<PAGE> 1
As filed with the Securities and Exchange Commission on December 30, 1997
Registration No. 333-41601
- --------------------------------------------------------------------------------
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)
Copies to:
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CHARLES C. PINCKNEY FRANK M. CONNER III CHARLES M. FLICKINGER
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD SUTHERLAND, ASBILL & BRENNAN LLP
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. 999 PEACHTREE STREET, N.E.
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 ATLANTA, GEORGIA 30309-3996
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 (404) 853-8000
(205) 250-5000 (202) 508-3303
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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 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; Pro Forma Financial Information.
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............. Business of PALFED; Voting Securities and
Principal Stockholders of PALFED
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...................................... Not Applicable.
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 PALFED, Inc. Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
PALFED, Inc. ("PALFED") to be held at the Aiken City Hall Meeting Room, 214 Park
Avenue, Aiken, South Carolina, 29801, on February 3, 1998, at 10:00 a.m., local
time, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger (the "Agreement"), entered
into with Regions Financial Corporation ("Regions") pursuant to which PALFED
will merge (the "Merger") with and into Regions, and Palmetto Federal Savings
Bank of South Carolina (the "Bank"), a wholly owned subsidiary of PALFED, will
become a wholly owned subsidiary of Regions and will continue serving its
current markets as a federally-chartered stock savings bank until combined with
Regions' principal banking subsidiary. The other subsidiaries of PALFED will
become subsidiaries of Regions. Upon consummation of the Merger, each share of
PALFED common stock issued and outstanding (except for certain shares held by
PALFED, Regions, or their respective subsidiaries and shares held by
stockholders who perfect their dissenters' rights) will be converted into .70 of
a share of Regions common stock, subject to possible upward adjustment.
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 PALFED has agreed to vote those PALFED 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 PALFED stockholders and approval of the Merger by
various regulatory agencies.
Stockholders of PALFED 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 PALFED 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 PALFED 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 PALFED, 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,
John C. Troutman
President and Chief Executive Officer
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PALFED, INC.
107 CHESTERFIELD STREET SOUTH, AIKEN, SOUTH CAROLINA, 29801
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 3, 1998
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of PALFED, Inc. ("PALFED"), a South Carolina corporation, will be held
at the Aiken City Hall Meeting Room, 214 Park Avenue, Aiken, South Carolina,
29801, on February 3, 1998, at 10:00 a.m., local time, for the following
purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of September 23, 1997 (the "Agreement"), by and between PALFED and
Regions Financial Corporation ("Regions") pursuant to which (i) Regions will
acquire all of the issued and outstanding common stock of PALFED through the
merger of PALFED with and into Regions (the "Merger"), (ii) each share of PALFED
common stock (except for certain shares held by PALFED, Regions, or their
respective subsidiaries and shares held by stockholders who perfect their
dissenters' rights) will be converted into .70 of a share of Regions common
stock, subject to possible upward adjustment, and (iii) each PALFED 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 26, 1997,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of PALFED 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 PALFED unanimously recommends that holders of
PALFED 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. Failure to vote
will have the same effect as a vote against the Merger. The proxy may be revoked
by the person executing the proxy by filing with the Secretary of PALFED 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
Howard M. Hickey, Jr.
Secretary
December 31, 1997
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A STOCKHOLDER RECEIVES MORE THAN ONE PROXY BECAUSE HE OR SHE OWNS
SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. YOUR PROXY WILL BE
VOTED WITH RESPECT TO THE MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY
SPECIFICATIONS ON THE PROXY.
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PALFED, INC. REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD FEBRUARY 3, 1998 (PAR VALUE $.625)
up to 3,928,555 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
PALFED, Inc., a savings and loan holding company organized and existing under
the laws of the state of South Carolina ("PALFED") upon consummation of the
proposed merger (the "Merger") described herein, by which PALFED will merge with
and into Regions pursuant to the terms of an Agreement and Plan of Merger, dated
as of September 23, 1997, by and between Regions and PALFED (the "Agreement").
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.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) PALFED will merge with and into Regions, (ii)
each outstanding share of the $1.00 par value common stock of PALFED ("PALFED
Common Stock") will be converted into .70 of a share of Regions Common Stock,
subject to possible adjustment, and (iii) each holder of PALFED 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.
The Exchange Ratio is adjustable upward only if certain conditions are met
concerning the quoted price of Regions Common Stock, and then only with the
concurrence of both PALFED and Regions. The Board of Directors of PALFED would
likely invoke the adjustment mechanism in the Agreement if the conditions
permit, in which case Regions must determine whether to proceed with the Merger
at a higher Exchange Ratio. In making this determination, the principal factors
Regions will consider include the projected effect of the Merger on Regions' pro
forma earnings per share and whether Regions' assessment of PALFED's earning
potential as part of Regions justifies the issuance of a higher number of
Regions' shares. If Regions declines to adjust the Exchange Ratio, PALFED may
elect to proceed without the adjustment. In making such determination, the Board
of Directors of PALFED will consider whether the Merger remains in the best
interest of PALFED and its stockholders, despite a decline in Regions' stock
price, and whether the consideration to be received by the holders of PALFED
Common Stock remains fair from a financial point of view. PALFED intends to
resolicit approval of the Merger from holders of PALFED Common Stock if its
Board of Directors determines to proceed with the Merger under circumstances
such that the value of the consideration to be received by such holders in the
Merger is below $21.00 per share as of the Determination Date (as defined in
the Agreement.) See "Description of the Transaction--Possible Adjustment of
Exchange Ratio."
As a result of the Merger, the separate existence of PALFED will cease, and
Palmetto Federal Savings Bank of South Carolina, a wholly owned subsidiary of
PALFED (the "Bank"), will become a wholly owned subsidiary of Regions, and the
other subsidiaries of PALFED will become subsidiaries of Regions. The Bank will
continue
<PAGE> 6
to operate as a federally-chartered stock savings bank until combined with
Regions' principal banking subsidiary, which Regions anticipates will occur
before year-end 1998. For a further description of the terms of the Merger, see
"Description of the Transaction."
This Prospectus also constitutes a Proxy Statement of PALFED and is being
furnished to the stockholders of PALFED in connection with the solicitation of
proxies by the Board of Directors of PALFED for use at its special meeting of
stockholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on February 3, 1998, to consider and vote on the proposed
Merger and related matters. This Proxy Statement/Prospectus and the accompanying
proxy card are first being mailed to stockholders of PALFED on or about December
31, 1997.
The date of this Proxy Statement/Prospectus is December 31, 1997.
2
<PAGE> 7
AVAILABLE INFORMATION
Regions and PALFED are subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file 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 PALFED. 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 PALFED 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 PALFED
was supplied by PALFED.
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;
3. Regions' Report of Form 10-C filed June 20, 1997; and
3
<PAGE> 8
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.
The following documents previously filed with the SEC by PALFED pursuant to
the Exchange Act are hereby incorporated by reference herein:
1. PALFED's Annual Report on Form 10-K for the year ended December 31,
1996;
2. PALFED's Quarterly Reports on Form 10-Q for the three months ended
March 31, June 30, and September 30, 1997;
3. PALFED's Current Reports on Form 8-K filed with the SEC on
September 2, September 29, and on December 12, 1997.
PALFED's Annual Report on Form 10-K for the year ended December 31, 1996
incorporates by reference specific portions of PALFED's Annual Report to
Stockholders for the year ended December 31, 1996 (the "PALFED 1996 Annual
Report"), but does not incorporate other portions of the PALFED 1996 Annual
Report. Only those portions of the PALFED 1996 Annual Report captioned "Selected
Financial Data", "Management's Discussion and Analysis of Financial Condition
and Results of Operations", "Report of Independent Accountants", "Consolidated
Financial Statements" and "Notes to Consolidated Financial Statements" are
incorporated herein. All other portions of the PALFED 1996 Annual Report are NOT
incorporated herein and are not a part of the Registration Statement.
All documents filed by Regions or PALFED 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.
Copies of the audited consolidated financial statements of Regions
included in Regions' Annual Report on Form 10-K for the year ended December 31,
1996, and the audited consolidated financial statements of PALFED included in
PALFED's annual report on Form 10-K for the year ended December 31, 1996
accompany 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), IF FILED BY
REGIONS, FROM RONALD C. JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL
CORPORATION, 417 NORTH 20TH STREET, BIRMINGHAM, ALABAMA, 35203 (TELEPHONE (205)
326-7090), AND IF FILED BY PALFED, FROM HOWARD M. HICKEY, JR., 107 CHESTERFIELD
STREET SOUTH, AIKEN, SOUTH CAROLINA, 29801 (TELEPHONE (803) 642-1400). IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
JANUARY 27, 1998.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION........................................................ 3
DOCUMENTS INCORPORATED BY REFERENCE.......................................... 3
SUMMARY...................................................................... 7
The Parties............................................................. 7
Special Meeting of PALFED Stockholders.................................. 8
Record Date; Vote Required.............................................. 8
The Merger; Exchange Ratio.............................................. 8
Dissenting Stockholders................................................. 8
Reasons for the Merger; Recommendation of PALFED's Board
of Directors........................................................... 9
Opinion of PALFED's Financial Advisor................................... 9
Effective Date.......................................................... 9
Exchange of Stock Certificates.......................................... 9
Regulatory Approvals and Other Conditions............................... 10
Waiver, Amendment, and Termination of the Agreement..................... 10
Interests of Certain Persons in the Merger.............................. 10
Certain Federal Income Tax Consequences of the Merger................... 10
Certain Differences in Stockholders' Rights............................. 11
Option Agreement........................................................ 11
Comparative Market Prices of Common Stock............................... 11
Comparative Per Share Data.............................................. 12
Selected Financial Data................................................. 13
THE SPECIAL MEETING.......................................................... 16
General................................................................. 16
Record Date; Vote Required.............................................. 16
DESCRIPTION OF THE TRANSACTION............................................... 17
General................................................................. 17
Possible Adjustment of Exchange Ratio .................................. 17
Treatment of PALFED Options............................................. 19
Background of and Reasons for the Merger................................ 19
Opinion of PALFED's Financial Advisor................................... 22
Effective Date of the Merger............................................ 22
Distribution of Regions Stock Certificates and
Payment for Fractional Shares......................................... 22
Conditions to Consummation of the Merger................................ 23
Regulatory Approvals.................................................... 23
Waiver, Amendment, and Termination of the Agreement..................... 24
Conduct of Business Pending the Merger.................................. 25
Management Following the Merger......................................... 27
Interests of Certain Persons in the Merger.............................. 27
Dissenting Stockholders................................................. 28
Certain Federal Income Tax Consequences of the Merger................... 30
Accounting Treatment.................................................... 31
Expenses and Fees....................................................... 31
Resales of Regions Common Stock......................................... 31
Option Agreement........................................................ 32
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS........................................ 34
Antitakeover Provisions Generally................................................ 34
Authorized Capital Stock......................................................... 34
Amendment of Certificate of Incorporation and Bylaws............................. 35
Classified Board of Directors and Absence of Cumulative Voting................... 36
Removal of Directors............................................................. 36
Limitations on Director Liability................................................ 36
Indemnification.................................................................. 37
Special Meetings of Stockholders................................................. 37
Actions by Stockholders Without a Meeting........................................ 38
Stockholder Nominations.......................................................... 38
Mergers, Consolidations, and Sales of Assets Generally........................... 38
Business Combinations with Certain Persons....................................... 39
Dissenters' Rights............................................................... 40
Stockholders' Rights to Examine Books and Records................................ 40
Dividends........................................................................ 40
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................... 41
BUSINESS OF PALFED ............................................................... 43
General..........................................................................
Goodwill Claim...................................................................
Recent Development...............................................................
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF PALFED................................ 43
BUSINESS OF REGIONS................................................................... 44
General.......................................................................... 44
Recent Developments.............................................................. 44
CERTAIN REGULATORY CONSIDERATIONS..................................................... 47
General.......................................................................... 47
Payment of Dividends............................................................. 48
Capital Adequacy................................................................. 49
Support of Subsidiary Institutions............................................... 50
Prompt Corrective Action......................................................... 50
FDIC Insurance Assessments....................................................... 51
DESCRIPTION OF REGIONS COMMON STOCK................................................... 52
STOCKHOLDER PROPOSALS................................................................. 52
EXPERTS............................................................................... 53
OPINIONS.............................................................................. 53
APPENDIX A--Agreement and Plan of Merger.............................................. A-1
APPENDIX B--Opinion of Sterne, Agee & Leach, Inc. .................................... 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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<PAGE> 11
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 "PALFED" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
PALFED. PALFED is a savings and loan holding company organized and existing
under the laws of the state of South Carolina, headquartered in Aiken, South
Carolina. PALFED operates principally through the Bank, which is a wholly owned
subsidiary of PALFED and a federally-chartered stock savings bank and which
provides a range of retail banking services through 23 banking and seven
mortgage lending offices in South Carolina. At September 30, 1997, PALFED had
total consolidated assets of approximately $668.5 million, total consolidated
deposits of approximately $573.4 million, and total consolidated stockholders'
equity of approximately $56.9 million. PALFED's principal executive office is
located at 107 Chesterfield Street South, Aiken, South Carolina, 29801, and its
telephone number at such address is (803) 642-1400.
Additional information with respect to PALFED and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. Sec "Available Information," "Documents Incorporated by
Reference," and "Business of PALFED."
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 . 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."
<PAGE> 12
SPECIAL MEETING OF PALFED STOCKHOLDERS
The Special Meeting will be held at 10:00 a.m., local time, on February 3,
1998, at the Aiken City Hall Meeting Room, 214 Park Avenue, Aiken, South
Carolina, 29801, for the purpose of considering and voting on approval of 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 PALFED Common Stock at the close of business on
December 26, 1997 (the "Record Date"), will be entitled to vote at the Special
Meeting. The affirmative vote of at least two-thirds of the PALFED Common Stock
outstanding and entitled to vote at the Special Meeting will be required to
approve the Agreement. Because the affirmative vote of at least two-thirds of
all the outstanding shares of PALFED Common Stock is required for approval of
the Agreement, abstentions, broker nonvotes, and shares otherwise not voted in
the affirmative will have the same effect as votes against the Agreement. As of
the Record Date, there were 5,299,251 shares of PALFED Common Stock outstanding
and entitled to be voted.
The directors and executive officers of PALFED and their affiliates
beneficially owned, as of the Record Date, 441,575 shares (or approximately 8.3%
of the outstanding shares) of PALFED Common Stock. Each member of the Board of
Directors of PALFED has agreed to vote those PALFED 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 PALFED Common Stock. As
of that date, neither PALFED nor Regions held any shares of PALFED 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 PALFED by Regions pursuant to
the Merger of PALFED with and into Regions. On the Effective Date, each share of
PALFED Common Stock then issued and outstanding (except for shares held by
PALFED, 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 .70 of a share of Regions Common Stock,
subject to possible upward adjustment (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 PALFED stockholder would be
entitled upon consummation of the Merger, based on the closing price of Regions
Common Stock on the Nasdaq National Market (as reported by The Wall Street
Journal, or, if not reported thereby, by another authoritative source selected
by Regions) on the last full trading day immediately preceding the Effective
Date. See "Description of the Transaction--General."
DISSENTING STOCKHOLDERS
Holders of PALFED 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 PALFED Common Stock in cash in
accordance with the applicable provisions of the South Carolina Business
Corporation Act of 1988, as amended (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.
<PAGE> 13
REASONS FOR THE MERGER; RECOMMENDATION OF PALFED'S BOARD OF DIRECTORS
PALFED'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, PALFED and its stockholders. Accordingly, PALFED's Board
unanimously recommends that PALFED's stockholders vote FOR approval of the
Agreement. EACH MEMBER OF THE BOARD OF DIRECTORS OF PALFED HAS AGREED TO VOTE
SUCH MEMBER'S SHARES OF PALFED COMMON STOCK IN FAVOR OF THE AGREEMENT. In
approving the Agreement, PALFED's directors considered Regions' 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 Sterne, Agee & Leach, Inc. ("Sterne, Agee") 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 PALFED. See "Description of the
Transaction--Background of and Reasons for the Merger."
OPINION OF PALFED'S FINANCIAL ADVISOR
Sterne, Agee has rendered an opinion to PALFED 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 PALFED. The opinion of Sterne, Agee is attached as
Appendix B to this Proxy Statement/Prospectus. PALFED 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 PALFED'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 PALFED, 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 fifth business day following the last
of the following events to 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 approving or exempting the
Merger and (ii) the date on which the Agreement is approved by the requisite
vote of PALFED stockholders; or such later date within 30 days thereof as
specified by Regions unless such a delay would cause the record date for
Regions' quarterly dividend for that quarter to occur after the Effective Date.
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 PALFED a form letter of transmittal, together with instructions for the
exchange of such stockholders' certificates representing shares of PALFED Common
Stock for certificates representing shares of Regions Common Stock. PALFED
STOCKHOLDERS SHOULD NOT SEND IN
9
<PAGE> 14
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND
INSTRUCTIONS. See "Description of the Transaction--Distribution of Regions Stock
Certificates and Payment for Fractional Shares."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Commissioner of 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 Federal Reserve and the South Carolina Commissioner will be
given or as to the timing or conditions of such approval.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of PALFED 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
PALFED and Regions, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by April
30, 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, PALFED will continue to operate as a savings and loan holding
company under its present management. As a result of having entered into the
Agreement, PALFED has not scheduled its 1998 Annual Meeting of Stockholders,
which usually is held in late April. In the event that the Agreement is not
approved by stockholders at the PALFED Special Meeting, or the Agreement is
terminated prior to the Effective Date, PALFED expects that it would hold its
1998 Annual Meeting as soon as practicable thereafter. See "Description of the
Transaction--Waiver, Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of PALFED's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of PALFED
generally. Those interests relate to, among other things, provisions in the
Agreement regarding indemnification and eligibility for certain Regions employee
benefits, treatment of outstanding options to acquire PALFED Common Stock,
accelerated vesting of restricted stock and stock options, and certain
agreements with executive officers activated by a change of control of PALFED.
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 PALFED
Common Stock for Regions Common Stock will not give rise to gain or loss to
PALFED stockholders, except to the extent of any cash received in lieu of
fractional share interests or as a result of exercise of dissenters' rights.
Gain recognition, if any, will not be in excess of the amount of cash received.
Subject to the provisions and limitations of Section 302(a) of the Code, gain or
loss will be recognized upon the receipt of cash in lieu
10
<PAGE> 15
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 CIRCUMSTANCE OF EACH STOCKHOLDER AND OTHER CIRCUMSTANCES, EACH PALFED
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).
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
On the Effective Date, PALFED stockholders, whose rights are governed by
the South Carolina Act and by PALFED'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 PALFED
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."
OPTION AGREEMENT
PALFED, as issuer, and Regions, as grantee, entered into a stock option
agreement (the "Option Agreement") pursuant to which PALFED granted Regions an
option to purchase, under certain circumstances and subject to certain
adjustments and limitations, up to 1,051,500 shares of PALFED Common Stock at a
price of $21.00 per share. The Option Agreement is exercisable upon the
occurrence of certain events that create the potential for another party to
acquire control of PALFED. To the best knowledge of PALFED, no such event which
would permit exercise of the Option Agreement has occurred as of the date of
this Proxy Statement/Prospectus. The Option Agreement was granted by PALFED as a
condition of and in consideration for Regions' entering into the Agreement and
is intended to increase the likelihood that the Merger will be effected by
making it more difficult and more expensive for a third party to acquire control
of PALFED. See "Description of the Transaction--Option Agreement."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock and PALFED Common Stock are traded in the
over-the-counter market and are quoted in the Nasdaq National Market. The
following table sets forth the last sale price of Regions Common Stock, the last
sale price of PALFED Common Stock, and the equivalent per share price (as
explained below) of PALFED Common Stock at the close on September 22, 1997, the
last trading day immediately preceding public announcement of the Merger, and
December 29, 1997, the latest practicable date prior to the mailing of this
Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS PALFED OF PALFED
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
September 22, 1997 $ 39.13 $21.50 $ 27.39
December 29, 1997 42.00 28.50 29.40
</TABLE>
11
<PAGE> 16
The equivalent per share price of PALFED 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 .70. Stockholders are advised to obtain
current market quotations for Regions Common Stock and PALFED Common Stock. The
market price of Regions Common Stock at the Effective Date may be higher or
lower than the market price at the time the Agreement was executed, at the date
of mailing this Proxy Statement/Prospectus, or at the time of the Special
Meeting. 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 PALFED, (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 PALFED Common Stock, giving effect to the Merger. The Regions and
PALFED pro forma combined information and the PALFED pro forma Merger equivalent
information give effect to the Merger on a pooling-of-interests accounting basis
and assume an Exchange Ratio of .70. See "Description of the
Transaction--Accounting Treatment." The pro forma data are presented for
information purposes only and are not necessarily indicative of the results of
operations or combined financial position that would have resulted had the
Merger been consummated at the dates or during the periods indicated, nor are
they necessarily indicative of future results of operations or combined
financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
PALFED, including the respective notes thereto. Regions' historical information
has been adjusted to reflect a 2-for-1 stock split effected by Regions on June
13, 1997.
