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Rule 424(b)(3)
Registration No. 333-24997
Dear SB&T Corporation Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
SB&T Corporation ("SB&T") to be held at SB&T's main office, 888 Concord Road,
Smyrna, Georgia, 30080, on May 29, 1997, at 11:00 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 dated as of December 19,
1996 (the "Agreement"), entered into with Regions Financial Corporation
("Regions") pursuant to which SB&T will merge (the "Merger") with and into
Regions, and Smyrna Bank & Trust (the "Bank"), a wholly owned subsidiary of
SB&T, will become a wholly owned subsidiary of Regions until combined with
Regions Bank, the principal banking subsidiary of Regions operating in Georgia.
The other subsidiaries of SB&T will become subsidiaries of Regions. Upon
consummation of the Merger, each share of SB&T common stock issued and
outstanding (except for certain shares held by SB&T or Regions and shares held
by stockholders who perfect their dissenters' rights of appraisal) will be
converted into .50 of a share of Regions common stock. The exchange ratio will
be proportionately adjusted if Regions effects a proposed 2 for 1 stock split
prior to the effective date of the Merger.
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 Agreement and the Merger have been approved unanimously by your Board
of Directors and are recommended by the Board to you for approval. Each member
of the Board of Directors of SB&T has agreed to vote those SB&T shares over
which such member has voting authority (other than in a fiduciary capacity) in
favor of the Agreement and the Merger. Consummation of the Merger is subject
to certain conditions, including approval of the Agreement by SB&T stockholders
and approval of the Merger by various regulatory agencies.
Stockholders of SB&T who perfect their dissenters' rights of appraisal
prior to the proposed Merger and comply with applicable law will be entitled to
receive the fair value of their SB&T shares in cash, as provided by applicable
law.
It is important to understand that approval of the Agreement requires the
affirmative vote of a majority of the common stock of SB&T entitled to vote at
the Special Meeting, not just a majority of the votes cast. Consequently, a
failure to vote will have the same effect as a vote against the Agreement.
Accordingly, whether or not you plan to attend the Special Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Regions is a
significant step for SB&T, 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,
B.J. Alexander
President and Chief Executive Officer
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SB&T CORPORATION
888 CONCORD ROAD, SMYRNA, GEORGIA, 30080
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of SB&T Corporation ("SB&T"), a bank holding company, will be held at
SB&T's main office, 888 Concord Road, Smyrna, Georgia, 30080, on May 29, 1997,
at 11:00 a.m., local time, for the following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of December 19, 1996 (the "Agreement"), by and between SB&T and Regions
Financial Corporation ("Regions") pursuant to which (i) Regions will acquire
all of the issued and outstanding common stock of SB&T through the merger of
SB&T with and into Regions (the "Merger"), (ii) each share of SB&T common stock
(except for certain shares held by SB&T or Regions and shares held by
stockholders who perfect their dissenters' rights of appraisal) will be
converted into .50 of a share of Regions common stock, subject to proportional
adjustment if Regions effects a proposed 2 for 1 stock split prior to the
effective date of the Merger, and (iii) each SB&T 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 April 18, 1997, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of SB&T 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 SB&T unanimously recommends that holders of SB&T
common stock vote to approve the proposals listed above.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Special Meeting in person. The proxy may
be revoked by the person executing the proxy by filing with the Secretary of
SB&T 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
Leonard W. Thomas
Corporate Secretary
April 28, 1997
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SB&T CORPORATION REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD MAY 29, 1997 (PAR VALUE $.625)
511,422 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 SB&T
Corporation, a bank holding company organized and existing under the laws of
the state of Georgia ("SB&T") upon consummation of the proposed merger (the
"Merger") described herein, by which SB&T will merge with and into Regions
pursuant to the terms of an Agreement and Plan of Merger, dated as of December
19, 1996 (the "Agreement"), by and between Regions and SB&T.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) SB&T will merge with and into Regions, (ii)
each outstanding share of the $1.00 par value common stock of SB&T ("SB&T
Common Stock") will be converted into .50 of a share of Regions Common Stock,
subject to proportional adjustment if Regions effects a proposed 2 for 1 stock
split prior to the effective date of the Merger, and (iii) each holder of SB&T
Common Stock will receive cash in lieu of any remaining fractional share
interest. A copy of the Agreement is attached to this Proxy
Statement/Prospectus as Appendix A.
As a result of the Merger, the separate existence of SB&T will cease, and
Smyrna Bank & Trust Co., a wholly owned subsidiary of SB&T (the "Bank"), will
become a wholly owned subsidiary of Regions and will continue in operation
serving its current markets as a state-chartered commercial bank until combined
with Regions Bank, the principal banking subsidiary of Regions operating in
Georgia, and the other subsidiaries of SB&T will become subsidiaries of
Regions. For a further description of the terms of the Merger, see "Description
of the Transaction."
This Prospectus also constitutes a Proxy Statement of SB&T and is being
furnished to the stockholders of SB&T in connection with the solicitation of
proxies by the Board of Directors of SB&T for use at its special meeting of
stockholders, including any adjournment or postponement thereof (the "Special
Meeting"), to be held on May 29, 1997, to consider and vote on the Agreement
and the proposed Merger and related matters. This Proxy Statement/Prospectus
and the accompanying proxy card are first being mailed to stockholders of SB&T
on or about April 29, 1997.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is April 28, 1997.
<PAGE> 4
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith,
files reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments
thereto, the "Registration Statement") filed with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the securities
offered hereby. This Proxy Statement/Prospectus does not include all of the
information in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. For further
information about Regions and the securities offered hereby, reference is made
to the Registration Statement. The Registration Statement may be inspected and
copied, at prescribed rates, at the SEC's public reference facilities at the
addresses set forth above. Regions Common Stock is traded in the Nasdaq
National Market. Reports, proxy statements, and other information concerning
Regions may be inspected at the offices of the National Association of
Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W., Washington, D.C.
20006.
No person is authorized to give any information or to make any
representations other than those included in this Proxy Statement/Prospectus,
and if given or made, such information or representations must not be relied
upon as having been authorized by Regions or SB&T. 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 SB&T
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 SB&T
was supplied by SB&T.
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. 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
2
<PAGE> 5
Stockholders for that year (the "Regions Annual Report to Stockholders"), but
does not incorporate other portions of the Regions Annual Report to
Stockholders. Only those portions of the Regions Annual Report to Stockholders
captioned "Financial Summary & Review 1996," "Financial Statements and Notes,"
and "Historical Financial Summary" are incorporated herein. Other portions of
the Annual Report to Stockholders are NOT incorporated herein and are not a
part of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed to constitute a part hereof, except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE
UPON REQUEST, WITHOUT CHARGE (EXCEPT FOR THE EXHIBITS THERETO), FROM RONALD C.
JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION, P.O. BOX 1448,
MONTGOMERY, ALABAMA 36102 (TELEPHONE (334) 832-8493). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 20, 1997.
3
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Special Meeting of SB&T Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Merger; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reasons for the Merger; Recommendation of SB&T's Board
of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Opinion of SB&T's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals and Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Differences in Stockholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Comparative Market Prices of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DESCRIPTION OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Treatment of SB&T Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Opinion of SB&T's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Distribution of Regions Stock Certificates and
Payment for Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Waiver, Amendment, and Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Management Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Antitakeover Provisions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Amendment of Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
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Classified Board of Directors and Absence of Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . . . 34
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Limitations on Director Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Special Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Actions by Stockholders Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Stockholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Mergers, Consolidations, and Sales of Assets Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Business Combinations with Certain Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stockholders' Rights to Examine Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SB&T MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
BUSINESS OF SB&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Transactions with Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF SB&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
BUSINESS OF REGIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Support of Subsidiary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
DESCRIPTION OF REGIONS COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
INDEX TO SB&T FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A--Agreement and Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B--Opinion of The Carson Medlin Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C--Copy of Title 14, Chapter 2, Article 13 of the Georgia
Code Relating to Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
5
<PAGE> 8
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 "SB&T" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
SB&T. SB&T is a bank holding company organized and existing under the laws
of the state of Georgia, with its principal executive office located in Smyrna,
Georgia. SB&T operates principally through the Bank, which is a wholly owned
subsidiary of SB&T and a state-chartered commercial bank and which provides a
range of retail banking services through three offices in Cobb County, Georgia.
At December 31, 1996, SB&T had total consolidated assets of approximately
$144.9 million, total consolidated deposits of approximately $131.7 million,
and total consolidated stockholders' equity of approximately $10.6 million.
SB&T's principal executive office is located at 888 Concord Road, Smyrna,
Georgia, 30080, and its telephone number at such address is (770) 434-8185.
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 377 banking offices located in Alabama, Florida,
Georgia, Louisiana, and Tennessee as of December 31, 1996. At that date,
Regions had total consolidated assets of approximately $18.9 billion, total
consolidated deposits of approximately $15.0 billion, and total consolidated
stockholders' equity of approximately $1.6 billion. Regions is the second
largest bank holding company headquartered in Alabama in terms of assets, based
on December 31, 1996 information. Regions operates banking subsidiaries in
Alabama, Florida, Georgia, Louisiana, and Tennessee and banking-related
subsidiaries engaged in mortgage banking, credit life insurance, leasing, and
securities brokerage activities with offices in various Southeastern states.
Through its subsidiaries, Regions offers a broad range of banking and
banking-related services.
Since December 31, 1996, Regions has completed the acquisitions of four
financial institutions, two of which are located in Louisiana, and one in each
of Florida and Georgia (referred to as the "Recently Completed Acquisitions").
Regions also has entered into definitive agreements to acquire, in addition to
SB&T, four additional financial institutions, one of which is located in each
of the states of Florida and Georgia, and two of which are located in Louisiana
(the "Other Pending Acquisitions"). For information with respect to the
Recently Completed Acquisitions and the Other Pending Acquisitions, (referred
to collectively as the "Other Acquisitions") see "Business of Regions--Recent
Developments."
Regions commenced operations in 1971, under its former name First Alabama
Bancshares, Inc., as a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Regions' principal executive
offices are located at 417 North 20th Street, Birmingham, Alabama 35203, and
its telephone number at such address is (205) 326-7100.
Additional information with respect to Regions and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of Regions."
6
<PAGE> 9
SPECIAL MEETING OF SB&T STOCKHOLDERS
The Special Meeting will be held at 11:00 a.m., local time, on May 29,
1997, at SB&T's main office, 888 Concord Road, Smyrna, Georgia, 30080, 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 SB&T Common Stock at the close of business on
April 18, 1997 (the "Record Date"), will be entitled to vote at the Special
Meeting. The affirmative vote of a majority of the SB&T Common Stock
outstanding and entitled to vote at the Special Meeting will be required to
approve the Agreement, not just a majority of the votes cast. As of the Record
Date, there were 1,022,844 shares of SB&T Common Stock outstanding and entitled
to be voted.
The directors and executive officers of SB&T and their affiliates
beneficially owned, as of the Record Date, 575,346 shares (or approximately
56.25% of the outstanding shares) of SB&T Common Stock. Each member of the
Board of Directors of SB&T has agreed to vote those SB&T shares over which such
member has voting control, other than in a fiduciary capacity, in favor of the
Agreement and the Merger. The directors and executive officers of Regions and
their affiliates beneficially owned, as of the Record Date, no shares of SB&T
Common Stock. As of that date, neither SB&T nor Regions held any shares of SB&T
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 SB&T by Regions pursuant to
the Merger of SB&T with and into Regions. On the Effective Date, each share of
SB&T Common Stock then issued and outstanding (except for shares held by SB&T,
Regions, or their respective subsidiaries, in each case other than shares held
in a fiduciary capacity or as a result of debts previously contracted and
shares held by stockholders who perfect their dissenters' rights of appraisal)
will be converted into .50 of a share of Regions Common Stock (the "Exchange
Ratio"). The Exchange Ratio will be proportionately adjusted if Regions effects
a proposed 2 for 1 stock split prior to the Effective Date. 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 SB&T stockholder would be
entitled upon consummation of the Merger, based on the last sales 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 SB&T 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 SB&T Common Stock in cash in accordance
with the applicable provisions of the Georgia Business Corporation Law (the
"Georgia Act"). The procedures to be followed by dissenting stockholders are
summarized under "Description of the Transaction--Dissenting Stockholders," and
the applicable provisions of the Georgia Act are reproduced as Appendix C.
REASONS FOR THE MERGER; RECOMMENDATION OF SB&T'S BOARD OF DIRECTORS
SB&T's Board of Directors has unanimously approved the Agreement and the
Merger and has determined that the Merger is fair to, and in the best interests
of, SB&T and its stockholders. Accordingly, SB&T's Board unanimously recommends
that SB&T's stockholders vote FOR approval of the Agreement. EACH MEMBER OF THE
BOARD OF DIRECTORS OF SB&T HAS AGREED TO VOTE THOSE SHARES OF SB&T COMMON STOCK
OVER WHICH SUCH MEMBER HAS VOTING CONTROL, OTHER THAN IN A FIDUCIARY CAPACITY,
IN FAVOR OF THE AGREEMENT. In
7
<PAGE> 10
approving the Agreement, SB&T's directors considered SB&T's financial
condition, the financial terms and the income tax consequences of the Merger,
the likelihood of the Merger being approved by regulatory authorities without
undue conditions or delay, and legal advice concerning the proposed Merger. See
"Description of the Transaction--Background of and Reasons for the Merger."
OPINION OF SB&T'S FINANCIAL ADVISOR
The Carson Medlin Company ("Carson Medlin") has rendered an opinion to SB&T
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 SB&T. The opinion
of Carson Medlin is attached as Appendix B to this Proxy Statement/Prospectus.
SB&T 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 SB&T's Financial Advisor."
EFFECTIVE DATE
Subject to the conditions as described in the Agreement to the obligations
of the parties to effect the Merger, the Effective Date will occur on the date
and at the time that the Delaware Certificate of Merger and the Georgia
Certificate of Merger are filed and become effective with, respectively, the
Delaware Secretary of State and the Georgia Secretary of State. Unless
otherwise agreed upon by Regions and SB&T, and subject to the conditions to the
obligations of the parties to effect the Merger, the parties will use their
reasonable efforts to cause the Effective Date to occur by the last day of the
month in which the last of the following events occurs: (i) the effective date
(including the expiration of any applicable waiting period) of the last
required consent of any 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 SB&T stockholders. The parties expect that
all conditions to consummation of the Merger will be satisfied so that the
Merger can be consummated during the second quarter of 1997, although there can
be no assurance as to whether or when the Merger will occur. See "Description
of the Transaction-- Effective Date of the Merger," "--Conditions to
Consummation of the Merger," and "--Waiver, Amendment, and Termination of the
Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, Regions will cause an exchange agent
selected by Regions (the "Exchange Agent"), to mail to the former stockholders
of SB&T a form letter of transmittal, together with instructions for the
exchange of such stockholders' certificates representing shares of SB&T Common
Stock for certificates representing shares of Regions Common Stock. SB&T
STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE
FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. See "Description of the
Transaction--Distribution of Regions Stock Certificates and Payment for
Fractional Shares."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Department of Banking and
Finance of the state of Georgia (the "Georgia Department"). Applications for
the requisite approvals have been filed with these agencies, each of which has
yet to issue its approval of the Merger. There can be no assurance that the
approvals of the Georgia Department and the Federal Reserve will be given or as
to the timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of SB&T stockholders, receipt of an
opinion of counsel as to the tax-free nature of certain aspects of the Merger,
and certain other customary conditions. See "Description of the
Transaction--Conditions to Consummation of the Merger."
8
<PAGE> 11
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date by mutual consent of the Boards of Directors of
both SB&T and Regions, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by
September 30, 1997, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason
the Merger is not consummated, SB&T will continue to operate as a bank holding
company under its present management. See "Description of the
Transaction--Waiver, Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of SB&T's management and Board of Directors have interests
in the Merger in addition to their interests as stockholders of SB&T generally.
Those interests relate to, among other things, provisions in the Agreement
regarding indemnification and eligibility for certain Regions employee
benefits, and treatment of outstanding options to acquire SB&T Common Stock.
See "Description of the Transaction--Interests of Certain Persons in the
Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned on the receipt of an opinion of
counsel to the effect that, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the exchange in the Merger of SB&T
Common Stock for Regions Common Stock will not give rise to gain or loss to
SB&T stockholders, except to the extent of any cash received in lieu of
fractional share interests or as a result of the exercise of dissenters'
rights. Gain recognition, if any, will not be in excess of the amount of cash
received. Subject to the provisions and limitations of Section 302(a) of the
Code, gain or loss will be recognized upon the receipt of cash in lieu of
fractional share interests and cash received by dissenters. See "Description of
the Transaction--Certain Federal Income Tax Consequences of the Merger."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER CIRCUMSTANCES, EACH SB&T
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, SB&T stockholders, whose rights are governed by the
Georgia Act and by SB&T'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 SB&T
stockholders in certain important respects, some of which constitute additional
antitakeover provisions provided for in Regions' governing documents. See
"Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. SB&T Common Stock is not traded in any established
market. The following table sets forth, as of the indicated dates, (i) the last
sale price of Regions Common Stock and the sale price in the last known
transaction of purchase and sale of SB&T Common Stock, which occurred on July
16, 1996, and (ii) the equivalent per share price (as explained below) of SB&T
Common Stock. The indicated dates of December 19, 1996, and April 25, 1997
represent, respectively, the last trading day immediately preceding public
9
<PAGE> 12
announcement of the proposed acquisition of SB&T by Regions and the latest
practicable date prior to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS SB&T OF SB&T
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
December 19, 1996 $ 51.38 $12.00 $ 25.69
April 25, 1997 55.38 12.00 27.69
</TABLE>
The equivalent per share price of SB&T 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 .50. Stockholders are advised to obtain
current market quotations for Regions Common Stock and SB&T Common Stock. No
assurance can be given as to the market price of Regions Common Stock at or
after the Effective Date.
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and SB&T, (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 SB&T Common Stock, giving effect to the Merger. The Regions and SB&T
pro forma combined information and the SB&T pro forma Merger equivalent
information give effect to the Merger on a pooling-of-interests accounting
basis and assume an Exchange Ratio of .50. 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 SB&T, including the respective notes thereto. Regions' historical
information has been restated to give effect to the combination of First
National Bancorp with Regions, effected March 1, 1996, and accounted for as a
pooling of interests. See "Documents Incorporated by Reference," and
"--Selected Financial Data."
10
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994
---- ---- ----
(Unaudited except Regions and
SB&T historical)
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical . . . . . . . . . . . . . . . . . $ 3.70 $ 3.21 $ 3.10
SB&T historical . . . . . . . . . . . . . . . . . . 1.86 1.58 1.27
Regions and SB&T pro forma combined(1) . . . . . . . 3.70 3.21 3.10
SB&T pro forma Merger equivalent(2) . . . . . . . . . 1.85 1.61 1.55
DIVIDENDS DECLARED PER COMMON
SHARE
Regions historical . . . . . . . . . . . . . . . . . $ 1.40 $ 1.32 $ 1.20
SB&T historical . . . . . . . . . . . . . . . . . . . .30 .28 .28
SB&T pro forma Merger equivalent(3) . . . . . . . . . .70 .66 .60
BOOK VALUE PER COMMON SHARE
(PERIOD END)
Regions historical . . . . . . . . . . . . . . . . . $ 25.52 $ 23.38 $ 21.26
SB&T historical. . . . . . . . . . . . . . . . . . . 10.42 8.83 7.16
Regions and SB&T pro forma combined(1) . . . . . . . 25.37
SB&T pro forma Merger equivalent(2) . . . . . . . . . 12.69
</TABLE>
_____________________
(1) Represents the combined results of Regions and SB&T as if the Merger
were consummated on January 1, 1994 and were accounted for as a
pooling of interests.
