
Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
Greenville Financial Corporation
290 South Pleasantburg Drive
Greenville, South Carolina 29607
Re: Proposed Merger of Greenville Financial Corporation with and
into Regions Financial Corporation
Ladies and Gentlemen:
We have acted as special tax counsel to Regions Financial Corporation
("Regions"), a corporation organized and existing under the laws of the State
of Delaware, in connection with the proposed merger of Greenville Financial
Corporation ("GFC"), a corporation organized and existing under the laws of the
State of South Carolina, with and into Regions. The Merger will be effected
pursuant to the Agreement and Plan of Merger by and between GFC and Regions,
dated as of September 4, 1997 (the "Agreement"). Following the Merger,
Greenville National Bank, a wholly owned, first-tier banking subsidiary of GFC,
may be merged (the "Bank Merger") with and into a wholly owned, first-tier
banking subsidiary of Regions. In our capacity as counsel to Regions, our
opinion has been requested with respect to certain of the federal income tax
consequences of the proposed Merger.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all
section references herein are to the Code.
<PAGE> 2
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 2
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by Regions with
the Securities and Exchange Commission under the Securities
Act of 1933, on December 4, 1997, including the Proxy
Statement/Prospectus for the Special Meeting of the
stockholders of Greenville Financial Corporation; and
(3) such additional documents as we have considered relevant.
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of Regions and GFC and through certificates
provided by the management of Regions and the management of GFC.
You have advised us that the proposed transaction will enable the
combined organization to realize certain economies of scale, provide a wider
array of banking and banking related services to consumers and businesses, and
strengthen market position and increase financial resources to meet competitive
challenges within the Greenville, South Carolina market area. To achieve these
goals, the following will occur pursuant to the Agreement:
(1) Subject to the terms and conditions of the Agreement, at the
Effective Time, GFC shall be merged into and with Regions in accordance with
the provisions of Section 252 of the DGCL with the effect provided in Section
259 of the DGCL and in accordance with Section 33-11-107 of the SCBCA with the
effect provided in Section 33-11-106 of the SCBCA (the "Merger"). Regions shall
be the Surviving Corporation of the Merger and shall continue to be governed by
the Laws of the State of Delaware. The Merger shall be consummated pursuant to
the terms of the Agreement, which has been approved and adopted by the Boards
of Directors of GFC and Regions.
(2) Subject to the provisions of Article 3 of the Agreement, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
<PAGE> 3
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 3
(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 GFC Common Stock (excluding shares held by GFC
or any of its Subsidiaries or by Regions or any of its
Subsidiaries, in each case other than in a fiduciary capacity
or as a result of debts previously contracted) issued and
outstanding at the Effective Time shall be converted into 1.2
shares of Regions Common Stock (the "Exchange Ratio").
(3) In the event GFC changes the number of shares of GFC Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, or similar recapitalization with respect to such stock,
the Exchange Ratio shall be proportionately adjusted. In the event Regions
changes the number of shares of Regions Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Exchange Ratio
shall be proportionately adjusted.
(4) Each of the shares of GFC Common Stock held by any GFC
Company or by any Regions Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
(5) Any holder of shares of GFC Common Stock who perfects such
holder's dissenters' rights of appraisal in accordance with and as contemplated
by Sections 13-13-101, et seq. of the SCBCA shall be entitled to receive the
value of such shares in cash as determined pursuant to such provision;
provided, however, 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 SCBCA and surrendered to GFC the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting stockholder of GFC fails to
perfect, or effectively withdraws or loses, such holder's right to appraisal
and of payment for such holder's shares, Regions shall issue and deliver the
consideration to which such holder of shares of GFC Common Stock is entitled
under Article Three of the Agreement (without interest) upon surrender by such
holder of the certificate or certificates representing shares of GFC Common
Stock held by such holder. GFC will establish an escrow account with an amount
sufficient to satisfy the maximum aggregate payment that may be required to be
paid to dissenting stockholders. Upon satisfaction of all claims of
<PAGE> 4
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 4
dissenting stockholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to GFC.