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 PALFED historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical....................................... $ 1.62 $ 1.33 $ 1.85 $ 1.60 $ 1.55
PALFED historical ....................................... .70 .24 .02 .80 .73
Regions and PALFED pro forma combined(1)................. 1.60 1.80 1.59 1.54
PALFED pro forma Merger equivalent(2).................... 1.12 1.26 1.11 1.08
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical....................................... .60 .525 .70 .66 .60
PALFED historical........................................ .09 .06 .08 -- --
PALFED pro forma Merger equivalent(3).................... .42 .37 .49 .46 .42
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical....................................... 13.58 12.43 12.76 11.69 10.63
PALFED historical........................................ 10.74 10.10 9.91 10.01 8.78
Regions and PALFED pro forma combined(1)................. 13.66
PALFED pro forma Merger equivalent(2).................... 9.56
</TABLE>
(1) Represents the combined results of Regions and PALFED 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 .70 of a share of Regions Common Stock for each share of PALFED Common
Stock.
(3) Represents historical dividends declared per share by Regions multiplied by
the Exchange Ratio of .70 of a share of Regions Common Stock for each share
of PALFED Common Stock.
(4) The Exchange Ratio is subject to upward adjustment if the average of the
closing sales prices of Regions Common Stock over a specified period is
less than $30.00. See "Description of the Transaction -- Possible
Adjustment of Exchange Ratio." The presentation of pro forma Merger
equivalent information would be affected by any increase in the Exchange
Ratio.
12
<PAGE> 17
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and PALFED. The data should be read in conjunction with
the historical financial statements, related notes, and other financial
information concerning Regions and PALFED incorporated by reference or included
herein. Interim unaudited data for the nine months ended September 30, 1997 and
1996 of Regions and PALFED reflect, in the opinion of the respective managements
of Regions and PALFED, 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."
13
<PAGE> 18
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 periods prior to 1996 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%.
<PAGE> 19
Selected Historical Financial Data of PALFED
<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 .................. $ 40,582 $ 37,492 $ 50,735 $ 50,530 $ 46,937 $ 48,191 $ 58,480
Total interest expense ................. 21,755 21,299 28,517 30,530 26,514 30,837 41,079
Net interest income .................... 18,827 16,193 22,218 20,000 20,423 17,354 17,401
Provision for estimated losses on loans 665 899 1,154 1,322 2,329 6,289 6,557
Net interest income after
provision for losses on loans ....... 18,162 15,294 21,064 18,678 18,094 11,065 10,844
Noninterest income excluding security
gains (losses)....................... 2,792 3,612 4,253 4,033 3,333 (667) 8,567
Security gains (losses)................. 34 197 239 145 1 2,067 (145)
SAIF special assessment ................ -- 3,300 3,300 -- -- -- --
Write-off of core deposit intangible ... -- -- 2,407 -- -- -- --
Other noninterest expenses ............. 15,052 13,808 18,388 16,454 15,917 16,166 16,514
Provision (benefit) for income taxes ... 2,188 749 1,349 2,257 1,757 (1,069) 1,229
Income (loss) before cumulative effect
of a change in accounting principle . 3,748 1,246 112 4,145 3,754 (2,632) 1,523
Cumulative effect of a change in
accounting principle, net of taxes... -- -- -- -- -- (10,454) 1,086
Net income (loss) ...................... 3,748 1,246 112 4,145 3,754 (13,086) 2,609
PER SHARE DATA:
Income (loss) before cumulative effect
of a change in accounting principle.. $ .70 $ .24 $ .02 $ .80 $ .73 $ (1.23) $ 1.05
Net income (loss) ...................... .70 .24 .02 .80 .73 (6.12) 1.80
Cash dividends declared ................ .09 .06 .08 -- -- -- --
Book value ............................. 10.74 10.10 9.91 10.01 8.78 8.78 26.84
Average shares outstanding ............. 5,351 5,220 5,242 5,163 5,170 2,137 1,446
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets ........................... $668,504 $659,902 $665,257 $646,024 $662,425 $ 647,606 $746,362
Interest-earning assets ................ 633,738 616,737 621,176 598,863 618,019 592,945 652,090
Loans receivable (including those held-
for-sale) ........................... 550,039 508,649 524,120 464,281 447,991 445,058 453,891
Securities ............................. 73,607 93,071 82,707 117,843 152,090 128,061 183,003
Intangible assets ...................... -- 2,465 -- 2,650 2,932 3,193 13,955
Deposits ............................... 573,411 521,359 540,128 496,746 478,249 477,218 520,613
FHLB advances and other borrowed money . 32,500 73,700 68,400 91,500 135,800 119,459 181,264
Stockholders' equity ................... 56,928 52,804 51,823 51,485 45,156 45,125 39,375
PERFORMANCE RATIOS:
Return on average assets(1)(5) ......... .76% .26% .02% .64% .57% (1.93)% .35%
Return on average stockholders'
equity(1)(5)......................... 9.30 3.10 .21 8.54 8.35 (31.94) 6.86
Net interest margin .................... 3.83 3.50 3.59 3.14 3.37 2.95 2.74
Efficiency(2)(5)........................ 68.50 86.60 79.90 65.50 59.80 71.00 68.50
Dividend payout ........................ 12.86 25.00 NM -- -- -- --
ASSET QUALITY RATIOS:
Net charge-offs to average loans
outstanding(1) ...................... .09% .42% .54% .24% .90% 1.03% 1.48%
Problem assets to total loans and
foreclosed real estate(3) ........... 2.45 4.39 3.32 3.47 4.54 6.76 3.64
Allowance for loan losses to total loans 1.32 1.53 1.33 1.81 1.83 2.22 1.82
Allowance for loan losses to
problem assets ...................... 52.40 29.60 36.90 26.35 19.31 16.84 17.46
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets ...................... 8.16% 8.33% 8.26% 7.44% 6.84% 5.96% 5.06%
Average loans to average deposits....... 96.47 94.97 95.61 92.36 94.13 91.81 94.02
Tangible capital(4) .................... 6.6 6.5 6.6 6.8 5.9 5.6 3.6
Core capital(4) ........................ 6.6 6.5 6.6 6.8 6.3 6.1 5.0
Risk-based capital(4) .................. 10.6 10.5 10.4 11.4 11.2 10.5 9.3
</TABLE>
NM Not meaningful
(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) The required minimum tangible and core capital ratios are 1.5% and 3%,
respectively. The minimum risk based capital ratio is 8%.
(5) Ratios for 1996 excluding the SAIF special assessment and the write-off
of core deposit intangible are as follows: Return on average assets - .73%,
Return on average stockholders' equity - 8.86%, Return on average assets -
.73%, and Efficiency - 60.98%.
<PAGE> 20
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of PALFED
Common Stock in connection with the solicitation by the PALFED Board of
Directors of proxies for use at the Special Meeting, at which PALFED
stockholders will be asked to vote upon a proposal to approve the Agreement. The
Special Meeting will be held at 10:00 a.m., local time, on February 3, 1998, at
the Aiken City Hall Meeting Room, 214 Park Avenue, Aiken, South Carolina, 29801.
PALFED stockholders are requested promptly to sign, date, and return the
accompanying proxy card to PALFED 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 PALFED 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
PALFED a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by PALFED 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 PALFED, Inc., 107 Chesterfield Street
South, Aiken, South Carolina, 29801, Attention: Howard M. Hickey, Jr., 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 PALFED 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, PALFED is unaware
of any other matter to be presented at the Special Meeting.
The cost of soliciting proxies will be borne by PALFED. Proxies may be
solicited by mail, advertisement, telecopy, telegraph or telex or other methods,
and in person by directors, consulting directors, officers and regular employees
of PALFED, none of whom will receive any additional compensation for such
solicitations, except for reimbursement of any out-of-pocket expenses. PALFED
has retained Georgeson & Company to assist in the distribution of proxy
solicitation materials at a cost of approximately $10,000, plus out-of-pocket
expenses. Banks, brokers, nominees and other custodians and fiduciaries will be
requested to forward proxy solicitation material to beneficial owners where
appropriate, and PALFED will reimburse such banks, brokers, nominees, custodians
and fiduciaries for their reasonable out-of-pocket expenses in sending the proxy
materials to beneficial owners.
PALFED STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
RECORD DATE; VOTE REQUIRED
PALFED's Board of Directors has established the close of business on
December 26, 1997, as the Record Date for determining the PALFED stockholders
entitled to notice of and to vote at the Special Meeting. Only PALFED
stockholders of record as of the Record Date will be entitled to vote at the
Special Meeting. As of the Record Date, there were approximately _______ holders
of 5,299,251 shares of PALFED
16
<PAGE> 21
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 PALFED to
beneficially own more than 5.0% of the outstanding shares of PALFED Common Stock
as of the Record Date, see "Voting Securities and Principal Stockholders of
PALFED."
The presence, in person or by proxy, of a majority of the outstanding
shares of PALFED Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Special Meeting. For these purposes,
shares of PALFED 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 for any reason,
including broker nonvotes. Generally, a broker who holds shares of PALFED Common
Stock in "street" name on behalf of a beneficial owner lacks authority to vote
such shares in the absence of specific voting instructions from the beneficial
owner.
Once a quorum is established, approval of the Agreement requires the
affirmative vote of the holders of at least two-thirds of the PALFED Common
Stock outstanding and entitled to vote at the Special Meeting. A failure to
vote, in person or by proxy, for any reason has the same effect as a vote
against the Agreement, including failure to return a properly executed proxy, an
abstention, or a broker nonvote.
The directors and executive officers of PALFED and their affiliates
beneficially owned, as of the Record Date, 441,575 shares (or approximately 8.3%
of the outstanding shares) of PALFED Common Stock. The directors and executive
officers of Regions and their affiliates beneficially owned, as of the Record
Date, no shares of PALFED Common Stock. As of that date, no subsidiary of either
PALFED or Regions held any shares of PALFED 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 PALFED Common Stock (excluding any shares held by PALFED,
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 .70 of a share of Regions Common Stock,
subject to possible upward adjustment as described below under the caption
"--Possible Adjustment of Exchange Ratio." 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 PALFED 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.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances, the Exchange Ratio could be adjusted upward
pursuant to certain provisions in the Agreement. Such an adjustment could occur
only if PALFED's Board of Directors elects by majority vote to terminate the
Agreement pursuant to the provisions of the Agreement described below, and if
Regions then elects to avoid termination by adjusting the Exchange Ratio. For
purposes of the description of these provisions and their operation, the
following definitions apply.
"Average Closing Price" means the average of the daily last sales prices of
Regions Common Stock as reported on the Nasdaq National Market (as reported by
The Wall Street Journal, or, if not reported thereby, by another
17
<PAGE> 22
authoritative source selected by Regions) for the ten consecutive full trading
days in which such shares are traded on the Nasdaq National Market, ending on
the seventh full trading day immediately preceding the anticipated date of
closing the Merger. "Determination Date" means the seventh full trading day
immediately preceding the anticipated date of closing the Merger.
If the Average Closing Price is less than $30.00, then PALFED may elect not
to effect the Merger at the original Exchange Ratio of .70. In such case, PALFED
has the right to terminate the Agreement during the five-business-day period
commencing on the day after the Determination Date by giving Regions written
notice of that decision. PALFED may withdraw its termination notice at any time
during that five-business-day period. During the three-business-day period
commencing upon the receipt of such notice, Regions has the option to increase
the Exchange Ratio to equal the quotient obtained by dividing (1) the product of
$30.00 and the Exchange Ratio (as then in effect) by (2) the Average Closing
Price. REGIONS IS UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO. If Regions
elects to adjust the Exchange Ratio, it must give PALFED prompt notice of that
election and of the adjusted Exchange Ratio, whereupon no termination shall have
occurred pursuant to the Agreement and the Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
These conditions reflect the parties' agreement that PALFED's stockholders
will assume the risk of declines in the value of Regions Common Stock to $30.00
per share. PALFED has the right to terminate the Agreement only when the price
of Regions Common Stock, as represented by the Average Closing Price, declines
to an amount below $30.00 per share as of the Determination Date (the seventh
full trading day preceding the anticipated date of closing the Merger).
The operation of the adjustment mechanism can be illustrated by the
following two scenarios. (For purposes of the numerical examples, the Exchange
Ratio is .70).
(a) The first scenario occurs if the Average Closing Price is not less than
$30.00. Under this scenario, there would be no right on the part of PALFED to
terminate the Agreement and therefore no potential adjustment to the Exchange
Ratio, even though the consideration to be received by PALFED stockholders would
have fallen from a pro forma $27.39 per share (as of September 22, 1997, the
date immediately preceding public announcement of the proposed Merger) to as
little as pro forma $21.00 per share.
(b) The second scenario arises where the Average Closing Price is below
$30.00. Under this scenario, PALFED would have the right to terminate the
Agreement and Regions would have the right, but not the obligation, to remove
such termination right by adjusting the Exchange Ratio. In this case, the
potential adjustment in the Exchange Ratio is designed to ensure that the PALFED
stockholders receive for each share of PALFED Common Stock that fraction of a
share of Regions Common Stock having a value (based upon the Average Closing
Price) of at least $21.00 per share, which corresponds to a decline in the
Regions Common Stock price to $30.00 per share.
For example, if the Average Closing Price were $26.00, in such a case,
PALFED could terminate the Agreement unless Regions elected within three
business days of Regions' receipt of PALFED's termination notice to increase the
Exchange Ratio to equal .8077, which represents the quotient obtained by
dividing (x) the product of $30.00 and .70 (the Exchange Ratio as then effect)
by (y) $26.00 (the Average Closing Price). Based upon the assumed $26.00 Average
Closing Price, the new Exchange Ratio would represent a value to the PALFED
stockholders of pro forma $21.00 per share.
PALFED stockholders should be aware that the actual market value of a share
of Regions Common Stock at the Effective Date and at the time certificates for
those shares are delivered following surrender and exchange of certificates for
shares of PALFED Common Stock may be more or less than the Average Closing
Price. PALFED stockholders are urged to obtain information on the market price
of Regions Common Stock that is more recent than that provided in this Proxy
Statement/Prospectus. See "Comparative Market Prices and Dividends."
18
<PAGE> 23
TREATMENT OF PALFED OPTIONS
The Agreement provides that all rights with respect to PALFED Common Stock
pursuant to stock options or stock appreciation rights granted by PALFED under
its stock option 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 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 and directors of PALFED hold
outstanding options to purchase in the aggregate 316,815 shares of PALFED
Common Stock. In accordance with PALFED's Stock Option plans, all outstanding
options to acquire PALFED Common Stock that have not previously vested will vest
upon stockholder approval of the Agreement.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Since 1994, PALFED has pursued a business
strategy of expanding and improving the Bank's core banking operations through
internal growth and the establishment of eight new branches and five new
mortgage offices. PALFED's management and Board of Directors believed this
expansion has decreased Palmetto Federal's reliance on the Central Savannah
River Area market, while at the same time growing its customer base and
franchise value. As part of its strategic planning process, the PALFED Board of
Directors, in consultation with PALFED's management and financial advisors,
periodically reviewed PALFED's long-term strategic business alternatives,
including possible acquisitions and business combinations. This strategic
planning process included analyzing various business strategies to determine
estimated values for PALFED common stock. From time to time, PALFED received
informal inquiries from other financial institutions about possible business
combinations. Management carefully evaluated each inquiry, reported to PALFED's
Executive Committee and subsequently reported to the PALFED Board of Directors.
In January 1997, after consideration of various strategic alternatives and
consultation with PALFED's financial advisors, the PALFED Board of Directors
unanimously concluded that the best way to maximize stockholder value was to
continue expanding the Bank's core banking operations through internal growth
and careful expansion into new markets. Although PALFED's Board of Directors
believed that a strategy of independence would best serve the long-term
interests of PALFED and its stockholders, the Board of Directors remained
willing to consider a possible business combination at a substantial premium.
In late May, 1997, William E. Jordan, Regions Regional President, contacted
John C. Troutman, PALFED's President and Chief Executive Officer, and requested
a meeting to discuss a possible acquisition by Regions of PALFED. On June 4,
1997 Regions executives met with PALFED's senior management in Aiken. At that
meeting, Regions provided PALFED with background information about Regions and
discussed a variety of issues relating to operating philosophies and objectives.
No discussion concerning a specific exchange ratio or price took place at that
meeting, but Regions management expressed an interest in continuing further
discussions. In June, 1997, PALFED provided Regions with certain confidential
business information and the parties entered into a Confidentiality Agreement
dated as of June 23, 1997.
On June 30, 1997, Mr. Troutman and Darrell R. Rains, PALFED's Chief
Financial Officer, met with Regions executives in Aiken, South Carolina. At this
meeting, Regions executives indicated a preliminary price range for PALFED
Common Stock that was below the initial price threshold established by PALFED's
Board of Directors to continue further acquisition discussions, but Regions
expressed an interest in continuing discussions after further review of PALFED's
financial information and business plans.
19
<PAGE> 24
In late July 1997, Mr. Jordan called Mr. Troutman to increase Regions'
offer, upon which Mr. Troutman proposed further discussions. A meeting was
scheduled for September 3, 1997. On September 3, 1997, Messrs. Troutman and
Rains met with Mr. Jordan and other Regions executives in Birmingham. At that
meeting, Regions and PALFED negotiated an exchange ratio of .70 of a share of
Regions Common Stock for each share of PALFED Common Stock, subject to
completion by Regions of due diligence and negotiation of a definitive merger
agreement. Based on the proposed exchange ratio that was within the range of
values supported by PALFED's internal valuation, Messrs. Troutman and Rains
agreed to recommend the proposed acquisition to PALFED's Board of Directors and
to allow Regions to move forward with due diligence. From September 5 through
September 11, 1997, PALFED sent Regions additional business information in
response to due diligence requests from Regions.
On September 10, 1997 the PALFED Board of Directors met to review the terms
of the initial draft of the Agreement proposed by Regions. After review of the
Agreement, the PALFED Board of Directors authorized PALFED's management and
legal counsel to continue negotiations on the proposed Agreement, including the
proposed Stock Option Agreement. The PALFED Board also approved an investment
advisory agreement between PALFED and Sterne, Agee, in which Sterne, Agee would
act as PALFED's financial advisor with respect to the possible acquisition of
PALFED and would render a fairness opinion to the Board of Directors regarding
the fairness, from a financial point of view, of the consideration paid in any
proposed sale transaction. At the September 10 meeting, Sterne, Agee reported to
the Board of Directors on its preliminary analysis of the terms of the Merger,
and furnished the Board comparative information about similar transactions and
the financial condition and operations of Regions. During the week of September
15, 1997, approximately 20 Regions employees conducted an on-site due diligence
at PALFED's offices.
As a result of unusual trading in PALFED common stock, on Friday, September
12, 1997, PALFED issued a press release announcing that it had entered into
preliminary merger discussions that might lead to a sale of PALFED. During the
following 10 days, Sterne, Agee received inquiries from six other financial
institutions about a possible business combination with PALFED. All but one of
the inquiries indicated a price range below the Exchange Ratio proposed by
Regions.
On September 18, 1997, PALFED received a nonbinding expression of interest
from another South Carolina institution at a pro forma exchange ratio of $30.00
per share for PALFED Common Stock (later verbally increased by the acquiror's
financial advisor to $31.00 per share on September 23, 1997). This proposal was
in the form of a nonbinding expression of interest that was contingent upon,
among other things, satisfactory due diligence by the acquiror and negotiation
of a definitive agreement. Sterne, Agee and PALFED's Executive Committee
reviewed this expression of interest and concluded that the proposed combination
was not in the best financial interests of PALFED and its stockholders and that
Regions Common Stock offered a superior value to PALFED's stockholders.