(2) Represents pro forma combined information multiplied by the Exchange
Ratio of .50 of a share of Regions Common Stock for each share of SB&T
Common Stock.
(3) Represents historical dividends declared per share by Regions
multiplied by the Exchange Ratio of .50 of a share of Regions Common
Stock for each share of SB&T Common Stock.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and SB&T. The data should be read in conjunction with
the historical financial statements, related notes, and other financial
information concerning Regions and SB&T incorporated by reference or included
herein. See "Documents Incorporated by Reference."
11
<PAGE> 14
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . $ 1,386,122 $ 1,259,600 $ 991,693 $ 746,544 $ 737,094
Total interest expense . . . . . . . 685,656 635,336 436,157 296,195 324,420
Net interest income . . . . . . . . . 700,466 624,264 555,536 450,349 412,674
Provision for loan losses . . . . . . 29,041 30,271 20,580 24,695 39,367
Net interest income after
loan loss provision . . . . . . 671,425 593,993 534,956 425,654 373,307
Total noninterest income excluding
security gains (losses) . . . . 217,624 187,830 171,705 169,318 147,943
Security gains (losses) . . . . . . . 3,115 (424) 344 831 2,417
Total noninterest expense . . . . . . 553,801 487,461 442,376 383,130 343,279
Income tax expense . . . . . . . . . 108,677 96,109 84,109 66,169 56,405
Net income . . . . . . . . . . . . . 229,686 197,829 180,520 146,504 123,983
PER SHARE DATA:
Net income . . . . . . . . . . . . . $ 3.70 $ 3.21 $ 3.10 $ 2.81 $ 2.42
Cash dividends . . . . . . . . . . . 1.40 1.32 1.20 1.04 .91
Book value . . . . . . . . . . . . . 25.52 23.38 21.26 19.85 17.13
OTHER INFORMATION:
Average number of shares outstanding 62,136 61,670 58,206 52,153 51,192
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets . . . . . . . . . . . . $18,930,175 $16,851,774 $15,810,076 $13,163,161 $10,457,676
Securities . . . . . . . . . . . . . 3,870,595 3,863,781 3,346,291 2,993,417 2,255,732
Loans, net of unearned income . . . . 13,311,172 11,542,311 10,855,195 8,430,931 6,657,557
Total deposits . . . . . . . . . . . 15,048,336 13,497,612 12,575,593 11,025,376 8,923,801
Long-term debt . . . . . . . . . . . 447,269 632,019 599,476 525,820 151,460
Stockholders' equity . . . . . . . . 1,598,726 1,429,253 1,286,322 1,106,361 886,116
PERFORMANCE RATIOS:
Return on average assets(5) . . . . . 1.29 % 1.21 % 1.27 % 1.38 % 1.29 %
Return on average stockholders'
equity(5) . . . . . . . . . . . 15.19 14.29 15.26 15.76 15.04
Net interest margin . . . . . . . . . 4.27 4.21 4.37 4.77 4.85
Efficiency (1)(5) . . . . . . . . . . 59.44 58.79 59.44 60.23 59.62
Dividend payout . . . . . . . . . . . 37.84 41.12 38.71 37.01 37.60
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income . . . . . .15 % .17 % .19 % .23 % .36 %
Problem assets to net loans and
other real estate (2) . . . . . .56 .59 .75 1.12 1.29
Nonperforming assets to net loans
and other real estate (3). . . . .76 .68 .80 1.28 1.39
Allowance for loan losses to loans,
net of unearned income . . . . . 1.32 1.38 1.32 1.48 1.51
Allowance for loan losses to
nonperforming assets (3) . . . . 173.65 202.55 164.48 115.88 107.97
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . . . . . 8.49 % 8.44 % 8.35 % 8.76 % 8.60 %
Average loans to average deposits 85.90 86.12 79.90 76.41 71.59
Tier 1 risk-based capital (4) . . . . 10.81 11.14 10.69 11.13 11.68
Total risk-based capital (4) . . . . 13.59 14.61 14.29 13.48 14.44
Tier 1 leverage (4) . . . . . . . . . 7.44 7.49 8.21 10.11 8.44
</TABLE>
- --------------------
(1) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains
(losses) from security transactions.
(2) Problem assets include loans on a nonaccrual basis, restructured
loans, and foreclosed properties.
(3) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(4) The required minimum Tier 1 and total risk-based capital ratios are
4.0% and 8.0%, respectively. The minimum leverage ratio of Tier 1
capital to total adjusted assets is 3.0% to 5.0%, depending on the
risk profile of the institution and other factors.
(5) Ratios for 1996 excluding $19.0 million in after-tax charges for SAIF
assessment and merger expenses are as follows: Return on average
stockholders' equity 16.45%, Return on average total assets 1.40%, and
Efficiency 56.16%.
12
<PAGE> 15
Selected Historical Financial Data of SB&T
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands except per share data and ratios)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . . $ 10,995 $ 9,909 $ 7,603 $ 5,460 $ 4,474
Total interest expense . . . . . . . . 5,366 4,710 3,048 2,099 1,939
Net interest income . . . . . . . . . . 5,629 5,199 4,555 3,361 2,535
Provision for loan losses . . . . . . . 20 0 0 0 0
Net interest income after
loan loss provision . . . . . . . . . 5,609 5,199 4,555 3,361 2,535
Total noninterest income excluding
security gains (losses) . . . . . . . 1,009 1,062 943 1,163 509
Security gains (losses) . . . . . . . . 0 0 0 189 474
Total noninterest expense . . . . . . . 3,826 3,891 3,578 3,018 2,277
Income tax expense . . . . . . . . . . 896 751 620 545 414
Net income . . . . . . . . . . . . . . 1,896 1,618 1,300 1,150 828
PER SHARE DATA:
Net income . . . . . . . . . . . . . . $ 1.86 $ 1.58 $ 1.27 $ 1.14 $ .84
Cash dividends . . . . . . . . . . . . .30 .28 .28 .45 .00
Book value . . . . . . . . . . . . . . 10.42 8.83 7.16 6.57 5.87
OTHER INFORMATION:
Average number of shares outstanding 1,021 1,021 1,021 1,006 985
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets . . . . . . . . . . . . . $ 144,923 $ 131,005 $ 111,316 $ 92,144 $ 61,308
Securities . . . . . . . . . . . . . . 43,665 43,063 38,490 38,140 22,351
Loans, net of unearned income . . . . . 79,654 63,692 61,133 42,608 29,578
Total deposits . . . . . . . . . . . . 131,671 119,511 102,278 84,198 54,475
Stockholders' equity . . . . . . . . . 10,631 8,993 7,300 6,694 5,780
PERFORMANCE RATIOS:
Return on average assets . . . . . . . 1.35 % 1.30 % 1.27 % 1.55 % 1.38 %
Return on average stockholders'
equity . . . . . . . . . . . . . . . 19.24 19.66 19.35 18.61 14.79
Net interest margin . . . . . . . . . . 4.38 4.54 4.82 4.94 5.04
Efficiency (1) . . . . . . . . . . . . 56.68 61.41 66.03 65.93 74.43
Dividend payout . . . . . . . . . . . . 16.13 17.41 21.65 39.47 .00
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income . . . . . . . (.03)% .05 % (.22) % .22 % .48 %
Problem assets to net loans and
other real estate (2) . . . . . . . . .70 1.42 .58 .96 1.80
Nonperforming assets to net loans
and other real estate (3) . . . . . . .70 1.43 .58 .96 1.80
Allowance for loan losses to loans,
net of unearned income . . . . . . . 1.36 1.63 1.75 2.25 3.45
Allowance for loan losses to
nonperforming assets (3) . . . . . . 192.20 112.42 303.68 231.16 189.42
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets . . . . . . . . . . . 7.03 % 6.62 % 6.58 % 8.31 % 9.32 %
Average loans to average deposits 58.31 54.87 55.55 55.65 55.38
Tier 1 risk-based capital (4) . . . . . 10.87 10.76 9.87 11.14 13.70
Total risk-based capital (4) . . . . . 12.00 12.01 11.12 12.39 14.95
Tier 1 leverage (4) . . . . . . . . . . 7.24 6.79 6.75 7.35 9.23
</TABLE>
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(1) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains
(losses) from security transactions.
(2) Problem assets include loans on a nonaccrual basis, restructured
loans, and foreclosed properties.
(3) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(4) The required minimum Tier 1 and total risk-based capital ratios are
4.0% and 8.0%, respectively. The minimum leverage ratio of Tier 1
capital to total adjusted assets is 3.0% to 5.0%, depending on the
risk profile of the institution and other factors.
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<PAGE> 16
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of SB&T
Common Stock in connection with the solicitation by the SB&T Board of Directors
of proxies for use at the Special Meeting, at which SB&T stockholders will be
asked to vote upon a proposal to approve the Agreement. The Special Meeting
will be held at 11:00 a.m., local time, on May 29, 1997, at the main offices of
SB&T, located at 888 Concord Road, Smyrna, Georgia, 30080.
SB&T stockholders are requested promptly to sign, date, and return the
accompanying proxy card to SB&T 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 SB&T 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
SB&T a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by SB&T 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 SB&T Corporation, 888
Concord Road, Smyrna, Georgia, 30080, Attention: Leonard W. Thomas, 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 SB&T 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, SB&T
is unaware of any other matter to be presented at the Special Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees of
SB&T, who will receive no additional compensation for such solicitation but may
be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
SB&T stockholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
SB&T's Board of Directors has established the close of business on April
18, 1997, as the Record Date for determining the SB&T stockholders entitled to
notice of and to vote at the Special Meeting. Only SB&T stockholders of record
as of the Record Date will be entitled to vote at the Special Meeting. The
affirmative vote of the holders of a majority of the SB&T Common Stock
outstanding and entitled to vote at the Special Meeting is required in order to
approve the Agreement. Therefore, an abstention or failure to return a properly
executed proxy card will have the same effect as a vote against the Agreement,
as will a broker's submitting a proxy card without exercising discretionary
voting authority with respect to the Agreement. As of the Record Date, there
were approximately 311 holders of 1,022,844 shares of SB&T 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 SB&T to
beneficially own more than 5.0% of the outstanding shares of SB&T Common Stock
as of the Record Date, see "Voting Securities and Principal Stockholders of
SB&T."
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<PAGE> 17
The presence, in person or by proxy, of a majority of the outstanding
shares of SB&T 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 SB&T Common Stock that are present, or represented by
proxy, at the Special Meeting will be counted for quorum purposes regardless of
whether the holder of the shares or proxy fails to vote on the Agreement or
whether a broker with discretionary authority fails to exercise its
discretionary voting authority with respect to the Agreement. Once a quorum is
established, approval of the Agreement requires the affirmative vote of the
holders of a majority of the SB&T Common Stock outstanding and entitled to vote
at the Special Meeting.
The directors and executive officers of SB&T and their affiliates
beneficially owned, as of the Record Date, 575,346 shares (or approximately
56.25% of the outstanding shares) of SB&T Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of
the Record Date, no shares of SB&T Common Stock. As of that date, no subsidiary
of either SB&T or Regions held any shares of SB&T 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 SB&T Common Stock (excluding any shares held by SB&T,
Regions, or their respective subsidiaries, other than shares held in a
fiduciary capacity or as a result of debts previously contracted, and shares
held by stockholders who perfect their dissenters' rights of appraisal) issued
and outstanding at the Effective Date will be converted into .50 of a share of
Regions Common Stock. The Exchange Ratio will be proportionately adjusted if
Regions effects a proposed 2 for 1 stock split prior to the Effective Date.
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 SB&T stockholder would
otherwise receive multiplied by the closing price of Regions Common Stock on
the Nasdaq National Market (as reported by The Wall Street Journal, or, if not
reported thereby, by another authoritative source selected by Regions), on the
last full trading day prior to the Effective Date.
TREATMENT OF SB&T OPTIONS
The Agreement provides that all rights with respect to SB&T Common Stock
pursuant to stock options or stock appreciation rights granted by SB&T 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.
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<PAGE> 18
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. During the last several years, there have been
significant developments in the banking and financial services industry. These
developments have included the increased emphasis and dependence on automation,
specialization of products and services, increased competition from other
financial institutions, and a trend toward consolidation and geographic
expansion, coupled with a relaxation of regulatory restrictions on interstate
conduct of business of financial institutions.
SB&T and its Board of Directors concluded that it could best serve its
stockholders, employees, customers and community by combining with a regional
banking organization, provided that SB&T could obtain a fair price for its
stockholders. Accordingly, SB&T and Regions entered into negotiations which
culminated in the Agreement.
In early July 1996, a representative from Regions approached SB&T
regarding its potential interest in merging with Regions. Following the initial
inquiry, the directors executive committee decided any further discussion
regarding a merger between SB&T and Regions should be initiated by Regions.
Approximately two weeks after the initial contact, a representative of
Regions again contacted the president of SB&T and requested that the directors
and president of SB&T consider meeting with ranking officers of the Georgia
Division of Regions to discuss any mutual interest regarding a merger. This
meeting was held in July 1996 at the Regions offices in Gainesville, Georgia.
The discussion centered around Regions' interest in growing its market share in
Georgia by acquiring a bank with the outstanding record exhibited by SB&T.
Following this meeting, members of the directors executive committee and
the president of SB&T met with counsel and, upon advice of counsel, engaged an
outside financial advisor to perform a financial analysis and evaluation of
SB&T. This analysis and evaluation was authorized to give the directors of
SB&T an expert outside opinion regarding SB&T.
The financial evaluation and analysis was completed in mid-August 1996 by
The Carson Medlin Company, a well- respected, investment banking firm with
offices in Tampa, Florida and Raleigh, North Carolina. A representative of
Carson Medlin attended SB&T's regularly scheduled Board meeting on August 15,
1996. Details of the analysis were explained with extensive discussion by the
Board of Directors. The Board again determined that any contact regarding a
merger or an acquisition should be initiated by Regions. At this meeting, the
Board also appointed a negotiating committee of four directors and the
president of SB&T to represent the Board of Directors and stockholders of SB&T
at any future meetings with Regions representatives.
In early October 1996, representatives of Regions contacted SB&T requesting
another meeting to discuss the possibility of SB&T's merging into Regions. The
negotiating committee met with Regions representatives and discussed the
benefits that could result from such a merger to both organizations, their
stockholders, officers and employees. Pricing was also a major consideration on
both sides. This issue was discussed and while no formal offer was presented by
either side, a representative from Regions made what was termed to be an
"informal offer." Later in October 1996, Regions again contacted
representatives of SB&T to ask if a meeting could be scheduled with
representatives from Regions that would include a regional president of Regions
being in attendance. At this meeting, representatives of Regions again
expressed their desire to reach a merger agreement with SB&T. Again the
benefits to all parties involved were discussed. Pricing was also discussed,
with representatives of Regions making a new informal offer which was somewhat
above the first offer made at the prior meeting.
At the Board of Directors' meeting held in October 1996, the full Board was
given a report detailing the negotiating committee's meetings with the Regions
representatives. The majority of the directors attending this
16
<PAGE> 19
meeting felt it was not in the best interest of SB&T and its shareholders to
accept or reply to the informal offer last made by the Regions'
representatives.
At the request of representatives from Regions, a meeting was held with
representatives from SB&T during the first week in November 1996 to discuss,
once more, the possibility of a proposed merger. Again, issues concerning the
benefits of a merger were discussed at length. After discussion related to
pricing, SB&T stated that the negotiating committee would not recommend an
exchange ratio of less than one-half share of Regions Common Stock for each
share of SB&T Common Stock. The meeting adjourned with no formal agreement
being reached but SB&T understood that Regions would entertain a transaction
based upon the proposed exchange ratio.
At the regularly scheduled meeting of the Board of Directors of SB&T held
in November 1996, the full Board of Directors was made aware of what had
transpired between SB&T's negotiating committee and Regions' representatives.
All matters including pricing were discussed, and it was decided by the full
Board of Directors that based on Carson Medlin's evaluation and analysis of
August 1996, the proposed exchange ratio represented a good offer and that,
along with the other benefits that a merger with Regions would bring to SB&T's
employees and customers, a vote to tentatively accept or reject the offer
should be made by the Board of Directors. It was understood that any acceptance
would be subject to full review of any definitive agreement or letter of intent
offered by Regions. The Board of Directors of SB&T then unanimously voted to
accept the proposed exchange ratio.
At the regularly scheduled Board of Directors meeting of SB&T held on
December 19, 1996, a definitive agreement providing for the merger of SB&T into
Regions was reviewed by SB&T's legal counsel with the Board. Thereafter, the
agreement was unanimously approved by the Board of Directors of SB&T.
SB&T's Reasons for the Merger. In approving the Merger, the directors of
SB&T considered a number of factors. Without assigning any relative or
specific weights to the factors, the SB&T Board of Directors considered the
following material factors:
(a) the information presented to the directors by the management of SB&T
concerning the business, operations, earnings, asset quality, and financial
condition of SB&T, including compliance with regulatory capital requirements on
an historical and prospective basis;
(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share
of SB&T Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of SB&T Common Stock for Regions Common Stock for
federal and state income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) The report of SB&T's financial advisor reviewing a comparison of SB&T
to selected peer financial institutions, premiums paid in other merger
transactions, a mark-to-market analysis of SB&T, and a discounted cash flow
analysis of SB&T;
(f) the alternatives to the Merger, including remaining an independent
institution in light of the current economic conditions of SB&T's market and
its competitive disadvantages compared to the larger financial institutions
operating in the market;
(g) the competitive and regulatory environment for financial institutions
generally;
(h) Regions' ability to provide comprehensive financial services through
the Bank to its market.
The terms of the Merger were the result of arms-length negotiations between
representatives of SB&T and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of
17
<PAGE> 20
SB&T unanimously approved the Merger as being in the best interests of SB&T and
its stockholders. Each member of the Board of Directors of SB&T has agreed to
vote such member's shares in favor of the Merger.
SB&T's Board of Directors unanimously recommends that SB&T 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 SB&T 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 SB&T 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 SB&T; and
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
OPINION OF SB&T'S FINANCIAL ADVISOR
The Board of Directors of SB&T retained Carson Medlin to act as its
financial advisor in connection with a potential acquisition of SB&T, pursuant
to an engagement letter dated July 9, 1996. As part of that engagement, Carson
Medlin has rendered its opinion as to the fairness of the Exchange Ratio
resulting from the terms of the Merger to the stockholders of SB&T from a
financial point of view. Carson Medlin will be compensated for its services.
Carson Medlin is a National Association of Securities Dealers, Inc. member
investment banking firm which specializes in the securities of southeastern
United States financial institutions. As part of its investment banking
activities, Carson Medlin is regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities, including mergers and acquisitions.