(6) Notwithstanding any other provision of the Agreement, each
holder of shares of GFC Common Stock exchanged pursuant to the Merger, or of
options to purchase shares of GFC Common Stock, who would otherwise have been
entitled to receive a fraction of a share of Regions Common Stock (after taking
into account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of
a share of Regions Common Stock multiplied by the market value of one share of
Regions Common Stock at the Effective Time, in the case of shares exchanged
pursuant to the Merger, or the date of exercise, in the case of options.
(7) At the Effective Time, all rights with respect to GFC Common
Stock pursuant to stock options ("GFC Options") granted by GFC under the GFC
Stock Plan, which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Regions
Common Stock, and Regions shall assume each GFC Option, in accordance with the
terms of the GFC Stock Plan and stock option agreement by which it is
evidenced.
With your consent, we have also assumed that the following statements
are true on the date hereof and will be true on the date the proposed
transaction is consummated:
(1) The fair market value of the Regions Common Stock and other
consideration, if any, received in the aggregate by the stockholders of GFC
will be approximately equal to the fair market value of the GFC Common Stock
surrendered in exchange therefor.
(2) There is no plan or intention on the part of the stockholders
op GFC who own one percent (1%) or more of GFC Common Stock, and to the best of
the knowledge of the management of GFC, there is no plan or intention on the
part of the remaining stockholders of GFC to sell, exchange, or otherwise
dispose of a number of shares of Regions Common Stock to be received in the
proposed transaction that would reduce their holdings in Regions Common Stock
received to a number of shares having, in the aggregate, a value as of the
Effective Time of less than fifty percent (50%) of the total value of all
shares of GFC Common Stock outstanding immediately prior to the Effective Time.
For purposes of this assumption, shares of GFC Common Stock exchanged for cash
or other property, surrendered by dissenters or exchanged for cash in lieu of
fractional shares of Regions Common Stock will be treated as outstanding GFC
Common Stock as of the Effective Time. Moreover, shares of GFC Common Stock and
shares of Regions Common Stock held by GFC stockholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the transaction will be
considered in making this assumption.
<PAGE> 5
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 5
(3) Regions has no plan or intention to redeem or otherwise
reacquire any shares of Regions Common Stock issued in the Merger, except for
purchases of stock in the open market in the normal course of business executed
through an independent broker in which Regions is not aware of the identity of
any seller or in private placement transactions in which the sellers are not
former GFC stockholders.
(4) Regions has no plan or intention to dispose of any of the
assets of GFC acquired in the transaction, except for dispositions made in the
ordinary course of business, transfers described in Section 368(a)(2)(C) or
pursuant to the Bank Merger.
(5) The liabilities of GFC assumed by Regions and the liabilities
to which the transferred assets of GFC are subject were incurred by GFC in the
ordinary course of its business.
(6) Following the transaction, Regions will continue the historic
business of GFC or use a significant portion of GFC's historic business assets
in a business.
(7) Regions, GFC, and the stockholders of GFC will pay their
respective expenses, if any, incurred in connection with the transaction,
except that Regions shall bear and pay the filing fees payable in connection
with the Registration Statement and the Proxy Statement and printing costs
incurred in connection with the printing of the Registration Statement and the
Proxy Statement.
(8) There is no intercorporate indebtedness existing between GFC
and Regions that was issued, acquired, or will be settled at a discount.
(9) GFC is not under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(10) Both the fair market value and the total adjusted basis of the
assets of GFC transferred to Regions will equal or exceed the sum of the
liabilities assumed by Regions plus the amount of the liabilities, if any, to
which the transferred assets are subject.