On September 23, 1997, the PALFED Board of Directors met to review and
consider the Agreement, as well as indications of interest from other financial
institutions. The PALFED Board reviewed the terms of the Agreement and the Stock
Option Agreement as summarized by PALFED's general counsel and outside legal
counsel. Management reported that Regions had completed its due diligence review
of PALFED's operations and that the parties had reached agreement on all
outstanding issues in the Agreement and Stock Option Agreement. Sterne, Agee
reported on all inquiries it had received from other financial institutions.
Sterne, Agee further presented its analysis of the nonbinding expression of
interest received from another South Carolina financial institution, its
analysis of the financial condition and operation of that company, and its pro
forma analysis of the resulting company. Based on this analysis, the Board of
Directors and management concluded that pursuit of a proposed combination with
that institution was not in the best financial interests of PALFED and its
stockholders. Sterne, Agee also reported on its analysis of the terms of the
Merger and rendered its oral opinion as to the fairness, from a financial point
of view, of the Exchange Ratio to PALFED's stockholders.
On the basis of these presentations and the factors set forth under
"Reasons for the Merger" below, the PALFED Board of Directors unanimously
approved the Agreement and the Stock Option Agreement and authorized execution
of the Agreement and the Stock Option Agreement.
20
<PAGE> 25
PALFED's Reasons for the Merger. In reaching its decision to approve the
Agreement and the Merger, the PALFED Board of Directors consulted with PALFED's
management, as well as with PALFED's legal and financial advisors, and
considered a number of factors. Without assigning any relative or specific
weights to the following factors, the PALFED Board of Directors considered each
of the following material factors:
(a) Financial Terms of the Merger. The presentation by Sterne, Agee
indicating that the transaction multiples of the Merger, based on the Exchange
Ratio and the price of Regions Common Stock on September 23, 1997, compared
favorably with other transactions reviewed by Sterne, Agee and represented a
multiple of approximately 2.64 times PALFED's per common share book value. The
Directors also considered the relationship of the Exchange Ratio to the market
price of PALFED Common Stock, and the partial protection in the Agreement
against a decline in the market value of Regions Common Stock.
(b) Financial Strength of Regions. Information presented to the PALFED
Board of Directors concerning the business, operations, earnings, asset quality,
and financial condition of Regions, including compliance with regulatory capital
requirements. In addition, the directors considered the dividend record of
Regions, the liquidity of Regions Common Stock, and the lack of substantial
dilution of Regions Common stock in the Merger.
(c) Nonfinancial Terms of the Merger. The PALFED Board of Directors
considered the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of PALFED Common Stock for Regions Common Stock,
the likelihood of the Merger being approved by applicable regulatory authorities
without undue conditions or delay, and the operating philosophies and corporate
culture of PALFED and Regions.
(d) Fairness Opinion. The PALFED Board of Directors considered the opinion
rendered by PALFED's financial advisor to the effect that, from a financial
point of view, the exchange of PALFED Common Stock for Regions Common Stock on
the terms and conditions set forth in the Agreement is fair to the holders of
PALFED Common Stock.
In evaluating the terms of the Merger, the Board of Directors of PALFED
was cognizant of a claim PALFED is asserting against the United States. See
"Business of PALFED -- Goodwill Claim." PALFED's management and Board of
Directors believe that the Exchange Ratio includes the potential value, if any,
of such claim.
The terms of the Merger were the result of arms-length negotiations between
representatives of PALFED and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of PALFED
unanimously approved the Merger as being in the best interests of PALFED and its
stockholders. Each member of the Board of Directors of PALFED has agreed to vote
such member's shares in favor of the Merger.
PALFED'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PALFED 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 PALFED 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 PALFED 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 PALFED; and
21
<PAGE> 26
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
OPINION OF PALFED'S FINANCIAL ADVISOR
PALFED retained Sterne, Agee to act as PALFED's financial advisor in
connection with the Merger. As part of this engagement, Sterne, Agee agreed to
render to the PALFED Board an opinion with respect to the fairness to the
stockholders of the consideration to be received in the Merger from a financial
point of view. On September 23, 1997, Sterne, Agee delivered to the PALFED Board
its oral opinion that, as of such date, the consideration to be received
pursuant to a draft version of the Agreement was fair to the PALFED stockholders
from a financial point of view. Sterne, Agee subsequently confirmed such opinion
in writing as of December 29, 1997, based on the final Agreement. The full text
of Sterne, Agee's final written opinion to the PALFED Board is included as
Appendix B to this Proxy Statement/Prospectus and should be read carefully and
in its entirety. Sterne, Agee's opinion to the PALFED Board does not constitute
a recommendation to any stockholder as to how such stockholder should vote at
the Special Meeting. The fairness opinion was based upon information available
to Sterne, Agee as of the date the opinion was rendered.
In rendering its opinion, Sterne, Agee, has, among other things: (i)
reviewed certain publicly available financial and other data with respect to
PALFED and Regions, including the consolidated financial statements for recent
years and interim periods to date, certain Regions' Current Reports on Form 8-K
presenting certain financial statements on a pro forma basis incorporating the
effects of then pending and expected to be completed acquisitions by Regions,
drafts of the Registration Statement, and certain other relevant financial and
operating data relating to PALFED and Regions made available to Sterne, Agee
from published sources and from the internal records of PALFED and Regions; (ii)
reviewed the Agreement; (iii) reviewed certain historical market prices and
trading volumes of PALFED Common Stock and Regions Common Stock in the
over-the-counter market as reported by the Nasdaq National Market; (iv) compared
PALFED and Regions from a financial point of view with certain other companies
in the financial services industry which Sterne, Agee deemed relevant; (v)
considered the financial terms, to the extent publicly available, of selected
recent acquisitions of financial institutions which Sterne, Agee deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed with
representatives of the managements of PALFED and Regions certain information of
a business and financial nature regarding PALFED
22
<PAGE> 27
and Regions, respectively, furnished to Sterne, Agee by PALFED and Regions,
respectively; (vii) inquired about and discussed the Agreement and other matters
related thereto with PALFED's counsel; and (viii) performed such other analyses
and examinations as Sterne, Agee deemed appropriate.
In connection with its review, Sterne, Agee has not independently verified
any of the foregoing information with respect to PALFED or Regions, has relied
on all such information, and has assumed that all such information is complete
and accurate in all material respects. With respect to the financial forecasts
for PALFED and Regions provided to Sterne, Agee by their respective managements,
Sterne, Agee has assumed for purposes of its opinion that they have been
reasonably prepared on bases reflecting the best available estimates and
judgments of their respective managements at the time of preparation as to the
future financial performance of PALFED and Regions and that they provide a
reasonable basis upon which Sterne, Agee could form its opinion. Sterne, Agee
has also assumed that there have been no material changes in PALFED's or
Regions' assets, financial condition, results of operations, business or
prospects since the respective dates of their last financial statements made
available to them. Sterne, Agee has relied on advice of counsel to PALFED as to
all legal matters with respect to PALFED (including PALFED'S goodwill lawsuit
described herein under "BUSINESS OF PALFED - Goodwill Claim"), Regions and the
Agreement. In addition, Sterne, Agee has not examined any of the loan files of
PALFED or Regions or otherwise evaluated the allowance for loan losses of PALFED
or Regions and has not made an independent evaluation, appraisal or physical
inspection of the assets or individual properties of PALFED or Regions, nor has
Sterne, Agee been furnished with any such appraisals. Further, its opinion is
based on economic, monetary and market conditions existing as of the date
hereof.
Sterne, Agee is a regional investment banking firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and other
types of acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. PALFED's Board of Directors
selected Sterne, Agee to act as its financial advisor in connection with the
Merger on the basis of the firm's expertise in southeastern financial
institutions and its existing relationship with PALFED. Sterne, Agee was the
lead manager of PALFED's rights offering in October, 1993. In the ordinary
course of its business, Sterne, Agee actively trades the
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equity securities of PALFED and Regions for its own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. From time to time, Sterne, Agee has assisted PALFED in
connection with stock purchases related to corporate and employee benefit plans.
Sterne, Agee and its officers, employees, consultants, and agents may have long,
short or option positions in the securities of PALFED and Regions. Sterne, Agee
has normally followed and provided investment research concerning PALFED and
Regions to its clients.
The summary set forth below reflects the material analyses performed by
Sterne, Agee but does not purport to be a complete description of the analyses
performed by Sterne, Agee. The analyses performed by Sterne, Agee are not
necessarily indicative of the actual values, which may be significantly more or
less favorable than suggested by such analyses. Additionally, analyses relating
to the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
In connection with rendering its opinion to the PALFED Board, Sterne, Agee
performed a variety of financial analyses, which are summarized below. Sterne,
Agee performed substantially similar analyses for its earlier opinions. The
evaluation of the fairness, from a financial point of view, of the consideration
to be received in the Merger was to some extent a subjective one based on the
experience and judgment of Sterne, Agee and not merely the result of
mathematical analysis of financial data. Sterne, Agee considered various
financial valuation methodologies in its determination. The preparation of a
fairness opinion involves determination as to the most appropriate factors to be
considered as well as relevant methods of financial analysis and the application
of those factors and methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description. Sterne, Agee
believes that its analyses must be considered as a whole and that selecting
portions of such analyses and factors considered by Sterne, Agee without
considering all such analyses and factors could create an incomplete view of the
process underlying Sterne, Agee's opinion. In addition, Sterne, Agee may have
given various analyses more or less weight than other analyses and may have
deemed various assumptions more or less probable than other assumptions. In its
analyses, Sterne, Agee incorporated numerous assumptions with respect to
business, market, monetary and economic conditions, industry performance and
other matters, many
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of which are beyond PALFED's and Regions' control. Any estimates contained in
Sterne, Agee's analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than such estimates.
Such analyses were prepared solely as part of Sterne, Agee's analysis of the
fairness to the PALFED stockholders of the consideration to be paid in the
Merger.
Market Premium. Sterne, Agee compared the equivalent market value of the
Regions' stock to be received by the holder of one share of PALFED Common Stock
with the price of a share of PALFED Common Stock prior to the announcement of
the Agreement. Based on a 0.70 exchange ratio and $41 closing price for Regions
on December 26, 1997 an equivalent price per PALFED share of $28.70 was compared
with the September 22, 1997 closing price of a PALFED share of $21.50.
Analysis of Selected Bank and Thrift Merger Transactions. Sterne, Agee
compared the Merger on the basis of multiples of earnings, stated book value,
tangible book value, and premium to core deposits of PALFED implied by the
aggregate consideration to be paid in the Merger as of the date of its opinion,
with the same ratios in recent acquisitions of banks and thrifts which Sterne,
Agee deemed comparable, in whole or in part, to the Merger. Such comparable
acquisitions included actual or pending transactions of select southeastern
thrifts or thrift holding companies announced during 1995 through December 1997,
including Triangle Bancorp's acquisition of United Federal Savings Bank;
Carolina First Corporation's acquisitions of First Southeast Financial
Corporation and Low Country Savings Bank; First Citizens Bancshares' acquisition
of Allied Bank Capital; First Union Corporation's acquisitions of RS Financial
Corporation, Home Federal Savings Bank and United Financial Corporation; and
First American Corporation's acquisition of Heritage Federal Bancshares; CCB
Financial Corporation's acquisition of American Federal Savings Bank; Union
Planters Corporation's acquisition of Leader Financial Corporation; SouthTrust
Corporation's acquisition of Bankers First Corporation; First Financial
Holdings' acquisition of Investors Savings Bank; and Regions Financial
Corporation's acquisition of GF Bancshares. Among the characteristics which such
comparable acquisitions have in common with the Merger are a size of
approximately $100 million to $3 billion in assets and/or their location in
average to above average growth market areas. Sterne, Agee's analysis showed
that, in the 13 transactions which were considered, the average price-to-book
value ratio was 1.98x, the average price-to-tangible-book value ratio was 2.01x,
the average price-to-earnings ratio
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was 18.3x, and the average premium to core deposits was 14.0%. Sterne, Agee
determined the price multiples implied by the value of the consideration to be
received by PALFED stockholders in the Merger based on a Regions common stock
price of $41 on December 26, 1997: the price-to-stated-book value ratio was
2.67x; the price-to-tangible book value ratio was 2.67x, the
price-to-last-12-months earnings ratio was 59.8x, and the premium to core
deposits was 19.4%.
Dilution Analysis. Sterne, Agee compared PALFED's book value and earnings per
share as of December 31, 1996 and for the nine months ended September 30, 1997,
with Regions' pro forma numbers included in this Registration Statement.
Assuming a 0.70 exchange ratio, Sterne, Agee calculated that there would be an
11.0% decrease in PALFED's equivalent stated book value per share from $10.74 to
$9.56 per share as of September 30, 1997 and a 60.0% increase in PALFED's
equivalent nine months 1997 earnings per share from $0.70 to $1.12 per share.
Sterne, Agee compared PALFED's indicated dividend rate per share as of the date
hereof with Regions' numbers and calculated a 366.7% increase in PALFED's
equivalent indicated dividend rate per share from $0.12 to $0.56 per share.
Present Value Analysis. Sterne, Agee calculated the present value of a share
of PALFED Common Stock assuming various price-to-earnings multiples applied to
future estimated earnings per share, plus interim dividends received, discounted
at various rates. The analysis incorporated PALFED's forecasts for earnings
growth during the periods and a range of assumed dividend payouts of 30%, 40%
and 50%. The range of price-to-earnings multiples considered was 10x to 15x and
the discount rates used were 10% and 15%. On the basis of such varying
assumptions, Sterne, Agee calculated a present value of PALFED on a stand-alone
basis ranging from $11.45 to $25.01 per share, as compared to consideration of
$28.70 based on the value of 0.70 share of Regions on December 26, 1997.
Contribution Analysis. Sterne, Agee analyzed the contribution of PALFED and
Regions to, among other things, total equity, assets, and deposits of the pro
forma combined companies for the period ending September 30, 1997,
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and projected pro forma net income for the calendar year ending December 31,
1997. This analysis showed, among other things, that based on pro forma combined
balance sheets for PALFED and Regions as of September 30, 1997, PALFED would
have contributed 3.0% of the total equity, 2.9% of the total assets, and 3.2% of
the total deposits. In terms of nine months pro forma net income for 1997,
PALFED would contribute approximately 1.7%. Based on an exchange ratio of 0.70,
holders of PALFED common stock would own approximately 2.7% of the combined
companies based on pro forma shares outstanding on September 30, 1997.
These analyses were based, as applicable, upon various earnings forecasts
for PALFED and Regions and assumed future dividend payout ratios. Managements'
projections are based upon many factors and assumptions, many of which are
beyond their control.
The foregoing description of Sterne, Agee's opinion is qualified in its
entirety by reference to the full text of such opinion which is attached hereto
as Appendix B.
Compensation to Financial Advisor. In a letter agreement dated September 9,
1997 and accepted September 10, 1997, PALFED retained Sterne, Agee to act as its
financial advisor to render a fairness opinion to PALFED in connection with any
sale or merger of PALFED. Pursuant to the letter agreement, PALFED agreed to pay
Sterne, Agee a fee of $500,000, with $25,000 of the fee as a retainer payable as
of the date of the letter agreement; $150,000 to be paid at the time of
publication of any proxy statement containing a fairness opinion; and $325,000
at the time of consummation of any proposed sale transaction. In addition,
PALFED agreed to reimburse Sterne, Agee for its reasonable out-of-pocket costs
and expenses incurred in connection with its services rendered to PALFED
Pursuant to the letter agreement and to indemnify Sterne, Agee, its partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal securities
laws.
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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 PALFED, 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 fifth business
day following the last of the following events: (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 approving or
exempting the Merger and (ii) the date on which the Agreement is approved by the
requisite vote of PALFED stockholders. Regions may specify a later date within
30 days thereof unless such a delay would cause the record date for Regions'
quarterly dividend for that quarter to occur after the Effective Date.
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 PALFED 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 PALFED generally may terminate
the Agreement if the Merger is not consummated by April 30, 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 PALFED a form letter
of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of PALFED Common Stock for
certificates representing shares of Regions Common Stock.
PALFED STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of certificates for PALFED Common Stock,
together with a properly completed letter of transmittal, there will be issued
and mailed to each holder of PALFED 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. The Exchange
Agent is not obligated to deliver the certificates for Regions common stock to
which any former holder of PALFED common stock is entitled as a result of the
Merger until the Exchange Agent receives such holder's certificates for PALFED
common stock, or an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be reasonably required in each case by the Exchange Agent. After
the Effective Date, to the extent permitted by law, PALFED 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 PALFED Common Stock has been converted, regardless of
whether such stockholders have surrendered their PALFED Common Stock
certificates. No dividend or other distribution payable after the Effective Date
with
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respect to Regions Common Stock, however, will be paid to the holder of any
unsurrendered PALFED 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 PALFED will be closed at the effective time of
the Merger and after the Effective Date, there will be no transfers of shares of
PALFED Common Stock on PALFED's stock transfer books. If certificates
representing shares of PALFED 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) approvals 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 PALFED 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 PALFED Common Stock for Regions
Common Stock will not give rise to recognition of gain or loss to PALFED
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 PALFED 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 receipt 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 PALFED 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
PALFED approved by their respective Boards of Directors; provided, however, that
after approval by the PALFED stockholders, no amendment shall be made that
decreases the consideration to be received by PALFED stockholders 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 PALFED
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final 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";
(b) by the Board of Directors of either party, if the holders of the
requisite number of shares of PALFED Common Stock shall not have approved the
Agreement;
(c) by mutual agreement of the Boards of Directors of Regions and PALFED;
(d) by the Board of Directors of either party, provided that the
terminating party is not then in material breach of any representation or
warranty in the Agreement, in the event of a breach by the other party of any
covenant or agreement in the Agreement or of any inaccuracy in any
representation or warranty, in either instance 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 April 30, 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 under the Agreement, 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. Under certain circumstances the Option
Agreement will remain in effect following termination of the Agreement. See
"--Option Agreement."
CONDUCT OF BUSINESS PENDING THE MERGER
Each of PALFED 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 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 PALFED or Regions prior to
consummation of the Merger, as described below.
In anticipation of the Merger, the Bank and Regions Mortgage, Inc.
("Regions Mortgage"), a wholly-owned subsidiary of Regions, intend to enter
into loan servicing agreements in which Regions Mortgage will service
approximately $490 million in first mortgage loans which Palmetto Federal
either owns or services for others. Under these servicing agreements, Regions
Mortgage receives the income for servicing those mortgages and collects a
servicing fee from Palmetto Federal.
PALFED. PALFED 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, which Regions has agreed shall not be unreasonably
withheld. Generally, PALFED has agreed that, except as specifically contemplated
by the Agreement or previously disclosed to Regions, it will not:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of PALFED or its subsidiaries;
(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money in excess of an aggregate
of $500,000 (for PALFED and its subsidiaries on a consolidated basis) except in
the ordinary course of the business of PALFED and its subsidiaries 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 PALFED or its subsidiaries 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 PALFED or its subsidiaries, or declare or pay any dividend or
make any other distribution in respect of PALFED Common Stock; provided that
PALFED may (to the extent legally able to do so), but shall not be obligated to,
declare and pay regular annual cash dividends on the PALFED Common Stock at a
rate not in excess of $.03 for the fourth quarter of 1997 and $.04 for any
quarter thereafter, provided that any dividend declared or payable on the shares
of PALFED Common Stock for the quarterly period during which the Effective Date
occurs shall, unless otherwise agreed upon in writing by Regions and PALFED, be
declared with a record date prior to the Effective Date only if the normal
record date for payment of the corresponding quarterly dividend to holders of
Regions Common Stock is before the Effective Date;
(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
PALFED Common Stock or any other capital stock of PALFED or its subsidiaries, 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;
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(e) adjust, split, combine, or reclassify any capital stock of PALFED or
its subsidiaries or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of PALFED Common Stock or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any shares of capital
stock of PALFED's subsidiaries or any assets having in the aggregate a book
value in excess of $250,000, other than in the ordinary course of business for
reasonable and adequate consideration;
(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 PALFED in its fiduciary
capacity;
(g) grant any increase in compensation or benefits to the employees or
officers of PALFED or its subsidiaries 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 this Agreement and previously disclosed to Regions; enter into or amend any
severance agreements with officers of PALFED or its subsidiaries except as
previously disclosed to Regions; grant any increase in fees or other increases
in compensation or other benefits to directors of PALFED or its subsidiaries;
(h) voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits;
(i) except as previously disclosed to Regions, enter into or amend any
employment contract between PALFED or its subsidiaries and any person (unless
such amendment is required by law) that PALFED or its subsidiaries 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;
(j) except as previously disclosed to Regions, adopt any new employee
benefit plan or program of PALFED or its subsidiaries or make any material
change in or to any existing employee benefit plans or programs of PALFED or its
subsidiaries 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;
(k) 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");
(l) with certain exceptions, commence or settle any litigation for money
damages in excess of $500,000; or
(m) 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, PALFED has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. PALFED 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, PALFED 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 PALFED Common Stock, without the prior written consent of PALFED.