Carson Medlin delivered its opinion on April 25, 1997 to the Board of
Directors of SB&T stating that the Exchange Ratio resulting from the terms of
the Merger is fair to the stockholders of SB&T, from a financial point of view.
Carson Medlin subsequently confirmed such opinion in writing as of the date of
this Proxy Statement/Prospectus. The full text of Carson Medlin's written
opinion dated the date of this Proxy Statement/Prospectus is attached as
Appendix B to this Proxy Statement/Prospectus and should be read in its
entirety with respect to the procedures followed, assumptions made, matters
considered and qualification and limitations on the review undertaken by Carson
Medlin in connection therewith. The consideration to be received by SB&T
stockholders in connection with the Merger is the result of negotiations
between SB&T and Regions. Carson Medlin's opinion is addressed to SB&T's Board
only, and the opinion does not constitute a recommendation to any SB&T
stockholder as to how such stockholder should vote at the SB&T Special Meeting
or as to any other matter. The summary of the opinion of Carson Medlin set
forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion attached as Appendix B.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of SB&T or Regions, nor
was it furnished with any such appraisals. Carson Medlin assumed that the
financial forecasts reviewed by it have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the
managements of
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<PAGE> 21
SB&T and Regions, and that such projected financial results will be realized in
the amounts and at the times contemplated thereby. Carson Medlin is not expert
in the evaluation of loan portfolios, underperforming or nonperforming assets,
net charge-offs of such assets or the adequacy of allowances for losses with
respect thereto; has not reviewed any individual credit files; and has assumed
that the loan loss allowances for each of SB&T and Regions are in the aggregate
adequate to cover such losses. Carson Medlin assumed that the Merger will be
recorded as a pooling of interests under generally accepted accounting
principles. Carson Medlin's opinion is necessarily based on economic, market
and other conditions as in effect on the date of its analysis, and on
information made available to it dated as of various earlier dates.
In connection with rendering its opinions, Carson Medlin performed a
variety of financial analyses. The preparation of a fairness opinion of this
nature involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances, and, therefore, is not readily susceptible to partial
analysis or summary description. Carson Medlin believes that its analyses must
be considered together as a whole and that selecting portions of such analyses
and the facts considered therein, without considering all other factors and
analyses, could create an incomplete view of the analyses and the process
underlying Carson Medlin's opinions. In its analyses, Carson Medlin made
numerous assumptions with respect to industry performance, business and
economic conditions, and other matters, many of which are beyond the control of
SB&T and Regions and which may not be realized. Any estimates contained in
Carson Medlin's analyses are not necessarily predictive of future results or
values, which may be significantly more or less favorable than such estimates.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which such companies or their securities may actually be
sold. None of the analyses performed by Carson Medlin was assigned a greater
significance by Carson Medlin than any other.
In connection with rendering its opinion dated the date hereof, Carson
Medlin reviewed (i) the Agreement; (ii) the annual reports to stockholders of
Regions, including audited financial statements for the five years ended
December 31, 1996; (iii) the annual reports to stockholders of SB&T, including
audited financial statements for the five years ended December 31, 1996; (iv)
the Proxy Statement of SB&T dated February 15, 1996 for the annual meeting of
the stockholders of SB&T held on March 21, 1996; (v) the Proxy Statement of
Regions dated April 1, 1997 for the annual meeting of the stockholders of
Regions to be held on May 14, 1997; (vi) interim financial statements of SB&T
through February 28, 1997; (vii) a preliminary copy of the Proxy
Statement/Prospectus prepared in connection with a special meeting of the
stockholders of SB&T to consider the Merger; and (viii) certain other financial
and operating information with respect to the business, operations and
prospects of Regions and SB&T.
Carson Medlin also (i) held discussions with members of the senior
management of SB&T and Regions regarding their respective historical and
current business operations, financial conditions and future prospects; (ii)
reviewed the historical market prices and trading activity for the common
stocks of Regions and SB&T and compared them with those of certain publicly
traded companies which it deemed to be relevant; (iii) compared the results of
operations of SB&T and Regions with those of certain publicly traded companies
which it deemed to be relevant; (iv) compared the proposed financial terms of
the Merger with the financial terms, to the extent publicly available, of
certain other recent business combinations of commercial banking organizations;
(v) analyzed the pro forma financial impact of the Merger on Regions; and (vi)
conducted such other studies, analyses, inquiries and examinations as Carson
Medlin deemed appropriate.
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.
Summary of Transaction Consideration. Carson Medlin reviewed the terms of
the proposed transaction, including the Exchange Ratio and the aggregate
transaction value. Carson Medlin reviewed the implied value of the
consideration offered based upon the $60.00 per share closing price of Regions
Common Stock on March 25, 1997 which showed that the implied value of the
proposed transaction was approximately $30.00
19
<PAGE> 22
per share of SB&T Common Stock, representing a 150% premium to the last
reported trade of SB&T Common Stock (on July 16, 1996), or a total transaction
value of approximately $30.7 million. Carson Medlin calculated that as of March
25, 1997 the aggregate transaction value represented 288% of SB&Ts stated book
value at December 31, 1996 pro forma, adjusted for the conversion of stock
options, 16.2 times SB&Ts 1996 earnings, an 18.3% premium on SB&Ts December 31,
1996 core deposits (defined as the aggregate transaction value minus stated
book value, as a percentage of core deposits) and 21.2% of the total assets of
SB&T at December 31, 1996.
Comparable Transaction Analysis. Carson Medlin reviewed certain information
relating to 15 selected Georgia bank mergers announced between July 1995 and
January 1997 in which the acquired banks had total assets of from $39 million
to $7.4 billion (the "Comparable Transactions"). The Comparable Transactions
are (acquiree/acquiror): Bank of Heard County/First National Bancorp;
Enterprise National Bank/Regions Financial Corporation; Metro Financial
Corporation/Regions Financial Corporation; Bank South/NationsBank Corporation;
First Gwinnett Bancshares/Regions Financial Corporation; Commercial
Bancorp-Georgia/Colonial BancGroup; Central Bankshares/ABC Bancorp; First
National Bancorp/Regions Financial Corporation; Middle Georgia Bank/First
Liberty Financial; Rockdale Community Bank/Regions Financial Corporation;
Allied Bankshares/Regions Financial Corporation; First National Financial/ABC
Bancorp; Dalton/Whitfield Bankshares/Colonial BancGroup; FNB Bankshares/First
Banking Company of Southeast Georgia; and First Bankshares/Regions Financial
Corporation. Carson Medlin considered, among other factors, the earnings,
capital level, asset size and quality of assets of the acquired financial
institutions. Carson Medlin compared the transaction prices to the then
recently reported annual earnings, stated book values, total assets and core
deposits.
On the basis of the Comparable Transactions, Carson Medlin calculated a
range of purchase prices as a percentage of stated book value for the
Comparable Transactions from a low of 161.7% to a high of 238.2%, with a mean
of 196.4%. These transactions indicated a range of values for SB&T from $16.82
per share to $24.77 per share, with a mean of $20.43 per share (based on SB&T's
stated book value of $10.40 per share at December 31, 1996, adjusted for the
pro forma exercise of stock options). The aggregate consideration implied by
the terms of the Merger is approximately $30.00 per share or 288% of adjusted
book value, which is above the high end of the range for the Comparable
Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions from a low of 10.6 times to a high of
21.5 times, with a mean of 16.0 times. These transactions indicated a range of
values for SB&T from $19.72 to $39.99 per share, with a mean of $29.76 per
share (based on SB&T's 1996 earnings of $1.86 per share). The aggregate
consideration implied by the terms of the Merger is approximately $30 per share
or 16.2 times earnings, which is slightly above the mean for the Comparable
Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 7.9% to a high of 25.2%,
with a mean of 14.0%. The premium on SB&T's core deposits implied by the terms
of the Agreement is 18.3%, above the mean for the Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 13.8%
to a high of 29.5%, with a mean of 19.7%. The aggregate consideration as a
percentage of total assets implied by the terms of the Merger is approximately
21.2%, which is above the mean for the Comparable Transactions.
Industry Comparative Analysis. In connection with rendering its opinion,
Carson Medlin compared selected operating results of SB&T to those of 50
publicly-traded community commercial banks in Alabama, Florida, Georgia, North
Carolina, South Carolina, Virginia and West Virginia (the "SIBR Banks") as
contained in the Southeastern Independent Bank Review(tm), a proprietary
research publication prepared by Carson Medlin quarterly since 1991. The SIBR
Banks range in asset size from approximately $97 million to
20
<PAGE> 23
$2.3 billion and in shareholders' equity from approximately $9.1 million to
$230.7 million. Carson Medlin considers this group of financial institutions
more comparable to SB&T than larger, more widely traded regional financial
institutions. Carson Medlin compared, among other factors, the profitability,
capitalization, and asset quality of SB&T to those of the SIBR Banks. Carson
Medlin noted that (i) SB&T had a return on average assets (ROA) for the year
ended December 31, 1996 of 1.35% compared to 1.23% on average for the SIBR
Banks; (ii) SB&T had a return on average equity (ROE) for the year ended
December 31, 1996 of 19.2% compared to 12.6% on average for the SIBR Banks;
(iii) SB&T had common equity to total assets at December 31, 1996 of 7.3%
compared to 9.7% on average for the SIBR Banks; and (iv) SB&T's non-performing
assets (defined as loans 90 days past due, nonaccrual loans and other real
estate) to total loans net of unearned income and other real estate at December
31, 1996 of 0.69% compared to 1.02% for the SIBR Banks. This comparison
indicated that SB&T's financial performance was better than that of the SIBR
Banks for most of the factors considered.
Carson Medlin also compared selected operating results of Regions to those
of 8 other publicly-traded southeastern United States mid-size regional bank
holding companies with assets between $4.2 and $26.2 billion (the "Peer
Banks"). The Peer Banks include: AmSouth Bancorporation, The Colonial
BancGroup, Inc., Compass Bancshares, Inc., First American Corporation, First
Tennessee National Corporation, National Commerce Bancorporation, SouthTrust
Corporation, and Union Planters Corporation. Carson Medlin considers this group
of southeastern financial institutions comparable to Regions as to financial
characteristics, stock price performance and stock trading volume. Carson
Medlin compared selected balance sheet data, asset quality, capitalization, and
profitability ratios at or for the year ended December 31, 1996 and stock
market data as of March 25, 1997. This comparison showed, among other things,
that (i) Regions' net interest margin was 4.27% compared to a mean of 4.06% and
a median of 4.02% for the Peer Banks; (ii) Regions' efficiency ratio (defined
as noninterest expense divided by the sum of noninterest income and taxable
equivalent net interest income before provision for loan losses) was 56.2%
compared to a mean of 59.3% and a median of 59.6% for the Peer Banks; (iii)
Regions' ROA was 1.29% compared to a mean of 1.19% and a median of 1.19% for
the Peer Banks; (iv) Regions' ROE was 15.2% compared to a mean of 16.0% and a
median of 16.4% for the Peer Banks; (v) Regions' stockholders' equity to total
assets was 8.45% compared to a mean of 7.44% and a median of 7.38% for the Peer
Banks; (vi) Regions' nonperforming assets to total assets were 0.53% compared
to a mean of 0.48% and a median of 0.56% for the Peer Banks; (vii) Regions'
loan loss reserves to nonperforming assets was 174% compared to a mean of 336%
and a median of 200% for the Peer Banks; and (viii) at March 25, 1997, Regions'
market capitalization was $3.8 billion compared to the Peer Banks which ranged
from a low of $0.8 billion to a high of $3.9 billion. This comparison indicated
that Regions' financial performance is generally above average in comparison to
the Peer Banks.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to SB&T, Regions or the
contemplated Merger. Accordingly, evaluating the results of these analyses
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of SB&T, Regions and
other factors that could affect the value of the companies to which they are
being compared. Mathematical analysis (such as determining the average or
median) is not, in itself, a meaningful method of using comparable industry or
transaction data.
Contribution Analysis. Carson Medlin reviewed the relative contributions in
terms of various balance sheet items, net income and market capitalization to
be made by SB&T and Regions to the combined institution based on (i) balance
sheet data at December 31, 1996, and (ii) income statement data for the year
ended December 31, 1996. The income statement and balance sheet components
analyzed included total assets, total loans, total deposits, shareholders'
equity, and 1996 net income. This analysis showed that, while SB&T
shareholders would own approximately 0.81% of the aggregate outstanding shares
of the combined institution based on the Exchange Ratio, SB&T is contributing
0.76% of total assets, 0.59% of total loans (net), 0.87% of total deposits,
0.66% of shareholders' equity, and 0.82% of annual net income.
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Present Value Analysis. Carson Medlin calculated the present value of
SB&T's stock assuming that SB&T remains an independent bank. For purposes of
this analysis, Carson Medlin utilized certain projections of SB&T's future
earnings through the year 2001. The analysis assumes that SB&T would continue
to pay a dividend of approximately 16% of projected net income, and that SB&T
common stock would be sold at the end of 5 years at 16X projected fifth year
earnings. This value was then discounted at annual rates of 13% through 15%.
These rates were selected to reflect the rates that investors in securities
such as the common stock of SB&T would require. On the basis of these
assumptions, Carson Medlin calculated that the present value of SB&T as an
independent bank ranged from $27.27 per share to $29.72 per share. The
aggregate consideration implied by the terms of the Agreement is approximately
$30.00 per share which falls above the high end of the range of the present
value analysis. Carson Medlin noted that the present value analysis was
included because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Stock Trading History. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for Regions Common Stock on a monthly basis from
December 1992 to March 1997. Carson Medlin also compared price performance of
Regions common stock during this period to the Standard and Poor's 500 Index
and the NASDAQ Bank Index.
This analysis showed that for the five-year period ending December 31,
1996, the increase in the market value of Regions Common Stock (including the
reinvestment of cash dividends) was 224% compared to an increase (including
dividend reinvestment) in the Standard and Poor's 500 index of 203% and an
increase of 326% in the NASDAQ Bank Index.
During the four quarters ending December 31, 1996, the ratio of stock price
to trailing 12 months earnings per share for the Peer Banks was: a low of 11.8
times, a high of 14.5 times, and a mean of 12.9 times. For the same periods,
Regions' price to earnings ratio ranged from a low of 11.7 times to a high of
14.2 times with a mean of 12.8 times. Regions Common Stock has traded on
average at a lower price to earnings ratio than the Peer Banks.
During the four quarters ending December 31, 1996, the stock price as a
percentage of book value for Peer Banks was: a low of 183%, a high of 222%, and
a mean of 199%. For the same periods, Regions' price to book ratio ranged from
a low of 177% to a high of 208% with a mean of 196%. Regions Common Stock has
traded on average at a lower price to book value basis compared to the Peer
Banks.
Carson Medlin also examined the recent trading volume in Regions Common
Stock, which trades on the NASDAQ National Market, with that of the Peer Banks.
During the four quarters ending December 31, 1996, the monthly trading volume
of outstanding shares of the Peer Banks ranged from a low of 3.5% to a high of
5.2% with a mean of 4.5%. Regions' quarter end monthly trading volume
to outstanding shares ranged from a low of 2.5% to a high of 7.6% with a mean
of 4.8%. Carson Medlin considers Regions Common Stock to be liquid and
marketable in comparison with these Peer Banks and other major bank holding
companies.
To the extent available, Carson Medlin also examined the trading prices and
volumes of SB&T Common Stock. SB&T Common Stock is closely held, trades
infrequently, and is generally considered to be illiquid, consequently Carson
Medlin placed little weight on the market price of SB&T Common Stock.
Shareholder Claims Analysis. Carson Medlin compared the ownership of one
share of SB&T Common Stock to the ownership of 0.50 shares of Regions Common
Stock (as implied by the terms of the Merger Agreement) from the perspective of
claims on various balance sheet and income statement variables. Assuming a
Regions Common Stock Price of $60.00 per share, Carson Medlin found that SB&T
stockholders would have a claim to $1.83 per SB&T share of pro forma 1996
earnings after consummation of the Merger versus $1.85 (adjusted for the pro
forma exercise of SB&T stock options) without the Merger and $150.99 per SB&T
share in total assets compared to $141.69 without the Merger. Furthermore, SB&T
stockholders would have
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a claim to $12.74 in December 31, 1996 pro forma book value per SB&T share
compared to $10.39 before the Merger and market value per SB&T share of $30.00
per SB&T share compared to a reported $12.00 before the Merger. Furthermore,
SB&T stockholders would be expected, assuming continuation of Regions' recent
dividend rate, to receive cash dividends at the annual rate of $0.70 per SB&T
share after the Merger versus $0.30 per SB&T share prior to the Merger. In view
of this comparison, Carson Medlin concluded that 0.50 shares of Regions Common
Stock is likely to be worth more than one share of SB&T Common Stock at the
date of consummation of the Merger.
Other Analyses. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Regions. In addition, Carson Medlin
performed a dilution analysis.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and have been evaluated as of the
date of the opinion. Events occurring after the date of issuance of the
opinion, including but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of SB&T or Regions could materially affect the assumptions used in
preparing the opinion.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time that the
Delaware Certificate of Merger and the Georgia Certificate of Merger relating
to the Merger are filed and declared effective with, respectively, the Delaware
Secretary of State and the Georgia Secretary of State. Unless otherwise agreed
upon by Regions and SB&T, and subject to the conditions to the obligations of
the parties to effect the Merger, the parties will use their reasonable efforts
to cause the Effective Date to occur on the last business day of the month in
which the last of the following events occur: (i) the effective date (including
the expiration of any applicable waiting period) of the last federal or state
regulatory approval required for the Merger and (ii) the date on which the
Agreement is approved by the requisite vote of SB&T stockholders.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and SB&T anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the second quarter of 1997. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or SB&T generally may terminate
the Agreement if the Merger is not consummated by September 30, 1997, unless
the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See "--Conditions to Consummation
of the Merger" and "--Waiver, Amendment, and Termination of the Agreement."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Date, Regions will cause an exchange agent
selected by Regions to mail to the former stockholders of SB&T a form letter of
transmittal, together with instructions for the exchange of such stockholders'
certificates representing shares of SB&T Common Stock for certificates
representing shares of Regions Common Stock.