(11) The payment of cash to GFC stockholders in lieu of fractional
shares of Regions Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Regions of issuing fractional shares and does not
represent separately bargained for consideration. The total cash consideration
that will be paid in the transaction to the GFC stockholders instead of issuing
fractional shares of Regions Common Stock will not exceed one percent (1%) of
the total consideration that will be issued in the transaction to the GFC
stockholders in exchange for their shares of GFC Common Stock. The fractional
share interests of each GFC stockholder will be aggregated, and no GFC
stockholder will receive cash in an amount equal to or greater than the value
of one full share of Regions Common Stock.
<PAGE> 6
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 6
(12) None of the compensation received by any stockholder-employees
of GFC will be separate consideration for, or allocable to, any of their shares
of GFC Common Stock; none of the shares of Regions Common Stock received by any
stockholder-employees of GFC will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any
stockholder-employees of GFC will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(13) At all times during the five-year period ending on the
Effective Date of the Merger, the fair market value of all of GFC's United
States real property interests was and will have been less than fifty percent
(50%) of the fair market value of the total of (a) its United States real
property interests, (b) its interests in real property located outside the
United States, and (c) its other assets used or held for use in a trade or
business. For purposes of the preceding sentence, (i) United States real
property interests include all interests (other than an interest solely as a
creditor) in real property and associated personal property (such as movable
walls and furnishings) located in the United States or the Virgin Islands and
interests in any corporation (other than a controlled corporation) owning any
United States real property interest, (ii) GFC is treated as owning its
proportionate share (based on the relative fair market value of its ownership
interest to all ownership interests) of the assets owned by any controlled
corporation or any partnership, trust, or estate in which GFC is a partner or
beneficiary, and (iii) any such entity in turn is treated as owning its
proportionate share of the assets owned by any controlled corporation or any
partnership, trust, or estate in which the entity is a partner or beneficiary.
As used in this paragraph, "controlled corporation" means any corporation at
least fifty percent (50%) of the fair market value of the stock of which is
owned by GFC, in the case of a first-tier subsidiary of GFC or by a controlled
corporation, in the case of a lower-tier subsidiary.
(14) Neither Regions nor GFC is an investment company. For purposes
of the foregoing, an "investment company" is a corporation that is a regulated
investment company, a real estate investment trust, or a corporation fifty
percent (50%) or more of the value of whose total assets are stock and
securities and eighty percent (80%) or more of the value of whose total assets
are assets held for investment. In making the fifty percent (50%) and eighty
percent (80%) determinations under the preceding sentence, stock and securities
in any subsidiary corporation shall be disregarded and the parent corporation
shall be deemed to own its ratable share of the subsidiary's assets, and a
corporation shall be considered a subsidiary if the parent owns fifty percent
(50%) or more of the combined voting power of all classes of stock entitled to
vote or fifty percent (50%) or more of the total value of shares of all classes
of stock outstanding.
(15) The Agreement represents the entire understanding of GFC and
Regions with respect to the Merger.
<PAGE> 7
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 7
OPINIONS
Based solely on the information submitted and the representations set
forth above and assuming that the Merger will take place as described in the
Agreement and that the representations made by Regions and GFC (including the
representation that GFC stockholders will maintain sufficient equity ownership
interests in Regions after the Merger) are true and correct at the time of the
consummation of the Merger, we are of the opinion that:
(1) Provided the Merger qualifies as a statutory merger under the
DGCL and the SCBCA, the Merger will be a reorganization within the meaning of
Section 368(a) of the Code. GFC and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(2) The stockholders of GFC will recognize no gain or loss upon
the exchange of all of their GFC Common Stock solely for shares of Regions
Common Stock.
(3) The aggregate tax basis of the Regions Common Stock received
by the GFC stockholders in the proposed transaction will, in each instance, be
the same as the aggregate tax basis of the GFC Common Stock surrendered in
exchange therefor, less the basis of any fractional share of Regions Common
Stock settled by cash payment.