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MANAGEMENT FOLLOWING THE MERGER
Consummation of the Merger will not alter the present officers and
directors of Regions. Information concerning the management of Regions is
included in the documents incorporated herein by reference. See "Documents
Incorporated by Reference." As a consequence of the Merger the corporate
existence of PALFED will cease and the directors of PALFED will no longer hold
those positions. Regions anticipates combining the Bank with its principal
banking subsidiary sometime in 1998. Regions anticipates that the present
officers of the Bank would continue in their respective capacities for the Bank
until that combination occurs.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will indemnify each person
entitled to indemnification from PALFED or any of its subsidiaries to the full
extent permitted by South Carolina Law and by PALFED's Articles of Incorporation
or Bylaws, in each case as in effect as of the date of the Agreement, and for a
period of 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 PALFED 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 PALFED 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 PALFED to honor all employment, severance, consulting, and other
compensation contracts previously disclosed to Regions between PALFED 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
PALFED's benefit plans.
As described above under "--Treatment of PALFED Options," the Agreement
also provides that all rights with respect to PALFED Common Stock pursuant to
stock options or stock appreciation rights granted by PALFED 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. In accordance with PALFED's Stock
Option plans, all outstanding options to acquire PALFED Common Stock that have
not previously vested will vest upon stockholder approval of the Agreement.
Effective as of November 18, 1997 and in accordance with past practices, the
PALFED Personnel Compensation Committee of the Board of Directors granted
incentive stock options to PALFED officers to acquire 50,000 shares of PALFED
Common Stock at an exercise price of $25.50 per share. In addition, pursuant to
the PALFED Amended and Restated Directors Stock Plan, as of November 25, 1997
PALFED granted each outside director and consulting director of PALFED options
to acquire 3,000 shares of PALFED Common Stock at an exercise price of 26.50 per
share, the market price of PALFED Common Stock on the date of grant.
Upon the signing of the Agreement, restrictions on 88,049 restricted
shares of PALFED Common Stock issued pursuant to the PALFED, Inc. 1993
Restricted Stock Incentive Award Plan lapsed. Upon the lapse of restrictions
on these restricted shares, PALFED incurred an additional compensation expense
of $1.1 million related to the accelerated vesting of these stock grants.
PALFED and the Bank have entered into Salary Continuation and
Noncompetition Agreements ("Change of Control Agreements") with nine executive
officers. The Change of Control Agreements for each of the officers are
identical in all material aspects. Each Change of Control Agreement provides
that upon a "Change of Control" and a "Change of Duties or Salary" (as such
terms are defined in the Change of Control Agreements), the executive is
entitled to receive an aggregate payment equal to two times the executive's
average annual compensation for the five years preceding the Change of Control.
In addition, each executive also receives a noncompetition payment equal to the
executive's average annual compensation for the five previous years.
Upon consummation of the Merger, a Change of Control and a Change of
Duties or Salary will have occurred and each executive will be entitled to
payment, whether or not such executive remains with Regions or the Bank
following the Effective Date. The estimated amounts payable to PALFED's
President and Chief Executive Officer and to each of the other four highest
compensated PALFED executives (based on estimates of 1997 compensation) are Mr.
Troutman ($874,171), Mr. Adams ($439,611), Mr. Cunning ($583,140), Mr. Hickey
($425,695), and Mr. Rains ($491,525).
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As of the Record Date, directors and executive officers of PALFED owned no
shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 13 of the South Carolina Act, a copy
of which is included as Appendix C to this Proxy Statement/Prospectus, if the
Merger is consummated, any holder of PALFED Common Stock who (i) gives to
PALFED, prior to the vote at the Special Meeting with respect to the approval of
the Agreement, written notice of such holder's intent to demand payment for such
holder's shares, and (ii) does not vote in favor thereof, shall be entitled to
receive, upon compliance with the statutory requirements summarized below, the
"fair value" of such holder's shares as of the Effective Date. The term "fair
value" means the value of shares of PALFED Common Stock immediately prior to the
effectuation of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger, as defined in Chapter 13 of the South Carolina Act,
and may be more or less than the value of Regions Common Stock that a holder of
PALFED Common Stock would be entitled to receive in 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 PALFED 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 PALFED in writing of the name
and address of the record stockholder of the shares, if known.
Stockholders who hold their shares of PALFED Common Stock in brokerage
accounts or other nominee forms and who wish to exercise dissenters' rights
should consult with their brokers to determine the appropriate procedures for
the making of demand for appraisal by such nominee.
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 favor of the Agreement, a stockholder wishing to preserve the
right to dissent and seek appraisal must give a separate written notice of such
holder's intent to demand payment for such holder's shares if the Merger is
effected, as hereinabove provided.
Any written objection to the Agreement satisfying the requirements
discussed above should be addressed as follows: PALFED, Inc., 107 Chesterfield
Street South, Aiken, South Carolina, 29801, Attention: Corporate Secretary.
If the Merger is authorized at the Special Meeting, PALFED must deliver a
written dissenters' notice (the "Dissenters' Notice") to all holders of PALFED
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 PALFED
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
PALFED 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 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.
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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 PALFED
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 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 Aiken
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 all
such parties. 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.
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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 PALFED, 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 PALFED 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 PALFED stockholders, except as indicated above or otherwise
required by law.
Any dissenting PALFED stockholder who perfects such holder's right to be
paid the value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes.
See "Certain Federal Income Tax Consequences of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX LAWS
NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, AND CORPORATIONS, AMONG
OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY
STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. STOCKHOLDERS, THEREFORE, ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, consummation of the Merger
is conditioned upon receipt by Regions and PALFED of an opinion from Alston &
Bird LLP, 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 PALFED, 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. PALFED and Regions will each be "a
party to a reorganization" within the meaning of Section 368(b) of the Code.
(b) The stockholders of PALFED will recognize no gain or loss upon the
exchange of their PALFED Common Stock solely for shares of Regions Common Stock.
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(c) The basis of the Regions Common Stock received by the PALFED
stockholders in the Merger will, in each instance, be the same as the basis of
the PALFED 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 PALFED
stockholders will, in each instance, include the period during which the PALFED
Common Stock surrendered in exchange therefor was held, provided that the PALFED
Common Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to PALFED 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 PALFED stockholder in exchange for
PALFED Common Stock pursuant to the exercise of dissenters' rights, such cash
will be treated as having been received in redemption of such holder's PALFED
Common Stock, subject to the provisions and limitations of Section 302 of the
Code.
(g) No gain or loss will be recognized by the holders of PALFED options
upon conversion of such options into rights with respect to Regions Common Stock
exercisable under the same terms and conditions as in effect immediately prior
to the Effective Date.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. PALFED 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.
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 REGIONS COMMON STOCK
The Regions Common Stock to be issued to PALFED 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, PALFED (such persons are referred to hereinafter as
"affiliates" and generally include executive officers, directors, and 10%
stockholders) at the time of the Special Meeting. Affiliates may not sell shares
of Regions Common Stock acquired in connection with the Merger, except pursuant
to an effective registration statement under the Securities Act or in compliance
with SEC Rule 145 or in accordance with a legal opinion satisfactory to Regions
that such sale or transfer is otherwise exempt from the Securities Act
registration requirements.
Each person who PALFED reasonably believes will be an affiliate of PALFED
has delivered to Regions a written agreement providing that such person
generally will not sell, pledge, transfer, or otherwise dispose of any Regions
Common Stock to be received by such person upon consummation of the Merger,
except in compliance with the Securities Act and the rules and regulations of
the SEC promulgated thereunder.
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OPTION AGREEMENT
As an inducement and a condition to Regions entering into the Agreement,
PALFED and Regions entered into the Option Agreement, pursuant to which PALFED
granted Regions an option (the "Option") entitling it to purchase up to
1,051,500 shares (representing 19.9% of the shares issued and outstanding before
giving effect to the exercise of such Option) of PALFED Common Stock under the
circumstances described below, at a cash price per share equal to $21.00. In no
event, however, shall Regions' total profit (defined in the Option Agreement
generally as the net amount realizable by Regions upon transfer of the Option or
upon the sale of PALFED Common Stock acquired by exercise of the Option) exceed
$7 million. The purpose of the Option Agreement is to make an acquisition of
PALFED by any party other than Regions more difficult and expensive. THIS
DESCRIPTION OF THE OPTION AGREEMENT AND THE OPTION DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPTION AGREEMENT,
WHICH IS FILED AS AN EXHIBIT TO THIS REGISTRATION STATEMENT AND INCORPORATED
HEREIN BY REFERENCE.
Subject to applicable law and regulatory restrictions, Regions may exercise
the Option, in whole or in part, if, but only if, a Purchase Event (as defined
below) occurs prior to the Option's termination; provided that Regions, at the
time, is not in material breach of the Option Agreement or the Agreement. As
defined in the Option Agreement, "Purchase Event" means either of the following
events:
(a) without Regions' written consent, PALFED's authorizing, recommending,
publicly proposing, or publicly announcing an intention to authorize, recommend,
or propose or entering into an agreement with any third party to effect (i) a
merger, consolidation, or similar transaction involving PALFED or any of its
subsidiaries (other than transactions solely between PALFED's subsidiaries),
(ii) except as permitted by the Agreement, the disposition, by sale, lease,
exchange, or otherwise, of 25% or more of the consolidated assets of PALFED and
its subsidiaries, or (iii) the issuance, sale, or other disposition of
(including by way of merger, consolidation, share exchange, or any similar
transaction) securities representing 25% or more of the voting power of PALFED
or any of its subsidiaries (any of the foregoing, an "Acquisition Transaction");
or
(b) any third party acquiring beneficial ownership (as such term is defined
in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire
beneficial ownership, of 25% or more of the then outstanding shares of PALFED
Common Stock.
The Option will terminate upon the earliest of the following:
(a) the Effective Date;
(b) termination of the Agreement in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Agreement under certain circumstances involving a
willful breach by PALFED)(a "Default Termination");
(c) 12 months after a Default Termination and;
(d) 12 months after termination of the Agreement (other than pursuant to a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event.
As defined in the Option Agreement, "Preliminary Purchase Event" includes
either of the following events:
(a) the commencement (as such term is defined in Rule 14d-2 under the
Exchange Act) of, or filing of a registration statement under the Securities Act
by any third party with respect to, a tender offer or exchange offer to purchase
any shares of PALFED Common Stock such that, upon consummation of such offer,
such person would own or control 25% or more of the then outstanding shares of
PALFED Common Stock (a "Tender Offer" or an "Exchange Offer," respectively); or
(b) failure of the stockholders of PALFED to approve the Agreement at the
meeting of such stockholders held for the purpose of voting on the Agreement,
the failure to have such meeting prior to termination of the Agreement, or the
withdrawal or modification by PALFED's Board of Directors in a manner adverse to
Regions of the recommendation of the Board of Directors with respect to the
Agreement after public announcement that a third party (i) made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction, (ii)
commenced a Tender Offer or filed a registration statement under the Securities
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Act with respect to an Exchange Offer, or (iii) filed an application under
certain federal statutes for approval to engage in an Acquisition Transaction.
In the event of any change in PALFED Common Stock by reason of a stock
dividend, stock split-up, recapitalization, exchange of shares, or similar
transaction, the type and number of securities subject to the Option, and the
purchase price therefore, will be adjusted appropriately as set forth in the
Option Agreement. In the event that any additional shares of PALFED Common Stock
are issued after September 23, 1997 (other than pursuant to an event described
in the preceding sentence), the number of shares of PALFED Common Stock subject
to the Option will be adjusted so that, after such issuance, it, together with
any shares of PALFED Common Stock previously issued pursuant to the Option
Agreement, equals 19.9% of the number of shares then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the Option.
Upon the occurrence of a Repurchase Event (as defined below) that occurs
prior to the exercise or termination of the Option, at the request of Regions,
delivered within 12 months of the Repurchase Event, PALFED will, subject to
regulatory restrictions, be obligated to repurchase the Option and any shares of
PALFED Common Stock therefor purchased pursuant to the Option Agreement at a
specified Price.
As defined in the Option Agreement, a "Repurchase Event" shall occur if (i)
any person (other than Regions or any Regions subsidiary) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns 50% or more of the
then-outstanding shares of PALFED Common Stock, or (ii) any of the following
transactions is consummated: (A) PALFED consolidates with or merges into any
person, other than Regions or one of Regions' subsidiaries, and is not the
continuing or surviving corporation of such consolidation or merger; (B) PALFED
permits any person, other than Regions or one of Regions' subsidiaries, to merge
into PALFED and PALFED shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of PALFED Common Stock
shall be changed into or exchanged for stock or other securities of PALFED or
any other person or cash or any other property or the outstanding shares of
PALFED Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (C) PALFED sells or otherwise transfers all or substantially
all of its assets to any person, other than Regions or one of Regions'
subsidiaries.
In the event that prior to the exercise or termination of the Option,
PALFED enters into an agreement to engage in any of the transactions described
in clause (ii) of the definition of Repurchase Event above, the agreement
governing such transaction must make proper provision so that the Option will,
upon consummation of such transaction, be converted into, or exchanged for, an
option with terms similar to the Option, at the election of Regions, of either
the acquiring person or any person that controls the acquiring person.
After the occurrence of a Purchase Event, Regions may assign the Option
Agreement and its rights thereunder in whole or in part.
Upon the occurrence of certain events, PALFED has agreed to file with the
SEC and to cause to become effective certain registration statements under the
Securities Act with respect to dispositions by Regions and its assigns of all or
part of the Option and/or any shares of PALFED Common Stock into which the
Option is exercisable.
The Option Agreement has the effect of discouraging persons who might now
or at any other time prior to the Effective Date be interested in acquiring all
or a significant interest in PALFED from considering or proposing such an
acquisition, even if such persons were prepared to offer or pay consideration to
the PALFED stockholders which had a current higher market price than the shares
of Regions Common Stock to be received per share of PALFED Common Stock pursuant
to the Agreement. The existence of the Option Agreement could significantly
increase the cost to a potential acquiror of acquiring PALFED compared to its
cost had PALFED not entered into the Option Agreement. Such increased cost
might discourage a potential acquiror from considering or proposing an
acquisition or might result in a potential acquiror proposing to pay a lower per
share price to acquire PALFED Common Stock than it might otherwise have proposed
to pay. Moreover, following consultation with its independent accountants,
PALFED believes that the exercise or repurchase of the PALFED options is likely
to prohibit any other acquiror of PALFED from accounting for an acquisition of
PALFED using the pooling-of-interest accounting method for a period of two
years.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of PALFED Common Stock will be
exchanging their shares of a South Carolina corporation governed by the South
Carolina Act and PALFED'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 PALFED stockholders and those of Regions stockholders. The differences
deemed material by PALFED 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 PALFED's Articles and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of Regions' Certificate and Bylaws described below under the
headings, "--Authorized Capital Stock," "--Amendment of Certificate of
Incorporation and Bylaws," "--Classified Board of Directors and Absence of
Cumulative Voting," "--Removal of Directors," "--Limitations on Director
Liability," "--Special Meetings of Stockholders," "--Actions by Stockholders
Without a Meeting," "--Stockholder Nominations and Proposals," and "--Mergers,
Consolidations, and Sales of Assets Generally," and the provisions of the
Delaware GCL described under the heading "--Business Combinations With Certain
Persons," are referred to herein as the "Protective Provisions." In general, one
purpose of the Protective Provisions is to assist Regions' Board of Directors in
playing a role in connection with attempts to acquire control of Regions, so
that the Board can further and protect the interests of Regions and its
stockholders as appropriate under the circumstances, including, if the Board
determines that a sale of control is in their best interests, by enhancing the
Board's ability to maximize the value to be received by the stockholders upon
such a sale.
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
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<PAGE> 45
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.
PALFED. PALFED's authorized capital stock consists of 10,000,000 shares of
PALFED Common Stock, of which 5,299,251 shares were issued and outstanding as of
the Record Date, and 5,000,000 shares of preferred stock, none of which are
outstanding.
Pursuant to the South Carolina Act, PALFED's Board of Directors may
authorize the issuance of additional shares of PALFED Common Stock without
further action by PALFED's stockholders. The PALFED Board of Directors has sole
authority to determine the terms of any one or more series of the preferred
stock, including voting rights, conversion rates, and liquidation preferences.
PALFED's Articles, as amended, do not provide the stockholders of PALFED with
preemptive rights to purchase or subscribe to any unissued authorized shares of
PALFED 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.
PALFED. 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.
PALFED'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.
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<PAGE> 46
The South Carolina Act provides 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 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.
PALFED. PALFED's Bylaws provide for a classified board of directors with
three classes. PALFED's Articles 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.
PALFED. Pursuant to PALFED'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 PALFED Common Stock.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of such director's duties, if the action is among
those as to which liability is limited. This provision may reduce the likelihood
of stockholder derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their
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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.
PALFED. 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 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.
PALFED. PALFED'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.
PALFED. Under PALFED's Bylaws, a special meeting of PALFED stockholders may
be called at any time by the President, the Chairman of the Board, or a majority
of the Board of Directors. The Bylaws further provide that the holders of not
less than 10% of the shares of PALFED Common Stock entitled to vote on the items
proposed for such meeting may call a special meeting of stockholders, provided
it is not within a specified time of an annual meeting and does not relate to a
subject matter on which the stockholders have voted within a specified time.
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<PAGE> 48
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.
PALFED. 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.
PALFED. PALFED's Bylaws provide that directors may be nominated by the
Board of Directors or a committee thereof, or by a stockholder who complies with
the nomination procedure set forth in the Bylaws. Under such procedure,
nomination must be made pursuant to timely written notice to the Secretary of
PALFED received at its principal executive offices not less than 90 days nor
more than 120 days prior to the date of the scheduled annual meeting (in the
case of an annual meeting), or (in the case of a special meeting at which
directors are to be elected) not later than the close of business on the 10th
day following public notice of the special meeting. Each such nomination notice
must set forth relating to each director nominee all information that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, pursuant to applicable SEC regulations, had the
nominee been proposed by PALFED's Board of Directors, and other specified
information.
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,
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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.
PALFED. 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), 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.
PALFED. The Articles provide that PALFED may engage in certain business
combination transactions (as defined) with an interested stockholder" (as
defined) only if approved by the holders of not less than 80% of the outstanding
PALFED Common Stock, unless (i) the business combination is approved by a
majority of the continuing directors or (ii) the consideration to be received by
the stockholders of PALFED satisfies certain "fair price" criteria. If either of
the above two exemptions to the 80% stockholder vote required is present, the
stockholder vote required to approve the business combination will be lower.
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 it has been approved by PALFED's Board of
Directors.
The South Carolina Code includes provisions that restrict voting rights of
shares acquired in certain control share acquisitions (the "Control Share
Act"). Generally, if a person acquires in one or a series of related
transactions an amount of stock equal to one-fifth or more of all of the voting
power of a South Carolina corporation subject to such provisions in a "control
share acquisition" (as defined in the Control Share Act), such shares have only
such voting rights as are accorded them by resolution adopted by the majority
of stockholders of the corporation. The
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Control Share Act defines "control shares" for purposes of such act and
establishes the procedures under which an acquiring person obtains stockholder
action with respect to voting rights of control shares.
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.
PALFED. 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.
PALFED. 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, the record of stockholders, stockholder communications,
a list of current 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 federal and state income 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.
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."