SB&T STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the Exchange
Agent of certificates for SB&T Common Stock, together with a properly completed
letter of transmittal, there will be issued and mailed to each holder of SB&T
Common Stock surrendering such items a certificate or certificates representing
the number of shares of Regions Common Stock to which such holder is entitled,
if any, and a check for the amount to be paid in lieu of any fractional share
interest, without interest. After the Effective Date, to the extent permitted
by law, SB&T stockholders of record as of the Effective Date will be entitled
to vote at any meeting of holders of
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Regions Common Stock the number of whole shares of Regions Common Stock into
which their SB&T Common Stock has been converted, regardless of whether such
stockholders have surrendered their SB&T Common Stock certificates. No dividend
or other distribution payable after the Effective Date with respect to Regions
Common Stock, however, will be paid to the holder of any unsurrendered SB&T
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 SB&T will be closed at the effective time of
the Merger and after the Effective Date, there will be no transfers of shares
of SB&T Common Stock on SB&T's stock transfer books. If certificates
representing shares of SB&T Common Stock are presented for transfer after the
Effective Date, they will be canceled and exchanged for the shares of Regions
Common Stock and a check for the amount due in lieu of fractional shares, if
any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Georgia Department, and the
expiration of all applicable waiting periods associated with these approvals,
without any conditions or restrictions that would, in the reasonable judgment
of Regions' Board of Directors, so materially adversely impact the economic
benefits of the transactions contemplated by the Agreement that, had such
condition or requirement been known, Regions would not, in its reasonable
judgment have entered into the Agreement;
(b) the approval by the holders of requisite number of shares of SB&T
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 SB&T Common Stock for Regions
Common Stock will not give rise to recognition of gain or loss to SB&T
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 generally, among
others: (i) the delivery by Regions and SB&T of opinions of their respective
counsel opining generally as to the corporate authority, existence, and
ownership of the respective party; (ii) certificates executed by their
respective duly authorized officers as to the satisfaction of certain
conditions and obligations set forth in the Agreement; (iii) 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; (iv) the receipt of a letter from Regions' independent auditors to the
effect that the Merger will qualify for pooling-of-interests accounting
treatment; and (v) the execution by B.J. Alexander, president of the Bank, of a
new employment agreement on terms reasonably acceptable to Regions.
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
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causes such approvals to fail to satisfy the conditions set forth in the
Agreement. Applications for the approvals described below have been submitted
to the appropriate regulatory agencies.
Regions and SB&T 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 Georgia Department. In
its evaluation, the Georgia Department 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
SB&T approved by their respective Boards of Directors; provided, however, that
after approval by the SB&T stockholders, no amendment that pursuant to the
Georgia Act requires further approval of the SB&T stockholders, including
decreasing the consideration to be received by SB&T stockholders, may be made
without the further approval of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Date, either before or after approval by SB&T
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, provided that the terminating
party is not then in material breach of any provision of the Agreement, or by
the Board of Directors of Regions if any required regulatory approval is
conditioned or restricted in the manner described under "--Conditions to
Consummation of the Merger" above;
(b) by the Board of Directors of either party, if the holders of the
requisite number of shares of SB&T Common Stock shall not have approved the
Agreement;
(c) by mutual consent of the Boards of Directors of Regions and SB&T;
(d) by the Board of Directors of either party, in the event of a breach by
the other party of any provision of the Agreement which meets certain
standards specified in the Agreement and cannot be or has not been cured within
30 days after the giving of written notice to the breaching party; or
(e) by the Board of Directors of either party if the Merger shall not have
been consummated by September 30, 1997, but only if the failure to consummate
the Merger by such date has not been caused by the terminating party's breach
of the Agreement.
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If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. Further, termination generally will not relieve the parties from
the consequences of any uncured willful breach of the Agreement giving rise to
such termination.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of SB&T and Regions generally has agreed, unless the prior consent of
the other party is obtained, and except as otherwise contemplated by the
Agreement, to operate its business only in the ordinary course, preserve intact
its business organizations and assets, maintain its rights and franchises, and
take no action that would affect, adversely and materially, the ability of
either party to perform its covenants and agreements under the Agreement in all
material respects and to consummate the Merger or to obtain any consent or
approval required for the consummation of the transactions contemplated by the
Agreement. Provided generally that Regions and its subsidiaries shall not be
prevented 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. In addition, the Agreement contains
certain other restrictions applicable to the conduct of the business of either
SB&T or Regions prior to consummation of the Merger, as described below.
SB&T. SB&T generally has agreed not to take certain actions relating to the
operation of its business pending consummation of the Merger without the prior
written consent of Regions. Those actions generally include, without
limitation: (i) amending the Articles of Incorporation or Bylaws or other
governing instrument of SB&T and its subsidiaries; (ii) incurring,
guaranteeing, or otherwise become responsible for any additional debt or other
obligation for borrowed money (other than indebtedness among SB&T and its
subsidiaries) in excess of an aggregate amount outstanding at any time of
$100,000 (for SB&T and its subsidiaries on a consolidated basis) except in the
ordinary course of business consistent with past practices (as described in the
Agreement) or forgiving any such indebtedness in excess of $25,000 except as
previously disclosed to Regions; (iii) acquiring or exchanging (other than
exchanges in the ordinary course under employee benefit plans) any shares, or
any securities convertible into shares, of its capital stock or paying any
dividend or other distribution in respect of its capital stock, except that
SB&T may, but shall not be legally obligated to, declare and pay regular annual
cash dividends at a rate not in excess of $.30 per share; (iv) issuing,
encumbering, or selling any additional shares of any SB&T capital stock, any
rights to acquire any such stock, or any security convertible into such stock,
except pursuant to the exercise of stock options outstanding as of the date of
the Agreement; (v) adjusting, splitting, combining, or reclassifying any of its
capital stock or the capital stock of any subsidiary; (vi) disposing of or
encumbering any shares of capital stock of any SB&T subsidiary or any assets
having an aggregate book value in excess of $100,000, other than in the
ordinary course of business for reasonable and adequate consideration; (vii)
acquiring direct or indirect control over or investing in the equity securities
of any other person, other than under circumstances set forth in the Agreement;
(viii) granting any increase in compensation or benefits to employees,
officers, or directors (except in accordance with past practice or previously
approved by the SB&T Board of Directors, in each case as previously disclosed
to Regions or as required by law), paying any severance pay or bonus (except
pursuant to the provisions of any applicable program or plan adopted by the
SB&T Board of Directors prior to the date of the Agreement previously disclosed
to Regions), entering into or amending any severance agreements with officers
of SB&T or any of its subsidiaries or except as previously disclosed to
Regions, or granting any increase in fees or other increases in compensation or
other benefits to directors of SB&T or any of its subsidiaries; (ix) except as
previously disclosed to Regions, entering into or amending any employment
contract that it does not have the unconditional right to terminate (unless
such amendment is required by law); (x) except as previously disclosed to
Regions, adopting any new employee benefit plan or program, or materially
changing any existing plan or program (except for any change required by law or
a change which, in the opinion of counsel, is necessary to maintain the tax
qualified status of any such plan); (xi) making any
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significant change in any tax or accounting methods or systems of internal
accounting controls (except in conformity to changes in generally accepted
accounting principles ("GAAP")); (xii) commencing or settling any litigation
(except in accordance with past practices), or settling any litigation for
money damages in excess of $25,000 or provided that, except to the extent
specifically reserved against in SB&T's financial statements dated prior to the
date of the Agreement, neither SB&T or any of its subsidiaries shall settle any
litigation involving any liability for money damages in excess of $25,000 or
restrictions upon the operations of SB&T or any of its subsidiaries; or (xiii)
except in the ordinary course of business, entering into or terminating any
material contract or making any change in any material lease or contract, other
than renewals of leases and contracts without material adverse changes of
terms, or as previously disclosed to Regions.
In addition, SB&T has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. SB&T 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, SB&T has agreed to use reasonable efforts
to cause its advisors and other representatives not to engage in any of the
foregoing activities.
Regions. The Agreement prohibits Regions from amending its certificate of
incorporation or bylaws in any manner which is adverse to, and discriminates
against, the holders of SB&T Common Stock.
MANAGEMENT FOLLOWING THE MERGER
Consummation of the Merger will not alter the present officers and
directors of Regions. Information concerning the management of Regions is
included in the documents incorporated herein by reference. See "Documents
Incorporated by Reference."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will, and will cause SB&T to,
indemnify each person entitled to indemnification from SB&T or any of its
subsidiaries to the full extent permitted by the Georgia Act and the Articles
of Incorporation and Bylaws of SB&T or any of its subsidiaries as of the date
of the Agreement, as the case may be, for six years from the Effective Date
with respect to matters occurring at or prior to the Effective Date.
The Agreement also provides that, after the Effective Date, Regions will
provide generally to officers and employees of SB&T 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 SB&T 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 SB&T to honor all employment, severance, consulting, and other
compensation contracts previously disclosed to Regions between SB&T 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 SB&T's benefit plans.
As described above under " --Treatment of SB&T Options," the Agreement also
provides that all rights with respect to SB&T Common Stock pursuant to stock
options or stock appreciation rights granted by SB&T 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.
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As of the Record Date, directors and executive officers of SB&T owned 1,338
shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 2, Article 13 of the Georgia Act, if
the Merger is consummated, any holder of record of SB&T Common Stock who (i)
gives to SB&T, prior to the vote at the Special Meeting with respect to the
approval of the Agreement, written notice of such holder's intent to demand
payment for such holder's shares, and (ii) does not vote in favor thereof,
shall be entitled to receive, upon compliance with the statutory requirements
summarized below, the fair value of such holder's shares as of the Effective
Date, excluding any appreciation or depreciation in anticipation of the Merger.
A stockholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies SB&T in writing of the name and address of each person on
whose behalf such holder asserts dissenters' rights. The rights of such a
partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different stockholders.
The written objection requirement referred to above will not be satisfied
under the Georgia statutory provisions by merely voting against approval of the
Agreement by proxy or in person at the Special Meeting. Any holder of SB&T
Common Stock who returns a signed proxy but fails to provide instructions as to
the manner in which such shares are to be voted will be deemed to have voted in
favor of the transaction and will not be entitled to assert dissenters' rights
of appraisal. In addition to not voting in favor of the Agreement, a
stockholder wishing to preserve the right to dissent and seek appraisal must
give a separate written notice of such holder's intent to demand payment for
such holder's shares if the Merger is effected, as hereinabove provided.
Any written objection to the Agreement satisfying the requirements
discussed above should be addressed as follows: SB&T Corporation, 888 Concord
Road, Smyrna, Georgia, 30080, Attention: Corporate Secretary.
If the Merger is authorized at the Special Meeting, SB&T must deliver a
written dissenters' notice (the "Dissenters' Notice") to all holders of SB&T
Common Stock who have satisfied the foregoing requirements. The Dissenters'
Notice must be sent within ten days after the Effective Date and must (i) state
where the demand for payment must be sent and where and when certificates for
shares of SB&T 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) set a date by which
SB&T must receive the demand for payment (which date may not be fewer than 30
nor more than 60 days after the Dissenters' Notice is delivered), and (iv) be
accompanied by a copy of Article 13 of the Georgia Act.
A stockholder of record who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such stockholder will retain all other rights of a
stockholder until those rights are canceled or modified by the consummation of
the Merger. A record stockholder who does not demand payment or deposit such
holder's shares certificates where required, each by the date set in the
Dissenters' Notice, is not entitled to payment for such holder's shares under
Article 13.
Except as described below, the surviving corporation resulting from the
Merger must, within ten days of the later of the Effective Date or receipt of a
payment demand, offer to pay to each dissenting stockholder who complied with
the payment demand and deposit requirements described above the amount the
surviving corporation estimates to be the fair value of such holder's shares,
plus accrued interest from the Effective Date. Such offer of payment must be
accompanied by (i) certain recent SB&T financial statements, (ii) the surviving
corporation's estimate of the fair value of the shares, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Section 14-2-1327 of the Georgia
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Act, and (v) a copy of the Article 13 of the Georgia Act. If the stockholder
accepts the surviving corporation's offer by written notice to the surviving
corporation within 30 days after the surviving corporation's offer, or is
deemed to have accepted the offer by failing to respond within 30 days, payment
must be made within 60 days after the later of the making of the offer or the
Effective Date.
If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, SB&T must return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, the surviving corporation must send a new Dissenter's Notice and
repeat the payment demand procedure described above.
Section 14-2-1327 of the Georgia Act provides that a dissenting stockholder
may notify the surviving corporation in writing of such holder's own estimate
of the fair value of such holder's shares and the interest due, and may demand
payment of such holder's estimate, if (i) such holder believes that the amount
offered by the surviving corporation is less than the fair value of such
holder's shares or that the interest due has been calculated incorrectly, or
(ii) SB&T, having failed to effect the Merger, does not return the deposited
certificates or release the transfer restrictions imposed on uncertificated
shares within 60 days after the date set for demanding payment. A dissenting
stockholder waives such holder's right to demand payment under Section
14-2-1327 unless such holder notifies the surviving corporation of such
holder's demand in writing within 30 days after the surviving corporation makes
or offers payment for such holder's shares. If the surviving corporation does
not offer payment within ten days of the later of the Effective Date or receipt
of a payment demand, then (i) the stockholder may demand the financial
statements and other information required to accompany the surviving
corporation's payment offer, and the surviving corporation must provide such
information within ten days after receipt of the written demand, and (ii) the
stockholder may notify the surviving corporation of such holder's own estimate
of the fair value of such holder's shares and the amount of interest due, and
may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, the
surviving corporation must commence a nonjury equity valuation proceeding in
the Superior Court of Cobb County, Georgia, within 60 days after receiving the
payment demand and must petition the court to determine the fair value of the
shares and accrued interest. If the surviving corporation does not commence the
proceeding within those 60 days, it is required to pay each dissenting
stockholder whose demand remains unsettled, the amount demanded. The surviving
corporation is required to make all dissenting stockholders whose demands
remain unsettled parties to the proceeding and to serve a copy of the petition
upon each dissenting stockholder. The court may appoint appraisers to receive
evidence and to recommend a decision on fair value. Each dissenting
stockholder made a party to the proceeding is entitled to judgment for the fair
value of such holder's shares plus interest to the date of judgment.
The court in an appraisal proceeding commenced under the foregoing
provision must determine the costs of the proceeding, excluding fees and
expenses of attorneys and experts for the respective parties, and must assess
those costs against the surviving corporation, except that the court may assess
the costs against all or some of the dissenting stockholders to the extent the
court finds they acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 14-2-1327. The court also may assess the fees
and expenses of attorneys and experts for the respective parties against the
surviving corporation if the court finds the surviving corporation did not
substantially comply with the requirements of specified provisions of Article
13 of the Georgia Act, or against either the surviving corporation or a
dissenting stockholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by
Article 13 of the Georgia Act.
If the court finds that the services of attorneys for any dissenting
stockholder were of substantial benefit to other dissenting stockholders
similarly situated, and that the fees for those services should not be assessed
against the surviving corporation, the court may award those attorneys
reasonable fees out of the amounts awarded the dissenting stockholders who were
benefitted. No action by any dissenting stockholder to enforce
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dissenters' rights may be brought more than three years after the Effective
Date, regardless of whether notice of the Merger and of the right to dissent
was given by SB&T or the surviving corporation in compliance with the
Dissenters' Notice and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting
stockholder of SB&T but is qualified in its entirety by reference to Article 13
of the Georgia Act, included in Appendix B to this Proxy Statement/Prospectus.
Any SB&T 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 SB&T
stockholders, except as indicated above or otherwise required by law.
Any dissenting SB&T stockholder who perfects such holder's right to be paid
the value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes. See "Certain
Federal Income Tax Consequences of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT
ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, AND CORPORATIONS, AMONG
OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF
THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. STOCKHOLDERS,
THEREFORE, ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND
OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Alston & Bird, special
counsel to Regions, has rendered an opinion to Regions and SB&T concerning
certain federal income tax consequences of the proposed Merger under federal
income tax law. It is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Delaware
GCL and the Georgia Act, the Merger will be a reorganization within the meaning
of Section 368(a) of the Code. SB&T and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(b) The stockholders of SB&T will recognize no gain or loss upon the
exchange of their SB&T Common Stock solely for shares of Regions Common Stock.
(c) The basis of the Regions Common Stock received by the SB&T stockholders
in the Merger will, in each instance, be the same as the basis of the SB&T
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 SB&T
stockholders will, in each instance, include the period during which the SB&T
Common Stock surrendered in exchange therefor was held, provided that the SB&T
Common Stock was held as a capital asset on the date of the exchange.
(e) The payment of cash to SB&T 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
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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. Generally, any gain
or loss recognized upon such exchange will be capital gain or loss, provided
the fractional share would constitute a capital asset in the hands of the
exchanging stockholder.
(f) Where solely cash is received by a SB&T stockholder in exchange for
SB&T Common Stock pursuant to the exercise of dissenters' rights, such cash
will be treated as having been received in redemption of such holder's SB&T
Common Stock, subject to the provisions and limitations of Section 302 of the
Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES OF THE MERGER. SB&T STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER FOREIGN STATE OR LOCAL 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 SB&T 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, SB&T (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 SB&T reasonably believes will be an affiliate of SB&T has
delivered to Regions a written agreement providing that such person generally
will not sell, pledge, transfer, or otherwise dispose of any Regions Common
Stock to be received by such person upon consummation of the Merger, except in
compliance with the Securities Act and the rules and regulations of the SEC
promulgated thereunder.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of SB&T Common Stock will be exchanging
their shares of a Georgia corporation governed by the Georgia Act and SB&T'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 SB&T stockholders and those
of Regions stockholders. The differences deemed material by SB&T and Regions
are summarized below. In particular, Regions' Certificate and Bylaws contain
several provisions that may be deemed to have an antitakeover effect in that
they could impede or prevent an acquisition of Regions unless the potential
acquirer has obtained the approval of Regions' Board of Directors. The
following discussion is necessarily general; it is not intended to be a
complete statement of all differences affecting the rights of stockholders and
their respective entities, and it is qualified in its entirety by reference to
the Georgia Act and the Delaware GCL as well as to Regions' Certificate and
Bylaws and SB&T'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.
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AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 120,000,000
shares of Regions Common Stock, of which 66,435,634 shares were issued at March
17, 1997, none of which were held as treasury shares. Regions' Board of
Directors may authorize the issuance of additional shares of Regions Common
Stock without further action by Regions' stockholders, unless such action is
required in a particular case by applicable laws or regulations or by any stock
exchange upon which Regions' capital stock may be listed. The Certificate does
not provide preemptive rights to Regions stockholders.
The authority to issue additional shares of Regions Common Stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefit and compensation plans, acquisitions, and public or
private sales for cash as a means of raising capital. Such shares could be used
to dilute the stock ownership of persons seeking to obtain control of Regions.
In addition, the sale of a substantial number of shares of Regions Common Stock
to persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
Common Stock (or the right to receive Regions Common Stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions.
SB&T. SB&T's authorized capital stock consists of 5,000,000 shares of SB&T
Common Stock, which is the only class of capital stock authorized and of which
1,022,844 shares were issued and outstanding as of the Record Date.
Pursuant to the Georgia Act, SB&T's Board of Directors may authorize the
issuance of additional shares of SB&T Common Stock without further action by
SB&T's stockholders. SB&T's Articles do not provide the stockholders of SB&T
with preemptive rights to purchase or subscribe to any unissued authorized
shares of SB&T 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.
SB&T. The Georgia Act generally provides that a Georgia corporation's
articles of incorporation may be amended by the affirmative vote of a majority
of the shares entitled to vote thereon, unless the articles of incorporation
provide for a higher or lower voting requirement. SB&T's Articles do not
provide a higher or lower voting requirement.
SB&T's Bylaws provide that the Board of Directors has the power to alter,
amend or repeal the Bylaws or adopt new Bylaws, but any Bylaws adopted by the
Board of Directors may be altered, amended or repealed, and new Bylaws adopted,
by the stockholders.
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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.
SB&T. SB&T's Articles do not provide for a classified Board of Directors
which means that all directors are elected annually by the stockholders to
serve for one-year terms. In addition, SB&T's Articles do not provide for
cumulative voting rights in the election of directors.