(4) The holding period of the Regions Common Stock received by the
GFC stockholders will, in each instance, include the period during which the
GFC Common Stock surrendered in exchange therefor was held, provided that the
GFC Common Stock was held as a capital asset on the date of the exchange.
(5) The payment of cash to GFC 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
shares redeemed as provided in Section 302(a) of the Code.
(6) Where solely cash is received by a GFC stockholder in exchange
for GFC Common Stock pursuant to the exercise of dissenters' rights, such cash
will be treated as having been received in redemption of such holder's GFC
Common Stock, subject to the provisions and limitations of Section 302 of the
Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements set out herein, which we have assumed and you have
confirmed to be true on the date hereof and will be true on the date on which
the proposed transaction is consummated. Our opinions cannot be relied
<PAGE> 8
Regions Financial Corporation
Greenville Financial Corporation
December 4, 1997
Page 8
upon if any of the facts contained in such documents or if such additional
information is, or later becomes, inaccurate, or if any of the statements set
out herein is, or later becomes, inaccurate. Finally, our opinions are limited
to the tax matters specifically covered thereby, and we have not been asked to
address, nor have we addressed, any other tax consequences of the proposed
transaction, including for example any issues related to the Bank Merger,
intercompany transactions, accounting methods, bad debt reserves, or changes in
accounting methods resulting from the Merger.
This opinion is being provided solely for the benefit of Regions, GFC
and GFC's stockholders. No other person or party shall be entitled to rely on
this opinion.
We consent to the use of this opinion and to the references made to
the firm under the caption "Description of the Transaction--Certain Federal
Income Tax Consequences of the Merger" in the Proxy Statement/Prospectus
constituting part of the Registration Statement on Form S-4 of Regions.
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Philip C. Cook
----------------------------------------
Philip C. Cook
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 1,100,127 shares of its common stock
and to the incorporation by reference therein of our report dated February 4,
1997 (except for the last two paragraphs of Note Q as to which the date is
March 13, 1997), with respect to the consolidated financial statements of
Regions Financial Corporation incorporated by reference in its Annual Report
(Form 10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
December 3, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report, dated January 10, 1997, on the financial statements of
Greenville Financial Corporation for the years ended December 31, 1996 and 1995
and each of the three years in the period ended December 31, 1996 in the
Registration Statement (Form S-4) of Regions.
/s/ ELLIOTT, DAVIS & COMPANY, LLP
Greenville, South Carolina
December 2, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF THE CARSON MEDLIN COMPANY
We hereby consent to the inclusion as Appendix B. to the Proxy
Statement/Prospectus constituting part of the Registration Statement on Form
S-4 of Regions Financial Corporation of our letter to the Board of Directors of
Greenville Financial Corporation and to the references made to such letter and
to the firm in such Proxy Statement/Prospectus. In giving such consent, we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ The Carson Medlin Company
THE CARSON MEDLIN COMPANY
Raleigh, North Carolina
December 19, 1997
<PAGE> 1
EXHIBIT 99
GREENVILLE FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints ________ _______, ________
_______, and _______ _______, and each or any one of them, with full power of
substitution, as Proxies to represent and to vote as designated below, all the
shares of common stock of Greenville Financial Corporation (the "Company") held
of record by the undersigned on December 17, 1997, at the Special Meeting of
Stockholders (the "Special Meeting") to be held on ________, 1998, or any
adjournments thereof.
1. Proposal to approve the Agreement and Plan of Merger, dated
as of September 4, 1997 (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,
Regions, or their respective subsidiaries) will be converted into 1.2
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 persons
named as Proxies 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.
<PAGE> 2
This Proxy revokes all prior proxies with respect to the Special
Meeting and may be revoked prior to its exercise.
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.
Dated:___________________________________________, 199__.
------------------------------------------
(Print Name of Stockholder)
-----------------------------------------
(Signature of Stockholder)
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(Print Name of Stockholder)
------------------------------------------
(Signature of Stockholder)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