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PALFED. 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 and PALFED Common Stock are listed for quotation on
the Nasdaq system. Regions Common Stock is quoted on the Nasdaq National Market
under the symbol "RGBK" and PALFED Common Stock is quoted on the Nasdaq National
Market under the symbol "PALM." The following table sets forth, for the
indicated periods, the high and low closing sale prices for Regions Common Stock
and the high and low closing bid and asked prices for PALFED Common Stock as
reported by Nasdaq, and the cash dividends declared per share of Regions Common
Stock and PALFED Common Stock for the indicated periods. The amounts indicated
for Regions have been adjusted to reflect a 2-for-1 stock split effected by
Regions on June 13, 1997.
<TABLE>
<CAPTION>
REGIONS PALFED
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 $ 9.63 $ 7.00 --
Second Quarter................ 18.72 17.25 .165 11.25 8.63 --
Third Quarter................. 20.63 18.50 .165 12.25 11.00 --
Fourth Quarter................ 22.44 19.82 .165 13.25 11.00 --
1996
First Quarter ................ 24.00 20.38 .175 13.25 11.25 .02
Second Quarter ............... 24.19 21.13 .175 13.50 11.88 .02
Third Quarter................. 24.32 21.82 .175 14.75 11.63 .02
Fourth Quarter................ 26.88 24.38 .175 15.25 13.00 .02
1997
First Quarter................. 30.94 25.69 .20 16.38 13.63 .03
Second Quarter................ 33.25 27.38 .20 17.75 15.00 .03
Third Quarter................. 39.13 32.06 .20 25.38 15.50 .03
Fourth Quarter (through
December 29, 1997) ........... 44.75 36.56 .20 31.13 23.25 .03
</TABLE>
On December 29, 1997, the last reported sale prices of Regions Common Stock
and PALFED Common Stock, as reported on the Nasdaq National Market, were $42.00
and $28.50, respectively. At the close of trading on September 22, 1997, the
last trading day prior to public announcement of the proposed Merger, the last
reported sale prices of Regions Common Stock and PALFED Common Stock, as
reported on the Nasdaq National Market, were $39.13 and $21.50, 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
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<PAGE> 52
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."
In 1996, PALFED paid a quarterly cash dividend of $0.02 per share. In 1997,
PALFED increased its quarterly cash dividend to $0.03 per share and intends to
increase the quarterly cash dividend to $0.04 per share in 1998. Payment of
dividends by the Bank to PALFED is subject to certain restrictions and requires
prior notice to and approval of the Office of Thrift Supervision (the "OTS").
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BUSINESS OF PALFED
GENERAL
PALFED is a savings and loan holding company organized under the laws of
the state of South Carolina with its principal executive office located in
Aiken, South Carolina. PALFED operates principally through the Bank, which is a
federally-chartered stock savings bank and which provides a range of retail
banking services through 23 banking and seven mortgage lending offices in
South Carolina. At September 30, 1997, PALFED had total consolidated assets of
approximately $668.5 million, total consolidated deposits of approximately
$573.4 million, and total consolidated stockholders' equity of approximately
$56.9 million. PALFED's principal executive office is located at 107
Chesterfield Street South, Aiken, South Carolina, 29801 and its telephone number
at such address is (803) 642-1400.
Additional information with respect to PALFED and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. A copy of the audited consolidated financial statements
of PALFED included in PALFED's Annual Report on Form 10-K for the year ended
December 31, 1996, accompanies this Proxy Statement/Prospectus.
GOODWILL CLAIM.
On August 3, 1995, PALFED and the Bank filed a lawsuit against the United
States in the Court of Federal Claims (the "Goodwill Suit") seeking damages from
the United States as a result of the 1989 enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), which imposed new
capital requirements on the thrift industry and, following a five-year
transition period, excluded intangible assets such as goodwill from the
calculation of the various capital requirements. The goodwill that was
eliminated from the Bank's capital calculations by FIRREA was the unamortized
portion of the "supervisory" goodwill incurred by the Bank in effecting the 1982
acquisition of First Federal Savings and Loan Association of Beaufort ("First
Federal").
At the time of the acquisition of First Federal by the Bank, the Federal
Home Loan Bank Board ("FHLBB") was actively encouraging healthy thrifts and
other investor groups to acquire or recapitalize troubled institutions to
eliminate or delay the cost of liquidation of such institutions to the Federal
Savings and Loan Insurance Corporation. As an inducement to encourage healthy
thrifts to consolidate with troubled or failing institutions, the FHLBB
permitted the thrifts to utilize the purchase method of accounting in connection
with the mergers. Under this method, which was in accordance with generally
accepted accounting principles, the assets acquired and liabilities assumed by
the surviving thrift were recorded at their estimated fair market value at the
date of acquisition. The balance between the assets and liabilities was recorded
as goodwill. Initially, the Bank recorded approximately $23 million of goodwill
and began amortizing such goodwill, with the approval of the FHLBB, over a
period of approximately 30 years using the straight-line method. Until the
passage of FIRREA, the Bank included the unamortized goodwill when calculating
its regulatory net worth and capital ratios.
With the filing of the Goodwill Suit, PALFED joined approximately 120 other
institutions that have similar claims pending against the United States in the
Court of Federal Claims (the "Goodwill Cases"). In most of the Goodwill Cases,
the plaintiffs claim that the United States breached its contract to permit the
inclusion of goodwill as capital and effected a taking of property without just
compensation. Prior to the filing of the Goodwill Suit, three Goodwill Cases
consolidated for review (collectively, the "Winstar Cases") had proceeded
through the Court of Federal Claims and were on appeal in the Court of Appeals.
In each of these suits, the Court of Federal Claims had ruled (and the Court of
Appeal subsequently affirmed) that the United States had a contract with the
plaintiffs that had been breached. On July 1, 1996, the United States Supreme
Court affirmed the Court of Appeals decision and remanded the cases for a trial
on damages.
Over the past several years, the Court of Federal Claims has stayed all
other Goodwill Cases, including the Goodwill Suit, while the Winstar Cases were
on appeal. The Winstar Cases are the only cases in which there has been a final
ruling on the government's contract liability. In addition, no court has ruled
on the appropriate measure of damages in the Winstar Cases, although a damages
trial related to the claim of Glendale Federal Bank, FSB is proceeding as of the
date of this Prospectus/Proxy Statement. No record, however, has been
established that would indicate what, if any, damages the plaintiffs in the
Goodwill Cases are entitled to recover. After the United States Supreme Court
ruling in the Winstar Cases, the Goodwill Cases have been proceeding pursuant to
an Omnibus Case Management Order ("CMO"). The CMO alters the procedure and
timetable for the Goodwill Cases and, in general, will prolong the litigation.
In considering the Goodwill Suit, PALFED's Board of Directors was advised
and is aware that the actual outcome of the Goodwill Suit is indeterminate and
subject to substantial risks and uncertainties even after the rulings in the
Winstar Cases, due to potential factual distinctions between the Winstar Cases
and the remaining Goodwill Cases on the issue of liability, lack of any
authority on the appropriate method of calculating damages, the extended time
period for any final judgment, and the uncertainties inherent in the judicial
process, and may not result in any award or settlement.
Recognizing that the actual outcome of the Goodwill Suit is indeterminate
and subject to substantial risk and uncertainties, the PALFED Board of Directors
did not place a separate value on the Goodwill Suit in determining the fair
price of PALFED Common Stock and whether the Exchange Ratio was fair, from a
financial point of view, to the stockholders of PALFED. In connection with
considering the merits of the Merger, management and PALFED's Board of Directors
believed that the Exchange Ratio includes the potential value, if any, of the
Goodwill Suit.
RECENT EVENT
In anticipation of the Merger, the Bank and Regions Mortgage, Inc.
("Regions Mortgage"), a subsidiary of Regions, entered into mortgage loan
servicing agreements pursuant to which Regions Mortgage will service
approximately $490 million in first mortgage loans which the Bank either owns or
services for others. In the event the Merger is not consummated, the Bank has
the right to terminate the loan servicing agreements.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF PALFED
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of PALFED Common Stock, as of the Record
Date.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Mid-Atlantic Investors 501,000 (1) 9.45%
Jerry Zucker
H. Jerry Shearer
P.O. Box 7574
Columbia, SC 29202
Common Stock John Hancock Advisors, Inc. 329,360 (2) 6.22
101 Huntington Avenue
Boston, MA 02199
</TABLE>
- ----------
(1) Information concerning beneficial ownership of Mid-Atlantic Investors and
Messrs. Zucker and Shearer is based solely on a Schedule 13D dated October
27, 1995 and Amendment No. 1 to Schedule 13D dated March 27, 1997 filed by
Mid-Atlantic Investors and Messrs. Zucker and Shearer, which information
the Company has not independently verified. As reported in Amendment No. 1
to Schedule 13D, Mr. Zucker holds sole voting and dispositive power as to
363,500 shares of PALFED Common Stock, and Messrs. Shearer and Zucker and
Mid-Atlantic Investors hold shared voting and dispositive power as to
137,500 shares of PALFED Common Stock.
(2) As reported on a Schedule 13G dated February 4, 1997, filed by John Hancock
Mutual Life Insurance Company and certain of its subsidiaries. As reported
in the Schedule 13G, the shares are held by the John Hancock Regional Bank
Fund, The Southeastern Thrift and Bank Fund, Inc. and the Financial
Industries Fund. John Hancock Advisors, Inc. has sole power to vote or
direct the vote of and to dispose of or direct the disposition of these
shares under advisory agreements with each of these funds.
49
<PAGE> 54
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 are located, 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:
50
<PAGE> 55
<TABLE>
<CAPTION>
CONSIDERATION
-----------------
APPROXIMATE
-------------------------
ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ------------- -------- ---- ---------
(In millions)
<S> <C> <C> <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,
Georgia (the "GF Acquisition") 97 19 Regions Purchase
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
PALFED, certain aspects of which transactions are set forth below:
51
<PAGE> 56
<TABLE>
<CAPTION>
CONSIDERATION
-----------------
APPROXIMATE
------------------------
ACCOUNTING
INSTITUTION ASSET SIZE VALUE(1) TYPE TREATMENT
----------- ---------- -------- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Greenville Financial Corporation, located in $134 $ 34 Regions Pooling
Greenville, South Carolina 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 Sarasota, Florida 212 39 Regions Pooling
Common of
Stock Interests
First State Corporation, located in 540 161 Regions Pooling
Albany, Georgia Common of
Stock Interests
------ ----
Totals $1,291 $345
====== ====
</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 GF Acquisition, 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 billion
to approximately $19.4 billion; and its total consolidated stockholders' equity
would have increased by approximately $171 million to approximately $2.0
billion.
52
<PAGE> 57
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. 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." Requirements
imposed by the statutes and regulations applicable to savings and loan holding
companies such as PALFED and thrift institutions such as the Bank are similar in
many respects but not identical to those addressed below. Additional information
regarding statutes and OTS regulations applicable to PALFED and the Bank is
included in PALFED's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated herein by reference.
GENERAL
Regions is a bank holding company registered with the Federal Reserve under
the BHC Act, and a savings and loan holding company registered with the OTS.
PALFED is a savings and loan holding company registered with the OTS. As such,
Regions and PALFED 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 or the OTS, as the case may be.
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 depository institution 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 depository institution;
(ii) it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of any depository institution; 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 PALFED are located has
"opted out." Accordingly, Regions has the ability to consolidate all of its bank
subsidiaries into a single bank with interstate branches.
53
<PAGE> 58
The BHC Act generally prohibits Regions from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of 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 PALFED 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 PALFED (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 PALFED are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and PALFED, 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 PALFED, as
well as by Regions and PALFED to their stockholders.
As to the payment of dividends, 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. The Bank and 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
54
<PAGE> 59
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, without
obtaining governmental approvals, could declare aggregate dividends to Regions
of approximately $138 million.
The payment of dividends by Regions and PALFED 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 and its subsidiary depository institutions are required to comply
with the capital adequacy standards established by the Federal Reserve in the
case of Regions and the appropriate federal banking regulator in the case of
each of its 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.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis
points. Regions' Leverage Ratio at September 30, 1997 was 7.35%. 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' 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 nor any of its subsidiary depository institutions has been advised by
any federal banking agency of any specific minimum capital ratio requirement
applicable to it.
55
<PAGE> 60
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "--Prompt Corrective Action."
The Federal Reserve, the OCC, and the FDIC have, pursuant to FDICIA,
recently adopted final regulations requiring regulators to consider interest
rate risk (when the interest rate sensitivity of an institution's assets does
not match the sensitivity of its liabilities or its off-balance-sheet position)
in the evaluation of a bank's capital adequacy. The bank regulatory agencies'
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 is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, Regions may not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of 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.
56
<PAGE> 61
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 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
57
<PAGE> 62
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 and PALFED recorded charges against earnings for the
special assessment in the quarter ended September 30, 1996 in the pre-tax
amounts of approximately $21.0 million and $3.3 million, respectively.
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 1997. Under SEC rules, proposals of Regions stockholders
intended to be presented at that meeting must have been received by Regions at
its principal executive offices no later than December 2, 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.
As a result of having entered into the Agreement, PALFED has not scheduled
its 1998 Annual Meeting of Stockholders, which usually is held in late April. In
the event that the Agreement is not approved by stockholders at the PALFED
Special Meeting, or the Agreement is terminated prior to the Effective Date,
PALFED expects that it would hold its 1998 Annual Meeting as soon as practicable
thereafter.
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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.
The consolidated financial statements of PALFED, incorporated by reference
in this Registration Statement, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, for the periods indicated in their report thereon which
is included in the Annual Report of PALFED on Form 10-K for the year ended
December 31, 1996. The financial statements audited by Coopers & Lybrand L.L.P.
have been incorporated herein by reference in reliance on their report given on
their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville LLP,
Birmingham, Alabama. Henry E. Simpson, partner in the law firm of Lange,
Simpson, Robinson & Somerville LLP, is a member of the Board of Directors of
Regions. As of December 29, 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.
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<PAGE> 64
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PALFED, INC.
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF SEPTEMBER 23, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <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
1.4 Execution of Stock Option Agreement and Support
Agreements............................................. A-6
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 PALFED or Regions.................... A-7
3.4 Dissenting Stockholders............................. A-7
3.5 Fractional Shares................................... A-7
3.6 Conversion of Stock Options; Restricted Stock....... A-7
ARTICLE FOUR -- EXCHANGE OF SHARES.......................... A-8
4.1 Exchange Procedures................................. A-8
4.2 Rights of Former PALFED Stockholders................ A-8
ARTICLE FIVE -- REPRESENTATIONS AND WARRANTIES OF PALFED.... A-9
5.1 Organization, Standing, and Power................... A-9
5.2 Authority; No Breach By Agreement................... A-9
5.3 Capital Stock....................................... A-9
5.4 PALFED Subsidiaries................................. A-10
5.5 Financial Statements................................ A-10
5.6 Absence of Undisclosed Liabilities.................. A-11
5.7 Absence of Certain Changes or Events................ A-11
5.8 Tax Matters......................................... A-11
5.9 Assets.............................................. A-12
5.10 Environmental Matters............................... A-12
5.11 Compliance With Laws................................ A-13
5.12 Labor Relations..................................... A-13
5.13 Employee Benefit Plans.............................. A-13
5.14 Material Contracts.................................. A-15
5.15 Legal Proceedings................................... A-15
5.16 Statements True and Correct......................... A-15
5.17 Tax, Accounting, and Regulatory Matters............. A-16
5.18 State Takeover Laws................................. A-16
5.19 Articles of Incorporation Provisions................ A-16
5.20 Support Agreements.................................. A-16
5.21 Derivatives Contracts............................... A-16
5.22 Year 2000........................................... A-16
ARTICLE SIX -- REPRESENTATIONS AND WARRANTIES OF REGIONS.... A-17
6.1 Organization, Standing, and Power................... A-17
6.2 Authority; No Breach By Agreement................... A-17
6.3 Capital Stock....................................... A-17
</TABLE>
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
6.4 SEC Filings; Financial Statements................... A-17
6.5 Absence of Undisclosed Liabilities.................. A-18
6.6 Absence of Certain Changes or Events................ A-18
6.7 Compliance With Laws................................ A-18
6.8 Legal Proceedings................................... A-18
6.9 Statements True and Correct......................... A-19
6.10 Tax, Accounting, and Regulatory Matters............. A-19
ARTICLE SEVEN -- CONDUCT OF BUSINESS PENDING CONSUMMATION... A-19
7.1 Covenants of Both Parties........................... A-19
7.2 Covenants of PALFED................................. A-20
7.3 Covenants of Regions................................ A-21
7.4 Adverse Changes in Condition........................ A-21
7.5 Reports............................................. A-21
ARTICLE EIGHT -- ADDITIONAL AGREEMENTS...................... A-22
8.1 Registration Statement; Proxy Statement; Stockholder
Approval............................................... A-22
8.2 Nasdaq/NMS Listing.................................. A-22
8.3 Applications........................................ A-22
8.4 Agreement as to Efforts to Consummate............... A-22
8.5 Investigation and Confidentiality................... A-22
8.6 Press Releases...................................... A-23
8.7 Certain Actions..................................... A-23
8.8 Tax Matters......................................... A-23
8.9 Agreement of Affiliates............................. A-23
8.10 Employee Benefits and Contracts..................... A-24
8.11 Indemnification..................................... A-24
8.12 State Takeover Laws................................. A-24
8.13 Articles of Incorporation Provisions................ A-25
ARTICLE NINE -- CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE................................................ A-25
9.1 Conditions to Obligations of Each Party............. A-25
9.2 Conditions to Obligations of Regions................ A-26
9.3 Conditions to Obligations of PALFED................. A-27
ARTICLE TEN -- TERMINATION.................................. A-27
10.1 Termination......................................... A-27
10.2 Effect of Termination............................... A-29
10.3 Non-Survival of Representations and Covenants....... A-29
ARTICLE ELEVEN -- MISCELLANEOUS............................. A-29
11.1 Definitions......................................... A-29
11.2 Expenses............................................ A-33
11.3 Brokers and Finders................................. A-34
11.4 Entire Agreement.................................... A-34
11.5 Amendments.......................................... A-34
11.6 Waivers............................................. A-34
11.7 Assignment.......................................... A-34
11.8 Notices............................................. A-34
11.9 Governing Law....................................... A-35
11.10 Counterparts........................................ A-35
11.11 Captions............................................ A-35
11.12 Severability........................................ A-35
Signatures.................................................. A-36
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
1. -- Form of Stock Option Agreement. (sec. 1.4).
2. -- Form of Support Agreement. (sec. 1.4).
3. -- Form of agreement of affiliates of PALFED. (sec. 8.9).
4. -- Form of Claims Letter. (sec. 9.2).
5. -- Form of Opinion Letter of PALFED's Counsel. (sec. 9.2).
6. -- 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 23, 1997, by and between PALFED, INC. ("PALFED"), a
corporation organized and existing under the laws of the State of South
Carolina, with its principal office located in Aiken, 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 PALFED 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 PALFED
by Regions pursuant to the merger of PALFED into and with Regions. At the
effective time of such merger, the outstanding shares of the capital stock of
PALFED shall be converted into shares of the common stock of Regions (except as
provided herein). As a result, stockholders of PALFED shall become stockholders
of Regions and each of the subsidiaries of PALFED 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 PALFED, the Board of Governors of the Federal Reserve System,
and other applicable federal and 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, PALFED and Regions are entering into a stock option agreement (the
"Stock Option Agreement"), in substantially the form of Exhibit 1 and each of
PALFED's directors will execute and deliver to Regions an agreement (a "Support
Agreement"), in substantially the form of Exhibit 2.
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, PALFED shall be merged into and with Regions in accordance with
the provisions of Sections 33-11-101, 33-11-103 and 33-11-105 of the SCBCA and
with the effect provided in Section 33-11-106 of the SCBCA and of Section 258 of
the DGCL and with the effect provided in Section 259 of the DGCL (the "Merger").
Regions shall be the Surviving Corporation of the Merger and shall continue to
be governed by the Laws of the State of Delaware. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the Boards of Directors of PALFED 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
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reflecting the Merger shall become effective with the Secretary of State of the
State of Delaware (the "Effective Time"). Subject to the terms and conditions
hereof, unless otherwise mutually agreed upon in writing by the duly authorized
officers of each Party, the Parties shall use their reasonable efforts to cause
the Effective Time to occur on the fifth business day following 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 PALFED approve this Agreement to the extent such approval is
required by applicable Law; or such later date within 30 days thereof as may be
specified by Regions, provided that Regions may not delay the Effective Time
pursuant to the immediately preceding clause if such delay would cause the
record date for payment of the quarterly dividend to holders of Regions Common
Stock for the quarter in which the Effective Time occurs to occur prior to the
Effective Time that, absent such delay, would have occurred subsequent to the
Effective Time.