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.
SB&T. Pursuant to SB&T's Bylaws, the entire Board of Directors or any
individual director may be removed from office with or without cause by the
affirmative vote of the holders of a majority of the shares entitled to vote in
an election of directors. In addition, the Board of Directors may remove a
director from office if such director is adjudicated an incompetent by a court,
if the director is convicted of a felony, if the director files for protection
from creditors under bankruptcy laws, if the director does not, within sixty
days of his or her election, accept the office in writing or by attendance at a
meeting of the Board of Directors and fulfill any other requirements for
holding the office of director, or if the director fails to attend regular
meetings of the Board of Directors for six consecutive meetings without having
been excused by the Board of Directors.
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
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is limited. This provision may reduce the likelihood of stockholder derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their
duties, even though such action, if successful, might have benefitted Regions
and its stockholders. The SEC has taken the position that similar provisions
added to other corporations' certificates of incorporation would not protect
those corporations' directors from liability for violations of the federal
securities laws.
SB&T. The Georgia Act generally permits a corporation's articles of
incorporation to relieve directors from liability for money damages for good
faith conduct. The Articles provide that "no Director of the corporation shall
have any liability to a shareholder or shareholders of the corporation to any
extent greater than allowed as a business corporation incorporated under the
provisions of Chapter 2 of Title 14, Uniform Code of Georgia Annotated . . . ."
This provision is intended to place limitations on director liability which are
substantially similar to those applicable to Regions.
INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its officers,
directors, employees, and agents to the full extent permitted by the Delaware
GCL. Under Section 145 of the Delaware GCL as currently in effect, other than
in actions brought by or in the right of Regions, such indemnification would
apply if it were determined in the specific case that the proposed indemnitee
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of Regions and, with respect to any criminal
proceeding, if such person had no reasonable cause to believe that the conduct
was unlawful. In actions brought by or in the right of Regions, such
indemnification probably would be limited to reasonable expenses (including
attorneys' fees) and would apply if it were determined in the specific case
that the proposed indemnitee acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of Regions,
except that no indemnification may be made with respect to any matter as to
which such person is adjudged liable to Regions, unless, and only to the extent
that, the court determines upon application that, in view of all the
circumstances of the case, the proposed indemnitee is fairly and reasonably
entitled to indemnification for such expenses as the court deems proper. To the
extent that any director, officer, employee, or agent of Regions has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding, as discussed herein, whether civil, criminal, administrative, or
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.
SB&T. SB&T's Bylaws provide that any person, the person's heirs, executors
or administrators, may be indemnified or reimbursed by SB&T for reasonable
expenses actually incurred in connection with any action, suit or proceeding,
civil or criminal, to which the person shall be made a party by reason of the
fact that the person is or was a director, trustee, officer, employee or agent
of SB&T, or that the person is or was serving at the request of SB&T, in such
position with another firm, corporation, trust or other organization or
enterprise in substantially the same manner and with substantially the same
effect as provided by Regions' Certificate.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders may be called at any time, but only by the chief executive
officer, the secretary, or the Board of Directors of Regions. Regions
stockholders do not have the right to call a special meeting or to require that
Regions' Board of Directors call such a meeting. This provision, combined with
other provisions of the Certificate and the restriction on the removal of
directors, would prevent a substantial stockholder from compelling stockholder
consideration of any proposal (such as a proposal for a business combination)
over the opposition of Regions' Board of Directors by calling a special meeting
of stockholders at which such stockholder could replace the entire Board with
nominees who were in favor of such proposal.
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SB&T. SB&T's Bylaws provide that special meetings of stockholders shall be
called by SB&T upon written request by the holders of 25% or more of all the
shares of SB&T which are entitled to vote in an election of directors. The
Bylaws also provide that special meetings of the stockholders may be called at
any time by a majority vote of the Board of Directors of SB&T.
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.
SB&T. Under the Articles, action requiring or permitting stockholder
approval may be approved by written consent of stockholders.
STOCKHOLDER NOMINATIONS
Regions. Regions' Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Board of Directors must be made
by delivering written notice of such nomination (the "Nomination Notice") to
the Secretary of Regions not less than 14 days nor more than 50 days before any
meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days notice of the meeting is given to
stockholders, the Nomination Notice must be delivered to the Secretary of
Regions not later than the seventh day following the day on which notice of the
meeting was mailed to stockholders. The Nomination Notice must set forth
certain background information about the persons to be nominated, including
information concerning (i) the name, age, business, and, if known, residential
address of each nominee, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of Regions capital stock
beneficially owned by each such nominee. The Board of Directors is not required
to nominate in the annual proxy statement any person so proposed; however,
compliance with this procedure would permit a stockholder to nominate the
individual at the stockholders' meeting, and any stockholder may vote such
holder's shares in person or by proxy for any individual such holder desires.
SB&T. SB&T's Bylaws provide for nomination by stockholders of individuals
for election to the Board of Directors in substantially the same manner as is
provided by Regions' Certificate and Bylaws, but with generally shorter time
periods. Such nominations may be submitted by any three stockholders of SB&T
holding an aggregate of not less than 3% of the SB&T Common Stock.
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
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merger, and (iv) either no shares of Regions Common Stock and no shares,
securities, or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of Regions Common Stock to be issued or delivered under the
plan of merger plus those initially issuable upon conversion of any other
shares, securities, or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of Regions Common Stock outstanding immediately
prior to the effective date of the merger.
SB&T. Neither SB&T's Articles nor Bylaws contain provisions regarding
business combination transactions. Accordingly, the Georgia Act generally
provides that such transactions require the approval by SB&T's Board of
Directors and by a majority of the outstanding shares of SB&T Common Stock.
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.
SB&T. Neither SB&T's Articles nor Bylaws provide that SB&T will be subject
to the sections of the Georgia Act that place restrictions on certain business
combinations.
DISSENTERS' RIGHTS OF APPRAISAL
Regions. The rights of appraisal of dissenting stockholders of Regions are
governed by the Delaware GCL. Pursuant thereto, except as described below, any
stockholder has the right to dissent from any merger of which Regions could be
a constituent corporation. No appraisal rights are available, however, for (i)
the shares of any class or series of stock that is either listed on a national
securities exchange, quoted on the Nasdaq National Market, or held of record by
more than 2,000 stockholders or (ii) any shares of stock of the constituent
corporation surviving a merger if the merger did not require the approval of
the surviving corporation's stockholders, unless, in either case, the holders
of such stock are required by an agreement of merger or consolidation to accept
for that stock something other than: (a) shares of stock of the corporation
surviving or resulting from the merger or consolidation; (b) shares of stock of
any other corporation that will be listed at the effective date of the merger
on a national securities exchange, quoted on the Nasdaq National Market, or
held of record by more than 2,000 stockholders; (c) cash in lieu of fractional
shares of stock described in clause (a) or (b) immediately above; or (d) any
combination of the shares of stock and cash in
37
<PAGE> 40
lieu of fractional shares described in clauses (a) through (c) immediately
above. Because Regions Common Stock is quoted on the Nasdaq National Market and
is held of record by more than 2,000 stockholders, unless the exception
described immediately above applies, holders of Regions Common Stock do not
have dissenters' rights of appraisal.
SB&T. The rights of appraisal of dissenting stockholders under Georgia law
are generally similar to those afforded under the Delaware GCL. The provisions
of the Georgia Act governing the rights of dissenting stockholders is included
as Appendix C. For a summary of such provisions and the procedures to be
followed by stockholders who desire to dissent from the Merger and receive the
fair value of their shares of SB&T Common Stock in cash, see "Description of
the Transaction--Dissenting Stockholders."
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware GCL provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the inspection,
if such purpose is reasonably related to such person's interest as a
stockholder.
SB&T. Pursuant to the Georgia Act, upon written notice of a demand to
inspect corporate records, a stockholder is entitled to inspect specified
corporate records, including articles of incorporation and bylaws, minutes of
stockholder meetings and certain resolutions adopted at director meetings, list
of directors and officers, and all stockholder communications for the preceding
three years, including financial statements. Upon demonstration of a
proper purpose, a stockholder may be entitled to inspect other corporate
records.
DIVIDENDS
Regions. The Delaware GCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary depository institutions. There are various statutory limitations on
the ability of Regions' subsidiary depository institutions to pay dividends to
Regions. See "Certain Regulatory Considerations--Payment of Dividends."
SB&T. Pursuant to the Georgia Act, a board of directors may from time to
time make distributions to its stockholders, subject to restrictions in its
articles of incorporation, provided that no distribution may be made if, after
giving it effect, (i) the corporation would not be able to pay its debts as
they become due in the usual course of business, or (ii) the corporation's
total assets would be less than the sum of its total liabilities plus (unless
the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution. SB&T's Articles do not contain provisions concerning
distributions to stockholders.
38
<PAGE> 41
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." SB&T Common Stock is not traded in any established market. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for Regions Common Stock as reported on the Nasdaq National Market,
the high and low prices for SB&T Common Stock and the cash dividends declared
per share of Regions Common Stock and SB&T Common Stock for the indicated
periods. The prices indicated for SB&T are based on actual transactions in
SB&T Common Stock of which SB&T management is aware; however, for the indicated
period there has been only a very limited number of transactions and all such
transactions have involved limited numbers of shares in SB&T Common Stock in
the indicated periods, and no assurance can be given that the indicated prices
represent the actual market value of the SB&T Common Stock.
<TABLE>
<CAPTION>
REGIONS SB&T
PRICE RANGE CASH DIVIDENDS PRICE RANGE CASH DIVIDENDS
----------- -----------
DECLARED DECLARED
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C>
1995
First Quarter . . . . . . $ 36.50 $ 31.63 $ .33 $ 8.00 $ 8.00 $ --
Second Quarter . . . . . . 37.44 34.50 .33 -- -- --
Third Quarter . . . . . . . 41.25 37.00 .33 10.00 10.00 --
Fourth Quarter . . . . . . 44.88 39.63 .33 8.50 8.50 .275
1996
First Quarter . . . . . . 48.00 40.75 .35 10.00 10.00 --
Second Quarter . . . . . . 48.38 42.25 .35 -- -- --
Third Quarter . . . . . . . 48.63 43.63 .35 12.00 12.00 --
Fourth Quarter . . . . . . 53.75 48.77 .35 -- -- .30
1997
First Quarter . . . . . . . 61.88 51.38 .40 -- -- .075
Second Quarter (through
April 25, 1997) . . . 56.50 55.25 -- -- -- --
</TABLE>
On April 25, 1997, the last reported sale price of Regions Common Stock as
reported on the Nasdaq National Market, and the price of SB&T Common Stock in
the last known transaction, which occurred on July 16, 1996, were $55.38 and
$12.00, respectively. On December 19, 1996, the last business day prior to
public announcement of the proposed Merger, the last reported sale price of
Regions Common Stock as reported on the Nasdaq National Market, and the last
known price of SB&T Common Stock, were $51.38 and $12.00, respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971.
Although Regions currently intends to continue to pay quarterly cash dividends
on the Regions Common Stock, there can be no assurance that Regions' dividend
policy will remain unchanged after completion of the Merger. The declaration
and payment of dividends thereafter will depend upon business conditions,
operating results, capital and reserve requirements, and the Board of
Directors' consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly 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."
39
<PAGE> 42
In 1996 and 1995, SB&T declared annual cash dividends of $.30 per share and
$.28 per share, respectively. In 1997, SB&T began to declare quarterly cash
dividends, beginning with a dividend of $.075 per share in March, 1997, and
SB&T anticipates continuing to declare and pay quarterly dividends prior to
consummation of the Merger. Whether dividends will actually be paid and the
amount of such dividends, however, will depend on SB&T's capital position, its
ability to meet its financial obligations as they become due, and its capacity
to act as a source of financial strength to the Bank.
SB&T MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
GENERAL
SB&T derives all of its income from its wholly owned subsidiary, the Bank.
The Bank's results of operations are primarily affected by its net interest
income. Net interest income is defined as interest and fees on loans and
investments, less interest expense on deposits. Interest from loans and
investments is a function of the average rates earned. The Bank's cost of funds
is a function of the average rates paid on deposits. Service charges and other
fees also affect income. The Bank's net income is further affected by the level
of other expenses such as employee compensation and benefits, occupancy cost,
advertising, and insurance.
RESULTS OF OPERATIONS
SB&T reported consolidated net income of approximately $1,896,013 in 1996,
$1,617,735 in 1995, and $1,300,024 in 1994. The improvement in net income each
year was primarily attributable to continued growth in the loan portfolio. A
provision for loan losses of $20,000 was made in 1996, compared to $0 in 1995
and $0 in 1994.
Return on average assets was 1.35% and return on average stockholders'
equity was 19.24% in 1996, compared to 1.30% and 19.66%, respectively, for
1995, and 1.27% and 19.35%, respectively, for 1994.
NET INTEREST INCOME
Net interest income is the primary source of the Bank's earnings stream and
represents the difference between interest income generated from earning assets
and the interest expense paid on deposits and borrowed funds. The Bank reported
net interest income of approximately $5,629,484 in 1996, $5,198,966 in 1995,
and $4,555,080 in 1994. Net interest margin is net interest income as a
percentage of total interest-earning assets. The difference between the yield
on interest-earning assets and the rate paid on interest-bearing liabilities is
the net interest spread. The Bank reported net interest margins of 4.38% for
1996, 4.54% for 1995, and 4.82% for 1994, and net interest spreads of 3.57% for
1996, 3.73% for 1995, and 4.15% for 1994.
40
<PAGE> 43
The following table represents the average balances of earning assets and
interest-bearing liabilities of the Bank with their associated yields or rates
as of December 31, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
(Balances in thousands)
1996 1995 1994
--------------------- ----------------------- ------------------------
Average Income/Yield/ Average Income/Yield/ Average Income/Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ---- ------- ------- ----
EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities . . . . . $ 41,476 $ 2,348 5.66% $39,345 $2,243 5.70% $39,139 $2,191 5.60%
Loans, Net of
Unearned Income . . . . . . . 74,475 7,984 10.72 63,057 6,9621 1.04 51,410 5,251 10.21
Fed Funds Sold . . . . . . . . 12,524 663 5.29 11,999 704 5.87 3,859 161 4.17
------ --- ---- ------ --- ---- ----- --- ----
Total Earning Assets . . . . $128,475 $10,995 8.56% $114,401 $9,909 8.66% $94,408 $7,603 8.05%
------- ------ ---- ------- ----- ---- ------ ----- ----
INTEREST-BEARING LIABILITIES:
Money Market and
Now Accounts . . . . . . . . $28,509 $870 3.05% $27,587 $ 897 3.25% $25,858 $771 2.98%
Saving Deposits . . . . . . . . 5,277 162 3.07 4,720 144 3.05 4,838 147 3.04
Certificates of
Deposit . . . . . . . . . . . 73,899 4,334 5.86 63,268 3,669 5.80 47,488 2,130 4.49
------ ----- ---- ------ ----- ---- ------ ----- ----
Total Interest-
bearing funds . . . . . . . . $107,685 $5,366 4.98% $95,575 $4,710 4.93% $78,184 $3,048 3.90%
------- ----- ---- ------ ----- ---- ------ ----- ----
Net Interest Income/Margin . . $5,629 4.38% $5,199 4.54% $4,555 4.82%
Net Interest Spread . . . . . . 3.58% 3.73% 4.15%
</TABLE>
As shown, the Bank was able to increase net interest income in each of the
last three years. The continued improvement in net interest income resulted
from a strategy of leveraging capital and increasing loans.
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Income from sources other than interest-earning assets and excluding
securities transactions is derived primarily from service charges and other
fees on customer deposits and transactions, and mortgage fees. Non-interest
income, excluding securities transactions, was approximately $1,008,715 in 1996
compared to $1,061,546 in 1995, and $942,496 in 1994. The decrease from 1995 to
1996 was due primarily to lower mortgage fees. The increase from 1994 to 1995
was due primarily to growth in the deposit base, increases in service charges
on customer deposit accounts, and increased mortgage fees.
Non-interest expense was approximately $3,826,376 in 1996, compared to
$3,891,453 in 1995 and $3,578,340 in 1994. Non-interest expense declined in
1996 due to reduced salaries and employee benefits attributable to a reduction
in mortgage loan operations in 1996. The increases in non-interest expense in
1995 and 1994 were primarily attributable to the growth of the Bank's
additional equipment, facilities, and
41
<PAGE> 44
personnel were necessary to serve the increased customer base. In addition, in
1995, the Bank's facility in Macland/Powder Springs was opened, which
contributed to increased operating expenses primarily in 1995 and 1996.
INCOME TAXES
The Bank's effective tax rate was 32.09% in 1996, 31.71% in 1995, and
32.27% in 1994. The effective rate is less than the statutory rate primarily
because of tax-free income provided from state and municipal bonds and the
purchase of Treasuries and certain agency issues which are tax-free to Georgia
banks.
FINANCIAL CONDITION
The Bank's balance sheet has emphasized management's philosophy of
increasing net interest income and return on equity through lending activities
and leveraging capital. For the last three years, loans have grown from
$61,133,290 at the end of 1994 to $79,654,496 at the end of 1996. Also during
this time, average stockholders' equity to average assets has remained at sound
levels of 7.03% for 1996, 6.62% for 1995 and 6.58% for 1994.
LOANS
The Bank's loan portfolio consists primarily of commercial, construction
and development, real estate, and installment loans. Net loans are defined as
gross loans minus allowance for loan losses and unearned income or fees. Net
loans were approximately $78,570,669 at December 31, 1996 compared to
$62,650,926 at December 31, 1995 and $60,061,624 as of December 31, 1994. The
increase in loans during these periods was due to increased loan demand and
marketing efforts particularly in the real estate and commercial loan area.
MATURITY DISTRIBUTION OF LOANS
The Bank's lending activities are weighted toward loans with maturities of,
or which reprice in, less than one year. This is why the Bank invests mainly
in fixed rate maturity securities as an offset. The following table presents an
analysis of the maturity distribution of the Bank's loan portfolio at December
31, 1996:
LOAN MATURITY/REPRICING SCHEDULE
(Dollars in thousands)
December 31, 1996
<TABLE>
<CAPTION>
LOANS
<S> <C>
FIXED RATE LOAN MATURITIES:
3 MONTHS OR LESS . . . . . . . . . . . . . . . . . . . . . $ 8,279
3 THRU 12 MONTHS . . . . . . . . . . . . . . . . . . . . . 18,963
1 THRU 5 YEARS . . . . . . . . . . . . . . . . . . . . . . 22,133
OVER 5 YEARS . . . . . . . . . . . . . . . . . . . . . . . 6,544
------
TOTAL FIXED RATE . . . . . . . . . . . . . . . . . . . . 55,919
FLOATING RATE LOANS REPRICING:
QUARTERLY . . . . . . . . . . . . . . . . . . . . . . . . $ 23,664
YEARLY . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------
TOTAL FLOATING RATE . . . . . . . . . . . . . . . . . . 23,735
TOTAL LOANS . . . . . . . . . . . . . . . . . . . . . . $ 79,654
===-----
</TABLE>
42
<PAGE> 45
NON-PERFORMING ASSETS
A "past due" loan is an accruing loan that is contractually past due 90
days or more as to principal or interest payments. Management classifies a loan
as nonaccrual when it becomes apparent that the principal and/or interest is
doubtful or when the loan becomes 90 days past due and is secured by collateral
with sufficient realizable value to recover at least the principal. When a loan
is placed on nonaccrual status, interest is no longer accrued or included in
interest income and previously accrued income is reversed. A loan is restored
to accrual status when all interest and principal payments are current and the
borrower has demonstrated the ability to make payments of principal and
interest as scheduled. Restructured loans include those for which there has
been a reduction in the stated interest rate, extension of maturity, reduction
in face amount of debt, or reduction in accrued interest. Real estate acquired
by the Bank as a result of foreclosure is classified as other real estate owned
until such time as it is sold.