1.4 Execution of Stock Option Agreement and Support Agreements. Immediately
after the execution of this Agreement by the Parties and as a condition hereto,
PALFED is executing and delivering to Regions a stock option agreement (the
"Stock Option Agreement"), in substantially the form of Exhibit 1 to this
Agreement, pursuant to which PALFED is granting to Regions an option to
purchase shares of PALFED Common Stock and (ii) each of the directors
of PALFED is executing and delivering to Regions a support agreement (the
"Support Agreement") in substantially the form of Exhibit 2 to this Agreement.
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 PALFED Common Stock (excluding shares held by PALFED
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 0.70 of a share of Regions Common Stock, subject to
adjustment as provided in Section 10.1(g) of this Agreement (the "Exchange
Ratio").
3.2 Anti-Dilution Provisions. In the event PALFED changes the number of
shares of PALFED Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend,
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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 PALFED or Regions. Each of the shares of PALFED Common
Stock held by any PALFED 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 PALFED Common Stock
who perfects such holder's dissenters' rights of appraisal in accordance with
and as contemplated by Sections 33-13-101 et seq. of the SCBCA shall be entitled
to receive the value of such shares in cash as determined pursuant to such
provision 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 PALFED 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
PALFED 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 PALFED Common Stock
is entitled under this Article Three (without interest) upon surrender by such
holder of the certificate or certificates representing shares of PALFED Common
Stock held by such holder. PALFED 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 PALFED.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of PALFED Common Stock exchanged pursuant to
the Merger, or of options to purchase shares of PALFED 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 PALFED Common Stock pursuant to stock options
or stock appreciation rights ("PALFED Options") granted by PALFED under the
PALFED 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 PALFED Option, in accordance with
the terms of the PALFED Stock Plan and stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each PALFED 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 PALFED Option shall be equal to the number of
shares of PALFED Common Stock subject to such PALFED Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such PALFED Option shall be adjusted by dividing the
per share exercise price under each such PALFED 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
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Section 424 of the Internal Revenue Code, as to any stock option which is an
"incentive stock option." PALFED 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 PALFED
Common Stock awarded under the PALFED Stock Plans or any other plan, program, or
arrangement of any PALFED 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 PALFED appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of PALFED Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of PALFED 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 PALFED 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 PALFED Common Stock is entitled as a result of the Merger until such holder
surrenders such holder's certificate or certificates representing the shares of
PALFED Common Stock for exchange as provided in this Section 4.1. The
certificate or certificates of PALFED Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither Regions, PALFED, nor the Exchange Agent shall
be liable to a holder of PALFED 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 PALFED Stockholders. At the Effective Time, the stock
transfer books of PALFED shall be closed as to holders of PALFED Common Stock
immediately prior to the Effective Time, and no transfer of PALFED 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 PALFED 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
PALFED 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 PALFED Common Stock are converted, regardless
of whether such holders have exchanged their certificates representing PALFED
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
PALFED Common Stock issued and outstanding at the Effective Time until such
holder surrenders such certificate for exchange
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as provided in Section 4.1 of this Agreement. However, upon surrender of such
PALFED 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 PALFED
Except as disclosed in the PALFED Disclosure Memorandum, PALFED hereby
represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. PALFED 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 Material Assets.
PALFED 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 PALFED.
5.2 Authority; No Breach by Agreement. (a) PALFED 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 two-thirds of the
outstanding shares of PALFED 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
PALFED, subject to the approval of this Agreement by the holders of two-thirds
of the issued and outstanding shares of PALFED Common Stock. Subject to such
requisite stockholder approval, this Agreement represents a legal, valid, and
binding obligation of PALFED, enforceable against PALFED in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
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 PALFED, nor the
consummation by PALFED of the transactions contemplated hereby, nor compliance
by PALFED with any of the provisions hereof, will (i) conflict with or result in
a breach of any provision of PALFED's Articles of Incorporation or Bylaws, or
(ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any PALFED Company
under, any Contract or Permit of any PALFED 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 PALFED 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,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PALFED, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
PALFED of the Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of PALFED consists of
(i) 10,000,000 shares of PALFED Common Stock, of which 5,293,201 shares are
issued and outstanding as of the date of this Agreement and not more than
5,612,221 shares will be issued and outstanding at the Effective Time, assuming
the exercise of outstanding options, and (ii) 5,000,000 shares of PALFED
Preferred Stock of which no shares
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are issued and outstanding and of which none shall be issued and outstanding at
the Effective Time. All of the issued and outstanding shares of PALFED Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of PALFED Common Stock has been
issued in violation of any preemptive rights of the current or past stockholders
of PALFED. PALFED has reserved 1,162,500 shares of PALFED Common Stock for
issuance under the PALFED Stock Plans, pursuant to which options to purchase not
more than 319,020 shares of PALFED Common Stock are outstanding as of the date
of this Agreement.
(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 PALFED 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 PALFED or
contracts, commitments, understandings, or arrangements by which PALFED is or
may be bound to issue additional shares of PALFED capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock.
5.4 PALFED Subsidiaries. PALFED has disclosed in Section 5.4 of the PALFED
Disclosure Memorandum all of the PALFED Subsidiaries as of the date of this
Agreement. PALFED or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each PALFED Subsidiary. No equity
securities of any PALFED Subsidiary are or may become required to be issued
(other than to a PALFED 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 PALFED Subsidiary is bound to issue (other than to a PALFED
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 PALFED Company is or may be bound to transfer any shares of the capital
stock of any PALFED Subsidiary (other than to a PALFED Company). There are no
Contracts relating to the rights of any PALFED Company to vote or to dispose of
any shares of the capital stock of any PALFED Subsidiary. All of the shares of
capital stock of each PALFED Subsidiary held by a PALFED Company are duly
authorized, validly issued, and fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the PALFED Company free and clear of
any Lien. Each PALFED Subsidiary is either a bank, a savings association or a
corporation, and is duly organized, validly existing, and in good standing under
the Laws of the jurisdiction in which it is chartered or 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 PALFED 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 PALFED. The only PALFED Subsidiary that is a depository institution is
Palmetto Federal. Palmetto Federal is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits in which are insured by or the Savings Association Insurance Fund.
5.5 Financial Statements. PALFED has disclosed in Section 5.5 of the
PALFED Disclosure Memorandum, and has delivered to Regions copies of, all PALFED
Financial Statements prepared for periods ended prior to the date hereof and
will deliver to Regions copies of all PALFED Financial Statements prepared
subsequent to the date hereof. The PALFED 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
PALFED 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 PALFED
Companies as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows of the PALFED 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
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the case of interim financial statements, to normal recurring year-end
adjustments which were not or are not expected to be Material in amount or
effect).
5.6 Absence of Undisclosed Liabilities. To the Knowledge of PALFED, no
PALFED Company has any Material Liabilities that are reasonably likely to have,
individually or in the aggregate a Material Adverse Effect on PALFED, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of PALFED as of June 30, 1997 included in the PALFED Financial Statements
or reflected in the notes thereto. No PALFED 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 PALFED.
5.7 Absence of Certain Changes or Events. Since June 30, 1997, except as
disclosed in the PALFED 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 PALFED, and (ii)
the PALFED 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 PALFED 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 PALFED 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 PALFED, and all returns filed are complete and accurate to the
Knowledge of PALFED. 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 PALFED, except to
the extent reserved against in the PALFED 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 PALFED 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
PALFED Companies for the period or periods through and including the date of the
respective PALFED Financial Statements has been made and is reflected on such
PALFED Financial Statements.
(d) Each of the PALFED 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 PALFED.
(e) None of the PALFED 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.
(f) There are no Liens with respect to Taxes upon any of the assets of the
PALFED Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the PALFED Companies that occurred during or after any
taxable period in which the PALFED Companies incurred a net operating loss that
carries over to any taxable period ending after December 31, 1996.
(h) No PALFED Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
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(i) All Material elections with respect to Taxes affecting the PALFED
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the PALFED 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.
(j) No PALFED 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 PALFED
Financial Statements, the PALFED 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 PALFED Companies. All Material tangible properties used in
the businesses of the PALFED Companies are in good condition, reasonable wear
and tear excepted, and are usable in the ordinary course of business consistent
with PALFED's past practices. All Assets which are material to the business of
the PALFED Companies, which are held under leases or subleases by any of the
PALFED 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 PALFED, each PALFED
Company, its Participation Facilities, and its Loan Properties are, and have
been, in compliance with all Environmental Laws, except those violations which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PALFED.
(b) There is no Litigation pending or to the Knowledge of PALFED threatened
before any court, governmental agency, or authority, or other forum in which any
PALFED 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 PALFED 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 PALFED.
(c) There is no Litigation pending or to the Knowledge of PALFED threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or PALFED 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 PALFED.
(d) To the Knowledge of PALFED, 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 PALFED.
(e) To the Knowledge of PALFED, during the period of (i) any PALFED
Company's ownership or operation of any of their respective current properties,
(ii) any PALFED Company's participation in the management of any Participation
Facility, or, (iii) any PALFED 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 (or potentially affecting) such properties, except such as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PALFED. Prior to the period of (i) any PALFED Company's
ownership or operation of any of their respective current properties, (ii) any
PALFED Company's participation in the management of any Participation Facility,
or (iii) any PALFED Company's holding of a security interest in a Loan Property,
to the Knowledge of PALFED, there were no releases of Hazardous
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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 PALFED.
5.11 Compliance With Laws. PALFED is duly registered as a savings and loan
holding company under the HOLA. Each PALFED 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 PALFED, 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 PALFED. Except as disclosed in Section
5.11 of the PALFED Disclosure Memorandum, none of the PALFED Companies:
(a) is in violation of any Material 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 PALFED; 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 PALFED 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 PALFED; (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 PALFED; or
(iii) requiring any PALFED 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, or the
capital adequacy of Palmetto Federal, its credit or reserve policies, its
management, or the payment of dividends.
5.12 Labor Relations. No PALFED Company is the subject of any Litigation
asserting that it or any other PALFED 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 PALFED Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
PALFED 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
PALFED Company, pending or threatened, or to its Knowledge, is there any
activity involving any PALFED Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.13 Employee Benefit Plans. (a) PALFED has disclosed in Section 5.13 of
the PALFED 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 PALFED
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 "PALFED Benefit
Plans"). Any of the PALFED 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 "PALFED ERISA Plan." Any PALFED 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 "PALFED Pension Plan." On or
after September 26, 1980, neither PALFED nor any PALFED 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
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3(37)(A)). The only "employee pension benefit plan," as defined in Section 3(2)
of ERISA, ever maintained by any PALFED Company that was intended to qualify
under Section 401(a) of the Internal Revenue Code, are the PALFED, Inc. Employee
Savings and Stock Ownership Plan and the PALFED, Inc. Pension Plan.
(b) PALFED 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
PALFED Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such PALFED 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, 1991, (iii) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any PALFED 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 PALFED 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 is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PALFED. Each PALFED 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
PALFED is not aware of any circumstances which will or could result in
revocation of any such favorable determination letter. Each trust created under
any PALFED ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and PALFED is not aware of any circumstance
which will or could result in revocation of such exemption. With respect to each
PALFED Benefit Plan to the Knowledge of PALFED, 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, to the Knowledge of PALFED, threatened Litigation
relating to any PALFED ERISA Plan. No PALFED Company has engaged in a
transaction with respect to any PALFED Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
PALFED Company to a Material tax or penalty 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 PALFED.
(d) No PALFED 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 PALFED Pension Plan, (ii) no change in the actuarial assumptions with
respect to any PALFED Pension Plan, and (iii) no increase in benefits under any
PALFED 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 PALFED or materially adversely affect the funding status of
any such plan. Neither any PALFED Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any PALFED Company, or the single-employer plan of any entity
which is considered one employer with PALFED 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 PALFED Company has provided, or is required to provide, security to a PALFED
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 PALFED Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any ERISA Affiliate.
(f) No PALFED Company has any obligations for retiree health and retiree
life benefits under any of the PALFED Benefit Plans.
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(g) Except as set forth in Section 5.13(g) of the 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 PALFED Company
from any PALFED Company under any PALFED Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any PALFED 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 PALFED Benefit Plans has been made to employees of any of the
PALFED Companies prior to the date hereof which is not in accordance with the
written or otherwise preexisting terms and provisions of such plans. All PALFED
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 PALFED 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 Section 5.14 of the PALFED
Disclosure Memorandum, none of the PALFED 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 PALFED Company or the guarantee by any PALFED 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 PALFED 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 PALFED with
the Securities and Exchange Commission (the "SEC") as of the date of this
Agreement if PALFED 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 "PALFED Contracts"). None of the PALFED Companies is in Default under any
PALFED Contract which, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on PALFED.
5.15 Legal Proceedings. Except to the extent specifically reserved against
in the PALFED Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of PALFED,
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 PALFED 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 PALFED, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any PALFED Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PALFED. Section 5.15 of the PALFED
Disclosure Memorandum provides a list of all Litigation in which a PALFED
company is a named defendant.
5.16 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any PALFED 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
PALFED 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 PALFED Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to PALFED's stockholders in connection with the
Stockholders' Meeting, and any other documents to be filed by a PALFED Company
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the
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respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the stockholders of PALFED, 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 PALFED 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 Tax, Accounting, and Regulatory Matters. No PALFED 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 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 PALFED, 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 State Takeover Laws. Each PALFED Company has taken all necessary
action to exempt the transactions contemplated by this Agreement from any
applicable "moratorium," "control share," "fair price," "business combination,"
or other anti-takeover laws and regulations of the State of South Carolina
(collectively, "Takeover Laws"), including those laws contained within Title 35,
Article 2 of the South Carolina Code.
5.19 Articles of Incorporation Provisions. Each PALFED 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 PALFED 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 PALFED Company that may be acquired or controlled by it.
5.20 Support Agreements. Each of the directors of PALFED has executed and
delivered to Regions an agreement in substantially the form of Exhibit 2 to this
Agreement.
5.21 Derivatives Contracts. Neither PALFED nor any of its Subsidiaries is
a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract, or any
other interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative contract (including various
combinations thereof).
5.22 Year 2000. Except as disclosed in Section 5.22 of the PALFED
Disclosure Memorandum, to the Knowledge of PALFED, 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. PALFED 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.
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ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to PALFED as follows:
6.1 Organization, Standing, and Power. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Material Assets. Regions is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 Authority; No Breach by Agreement. (a) Regions has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
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, which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.1(b) of this Agreement, violate any Law or Order
applicable to any Regions Company or any of their respective 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,
or under the HSR Act and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
Regions of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Regions consists as of
the date of this Agreement, of 240,000,000 shares of Regions Common Stock, of
which 136,722,928 shares were issued and outstanding 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 PALFED
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 PALFED 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, 1994, 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
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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 or effect.
6.5 Absence of Undisclosed Liabilities. No Regions Company has any
Material Liabilities, 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 is 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 Material 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 governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions; (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions; or
(iii) requiring any Regions Company (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 credit
or reserve policies, 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
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against any Asset, interest, or right of any of them, 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 PALFED 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 PALFED'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 PALFED, 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 Tax, Accounting, 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 treatment or 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).
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.
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7.2 Covenants of PALFED. Except as specifically contemplated or permitted
by this Agreement or as disclosed in the PALFED Disclosure Memorandum, from the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, PALFED 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, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any PALFED 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 PALFED Company to another PALFED Company) in excess
of an aggregate of $500,000 (for the PALFED Companies on a consolidated
basis) except in the ordinary course of the business of PALFED Companies
consistent with past practices (which shall include, for PALFED, 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 any PALFED 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 PALFED Company, or declare or pay any dividend or
make any other distribution in respect of any PALFED Common Stock; provided
that PALFED may (to the extent legally able to do so), but shall not be
obligated to, declare and pay regular cash dividends on the PALFED Common
Stock at a rate not in excess of $.03 (for the fourth quarter of 1997) and
$.04 (for any quarter thereafter), and in accordance with PALFED's most
recent past practices for cash dividends as disclosed in Section 7.2(c) of
the PALFED Disclosure Memorandum, provided that any dividend declared or
payable on the shares of PALFED Common Stock for the quarterly period
during which the Effective Time occurs shall, unless otherwise agreed upon
in writing by Regions and PALFED, be declared with a record date prior to
the Effective Time only if the normal record date for payment of the
corresponding quarterly dividend to holders of Regions Common Stock is
before the Effective Time; 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 PALFED Common Stock or any other capital stock of any PALFED
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
PALFED Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of PALFED Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any PALFED Subsidiary (unless any such shares of stock
are sold or otherwise transferred to another PALFED Company) or any Assets
having in the aggregate a book value in excess of $250,000 other than in
the ordinary course of business for reasonable and adequate consideration;
or
(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
PALFED in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any PALFED Company except as disclosed in Section 7.2(g) of the
PALFED 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 PALFED Disclosure Memorandum; enter into or amend any
severance agreements with officers of any PALFED Company except as
disclosed in Section 7.2(g) of the PALFED Disclosure Memorandum; grant any
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increase in fees or other increases in compensation or other benefits to
directors of any PALFED Company; or
(h) voluntarily accelerate the vesting of any stock options or other
stockbased compensation or employee benefits; or
(i) enter into or amend any employment Contract between any PALFED
Company and any Person (unless such amendment is required by Law) that the
PALFED 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
(j) except as disclosed in Section 7.2 of the PALFED Disclosure
Memorandum, adopt any new employee benefit plan or program of any PALFED
Company or make any Material change in or to any existing employee benefit
plans or programs of any PALFED 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
(k) 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
(l) commence or settle any Litigation other than in accordance with
past practice; provided that, except to the extent specifically reserved
against in the PALFED Financial Statements dated prior to the date of this
Agreement, no PALFED Company shall settle any Litigation involving any
Liability of any PALFED Company for money damages in excess of $500,000 or
restrictions upon the operations of any PALFED Company; or
(m) except in the ordinary course of business, enter into or terminate
any Material Contract or make any change in any Material lease or Contract.
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: (i) it will not, without the prior written consent of
a duly authorized officer of PALFED 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 PALFED Common Stock; and (ii) it will
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment, to enhance the long-term value of
the Regions Common Stock and the business prospects to Regions.
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 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 each Party shall deliver to the other Party
copies of all such reports filed by such Party 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-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.
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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 PALFED has provided, on a
reasonably timely basis, all information concerning PALFED 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 other applicable securities Laws in connection with the
issuance of the shares of Regions Common Stock upon consummation of the Merger.
PALFED shall promptly furnish all information concerning it and the holders of
its capital stock as Regions may reasonably request in connection with such
action. PALFED 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) PALFED 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 PALFED 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 PALFED 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 PALFED 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 PALFED 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 and 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,
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each Party shall promptly return all documents and copies thereof, and all work
papers containing confidential information received from the other Party.
(c) PALFED shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
acquisition transaction with PALFED to preserve the confidentiality of the
information relating to PALFED provided to such parties.
8.6 Press Releases. Prior to the Effective Time, PALFED 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 PALFED Company nor any Affiliate thereof
nor any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any PALFED Company shall directly
or indirectly solicit any Acquisition Proposal by any Person. Except to the
extent necessary to comply with the fiduciary duties of PALFED's Board of
Directors as advised in writing by counsel to such Board of Directors, no PALFED
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 PALFED 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. PALFED
shall promptly notify Regions orally and in writing in the event that it
receives any inquiry or proposal relating to any such transaction. PALFED 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 LLP 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 PALFED Common Stock
for Regions Common Stock will not give rise to gain or loss to the stockholders
of PALFED with respect to such exchange (except to the extent of any cash
received), (iii) the exchange or conversion by the holders of PALFED Options
with respect to Regions Common Stock, as contemplated by Section 3.6 of this
Agreement, will not give rise to any gain or loss to such holder with respect to
such exchange; and (iv) each of PALFED 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 PALFED 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. PALFED has disclosed in Section 8.9 of the
PALFED Disclosure Memorandum each Person whom it reasonably believes is an
"affiliate" of PALFED for purposes of Rule 145 under the 1933 Act. PALFED 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 3, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of PALFED 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 and PALFED
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 PALFED in exchange for shares of PALFED Common
Stock shall not be transferable until such time as financial results covering at
least 30 days of combined operations of Regions and PALFED have been
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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 PALFED 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 PALFED
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 PALFED
should be treated as service under Regions' qualified defined benefit plans,
(ii) service under any qualified defined contribution plans of PALFED shall be
treated as service under Regions' qualified defined contribution plans, and
(iii) service under any other employee benefit plans of PALFED shall be treated
as service under any similar employee benefit plans maintained by Regions.