The following is an analysis of nonaccrual loans, past due loans and other
real estate of the Bank at the dates indicated:
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NON-ACCRUAL LOANS:
REAL ESTATE . . . . . . . . . . 0 19 0 0 80
INSTALLMENT . . . . . . . . . . 4 7 77 51 58
COMMERCIAL . . . . . . . . . . 17 0 26 0 0
ACCRUING LOANS WHICH ARE
PAST DUE 90 DAYS OR MORE
AND NOT ON NON-ACCRUAL:
REAL ESTATE . . . . . . . . . . 0 6 0 0 0
INSTALLMENT . . . . . . . . . . 5 0 0 0 0
OTHER REAL ESTATE . . . . . . . . 538 894 250 363 401
--- --- --- --- ---
TOTAL NONPERFORMING
ASSETS . . . . . . . . . . . 564 926 353 414 539
--- --- --- --- ---
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The balance of the allowance for loan losses at December 31, 1996 was
$1,083,827 compared to the December 31, 1995 balance of $1,040,936 and the
December 31, 1994 balance of $1,071,666.
Inherent in the Bank's lending activities is the risk that loan losses will
be experienced and that the risk of loss will vary with the type of loan being
made and the creditworthiness of the borrower over the term of the loan. To
reflect the currently perceived risk of loss associated with the Bank's loan
portfolio, provisions are made to the allowance for loan losses. The allowance
is created by direct charges against income and is available for loan losses.
The amount of the allowance for loan losses and the provisions for loan losses
is evaluated quarterly, based on management's estimate of risk in the overall
loan portfolio and the estimated exposure on individual loans. In evaluating
the adequacy of the allowance and the amount of the provision, consideration is
given to such factors as: management's evaluation of specific loans; the level
and composition of classified loans; historical loss experience; results of
examination by regulatory agencies and an internal asset review process;
expectations of future national and local economic conditions and their impact
on particular industries and the individual borrowers; the market value of
collateral and strength of available guaranties; concentrations of credit; and
other judgmental factors.
43
<PAGE> 46
In 1996, the Bank made provisions totaling $20,000 to increase the
allowance for loan losses while in 1995 and 1994, the provision for each year
was $0. The increase in 1996 was due to continued increases in loan balances
particularly commercial and installment loans. No provisions were made in 1995
and 1994 because of continued improvement in credit quality and an upswing in
the local economy. The allowance for loan losses at December 31, 1996, 1995,
and 1994 was 1.36%, 1.63%, and 1.75%, respectively, of loans net of unearned
income. Management considers the allowance to be adequate based on its
assessment of the loan portfolio.
The following table presents an analysis of the allowance for loan losses for
the past five years:
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
December 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE
LOAN LOSSES:
BALANCE AT BEGINNING
OF YEAR . . . . . . . . . . . $1,041 $1,072 $ 957 $1,021 $1,164
RECOVERIES . . . . . . . . . . 50 25 127 108 186
LESS: CHARGE-OFFS . . . . . . . 27 56 12 172 329
PROVISION FOR LOAN LOSSES . . . 20 0 0 0 0
ADJUSTMENTS . . . . . . . . . . 0 0 0 0 0
----- ----- ----- ----- -----
BALANCE AT END OF YEAR . . . . 1,084 1,041 1,072 957 1,021
----- ----- ----- ----- -----
CHARGE-OFFS
REAL ESTATE . . . . . . . . . . 0 0 0 139 187
INSTALLMENT . . . . . . . . . . 27 53 12 0 87
COMMERCIAL . . . . . . . . . . 27 3 0 33 55
------ ----- ----- ----- -----
TOTAL . . . . . . . . . . . . 27 56 12 172 329
------ ----- ----- ----- -----
RECOVERIES:
REAL ESTATE . . . . . . . . . . 0 0 71 50 80
INSTALLMENT . . . . . . . . . . 3 1 6 14 21
COMMERCIAL . . . . . . . . . . 47 24 50 44 85
------ ----- ----- ----- -----
TOTAL . . . . . . . . . . . . $ 50 $ 25 $ 127 $ 108 $ 186
------ ----- ----- ----- -----
NET CHARGE-OFFS
TO AVERAGE LOANS . . . . . . . (.03)% 0.05% (.22)% 0.22% 0.48%
------ ------ ------ ------ ------
</TABLE>
INVESTMENT SECURITIES
The Bank has established uniform investment and funds management procedures
to satisfy its liquidity requirements while attempting to maximize earnings and
asset quality. Management assesses the short- and long-term needs of the Bank
through consideration of loan demand, interest rate factors, and prevailing
market conditions on a regular basis. This assessment leads to recommendations
for purchases and other transactions that are made considering safety,
liquidity, and maximization of return to the Bank. Management's strategy for
securities is to maintain a high quality portfolio through investing primarily
in agency-issued callable securities, longer term non-callable, tax-free
municipal bonds and medium-to-short term non-callable U.S. Treasuries. The Bank
does not engage in the trading of securities.
The investment security portfolio has remained relatively stable during the
years 1994 through 1996. At December 31, 1996, 1995, and 1994, the investment
security portfolio totaled $43,664,781, $43,063,294, and $38,490,338,
respectively.
44
<PAGE> 47
DEPOSITS
At December 31, 1996, deposits totaled $131,671,009, an increase of
approximately $12,160,398 from the December 31, 1995 balance of $119,510,611.
Deposits totaled $102,277,725 at December 31, 1994. The increases were due to
increased marketing efforts and service and the customer attrition from the
consolidation of the larger competitors in the area.
LIQUIDITY
Liquidity for the Bank is the ability to raise funds at a reasonable cost,
fund asset growth, meet deposit withdrawals and customer's borrowing needs,
satisfy maturities of short-term borrowing and maintain reserve requirements.
In order to meet its liquidity needs, the Bank invests in money market assets
such as federal funds sold to other financial institutions.
The Bank monitors its liquidity position periodically in relation to
changes in long- and short-term interest rates. The maturity distributions and
interest sensitivity of assets and liabilities are adjusted in response to
those changes.
At December 31, 1996, 1995, and 1994 the Bank's loan-to-deposit ratio was
60.50%, 53.29% and 59.77%, respectively. The Bank has not had a problem
meeting its liquidity needs.
INTEREST RATE SENSITIVITY MANAGEMENT
The primary objective of monitoring the Bank's interest rate sensitivity,
or inherent rate risk, is to provide management the tools necessary to manage
the balance sheet to minimize adverse changes in net interest income as a
result of changes in the direction and level of interest rates. Federal Reserve
monetary control efforts and legislative changes have been significant factors
affecting the management of interest rate sensitivity positions in recent
years.
Repricing characteristics are the time frames at which interest-earning
assets and interest-bearing liabilities are subject to changes in interest
rates either at replacement or maturity. Sensitivity is measured as the
difference between the volume of assets and liabilities in the Bank's current
portfolio that are subject to repricing sensitivity gaps and are usually
calculated separately for various segments of time and on a cumulative basis.
45
<PAGE> 48
Any excess of assets or liabilities results in an interest rate sensitivity
gap. A positive gap denotes asset sensitivity and a negative gap represents
liability sensitivity. The following table shows interest sensitivity for three
different intervals as of December 31, 1996.
INTEREST RATE SENSITIVITY ANALYSIS
AS OF DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
0-90 91-365 OVER
DAYS DAYS 1 YEAR TOTAL
---- ---- ------ -----
<S> <C> <C> <C> <C>
EARNING ASSETS
LOANS . . . . . . . . . . . . . . . . . . . . . . $31,943 $19,034 $28,677 $79,654
SECURITIES . . . . . . . . . . . . . . . . . . . 8,476 3,015 32,174 43,665
FED FUNDS SOLD . . . . . . . . . . . . . . . . . 10,264 10,264
------ ------ ------- --------
TOTAL . . . . . . . . . . . . . . . . . . . . . 50,683 22,049 60,851 133,583
INTEREST-BEARING LIABILITIES
NOW ACCOUNTS . . . . . . . . . . . . . . . . . . 10,523 10,523
MMDA ACCOUNTS . . . . . . . . . . . . . . . . . . 16,428 16,428
REGULAR SAVINGS . . . . . . . . . . . . . . . . 5,273 5,273
CERT. OF DEP. . . . . . . . . . . . . . . . . . . 17,818 42,296 19,192 79,306
------ ------ ------ -------
TOTAL . . . . . . . . . . . . . . . . . . . . . 50,042 42,296 19,192 111,530
INT. SENS. GAP . . . . . . . . . . . . . . . . . . 641 (20,247) 41,659 22,053
------ -------- ------ ------
CUMULATIVE GAP . . . . . . . . . . . . . . . . . . $ 641 $(19,606) $22,053
------- --------- ------
</TABLE>
The Bank has a negative one-year cumulative repricing gap of ($19,606) as
of December 31, 1996. A negative gap implies that net interest income would
increase in a falling rate environment and decrease in a rising rate
environment. However, the degree of interest rate sensitivity is not equal for
all types of assets and liabilities. The Bank's experience has indicated that
the repricing of interest-bearing demand, savings, and money market accounts
does not move with the same magnitude as general market rates. Additionally,
the Bank considers these deposits to be "core" deposits along with non-interest
bearing deposits. This stability would indicate a much longer implicit maturity
than their contractual maturity. With these considerations, the Bank feels that
an increase or decrease in market interest rates is unlikely to produce
unacceptable volatility in net interest income.
CAPITAL RESOURCES
SB&T's shareholders' equity of $10,630,579 at December 31, 1996 remains at
a level considered to be adequate by management. The increase in shareholders'
equity from $7,299,817 at December 31, 1994 to $10,630,579 at December 31, 1996
was due to continued profits.
At December 31, 1996 the Bank had a Tier 1 and a total capital ratio of
10.87% and 12.00%, respectively. At December 31, 1995, the Bank had a Tier 1
and a total capital ratio of 10.76% and 12.01%, respectively. At December 31,
1994, the Bank had a Tier 1 and a total capital ratio of 9.87% and 11.12%,
respectively.
In addition, at December 31, 1996, 1995, and 1994, the Bank's leverage
ratio was 7.24%, 6.79%, and 6.75%, respectively.
46
<PAGE> 49
EFFECTS OF INFLATION
The majority of the assets and liabilities of a financial institution are
monetary in nature; therefore, a financial institution differs greatly from
most commercial and industrial companies which have significant investments in
fixed assets or inventories. However, inflation does have an important impact
on the growth of total assets in the banking industry and the resulting need to
increase equity to asset ratio. Inflation also affects non-interest expenses
which tend to rise during periods of general inflation and which will lower
bank profits.
BUSINESS OF SB&T
SB&T is a bank holding company organized under the laws of the state of
Georgia with its principal executive office located in Smyrna, Georgia. SB&T
operates principally through the Bank, which is a state-chartered commercial
bank and which provides a range of retail banking services through three
offices in Cobb County, Georgia. At December 31, 1996, SB&T had total
consolidated assets of approximately $144.9 million, total consolidated
deposits of approximately $131.7 million, and total consolidated stockholders'
equity of approximately $10.6 million. SB&T's principal executive office is
located at 888 Concord Road, Smyrna, Georgia, 30080, and its telephone number
at such address is (770) 434-8185.
BUSINESS AND PROPERTIES
The Bank offers a full range of traditional commercial banking services,
including demand, savings, and time deposits, consumer, commercial and real
estate loans, drive-in banking facilities and access to 24-hour teller machines
through various networks.
As of December 31, 1996, the Bank had approximately 50 employees. No
employees are represented by unions or other bargaining units, and management
considers its relations with employees to be satisfactory.
COMPETITION
SB&T encounters vigorous competition in its market areas from a number of
sources, including bank holding companies and commercial banks, thrift
institutions, other financial institutions and financial intermediaries.
Regional interstate banking laws and other recent federal and state laws have
resulted in increased competition from both conventional banking institutions
and other business offering financial services and products. The Bank also
competes for interest bearing funds with a number of other financial
intermediaries and investment alternatives, including brokerage firms "money
market" funds, government and financial institutions, some of which have
greater financial resources than SB&T. At December 31, 1996, there were
approximately 125 commercial bank branches, 2 savings bank branches, and 10
credit union branches competing in Cobb County.
LEGAL PROCEEDINGS
SB&T and the Bank are not parties to any material legal proceedings other
than ordinary routine litigation incidental to their business.
47
<PAGE> 50
MANAGEMENT
The following table presents information about the directors and executive
officers of SB&T and the Bank:
<TABLE>
<CAPTION>
PRESENT OCCUPATION POSITION AND DIRECTOR OR NUMBER OF SHARES
AND PRINCIPAL OFFICES HELD EXECUTIVE BENEFICIALLY OWNED(1)
OCCUPATION FOR WITH SB&T OFFICER AT THE RECORD DATE
NAME LAST FIVE YEARS AND BANK SINCE AND PERCENT OF CLASS
- --------------------- --------------- -------- ----- --------------------
<S> <C> <C> <C> <C> <C>
Chester A. Austin Vice President Director 1994 3,795 .37%
Tip Top Poultry,
Inc.
Charles E. Camp Attorney Director 1988 27,535 2.69
Jack W. Corn Retired Director 1993 57,879(2) 5.66
R. Larry Freeman President Director 1988 94,129(3) 9.20
Consolidated
Disposal
Systems, Inc.
Charles J. Jones Developer Chairman 1988 88,007(4) 8.60
Paul E. Lee Engineer Director 1988 7,785 .76
Robert C. Mulliniks, MD Medical Doctor Director 1988 75,159(3)(5) 7.35
James C. Pitts, D.D.S. Dentist Director 1988 59,419(6) 5.81
R. L. Potts, Sr. Retired Real 1988 85,279(7) 8.34
Estate Developer Director
James C. Wallace Jim Wallace Director 1988 71,079(3) 6.95
Service Stations
B. J. Alexander Bank President President of 1991 5,115 .50
SB&T and
the Bank
Leonard W. Thomas Bank CFO Secretary/ 1993 165 .02
Treasurer of
SB&T; SVP
of the Bank
- ------------------
</TABLE>
(1) Unless otherwise indicated, the beneficial owner has both sole voting
and sole investment powers over his shares.
(2) Includes 5,000 shares owned by Corn Enterprises and 52,734 shares
owned by The Corn Family Partnership LP.
(3) Includes shares owned by the director and his wife.
(4) Does not include 2,200 shares owned by Mr. Jones' wife, as to which
he disclaims beneficial ownership. It does include 22,000 shares owned
by Mr. Jones' Pension Plan.
(5) Includes 5,400 shares of stock owned by Dr. Mulliniks' Pension Plan
and 10,000 shares owned by Dr. Mulliniks' grandchildren.
(6) Includes 32,349 shares owned by Dr. Pitts' Profit Sharing Plan.
(7) Includes 2,200 shares owned jointly by Mr. Potts and his sons and
12,000 shares for which Mr. Potts has Power of Attorney to vote.
EMPLOYEE BENEFIT PLANS
The Bank has a contributory 401(k) profit-sharing plan covering all
employees, subject to certain minimum age and service requirements. The Bank
contributed $29,678, $20,391, and $21,770 to the plan for the years ended
December 31, 1996, 1995, and 1994, respectively.
48
<PAGE> 51
SB&T has reserved 69,409 shares of SB&T Common Stock to be awarded to key
officers under a Key Officer Stock Option Plan. This plan is administered by a
committee of the Board of Directors and provides for the granting of options to
purchase shares of SB&T Common Stock to key officers of the Bank. Options are
exercisable in whole or in part upon such terms as may be determined by the
committee. Options will not be exercisable later than ten years after the date
of grant and vest in equal increments over a five-year period. The exercise
price of each option is equivalent to the fair market value of the SB&T Common
Stock on the date of the grant. None of SB&T's directors and executive officers
holds options.
SB&T has several deferred compensation agreements with its directors, its
president and a former employee which provide benefits payable at age
sixty-five or if the individual becomes totally disabled. Under certain
circumstances, benefits are payable to the individual beneficiary. The present
value of the estimated liability under the agreements is being accrued over the
expected remaining years of employment, if applicable. The estimated amounts to
be paid under the agreements are being accrued from the date of the agreements
to the expected retirement date. Payments to the former employee are being made
monthly and the related liability is being adjusted to reflect payments. In
1996, 1995, and 1994 SB&T expensed $119,772, $88,266, and $48,495,
respectively, for deferred compensation relating to these agreements. Accrued
deferred compensation of $318,880 and $253,946 as of December 31, 1996 and
1995, respectively, is reflected in other liabilities in SB&T's financial
statements included elsewhere in this Proxy Statement/Prospectus. SB&T has
purchased insurance policies on the lives of the directors and its president
which it intends to use to fund the death and retirement benefits to be paid
under their agreements. The cash surrender value of the policies of $2,180,832
and $1,994,248 as of December 31, 1996 and 1995, respectively, is recorded in
other assets in SB&T's financial statements included elsewhere in this Proxy
Statement/Prospectus.
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, the Bank has loans, deposits and other
transactions with its executive officers, directors, and organizations with
which such persons are associated. Such transactions are on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with others. The aggregate amount of loans to
the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of December 31, 1996 were approximately $4,489,295.
49
<PAGE> 52
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF SB&T
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of SB&T 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 (1)
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Jack W. Corn 57,879(2) 5.66%
1100 Hazeltine Ln.
Kennesaw, GA 30144
Common Stock R. L. Freeman 94,129(3) 9.20
1760 Point Pleasant
The Vinings
Smyrna, GA 30080
Common Stock Charles J. Jones 88,007(4) 8.60
4181 Brunswick Court
Smyrna, GA 30080
Common Stock Robert C. Mulliniks, M.D. 75,159(3)(5) 7.35
570 Colston Road
Marietta, GA 30064
Common Stock James C. Pitts, D.D.S. 59,419(6) 5.81
573 Concord Road
Smyrna, GA 30080
Common Stock R. L. Potts, Sr. 85,279(7) 8.34
4108 Ridge Road
Smyrna, GA 30080
Common Stock James C. Wallace 71,079(3) 6.95
3028 Bakers Meadow
Atlanta, GA 30339
</TABLE>
- ---------------
(1) Unless otherwise indicated, the beneficial owner has both sole voting
and sole investment powers over his shares.
(2) Includes 5,000 shares owned by Corn Enterprises and 52,734 shares
owned by The Corn Family Partnership LP.
(3) Includes stock owned by the director and his wife. (4) Does not
include 2,200 shares owned by Mr. Jones' wife as to which Mr. Jones
disclaims beneficial ownership. It does include 22,000 shares owned by
Mr. Jones' Pension Plan.
(5) Includes 5,400 shares of stock owned by Dr. Mulliniks' Pension Plan
and 10,000 shares owned by Dr. Mulliniks' grandchildren.
(6) Includes 32,349 shares owned by Dr. Pitts' Profit Sharing Plan.
(7) Includes 2,200 shares owned jointly by Mr. Potts and his sons and
12,000 shares for which Mr. Potts has Power of Attorney to vote.
50
<PAGE> 53
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 377 banking offices located in Alabama, Florida, Georgia,
Louisiana, and Tennessee as of December 31, 1996. At that date, Regions had
total consolidated assets of approximately $18.9 billion, total consolidated
deposits of approximately $15.0 billion and total consolidated stockholders'
equity of approximately $1.6 billion. Regions operates banking subsidiaries in
Alabama, Florida, Georgia, Louisiana, and Tennessee and banking-related
subsidiaries engaged in mortgage banking, credit life insurance, and investment
brokerage activities with offices in various Southeastern states. Through its
subsidiaries, Regions offers a broad range of banking and banking-related
services.
The following table presents information about Regions' banking operations
in the states in which its subsidiary depository institutions are located,
based on December 31, 1996 information:
<TABLE>
<CAPTION>
NUMBER OF TOTAL TOTAL
BANKING OFFICES ASSETS DEPOSITS
--------------- ------ --------
(In thousands)
<S> <C> <C> <C>
Alabama . . . . 183 $11,923 $9,044
Florida . . . . 36 1,194 1,081
Georgia . . . . 74 3,473 2,998
Louisiana . . . 59 2,155 1,820
Tennessee . . . 25 507 458
</TABLE>
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 four financial institutions (the "Recently Completed
Acquisitions"), certain aspects of which transactions are set forth in the
following table:
51
<PAGE> 54
<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 Purchase
Louisiana Common
Stock
-------- ------
Totals $ 1,048 $ 245
- --------------- ======== ======
</TABLE>
Other Pending Acquisitions. As of the date of this Proxy
Statement/Prospectus, Regions has pending three acquisitions in addition to
SB&T (the "Other Pending Acquisitions," and, together with the Recently
Completed Acquisitions, the "Other Acquisitions"), certain aspects of which
transactions are set forth below:
<TABLE>
<CAPTION>
CONSIDERATION
---------------------
APPROXIMATE
-----------------------
ACCOUNTING
INSTITUTION ASSET SIZE VALUE(1) TYPE TREATMENT
----------- ---------- ----- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
First Mercantile National Bank, located in Longwood, $ 145 $ 21 Regions Purchase
Florida Common
Stock
First Bankshares, Inc., located in Hapeville 106 19 Regions Pooling
Georgia Common of
Stock Interests
The New Iberia Bancorp, Inc., located in New 299 65 Regions Pooling
Iberia, Louisiana Common of
-------- -------- Stock Interests
Totals $ 550 $ 105
- --------------- ======== =====
</TABLE>
(1) Calculated as of the date of announcement of the transaction.
52
<PAGE> 55
Consummation of the Other Pending Acquisitions is subject to the approval
of certain regulatory agencies, and of the stockholders of the institutions to
be acquired. Moreover, the closing of each transaction is subject to various
contractual conditions precedent. No assurance can be given that the conditions
precedent to consummating the transactions will be satisfied in a manner that
will result in their consummation.
If the Other Acquisitions and Merger had been consummated on December 31,
1996, Regions' total consolidated assets would have increased by approximately
$1.7 billion to approximately $20.6 billion; its total consolidated deposits
would have increased by approximately $1.5 billion to approximately $16.5
billion; and its total consolidated stockholders' equity would have increased
by approximately $120 million to approximately $1.7 billion.
Proposed Stock Split. Subject to stockholder approval of a proposed
amendment to the certificate of incorporation to increase the number of
authorized shares from 120,000,000 to 240,000,000, Regions intends to effect a
2 for 1 stock split on June 13, 1997.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to Regions and SB&T. Additional
information is available in Regions' Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. See "Documents Incorporated by Reference."
GENERAL
Regions and SB&T are both bank holding companies registered with the
Federal Reserve under the BHC Act. As such, Regions and SB&T and their non-bank
subsidiaries are subject to the supervision, examination, and reporting
requirements of the BHC Act and the regulations of the Federal Reserve. In
addition, as a savings and loan holding company, Regions is also registered
with the OTS and is subject to the regulation, supervision, examination, and
reporting requirements of the OTS.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the Community Reinvestment Act of 1977.
53
<PAGE> 56
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective in September 1995, repealed
the prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that Regions, and any other bank holding company
located in Alabama may now acquire a bank located in any other state, and any
bank holding company located outside Alabama may lawfully acquire any
Alabama-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether. As of the date of this Proxy Statement/Prospectus, none
of the states in which the banking subsidiaries of Regions or SB&T are located
has either moved up the date after which interstate branching will be
permissible or "opted out." Assuming no state action prior to June 1, 1997,
Regions would be able to consolidate all of its bank subsidiaries into a single
bank with interstate branches following that date.
The BHC Act generally prohibits Regions and SB&T 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 SB&T 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 SB&T (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 SB&T are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and SB&T, including cash flow to pay
54
<PAGE> 57
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
SB&T, as well as by Regions and SB&T to their stockholders.
As to the payment of dividends, the Bank and all of Regions'
state-chartered banking subsidiaries are subject to the respective laws and
regulations of the state in which the bank is located, and to the regulations
of the bank's primary federal regulator. Regions' subsidiaries that are thrift
institutions are subject to the OTS' capital distributions regulation.
If, in the opinion of the federal banking regulatory agency, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), an insured
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements which
provide that bank holding companies and insured banks should generally pay
dividends only out of current operating earnings.
At December 31, 1996, under dividend restrictions imposed under federal and
state laws, the subsidiary depository institutions of Regions and SB&T, without
obtaining governmental approvals, could declare aggregate dividends to Regions
and SB&T of approximately $169 million and $949,000 respectively.
The payment of dividends by Regions and SB&T 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, SB&T, and their respective subsidiary depository institutions are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of Regions and SB&T and the appropriate federal
banking regulator in the case of each of their subsidiary depository
institutions. There are two basic measures of capital adequacy for bank holding
companies that have been promulgated by the Federal Reserve: a risk-based
measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
At December 31, 1996, Regions' consolidated Total Capital Ratio and its Tier 1
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were
13.59% and 10.81%, respectively, and SB&T's Total Capital and Tier 1 Capital
Ratios were 12.00% and 10.87%, respectively.
55
<PAGE> 58
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3.0%, plus an additional cushion of 100 to 200 basis
points. Regions' and SB&T's respective Leverage Ratios at December 31, 1996
were 7.44% and 7.34%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital
leverage ratio" (deducting all intangibles) and other indicators of capital
strength in evaluating proposals for expansion or new activities.
Each of Regions' and SB&T's subsidiary depository institutions is subject
to risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the Federal
Reserve. Each of the subsidiary depository institutions was in compliance with
applicable minimum capital requirements as of December 31, 1996. Neither
Regions, SB&T, nor any of their subsidiary depository institutions has been
advised by any federal banking agency of any specific minimum capital ratio
requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the OCC, and the FDIC have,
pursuant to FDICIA, recently adopted final regulations requiring regulators to
consider interest rate risk (when the interest rate sensitivity of an
institution's assets does not match the sensitivity of its liabilities or its
off-balance-sheet position) in the evaluation of a bank's capital adequacy. The
bank regulatory agencies have concurrently proposed a methodology for
evaluating interest rate risk which would require banks with excessive interest
rate risk exposure to hold additional amounts of capital against such
exposures. The OTS has already included an interest-rate risk component in its
risk-based capital guidelines for savings associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Regions and SB&T are expected to act as
sources of financial strength for, and to commit resources to support, each of
their respective banking subsidiaries. This support may be required at times
when, absent such Federal Reserve policy, Regions or SB&T 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
56
<PAGE> 59
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.
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.
57
<PAGE> 60
At December 31, 1996, all of the subsidiary depository institutions of
Regions and SB&T 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. Assessment rates for members of both the Bank
Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") for
the first half of 1995, as they had been during 1994, ranged from 23 basis
points (0.23% of deposits) for an institution in the highest category (i.e.,
"well capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern"). These rates were established for both funds to achieve a
designated ratio of reserves to insured deposits (i.e., 1.25%) within a
specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning in 1996, the deposit insurance premiums for 92% of all BIF members in
the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates have
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, in July 1995, the FDIC, the
Treasury Department, and the OTS released statements outlining a proposed plan
to recapitalize the SAIF, the principal feature of which was a special one-time
assessment on depository institutions holding SAIF-insured deposits, which was
intended to recapitalize the SAIF at a reserve ratio of 1.25%. This proposal
contemplated elimination of the disparity between the assessment rates on BIF
and SAIF deposits following recapitalization of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds Act of
1996 (the "Funds Act") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC has implemented a special one-time assessment of approximately
65.7 basis points (0.657%) on a depository institution's SAIF-insured deposits
held as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions). Regions recorded a
charge against earnings for the special assessment in the quarter ended
September 30, 1996 in the pre-tax amount of approximately $21.0 million. SB&T
was not affected by the special assessment.
In addition, the FDIC revised the SAIF assessment rate schedule to effect
(i) a widening in the assessment rate spread among institutions in the
different capital and risk assessment categories and (ii) an overall
58
<PAGE> 61
reduction of the assessment rate range assessable on SAIF deposits of from 0 to
27 basis points. Effective January 1, 1997, FICO assessments will be imposed on
both BIF- and SAIF-insured deposits in annual amounts presently estimated at
1.29 basis points and 6.44 basis points, respectively. Beginning in January,
2000, BIF- and SAIF-insured institutions will share the FICO interest costs at
equal rates currently estimated at 2.43 basis points. Regions anticipates that
the net effect of the decrease in the premium assessment rate on SAIF deposits
will result in a reduction in its total deposit insurance premium assessments
for the years 1997 through 1999, assuming no further changes in announced
premium assessment rates.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 120,000,000 shares of Regions Common Stock,
of which 66,435,634 shares were issued at March 17, 1997, none of which were
held as treasury shares. 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 December 31, 1996, under
such requirements and guidelines, Regions' subsidiary institutions had $169
million of undivided profits legally available for the payment of dividends.
See "Certain Regulatory Considerations--Payment of Dividends."
For a further description of Regions Common Stock, see "Effect of the
Merger on Rights of Stockholders."
STOCKHOLDER PROPOSALS
Regions expects to hold its next annual meeting of stockholders after the
Merger during May 1998. Under SEC rules, proposals of Regions stockholders
intended to be presented at that meeting must be 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.
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 the Annual Report of Regions 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 SB&T, included in this
Registration Statement, have been audited by Mauldin & Jenkins, independent
auditors, for the periods indicated in their report thereon which is included
herein. The financial statements audited by Mauldin & Jenkins have been
included herein in reliance on their report given on their authority as experts
in accounting and auditing.
59
<PAGE> 62
OPINIONS
The legality of the shares of Regions Common Stock to be issued in the
Merger will be passed upon by Lange, Simpson, Robinson & Somerville,
Birmingham, Alabama. Henry E. Simpson, partner in the law firm of Lange,
Simpson, Robinson & Somerville, is a member of the Board of Directors of
Regions. As of April 25, 1997, attorneys in the law firm of Lange, Simpson,
Robinson & Somerville owned an aggregate of 118,745 shares of Regions Common
Stock.
Certain tax consequences of the transaction have been passed upon by Alston
& Bird, Atlanta, Georgia.
60
<PAGE> 63
INDEX TO SB&T FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................ F-2
FINANCIAL STATEMENTS
Consolidated balance sheets............................... F-3
Consolidated statements of income......................... F-4
Consolidated statements of stockholders' equity........... F-5
Consolidated statements of cash flows..................... F-6
Notes to consolidated financial statements................ F-7
</TABLE>
F-1
<PAGE> 64
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
SB&T Corporation and Subsidiary
Smyrna, Georgia
We have audited the accompanying consolidated balance sheets of SB&T
Corporation and subsidiary as of December 31, 1996, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly the financial position of SB&T Corporation and subsidiary as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ MAULDIN & JENKINS
- --------------------------------------
Mauldin & Jenkins
Atlanta, Georgia
January 31, 1997
F-2
<PAGE> 65
SB&T CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 4,731,421 $ 5,451,245
Federal funds sold.......................................... 10,264,000 11,187,000
Securities available-for-sale............................... 7,845,685 11,047,842
Securities held-to-maturity, fair value ($35,576,797 and
$31,775,659).............................................. 35,819,096 32,015,452
Mortgage loans available-for-sale........................... -- 905,200
Loans....................................................... 79,654,496 63,691,862
Less allowance for loan losses.............................. 1,083,827 1,040,936
------------ ------------
Loans, net................................................ 78,570,669 62,650,926
Premises and equipment...................................... 3,194,722 3,215,128
Other assets................................................ 4,497,010 4,532,353
------------ ------------
Total assets...................................... $144,922,603 $131,005,146
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand................................ $ 20,141,513 $ 18,913,683
Interest-bearing demand................................... 26,950,823 25,578,502
Savings................................................... 5,272,653 4,833,116
Time, $100,000 and over................................... 21,851,795 20,006,525
Other time................................................ 57,454,225 50,178,785
------------ ------------
Total deposits.................................... 131,671,009 119,510,611
Other liabilities........................................... 2,621,015 2,501,176
------------ ------------
Total liabilities................................. 134,292,024 122,011,787
------------ ------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 5,000,000 shares authorized,
1,020,644 and 1,018,884 shares issued and
outstanding............................................ 1,020,644 1,018,884
Capital surplus........................................... 3,820,552 3,813,912
Retained earnings......................................... 5,808,383 4,218,563
Unrealized losses on securities available-for-sale, net of
tax.................................................... (19,000) (58,000)
------------ ------------
Total stockholders' equity........................ 10,630,579 8,993,359
------------ ------------
Total liabilities and stockholders' equity........ $144,922,603 $131,005,146
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 66
SB&T CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME:
Loans................................................... $ 7,983,876 $6,961,592 $5,250,814
Taxable securities...................................... 2,107,610 2,097,190 2,070,748
Nontaxable securities................................... 240,376 146,215 120,345
Federal funds sold...................................... 663,441 704,211 161,197
----------- ---------- ----------
Total interest income........................... 10,995,303 9,909,208 7,603,104
Interest expense on deposits.............................. 5,365,819 4,710,242 3,048,024
----------- ---------- ----------
Net interest income............................. 5,629,484 5,198,966 4,555,080
Provision for loan losses................................. 20,000 -- --
----------- ---------- ----------
Net interest income after provision for loan
losses........................................ 5,609,484 5,198,966 4,555,080
----------- ---------- ----------
OTHER INCOME:
Service charges on deposit accounts..................... 431,300 407,702 371,864
Mortgage origination income............................. 273,993 436,958 310,567
Gain on sale of other real estate....................... 43,823 -- 145,997
Other operating income.................................. 259,599 216,886 114,370
----------- ---------- ----------
Total other income.............................. 1,008,715 1,061,546 942,798
----------- ---------- ----------
OTHER EXPENSES:
Salaries and employee benefits.......................... 2,116,390 2,266,638 1,946,236
Equipment expenses...................................... 312,739 287,561 249,324
Occupancy expenses...................................... 259,854 255,032 204,533
Other operating expenses................................ 1,137,393 1,082,222 1,178,247
----------- ---------- ----------
Total other expenses............................ 3,826,376 3,891,453 3,578,340
----------- ---------- ----------
Income before income taxes...................... 2,791,823 2,369,059 1,919,538
Income tax expense........................................ 895,810 751,324 619,514
----------- ---------- ----------
Net income...................................... $ 1,896,013 $1,617,735 $1,300,024
=========== ========== ==========
Net income per share of common and common stock
equivalents............................................. $ 1.86 $ 1.58 $ 1.27
----------- ---------- ----------
Average shares outstanding................................ 1,020,634 1,020,602 1,020,602
=========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 67
SB&T CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
LOSSES
ON SECURITIES
COMMON STOCK AVAILABLE- TOTAL
---------------------- CAPITAL RETAINED FOR-SALE, STOCKHOLDERS'
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAX EQUITY
--------- ---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993.................... 1,018,884 $1,018,884 $3,813,912 $1,861,190 $ -- $ 6,693,986
Net income.............. -- -- -- 1,300,024 -- 1,300,024
Dividends declared,
$.275 per share...... -- -- -- (280,193) -- (280,193)
Net change in unrealized
losses on securities
available-for-sale,
net of tax........... -- -- -- -- (414,000) (414,000)
--------- ---------- ---------- ---------- --------- -----------
Balance, December 31,
1994.................... 1,018,884 1,018,884 3,813,912 2,881,021 (414,000) 7,299,817
Net income.............. -- -- -- 1,617,735 -- 1,617,735
Dividends declared,
$.275 per share...... -- -- -- (280,193) -- (280,193)
Net change in unrealized
losses on securities
available-for-sale,
net of tax........... -- -- -- -- 356,000 356,000
--------- ---------- ---------- ---------- --------- -----------
Balance, December 31,
1995.................... 1,018,884 1,018,884 3,813,912 4,218,563 (58,000) 8,993,359
Net income.............. -- -- -- 1,896,013 -- 1,896,013
Exercise of stock
options.............. 1,760 1,760 6,640 -- -- 8,400
Dividends declared, $.30
per share............ -- -- -- (306,193) -- (306,193)
Net change in unrealized
losses on securities
available-for-sale,
net of tax........... -- -- -- -- 39,000 39,000
--------- ---------- ---------- ---------- --------- -----------
Balance, December 31,
1996.................... 1,020,644 $1,020,644 $3,820,552 $5,808,383 $ (19,000) $10,630,579
========= ========== ========== ========== ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 68
SB&T CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 1,896,013 $ 1,617,735 $ 1,300,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 241,672 217,500 181,241
Provision for loan losses................... 20,000 -- --
Gain on sale of other real estate........... (43,823) -- --
Net realized gain on sale of securities
available-for-sale........................ -- -- (302)
Deferred income taxes....................... (27,187) (22,776) 4,308
Net (increase) decrease in mortgage loans
available-for-sale........................ 905,200 (70,125) 1,277,654
Increase in interest receivable............. (49,752) (93,831) (277,534)
Increase (decrease) in interest payable..... (546) 621,861 427,797
Other operating activities.................. (330,437) 168,752 (1,920,092)
------------ ------------ ------------
Net cash provided by operating
activities........................... 2,611,140 2,439,116 993,096
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of securities available-for-sale..... (1,379,406) (1,735,841) (3,225,861)
Proceeds from sales of securities
available-for-sale.......................... -- -- 3,498,438
Proceeds from maturities of securities
available-for-sale.......................... 4,640,563 2,791,054 1,084,368
Purchases of securities held-to-maturity....... (8,314,823) (5,699,144) (2,497,639)
Proceeds from maturities of securities held-to-
maturity.................................... 4,511,179 610,975 162,826
Net (increase) decrease in Federal funds
sold........................................ 923,000 (10,991,000) 1,554,000
Net increase in loans.......................... (15,939,743) (3,233,584) (18,411,213)
Proceeds from sale of other real estate........ 560,927 -- --
Purchase of premises and equipment............. (221,266) (760,705) (432,130)
------------ ------------ ------------
Net cash used in investing
activities........................... (15,219,569) (19,018,245) (18,267,211)
------------ ------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits....................... 12,160,398 17,232,886 18,079,580
Exercise of stock options...................... 8,400 -- --
Dividends paid................................. (280,193) (330,832) (254,721)
------------ ------------ ------------
Net cash provided by financing
activities........................... 11,888,605 16,902,054 17,824,859
------------ ------------ ------------
Net increase (decrease) in cash and due from
banks.......................................... $ (719,824) $ 322,925 $ 550,744
Cash and due from banks at beginning of year..... 5,451,245 5,128,320 4,577,576
------------ ------------ ------------
Cash and due from banks at end of year........... $ 4,731,421 $ 5,451,245 $ 5,128,320
============ ============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest.................................... $ 5,366,365 $ 4,088,380 $ 2,620,227
Income taxes................................ $ 926,002 $ 774,100 $ 633,130
NONCASH TRANSACTIONS:
Unrealized gain (loss) on securities
available-for-sale.......................... $ 59,000 $ 540,000 $ (628,000)
Principal balance of loans transferred to other
real estate................................. $ -- $ 644,282 $ --
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 69
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
SB&T Corporation (the "Company") is a one-bank holding company whose
business is presently conducted by its wholly-owned subsidiary, Smyrna Bank &
Trust (the "Bank"), Smyrna, Georgia. The Bank is a commercial bank with its main
office in Smyrna, Georgia and branches located in Austell and Marietta, Georgia.