Regions also shall cause PALFED and its Subsidiaries to honor all employment,
severance, consulting, and other compensation Contracts disclosed in Section
8.10 of the PALFED Disclosure Memorandum to Regions between any PALFED 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 PALFED 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
indemnify, defend, and hold harmless each person entitled to indemnification
from a PALFED 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 PALFED'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
PALFED is required to effectuate any indemnification, Regions shall cause PALFED
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) above, 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 PALFED 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 PALFED 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 PALFED
and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Regions or PALFED 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 PALFED shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
8.12 State Takeover Laws. Each PALFED Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of,
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any applicable Takeover Laws, including those laws contained in Title 35,
Article 2 of the South Carolina Code.
8.13 Articles of Incorporation Provisions. Each PALFED 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 PALFED 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 PALFED 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 PALFED 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.
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(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 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 PALFED 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 PALFED set forth in Section 5.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimis in amount).
The representations and warranties of PALFED set forth in Sections 5.17,
5.18, and 5.19 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of PALFED set forth in this Agreement (including the
representations and warranties set forth in Sections 5.3, 5.17, 5.18, and
5.19) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on PALFED; 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 PALFED 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.
(c) Certificates. PALFED 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
PALFED'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 executive officers of
PALFED shall have executed and delivered to Regions letters in
substantially the form of Exhibit 4 to this Agreement.
(e) Legal Opinion. Regions shall have received a written opinion,
dated as of the Effective Time, of counsel to PALFED, in substantially the
form of Exhibit 5 to this Agreement.
(f) Affiliate Agreements. Regions shall have received from each
affiliate of PALFED the affiliates agreement referred to in Section 8.9 of
this Agreement.
(g) Pooling Treatment. PALFED shall not have taken any action that
would prevent the Merger from qualifying for pooling-of-interests
accounting treatment under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
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9.3 Conditions to Obligations of PALFED. The obligations of PALFED 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 PALFED pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Regions set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Regions set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Regions set forth in Section 6.10 of
this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of
Regions set forth in this Agreement (including the representations and
warranties set forth in Sections 6.3 and 6.10) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Regions; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" 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 PALFED (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 9.3(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 PALFED
and its counsel shall request.
(d) Fairness Opinion. PALFED shall have received a letter from
Sterne, Agee & Leach, Inc. or another financial adviser selected by PALFED
dated not more than five (5) days prior to the date of the Proxy Statement
to the effect that in the opinion of such firm, the Exchange Ratio is fair
to the stockholders of PALFED from a financial point of view.
(e) Legal Opinion. PALFED shall have received a written opinion,
dated as of the Effective Time, of counsel to Regions, in substantially the
form of Exhibit 6 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
PALFED, 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 PALFED; 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 PALFED 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
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to refuse to consummate the Merger under the applicable standard set forth
in Section 9.2(a) of this Agreement in the case of PALFED 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 PALFED 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
(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 PALFED 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 PALFED Stockholders' Meeting where the
transactions were presented to such stockholders for approval and voted
upon; or
(e) By the Board of Directors of PALFED or by the Board of Directors
of Regions in the event that the Merger shall not have been consummated by
April 30, 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 PALFED 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 PALFED, if it determines by a vote of
a majority of the members of its entire Board, at any time during the five
business-day period commencing on the day immediately following the
Determination Date, if the Average Closing Price shall be less than $30.00;
subject, however, to the following three sentences. If PALFED refuses to
consummate the Merger pursuant to this Section 10.1(g), it shall give
prompt written notice thereof to Regions; provided, that such notice of
election to terminate may be withdrawn at any time within the
aforementioned five business-day period. During the three business-day
period commencing with its receipt of such notice, Regions shall have the
option to elect to increase the Exchange Ratio to equal the quotient
obtained by dividing (1) the product of $30.00 and the Exchange Ratio (as
then in effect) by (2) the Average Closing Price. If Regions makes an
election contemplated by the preceding sentence, within such three
business-day period, it shall give prompt written notice to PALFED of such
election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 10.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified), and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio
as adjusted pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of Regions Common Stock as reported on the Nasdaq/NMS (as reported
by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Regions) for the ten consecutive full
trading days in which such shares are traded on the Nasdaq/NMS ending at
the close of trading on the Determination Date.
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"Determination Date" shall mean the seventh full trading day
immediately preceding the date of the anticipated Closing.
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, 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, PALFED, other than
the formation of a newly organized holding company for PALFED in which the
shares of PALFED 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.
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"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 5.12 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 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"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.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"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 (not
including outside 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.
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"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 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, is likely to have a Material adverse impact on (i) the
financial position, business, results of operations or prospects 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,
savings associations, and their holding companies, (c) actions and
omissions of a Party (or any of its Subsidiaries) taken with the prior
informed consent of the other Party in contemplation of the transactions
contemplated hereby, or (d) the Merger and compliance with the provisions
of this Agreement on the operating performance of the Parties.
"Merger" shall mean the merger of PALFED 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.
"PALFED Benefit Plans" shall have the meaning set forth in Section
5.13 of this Agreement.
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"PALFED Common Stock" shall mean the $1.00 par value common stock of
PALFED.
"PALFED Companies" shall mean, collectively, PALFED and all PALFED
Subsidiaries.
"PALFED Disclosure Memorandum" shall mean the written information
entitled "PALFED Disclosure Memorandum" delivered prior to the date of this
Agreement, to Regions describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made.
"PALFED Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of PALFED 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 PALFED Disclosure Memorandum, and (ii) the
consolidated balance sheets of PALFED (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.
"PALFED Preferred Stock" shall mean the no par value preferred stock
of PALFED.
"PALFED Stock Plans" shall mean the stock plans of PALFED listed in
Section 5.13 of the PALFED Disclosure Memorandum.
"PALFED Subsidiaries" shall mean the Subsidiaries of PALFED, which
shall include the PALFED Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of PALFED in the future and owned by
PALFED at the Effective Time.
"Palmetto Federal" shall mean Palmetto Federal Savings Bank of South
Carolina, a federal stock savings bank and wholly-owned subsidiary of
PALFED.
"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 PALFED or Regions and "Parties" shall mean
both PALFED and Regions.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by PALFED 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
PALFED.
"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
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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.
"South Carolina Code" shall mean the Code of Laws of South Carolina,
1976.
"Stock Option Agreement" shall mean the Stock Option Agreement of even
date herewith issued to Regions by PALFED, substantially in the form of
Exhibit 1.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
PALFED 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 2.
"Surviving Corporation" shall mean Regions as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, 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
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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. Except for Sterne, Agee & Leach, Inc. as to
PALFED, each of the Parties represents and warrants that neither it nor any of
its officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by PALFED or Regions, each of PALFED
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 PALFED Common Stock, there shall be made no
amendment decreasing the consideration to be received by PALFED 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 PALFED, to waive or extend the time for the
compliance or fulfillment by PALFED 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, PALFED, 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 PALFED 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 PALFED.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage
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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>
PALFED: PALFED, INC.
Post Office Box 1116
Aiken, South Carolina 29802
Telecopy Number: (803) 642-6657
Attention: John C. Troutman
President and Chief Executive Officer
Copy to Counsel: SUTHERLAND, ASBILL & BRENNAN LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Telecopy Number: (404) 853-8806
Attention: Charles M. Flickinger
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 any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: PALFED, INC.
By: /s/ HOWARD M. HICKEY, JR. By: /s/ JOHN C. TROUTMAN
------------------------------------------------- -------------------------------------------------
Howard M. Hickey, Jr. John C. Troutman
Secretary President and Chief Executive Officer
[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
December 29, 1997
Members of the Board of Directors
PALFED, Inc.
107 Chesterfield Street, South
Aiken, South Carolina 29801
Sirs:
We understand that PALFED, Inc. (the "Company"), and Regions Financial
Corporation, a Delaware corporation ("Regions"), have entered into an Agreement
and Plan of Reorganization, dated as of September 23, 1997 (the "Agreement"),
pursuant to which a wholly-owned subsidiary of Regions will be merged with the
Company and each outstanding share of the Company's common stock (excluding
treasury shares and shares held by stockholders who perfect their dissenters'
rights) will cease to be outstanding and will be converted into and exchanged
for the right to receive 0.70 shares of Regions common stock subject to
adjustments under certain circumstances (the "Consideration"), as described in
the Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the stockholders of the Company's common stock pursuant to the
Agreement is fair to the stockholders of the Company (other than Regions or any
of its subsidiaries) from a financial point of view, as of the date hereof.
In rendering its opinion, Sterne, Agee, has, among other things: (i)
reviewed certain publicly available financial and other data with respect to the
Company and Regions, including the consolidated financial statements for recent
years and interim periods to date; certain Regions Current Reports on Form 8-K
presenting certain financial statements on a pro forma basis incorporating the
effects of then pending and expected-to-be-completed acquisitions by Regions;
drafts of the Registration Statement; and certain other relevant financial and
operating data relating to the Company and Regions made available to Sterne,
Agee from published sources and from the internal records of the Company and
Regions; (ii) reviewed the Agreement; (iii) reviewed certain historical market
prices and trading volumes of the Company and Regions common stock in the
over-the-counter market as reported by the NASDAQ National Market; (iv) compared
the Company and Regions from a financial point of view with certain other
companies in the financial services industry which Sterne, Agee deemed relevant;
(v) considered the financial terms, to the extent publicly available, of
selected recent acquisitions of financial institutions which Sterne, Agee deemed
to be comparable, in whole or in part, to the Merger; (vi) reviewed and
discussed with representatives of the managements of the Company and Regions
certain information of a business and financial nature regarding the Company and
Regions, respectively, furnished to Sterne, Agee by the Company and Regions,
respectively, (vii) made inquiries regarding and discussed the Agreement and
other matters related thereto with the Company's counsel; and (viii) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not independently verified any of
the foregoing information with respect to the Company or Regions, have relied on
all such information, and have assumed that all such information is complete and
accurate in all material respects. With respect to the financial forecasts for
the Company and Regions provided to us by their respective managements, we have
assumed for purposes of our opinion that they have been reasonably prepared on
bases reflecting the best available estimates and judgments of their respective
managements at the time of preparation as to the future financial performance of
the Company and Regions and that they provide a reasonable basis upon which we
could form our opinion. We have also assumed that there have been no material
changes in the Company's or Regions' assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements made available to us. We have relied on advice of counsel
to the Company as to all legal matters with respect to the Company (including
PALFED's goodwill lawsuit), Regions and the Agreement. In addition, we have not
examined any of the loan files of the Company or Regions or otherwise evaluated
the allowance for loan losses of the Company or Regions and have not made an
independent evaluation, appraisal or physical inspection of the assets or
individual properties of the Company or Regions, nor have we been
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furnished with any such appraisals. Further, our opinion is based on economic,
monetary and market conditions existing as of the date hereof.
In the ordinary course of our business, we actively trade the equity
securities of the Company and Regions for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. Sterne, Agee, and its officers, employees, consultants, and
agents may have long, short, or option positions in the securities of the
Company and Regions. Sterne, Agee has normally followed and provided investment
research concerning PALFED and Regions to its clients.
Based upon the foregoing, and in reliance thereon, it is our opinion that,
as of the date hereof, the Consideration to be received by the stockholders of
the Company pursuant to the Agreement is fair to the stockholders of the Company
(other than Regions or any of its subsidiaries) from a financial point of view.
This opinion is furnished pursuant to our engagement letter, dated
September 9, 1997, and is for the benefit of the Board of Directors of the
Company and is not a recommendation to any stockholder as to how such
stockholder should vote with respect to the merger.
Very truly yours,
STERNE, AGEE & LEACH, INC.
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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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<PAGE> 106
(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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<PAGE> 107
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
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<PAGE> 108
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
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.
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<PAGE> 109
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or 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
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<PAGE> 110
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>
2.1 -- Agreement and Plan of Merger, dated as of September 23, 1997, by and between PALFED, Inc. and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
2.2 -- Option Agreement, dated as of September 23, 1997 by and between PALFED, Inc. and Regions
Financial Corporation.
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 Coopers & Lybrand L.L.P.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird -- included in Exhibit 8.
23.5 -- Consent of Sterne, Agee & Leach, Inc.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
original registration statement.
99. -- Form of proxy.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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
II-4
<PAGE> 111
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 112
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 29th day of December, 1997.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
BY: /s/ Richard D. Horsley
----------------------------------
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
<S> <C> <C>
* J. Stanley Mackin
- -------------------------- Chairman of the Board and December 29, 1997
J. Stanley Mackin Chief Executive Officer and
Director
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and December 29, 1997
Richard D. Horsley Executive Financial Officer
and Director
* Robert P. Houston
- -------------------------- Executive Vice President and December 29, 1997
Robert P. Houston Comptroller
</TABLE>
II-5
<PAGE> 113
<TABLE>
<S> <C> <C>
* Sheila S. Blair Director December 29, 1997
- --------------------------
Sheila S. Blair
Director
- --------------------------
William B. Boles, Sr.
* James B. Boone, Jr. Director December 29, 1997
- --------------------------
James B. Boone, Jr.
* Albert P. Brewer Director December 29, 1997
- --------------------------
Albert P. Brewer
* James S.M. French Director December 29, 1997
- --------------------------
James S.M. French
* Carl E. Jones, Jr. President and Chief Operating December 29, 1997
- -------------------------- Officer and Director
Carl E. Jones, Jr.
* Olin B. King Director December 29, 1997
- --------------------------
Olin B. King
* Henry E. Simpson Director December 29, 1997
- --------------------------
Henry E. Simpson
Director
- --------------------------
Lee J. Styslinger, Jr.
* Robert J. Williams Director December 29, 1997
- --------------------------
Robert J. Williams
</TABLE>
* By /s/ Richard D. Horsley, as attorney-in-fact December 29, 1997
pursuant to a power of attorney.
II-6
<PAGE> 114
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------------------ ------------
<S> <C>
2.1 -- Agreement and Plan of Merger, dated as of September 23, 1997, by and between PALFED, Inc. and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
2.2 -- Option Agreement, dated as of September 23, 1997, by and between PALFED, Inc. and Regions Financial
Corporation.
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 Coopers & Lybrand L.L.P.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird -- included in Exhibit 8.
23.5 -- Consent of Sterne, Agee & Leach, Inc.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
original registration statement.
99. -- Form of Proxy.
</TABLE>
<PAGE> 1
EXHIBIT 2.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of September 23, 1997, by and between PALFED, Inc., a South Carolina
corporation ("Issuer"), and Regions Financial Corporation, a Delaware
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Merger, dated as of September 23, 1997 (the "Merger Agreement"),
providing for, among other things, the merger of a Issuer with and into Grantee,
with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 1,051,500 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $1.00 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $21.00; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, Holder may exercise the Option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event and prior to the termination of the Option. The Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time, (B) termination of the Merger Agreement in accordance
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to (i) Section 10.1(b) thereof (but only if such termination
was a result of a willful breach by Issuer) or (ii) Section
<PAGE> 2
10.1(c) thereof (but only if such termination was the result of a willful breach
by Issuer) (each a "Default Termination")), (C) 12 months after a Default
Termination, and (D) 12 months after any termination of the Merger Agreement
following the occurrence of a Purchase Event or a Preliminary Purchase Event.
Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise of
the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent,
Issuer shall have authorized, recommended, publicly proposed or
publicly announced an intention to authorize, recommend or propose, or
entered into an agreement with any person (other than Grantee or any
Subsidiary of Grantee) to effect an Acquisition Transaction (as defined
below). As used herein, the term Acquisition Transaction shall mean (A)
a merger, consolidation or similar transaction involving Issuer or any
of its Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and transactions involving Issuer or any Subsidiary in
which the voting securities of Issuer outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into securities of the surviving entity or the parent
thereof) at least 60% of the combined voting power of the voting
securities of the Issuer or the surviving entity or the parent thereof
outstanding immediately after the consummation of the transaction), (B)
except as permitted pursuant to Section 7.2 of the Merger Agreement,
the disposition, by sale, lease, exchange or otherwise, of Assets of
Issuer or any of its Subsidiaries representing in either case 25% or
more of the consolidated assets of Issuer and its Subsidiaries, or (C)
the issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 25% or more of the voting power of Issuer or any of its
Subsidiaries (any of the foregoing, an "Acquisition Transaction"); or
(ii) any person (other than Grantee, any
Subsidiary of Grantee) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any "group"
(as such term is defined under the Exchange Act), other than a group of
which Grantee or any of its Subsidiaries of Grantee is a member, shall
have been formed which beneficially owns 25% or more of the
then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any
Subsidiary of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act), or shall have filed a registration
statement under the Securities Act of 1933, as amended (the
"Securities
-2-
<PAGE> 3
Act") with respect to, a tender offer or exchange offer to purchase any
shares of Issuer Common Stock such that, upon consummation of such
offer, such person would own or control 25% or more of the
then-outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such stockholders
held for the purpose of voting on the Merger Agreement, such meeting
shall not have been held or shall have been canceled prior to
termination of the Merger Agreement, or Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after it shall have been publicly
announced that any person (other than Grantee or any Subsidiary of
Grantee) shall have (A) made a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in draft or
final form, under any federal or state statute or regulation (including
a notice filed under the HSR Act and an application or notice filed
under the BHC Act, the Bank Merger Act, or the Change in Bank Control
Act of 1978) seeking the Consent to an Acquisition Transaction from any
federal or state governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
in connection with such purchase, Issuer shall cooperate with Holder in the
filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement
to the contrary, in no event shall:
(i) Holder's (taking into account all other
Holders) Total Profit (as defined below) exceed $7.0 million and, if it
otherwise would exceed such amount, Holder, at its sole election, shall
either (A) reduce the number of shares of Issuer Common Stock subject
to the Option, (B) deliver to Issuer for cancellation without
consideration Option Shares previously purchased by Holder, (C) pay
cash to Issuer, or (D) any combination of the foregoing, so that
Holder's actually realized Total Profit (together with the Total Profit
realized by all other Holders) shall not exceed $7.0 million after
taking into account the foregoing actions; and
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(ii) the Option be exercised for a number of
shares of Issuer Common Stock as would, as of the date of exercise,
result in Holder's (taking into account all other Holders) Notional
Total Profit (as defined below) of more than $7.0 million; provided,
that nothing in this clause (ii) shall restrict any exercise of the
Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Holder and its affiliates as of such date, were sold for cash at
the closing sale price per share of Issuer Common Stock as quoted on the
Nasdaq/NMS (or, if Issuer Common Stock is not then quoted on the Nasdaq/NMS, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by Holder) as of the close of business on the preceding trading
day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any
Substitute Option (as defined below).
(f) Grantee agrees, promptly following any exercise of
all or any portion of the Option, and subject to its rights under Section 8, to
use commercially reasonable efforts promptly to maximize the value of Option
Shares purchased, taking into account market conditions, the number of Option
Shares, the potential negative impact of substantial sales on the market price
for Issuer Common Stock, and availability of an effective registration statement
to permit public sale of Option Shares.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer,
in immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 13(f)
hereof.
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<PAGE> 5
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF SEPTEMBER 23, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Issuer; provided, however,
the Issuer makes no representation or warranty with respect to whether
the issuance of shares of Issuer Common
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<PAGE> 6
Stock pursuant to this Agreement requires the approval of Issuer's
stockholders. This Agreement has been duly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for
issuance, upon exercise of the Option, the number of shares of Issuer
Common Stock necessary for Holder to exercise the Option, and Issuer
will take all necessary corporate action to authorize and reserve for
issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer
Common Stock or other securities which may be issuable pursuant to
Section 7, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid, and nonassessable, and shall be delivered free and
clear of all liens, claims, charges, and encumbrances of any kind or
nature whatsoever, including any preemptive rights of any stockholder
of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or
other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities
Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, if any, so that Holder shall receive,
upon exercise of the Option, the number and class of shares or other securities
or property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or pursuant to this
Option), the number of shares of Issuer Common Stock subject to the Option shall
be adjusted so that, after such
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<PAGE> 7
issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement:
(i) to consolidate with or merge into any person, other than Grantee or one of
its Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its Assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls the
Acquiring Corporation (in each case, such person being referred to as the
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided that, if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee. The Substitute Option
Issuer shall also enter into an agreement with the then-holder or holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of the Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the Substitute Common Stock (the
"Substitute Purchase Price") shall then be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (y) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (z) the transferee of all or any substantial part of the
Issuer's assets (or the assets of its Subsidiaries).
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<PAGE> 8
(ii) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon
exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of
(x) the price per share of the Issuer Common Stock at which a
Tender Offer or Exchange Offer therefor has been made by any
person (other than Grantee), (y) the price per share of the
Issuer Common Stock to be paid by any person (other than the
Grantee) pursuant to an agreement with Issuer, and (z) the
highest closing sales price per share of Issuer Common Stock
quoted on the Nasdaq/NMS (or if Issuer Common Stock is not
quoted on the Nasdaq/NMS, the highest bid price per share on
any day as quoted on the principal trading market or
securities exchange on which such shares are traded as
reported by a recognized source chosen by Grantee) within the
six-month period immediately preceding the agreement;
provided, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the
price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by
Grantee (or by a majority in interest of the Grantees if there
shall be more than one Grantee (a "Grantee Majority")) and
reasonably acceptable to Issuer, divided by the number of
shares of the Issuer Common Stock outstanding at the time of
such sale. In the event that an exchange offer is made for the
Issuer Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than
cash, the value of the securities or other property issuable
or deliverable in exchange for the Issuer Common Stock shall
be determined by a nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer
(or if applicable, Acquiring Corporation). (If there shall be
more than one Grantee, any such selection shall be made by a
Grantee Majority.)
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for
the one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the closing
price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common
stock issued by Issuer, the person merging into Issuer or by
any company which controls or is controlled by such merger
person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing
paragraphs shall the Substitute Option be exercisable for more than
19.9% of the aggregate of the shares of the Substitute Common Stock
outstanding prior to exercise of the Substitute Option. In the event
that the Substitute Option would be exercisable for more than 19.9% of
the aggregate of the shares of Substitute Common Stock but for this
clause (f), the Substitute Option Issuer shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) over (ii)
the value of the Substitute Option after giving effect to the
limitation in this clause (f). This difference in value shall be
determined by a nationally recognized investment banking firm selected
by Grantee (or a Grantee Majority) and reasonably acceptable to the
Acquiring Corporation.
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<PAGE> 9
(g) Issuer shall not enter into any transaction described
in subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be necessary
so that the provisions of this Section 7 are given full force and effect
(including, without limitation, any action that may be necessary so that the
shares of Substitute Common Stock are in no way distinguishable from or have
lesser economic value than other shares of common stock issued by the Substitute
Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 shall
apply, with appropriate adjustments, to any securities for which the Option
becomes exercisable pursuant to this Section 7 and, as applicable, references in
such sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option," "Substitute Purchase Price" and "Substitute Common Stock,"
respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to Section 3(e) and to the last sentence of
Section 3(a), at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 12
months immediately thereafter, Issuer shall repurchase from Holder the Option
and all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Request Date."
Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common Stock acquired by Holder pursuant to
the Option with respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common Stock over (y)
the Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section 7)
paid (or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by
Holder for each share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder then has
beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock
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<PAGE> 10
purchased thereunder with respect to which Holder then has beneficial ownership,
and Holder shall warrant that it has sole record and beneficial ownership of
such shares and that the same are then free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever. Notwithstanding the foregoing,
to the extent that prior notification to or Consent of any governmental or
regulatory agency or authority is required in connection with the payment of all
or any portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this Section
8, Issuer shall promptly give notice of such fact to Holder. If any governmental
or regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq/NMS
(or if Issuer Common Stock is not quoted on the Nasdaq/NMS, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 60 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's Assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer as determined by
an independent nationally recognized investment banking firm selected by Holder
and reasonably acceptable to Issuer (which determination shall be conclusive for
all purposes of this Agreement), divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized
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<PAGE> 11
investment banking firm selected by Holder and reasonably acceptable to Issuer,
which determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns 50% or more of the
then-outstanding shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(iii) shall be consummated.
(e) In connection with the application of the provisions
of this Section 8, Grantee acknowledges (i) that Issuer's ability to fund the
Section 8 Repurchase Consideration in accordance with the provisions of this
Section 8 may be dependent upon the payment by Issuer's Subsidiaries of a
capital distribution or distributions ("Capital Distribution") to Issuer and
that any such Capital Distribution will be subject to the prior approval of the
Office of Thrift Supervision and the principal federal and state regulatory
agencies having jurisdiction over Issuer's Subsidiary banks, and (ii) that,
unless there has been an agreement of the type described in Section 7(b),
Issuer's obligations under this Section 8 do not impose on Issuer an obligation
to otherwise finance the payment of the Section 8 Repurchase Consideration
through the incurrence of indebtedness or the issuance of capital instruments or
securities by Issuer in either case sufficient in amount to satisfy the payment
of the Section 8 Repurchase Consideration. Accordingly, Issuer shall not be
deemed to be in breach of this Section 8 if, after making its best efforts to
obtain regulatory authorization for a Capital Distribution required to pay the
Section 8 Repurchase Consideration, it is unable to do so.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of
subparagraph (c) below, if requested by any Holder, including Grantee and any
permitted transferee ("Selling Holder"), as expeditiously as possible prepare
and file a registration statement under the Securities Laws if necessary in
order to permit the sale or other disposition of any or all shares of Issuer
Common Stock or other securities that have been acquired by or are issuable to
Selling Holder upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by Holder in such request (it being
understood and agreed that any such sale or other disposition shall be effected
on a widely distributed basis so that, upon consummation thereof, no purchaser
or transferee shall beneficially own more than 2% of the shares of Issuer Common
Stock then outstanding), including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws. Each such Holder shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the
Option, but prior to the termination of the Option, proposes to register any
shares of Issuer Common Stock under the Securities Laws in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will
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promptly give written notice to Holder of its intention to do so and, upon the
written request of Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer Common Stock
intended to be included in such underwritten public offering by Selling Holder),
Issuer will use all reasonable efforts to cause all such shares, the holders of
which shall have requested participation in such registration, to be so
registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith determine that the inclusion of such shares would
interfere with the successful marketing of the shares of Issuer Common Stock for
the account of Issuer, or (ii) in the case of a registration solely to implement
a dividend reinvestment or similar plan, an employee benefit plan or a
registration filed on Form S-4 or any successor form, or a registration filed on
a form which does not permit registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph (b), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among Selling Holders and any other person (other than
Issuer or any person exercising demand registration rights in connection with
such registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer. Notwithstanding
anything to the contrary contained herein, Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the occurrence of a Purchase Event
and following the termination of the Option;
(ii) more than once;
(iii) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which
the Selling Holders concerned were afforded the opportunity to register
such shares under the Securities Laws and such shares were registered
as requested; and
(iv) unless a request therefor is made to Issuer
by Selling Holders holding at least 20% or more of the aggregate number
of Option Shares then outstanding or the right to acquire at least 20%
of the Option Shares.
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<PAGE> 13
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in any registration statement or prospectus
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement or any omission or
alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
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<PAGE> 14
relieve it of any liability which it may otherwise have to any indemnified party
under this subparagraph (e), except to the extent such failure to notify
materially prejudices the indemnifying party. In case notice of commencement of
any such action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party unless
(i) the indemnifying party either agrees to pay the same, (ii) the indemnifying
party falls to assume the defense of such action with counsel satisfactory to
the indemnified party, or (iii) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the indemnifying
party that may be contrary to the interest of the indemnified party, in which
case the indemnifying party shall be entitled to assume the defense of such
action notwithstanding its obligation to bear fees and expenses of such counsel;
provided, however, that the indemnifying party shall not be liable for the
expenses of more than one firm of counsel for all indemnified parties in any
jurisdiction. No indemnifying party shall be liable for any settlement entered
into without its consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use its best efforts to comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any
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<PAGE> 15
Option Shares by Holder in accordance with and to the extent permitted by any
rule or regulation promulgated by the SEC from time to time, including, without
limitation, Rules 144 and 144A.
(g) Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save Holder harmless, without limitation as to
time, against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq/NMS or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq/NMS or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided in Section 9,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(B) WAIVER AND AMENDMENT. Any provision of this Agreement
may be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
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<PAGE> 16
(C) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY;
SEVERABILITY. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option Shares
or any permitted transferee of this Agreement pursuant to Section 12(h) and
other than as provided in the Merger Agreement) any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state governmental or
regulatory agency or authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(D) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law rules.
(E) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(F) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement(or at such other address for a party as shall be specified by like
notice).
(G) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall be considered
one and the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign the same
counterpart.
(H) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
by any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that Grantee may assign
this Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign
its rights hereunder in whole or in part after the occurrence of a Purchase
Event. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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<PAGE> 17
(I) FURTHER ASSURANCES. In the event of any exercise of
the Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(J) SPECIFIC PERFORMANCE. The parties hereto agree that
this Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: PALFED, INC.
By: /s/ Howard M. Hickey, Jr By: /s/ John C. Troutman
-------------------------- -------------------------------------
Howard M. Hickey, Jr. John C. Troutman
Secretary President and Chief Executive Officer
[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]
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<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville]
December 4, 1997
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with PALFED, Inc.
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of PALFED, Inc.
("PALFED") 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 PALFED upon consummation of the Merger.
The maximum number of shares of Regions to be issued in the Merger is estimated
to be 3,928,555.
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
<PAGE> 1
EXHIBIT 8
ALSTON&BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777 Telex: 54-2996
Philip C. Cook Direct Dial (404) 881-7000
December 5, 1997
Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
PALFED, Inc.
107 Chesterfield Street South
Aiken, South Carolina 29801
Re: Proposed Merger of PALFED, Inc. with and into Regions
Financial Corporation
Ladies and Gentlemen:
We have acted as special tax counsel to Regions Financial Corporation
("Regions"), a corporation organized and existing under the laws of the State of
Delaware, in connection with the proposed merger of PALFED, Inc. ("PALFED"), 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 PALFED and Regions, dated as of
September 23, 1997 (the "Agreement"). In our capacity as counsel to Regions, our
opinion has been requested with respect to certain of the federal income tax
consequences of the proposed Merger.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all section
references herein are to the Code.
1211 East Morehead Street 3605 Glenwood Avenue 601 Pennsylvania Avenue, N.W.
P. O. Drawer 34009 P. O. Drawer 31107 North Building, Suite 250
Charlotte, NC 28234-4009 Raleigh, NC 27622-1107 Washington, DC 20004-2601
704-331-6000 919-420-2200 202-508-3300
Fax: 704-334-2014 Fax: 919-881-3175 Fax: 202-508-3333
<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 filed by Regions with the
Securities and Exchange Commission under the Securities Act of
1933, on December 5, 1997, including the Proxy
Statement/Prospectus for the Special Meeting of the
stockholders of PALFED; 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 PALFED and through certificates
provided by the management of Regions and the management of PALFED.
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 Aiken, 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, PALFED shall be merged into and with Regions in accordance with
the provisions of Section 258 of the DGCL with the effect provided in Section
259 of the DGCL and in accordance with Sections 33-11-101, 33-11-103 and
33-11-105 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 PALFED 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:
(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 PALFED Common Stock (excluding shares
held by PALFED 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 0.70 of
a share of Regions Common Stock, subject to
adjustment as provided in section 10.1(g) of the
Agreement (the "Exchange Ratio").
<PAGE> 3
(3) In the event PALFED changes the number of shares of PALFED
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 PALFED Common Stock held by any PALFED
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 PALFED 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 PALFED 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 PALFED 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 PALFED Common Stock is entitled
under Article 3 of the Agreement (without interest) upon surrender by such
holder of the certificate or certificates representing shares of PALFED Common
Stock held by such holder. PALFED 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 PALFED.
(6) Notwithstanding any other provision of the Agreement, each
holder of shares of PALFED Common Stock exchanged pursuant to the Merger, or of
options to purchase shares of PALFED 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 PALFED
Common Stock pursuant to stock options or stock appreciation rights ("PALFED
Options") granted by PALFED under the PALFED 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 PALFED Option, in accordance with the terms of the PALFED 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:
<PAGE> 4
(1) The fair market value of the Regions Common Stock and other
consideration, if any, received in the aggregate by the stockholders of PALFED
will be approximately equal to the fair market value of the PALFED Common Stock
surrendered in exchange therefor.
(2) There is no plan or intention on the part of the stockholders
of PALFED who own five percent (5%) or more of PALFED Common Stock, and to the
best of the knowledge of the management of PALFED, there is no plan or intention
on the part of the remaining stockholders of PALFED 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 PALFED Common Stock outstanding immediately prior to the Effective Time. For
purposes of this assumption, shares of PALFED 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 PALFED
Common Stock as of the Effective Time. Moreover, shares of PALFED Common Stock
and shares of Regions Common Stock held by PALFED stockholders and otherwise
sold, redeemed, or disposed of in contemplation of or subsequent to the
transaction will be considered in making this assumption.
(3) Regions has no plan or intention to redeem or otherwise
reacquire any shares of Regions Common Stock issued in the Merger, except for
purchases of stock in the open market in the normal course of business executed
through an independent broker in which Regions is not aware of the identity of
any seller or in private placement transactions in which the sellers are not
former PALFED stockholders.
(4) Regions has no plan or intention to dispose of any of the
assets of PALFED acquired in the transaction, except for dispositions made in
the ordinary course of business or transfers described in Section 368(a)(2)(C).
(5) The liabilities of PALFED assumed by Regions and the
liabilities to which the transferred assets of PALFED are subject were incurred
by PALFED in the ordinary course of its business.
(6) Following the transaction, Regions will continue the historic
business of PALFED or use a significant portion of PALFED's historic business
assets in a business.
(7) Regions, PALFED, and the stockholders of PALFED 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
PALFED and Regions that was issued, acquired, or will be settled at a discount.
(9) PALFED 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) The fair market value of the assets of PALFED 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 PALFED stockholders in lieu of
fractional shares of Regions Common Stock is solely for the purpose of avoiding
the expense and inconvenience to
<PAGE> 5
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 PALFED 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 PALFED stockholders in exchange
for their shares of PALFED Common Stock. The fractional share interests of each
PALFED stockholder will be aggregated, and no PALFED stockholder will receive
cash in an amount equal to or greater than the value of one full share of
Regions Common Stock.
(12) None of the compensation received by any stockholder-employees
of PALFED will be separate consideration for, or allocable to, any of their
shares of PALFED Common Stock; none of the shares of Regions Common Stock
received by any stockholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(13) At all times during the five-year period ending on the
Effective Date of the Merger, the fair market value of all of PALFED'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) PALFED 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 PALFED 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 PALFED, in the case of a first-tier subsidiary of PALFED or by a
controlled corporation, in the case of a lower-tier subsidiary.
(14) Neither Regions nor PALFED 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) PALFED Options granted under the PALFED Stock Plans were
granted to employees in connection with the performance of services by the
employees.
(16) The non-qualified stock options and the stock appreciation
rights granted under the PALFED Stock Plans do not have a readily ascertainable
fair market value. Such non-
<PAGE> 6
qualified options and stock appreciation rights are also not actively traded on
an established market.
(17) The excess of the aggregate fair market value of the shares
subject to each incentive stock option granted under the PALFED Stock Plans
immediately after the assumption by Regions of such option is not more than the
excess of the aggregate fair market value of all shares subject to such option
immediately before the assumption by Regions over the aggregate option price of
such shares.
(18) The assumption by Regions of the incentive stock options with
respect to PALFED Common Stock does not give any holder of the options
additional benefits which he or she did not have prior to such assumption under
the incentive stock option.
(19) The Agreement represents the entire understanding of PALFED
and Regions with respect to the Merger.
OPINIONS
Based solely on the information submitted and the representations set
forth above and assuming that the Merger will take place as described in the
Agreement and that the representations made by Regions and PALFED (including the
representation that PALFED 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) The Merger will be a reorganization within the meaning of
Section 368(a) of the Code. PALFED and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(2) The stockholders of PALFED will recognize no gain or loss upon
the exchange of all of their PALFED Common Stock solely for shares of Regions
Common Stock.
(3) The basis of the Regions Common Stock received by the PALFED
stockholders in the proposed transaction will, in each instance, be the same as
the basis of the PALFED 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
PALFED stockholders will, in each instance, include the period during which the
PALFED Common Stock surrendered in exchange therefor was held, provided that the
PALFED Common Stock was held as a capital asset on the date of the exchange.
(5) The payment of cash to PALFED 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 PALFED stockholder in
exchange for PALFED Common Stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of such holder's
PALFED Common Stock, subject to the provisions and limitations of Section 302 of
the Code.
(7) No gain or loss will be recognized by the holders of PALFED
Options granted under the PALFED Stock Plans upon the conversion of the PALFED
Options into rights with
<PAGE> 7
respect to Regions Common Stock exercisable under the same terms and conditions
as in effect immediately prior to the Effective Time.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed and you have confirmed to be
true on the date hereof and will be true on the date on which the proposed
transaction is consummated. Our opinions cannot be relied upon if any of the
facts contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the proposed transaction, including for
example any issues related to intercompany transactions, accounting methods, bad
debt reserves, or changes in accounting methods resulting from the Merger.
This opinion is being provided solely for the benefit of Regions,
PALFED and PALFED's stockholders and Option holders. 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 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 3,928,555 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 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 ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 (File No. ) of our report, which includes an explanatory paragraph
concerning changes in methods of accounting for impaired loans and mortgage
servicing rights in 1995, dated February 22, 1997, on our audits of the
consolidated financial statements of PALFED, Inc. and subsidiaries as of
December 31, 1996 and 1995, and for the three years ended December 31, 1996,
which report is included in the Company's Annual Report on Form 10-K for the
year ending December 31, 1996. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand LLP
Atlanta, Georgia
December 2, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF STERNE, AGEE & LEACH, INC.
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
PALFED, Inc. 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.
Sterne, Agee & Leach, Inc.
/s/ Sterne, Agee & Leach, Inc.
By: /s/ Kathryn H. Bissette
Senior Vice President
Atlanta, Georgia
December 29, 1997
<PAGE> 1
PALFED, INC.
This Proxy is Solicited on Behalf of the Board of Directors
For the Special Meeting of Shareholders
February 3, 1998
The undersigned hereby appoints Howard M. Hickey, Jr. and John C.
Troutman, or either of them, each with full power of substitution, acting
jointly or by any one of them if only one be present and acting, attorneys and
proxies to vote in the manner specified below (according to the number of shares
which the undersigned would be entitled to cast if then personally present) at
the Special Meeting of PALFED, Inc. ("PALFED") to be held on February 3, 1998,
including any adjournments thereof.
THIS PROXY SHALL BE VOTED AS DIRECTED. IF NO DIRECTION TO THE CONTRARY
IS INDICATED, IT WILL BE VOTED "FOR" PROPOSAL ONE. Discretionary authority is
hereby conferred as to all other matters that may come before the meeting and
all adjournments or postponements thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS.
PLEASE SIGN THIS CARD ON THE REVERSE SIDE
<PAGE> 2
[ X ] Please mark
your vote as
in this example
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposal ONE.
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Proposal to approve the Agreement and Plan of Merger, dated as of September FOR AGAINST ABSTAIN
23, 1997 (the "Agreement"), by and between PALFED and Regions Financial
Corporation ("Regions") pursuant to which PALFED will merge with and into [ ] [ ] [ ]
Regions and each share of common stock of PALFED (except for certain shares held
by PALFED, Regions, or their respective subsidiaries) will be converted into .70
of a share of Regions common stock, subject to possible upward adjustment, and
under such other terms and conditions as are set forth in the Agreement:
Dated: , 1998
-----------------
------------------------------
Signature
------------------------------
Signature
PLEASE SIGN this proxy exactly as
your name or names appear hereon.
If shares are held jointly,
signatures should appear for both
names. When signing as attorney,
executor, administrator, trustee,
guardian or custodian, please
indicate the capacity in which you
are signing.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
</TABLE>