The Bank provides a full range of banking services to individual and corporate
customers in its primary market area of Cobb County, Georgia and surrounding
counties.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and the Bank. Significant intercompany transactions and accounts are eliminated
in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the financial
services industry. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ from those estimates.
Cash and Due from Banks
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Company has not experienced any losses in such
accounts.
Securities
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. All
other debt securities are classified as available-for-sale and carried at fair
value with net unrealized gains and losses included in stockholders' equity net
of tax. Other equity securities without a readily determinable fair value are
carried at cost.
Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
Mortgage Loans Available-for-Sale
Mortgage loans available-for-sale include mortgage and other loans and are
carried at the lower of aggregate cost or fair value.
Loans
Loans are carried at their principal amounts outstanding less deferred fees
and the allowance for loan losses. Interest income on loans is credited to
income based on the principal amount outstanding.
Loan origination fees and certain direct costs of most loans are recognized
at the time the loan is recorded. Loan origination fees and costs incurred for
other loans are deferred and recognized as income over the life of the loan.
Because net origination loan fees and costs are not material, the results of
operations are
F-7
<PAGE> 70
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
not materially different than the results which would be obtained by accounting
for loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio, and other risks
inherent in the portfolio. In addition, regulatory agencies, as an integral part
of their examination process, periodically review the Company's allowance for
loan losses, and may require the Company to record additions to the allowance
based on their judgment about information available to them at the time of their
examinations.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they become
due. When accrual of interest is discontinued, all unpaid accrued interest is
reversed. Interest income is subsequently recognized only to the extent cash
payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the terms of
the loan agreement. Individually identified impaired loans are measured based on
the present value of payments expected to be received, using the contractual
loan rate as the discount rate. Alternatively, measurement may be based on
observable market prices or, for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds the measure
of fair value, a valuation allowance is established as a component of the
allowance for loan losses. Changes to the valuation allowance are recorded as a
component of the provision for loan losses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent gains
or losses on sale and any subsequent adjustment to the value are recorded as
other expenses.
Income Taxes
Income tax expense consists of current and deferred taxes. Current income
tax provisions approximate taxes to be paid or refunded for the applicable year.
Deferred tax assets and liabilities are recognized on the temporary differences
between the bases of assets and liabilities as measured by tax laws and their
bases as reported in the financial statements. Deferred tax expense or benefit
is then recognized for the change in deferred tax assets or liabilities between
periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards, and tax credits
will be realized. A valuation allowance is recorded for those deferred tax items
for which it is more likely than not that realization will not occur.
The Company and the Bank file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to income taxes (benefits)
of the consolidated group.
F-8
<PAGE> 71
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement Benefits
Generally, the policy of the Company does not provide for postretirement
health care and life insurance benefits. In rare instances where such benefits
are provided, the expenditures are charged to salaries and employee benefits
expense when paid because the amounts are not significant.
Earnings Per Share
Earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding. Common stock equivalents include stock options.
2. SECURITIES
The amortized cost and fair values of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1996:
U. S. Treasury and government agencies..... $ 7,272,547 $ 14,371 $ (43,371) $ 7,243,547
Equity securities.......................... 602,138 -- -- 602,138
----------- -------- --------- -----------
$ 7,874,685 $ 14,371 $ (43,371) $ 7,845,685
=========== ======== ========= ===========
December 31, 1995:
U. S. Treasury and government agencies........ $10,939,904 $ 39,270 $(127,270) $10,851,904
Equity securities............................. 195,938 -- -- 195,938
----------- -------- --------- -----------
$11,135,842 $ 39,270 $(127,270) $11,047,842
=========== ======== ========= ===========
Securities Held-to-Maturity
December 31, 1996:
U. S. Treasury and government agencies..... $28,062,970 $ 68,611 $(322,737) $27,808,844
Municipal securities....................... 6,256,887 85,663 (19,033) 6,323,517
Mortgage-backed securities................. 1,499,239 -- (54,803) 1,444,436
----------- -------- --------- -----------
$35,819,096 $154,274 $(396,573) $35,576,797
=========== ======== ========= ===========
December 31, 1995:
U. S. Treasury and government agencies........ $24,920,574 $ 86,268 $(311,534) $24,695,308
Municipal securities.......................... 5,595,101 103,425 (39,308) 5,659,218
Mortgage-backed securities.................... 1,499,777 -- (78,644) 1,421,133
----------- -------- --------- -----------
$32,015,452 $189,693 $(429,486) $31,775,659
=========== ======== ========= ===========
</TABLE>
The amortized cost and fair value of securities as of December 31, 1996 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the
F-9
<PAGE> 72
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
mortgages underlying the securities may be called or prepaid without penalty.
Therefore, these securities and equity securities are not included in the
maturity categories in the following maturity summary.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY
----------------------------- ---------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Due in one year or less....................... $2,750,692 $2,746,273 $ 3,668,094 $ 3,666,585
Due from one year to five years............... 4,521,855 4,497,274 20,041,824 20,003,490
Due from five to ten years.................... -- -- 10,509,939 10,362,286
Due after ten years........................... -- -- 100,000 100,000
Equity Securities............................. 602,138 602,138 -- --
Mortgage-backed securities.................... -- -- 1,499,239 1,444,436
---------- ---------- ----------- -----------
$7,874,685 $7,845,685 $35,819,096 $35,576,797
========== ========== =========== ===========
</TABLE>
Securities with a carrying value of $21,863,468 and $22,428,030 at December
31, 1996 and 1995, respectively, were pledged to secure public deposits and for
other purposes.
Gains and losses on sales of securities available-for-sale for 1994 consist
of the following:
<TABLE>
<S> <C>
Gross gains................................................. $ 49,431
Gross losses................................................ (49,129)
--------
Net realized gains.......................................... $ 302
========
</TABLE>
There were no sales of securities during 1996 or 1995.
3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Commercial and financial.................................... $38,202,000 $26,304,000
Real estate -- construction................................. 24,312,000 20,648,000
Real estate -- mortgage..................................... 9,895,000 9,257,000
Consumer instalment loans................................... 7,517,000 7,630,000
Other....................................................... 21,636 96,651
----------- -----------
79,947,636 63,935,651
Unearned income............................................. (293,140) (243,789)
Allowance for loan losses................................... (1,083,827) (1,040,936)
----------- -----------
Loans, net.................................................. $78,570,669 $62,650,926
=========== ===========
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year......................... $1,040,936 $1,071,666 $ 957,547
Provision for loan losses........................ 20,000 -- --
Loans charged off................................ (27,123) (55,556) (12,425)
Recoveries of loans previously charged off....... 50,014 24,826 126,544
---------- ---------- ----------
Balance, end of year............................... $1,083,827 $1,040,936 $1,071,666
========== ========== ==========
</TABLE>
F-10
<PAGE> 73
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total recorded investment in impaired loans was $20,566 and $66,436 at
December 31, 1996 and 1995, respectively. Included in these loans were $16,580
and $19,056 that had related allowances for loan losses of $8,920 and $9,528 at
December 31, 1996 and 1995, respectively. The average recorded investment in
impaired loans for 1996 and 1995 was $92,664 and $87,207, respectively. Interest
income on impaired loans of $1,833 and $11,866 was recognized for cash payments
received for the years ended 1996 and 1995, respectively.
Loans on which the accrual of interest had been discontinued or reduced
amounted to $103,195 at December 31, 1994. There was no significant reduction in
interest income associated with nonaccrual and renegotiated loans at December
31, 1994.
The Company has granted loans to certain directors, executive officers, and
related entities of the Company and the Bank. The interest rates on these loans
were substantially the same as rates prevailing at the time of the transaction
and repayment terms are customary for the type of loan involved. Changes in
related party loans for the year ended December 31, 1996 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year.................................. $ 3,497,369
Advances.................................................. 2,235,829
Repayments................................................ (1,243,903)
-----------
Balance, end of year........................................ $ 4,489,295
===========
</TABLE>
4. PREMISES AND EQUIPMENT
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Land...................................................... $ 796,389 $ 796,389
Buildings................................................. 2,257,197 2,167,745
Equipment................................................. 1,624,057 1,569,641
----------- -----------
4,677,643 4,533,775
Accumulated depreciation.................................. (1,482,921) (1,318,647)
----------- -----------
$ 3,194,722 $ 3,215,128
=========== ===========
</TABLE>
5. EMPLOYEE BENEFIT PLANS
The Bank has a contributory 401(k) profit-sharing plan covering all
employees, subject to certain minimum age and service requirements. The Bank
contributed $29,678, $20,391 and $21,770 to the plan for the years ended
December 31, 1996, 1995 and 1994, respectively.
The Company had reserved 69,409 shares of common stock to be awarded to key
officers under a Key Officer Stock Option Plan. This plan is administered by a
committee of the Board of Directors and provides for the granting of options to
purchase shares of the common stock to key officers of the Bank. Options are
exercisable in whole or in part upon such terms as may be determined by the
committee. Options will not be exercisable later than ten years after the date
of grant. These options vest in equal increments over a five year
F-11
<PAGE> 74
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
period. The exercise price of each option granted was equivalent to the fair
market value on the date of the grant. Other pertinent information related to
the options is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1995 1995 1994
------------------ ------------------ ------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Under option, beginning of year... 3,960 $4.85 3,960 $4.85 3,960 $4.85
Granted......................... -- -- -- -- -- --
Exercised....................... (1,760) 4.77 -- -- -- --
Terminated...................... -- -- -- -- -- --
------ ----- -----
Under option, end of year......... 2,200 4.91 3,960 4.85 3,960 4.85
====== ===== =====
Exercisable, end of year.......... 2,200 4.91 3,960 4.85 3,960 4.85
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED-
WEIGHTED- AVERAGE
AVERAGE REMAINING
RANGE OF EXERCISE CONTRACTUAL
NUMBER PRICES PRICE LIFE
------ -------- --------- -----------
<S> <C> <C> <C> <C>
Under option and exercisable, end of year.............. 2,200 $4.91 $4.91 0.1
</TABLE>
As permitted by SFAS No. 123 ("Accounting for Stock-Based Compensation"),
the Company recognizes compensation cost for stock-based employee compensation
awards in accordance with APB Opinion No. 25, ("Accounting for Stock Issued to
Employees"). The Company recognized no compensation cost for stock-based
employee compensation awards for the year ended December 31, 1996. The effect on
net income and earnings per share had the Company accounted for compensation
cost in accordance with SFAS No. 123 is not material.
6. DEFERRED COMPENSATION PLAN
The Company has several deferred compensation agreements with its
directors, president and a former employee which provides benefits payable at
age sixty-five or if he or she becomes totally disabled. Under certain
circumstances, benefits are payable to his or her beneficiary. The present value
of the estimated liability under the agreement is being accrued over the
expected remaining years of employment, if applicable. The estimated amounts to
be paid under the compensation plan are being accrued from the date of the plan
to the expected retirement date. Payments to the former employee are being made
monthly and the related liability is being adjusted to reflect payments. In
1996, 1995 and 1994, the Company expensed $119,772, $88,266 and $48,495,
respectively, for deferred compensation relating to these plans. Accrued
deferred compensation of $318,880 and $253,946 as of December 31, 1996 and 1995,
respectively, is reflected in other liabilities in the accompanying balance
sheets. The Company has purchased insurance policies on the life of the officer
which it intends to use to fund the death and retirement benefits to be paid
thereunder. The cash surrender value of $2,180,832 and $1,994,248 as of December
31, 1996 and 1995, respectively, is recorded in other assets in the accompanying
balance sheets.
F-12
<PAGE> 75
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current................................................ $922,997 $774,100 $615,206
Deferred............................................... (27,187) (22,776) 4,308
-------- -------- --------
Income tax expense................................... $895,810 $751,324 $619,514
======== ======== ========
</TABLE>
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1996 1995 1994
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income tax at statutory rate...... $949,220 34% $805,480 34% $652,643 34%
Tax-exempt interest............. (78,491) (3) (49,543) (2) (40,750) (2)
Disallowed interest expense..... 10,178 -- 6,432 -- --
State income tax................ 23,402 1 -- -- 4,055 --
Other items, net................ (8,499) -- (11,045) 3,566 --
-------- -- -------- -- -------- --
Income tax expense................ $895,810 32% $751,324 32% $619,514 32%
======== == ======== == ======== ==
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves........................................ $265,827 $232,710
Deferred compensation..................................... 120,332 72,614
Deferred loan fees........................................ 109,494 82,335
Securities available-for-sale............................. 10,000 30,000
Other real estate......................................... 37,736 34,000
-------- --------
543,389 451,659
-------- --------
Deferred tax liabilities:
Depreciation and amortization............................. 190,423 162,367
Other..................................................... 66,245 9,758
-------- --------
256,668 172,125
-------- --------
Net deferred tax assets..................................... $286,721 $279,534
======== ========
</TABLE>
8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into
off-balance-sheet financial instruments which are not reflected in the financial
statements. These financial instruments include commitments to extend credit and
standby letters of credit. Such financial instruments are included in the
financial statements when funds are disbursed or the instruments become payable.
These instruments involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the balance sheet.
F-13
<PAGE> 76
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Commitments to extend credit................................ $22,015,000 $18,800,000
Standby letters of credit................................... 676,000 891,000
----------- -----------
$22,691,000 $19,691,000
=========== ===========
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending loans to customers. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment and personal property.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral held varies as
specified above and is required in instances which the Company deems necessary.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management for the Company, any liability
resulting from such proceedings would not have a material effect on the
Company's financial statements.
At December 31, 1996, the Bank was obligated under a noncancelable
operating leases for a building located in Acworth, Georgia.
The total minimum rental commitment at December 31, 1996 under the leases
is $13,512 which is due as follows:
<TABLE>
<CAPTION>
DUE IN THE YEAR ENDING DECEMBER 31,
- -----------------------------------
<S> <C>
1997................................................. $13,512
=======
</TABLE>
The total rental expense was $29,954, $29,117 and $ -- in 1996, 1995 and
1994, respectively.
9. CONCENTRATIONS OF CREDIT
The Bank makes real estate, commercial and consumer loans and grants loans
commitments and standby letters of credit to customers primarily in the Bank's
market area of Cobb County and surrounding counties. A substantial portion of
the Bank's loans are secured by real estate in these areas. Accordingly, the
ultimate collectibility of a substantial portion of the Bank's loan portfolio is
susceptible to changes in the business economy and real estate market conditions
in these areas. The Bank, as a matter of policy, does not generally extend
credit to any single borrower or group of related borrowers in excess of 25% of
the Bank's statutory capital (capital stock, capital surplus and appropriated
retained earnings accounts $8,000,000) which amounted to approximately
$2,000,000 at December 31, 1996.
F-14
<PAGE> 77
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that
may be declared without prior regulatory approval. At December 31, 1996,
approximately $949,000 of retained earnings were available for dividend
declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory -- and possibly
additional discretionary -- actions by regulators that, if undertaken, could
have a direct material effect on the financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Bank must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company and Bank
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of total
and Tier I capital to risk-weighted assets and of Tier I capital to average
assets. Management believes, as of December 31, 1996, the Company and the Bank
meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Company and Bank's actual capital amounts and ratios are presented in
the following table.
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------------------- ------------------ -----------------------
AS OF DECEMBER 31, 1996 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- ----------------------- ----------- ----- ---------- ----- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted
Assets):
Consolidated..................... $11,715,000 12.14% $8,803,000 8% $10,733,000 10%
Bank............................. $11,574,000 12.00% $7,719,000 8% $ 9,649,000 10%
Tier I Capital (to Risk Weighted
Assets):
Consolidated..................... $10,631,000 11.02% $3,860,000 4% $ 5,789,000 6%
Bank............................. $10,490,000 10.87% $3,860,000 4% $ 5,789,000 6%
Tier I Capital (to Average Assets):
Consolidated..................... $10,631,000 7.34% $5,797,000 4% $ 7,246,000 5%
Bank............................. $10,490,000 7.24% $5,797,000 4% $ 7,246,000 5%
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In cases where
quoted market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. The use of different methodologies
may have a
F-15
<PAGE> 78
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
material effect on the estimated fair value amounts. Also, the fair value
estimates presented herein are based on pertinent information available to
management as of December 31, 1996 and 1995. Such amounts have not been revalued
for purposes of these financial statements since those dates and, therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
Cash, Due From Banks, and Federal Funds Sold:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
Available-For-Sale and Held-To-Maturity Securities:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value approximate
fair values.
Loans:
For mortgage loans available-for-sale and variable-rate loans that reprice
frequently and have no significant change in credit risk, fair values are based
on carrying values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow methods or underlying
collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values. Fair values
for fixed-rate certificates of deposit are estimated using discounted cash flow
methods, using interest rates currently being offered on certificates.
Accrued Interest:
The carrying amounts of accrued interest approximate their fair values.
Off-Balance Sheet Instruments:
Fair values of the Company's off-balance sheet financial instruments are
based on fees charged to enter into similar agreements. However, commitments to
extend credit and standby letters of credit do not represent a significant value
to the Company until such commitments are funded. The Company has determined
that these instruments do not have a distinguishable fair value and no fair
value has been assigned.
F-16
<PAGE> 79
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks and
Federal funds sold......... $ 14,995,421 $ 14,995,421 $ 16,638,245 $ 16,638,245
Securities
available-for-sale......... 7,845,685 7,845,685 11,047,842 11,047,842
Securities held-to-maturity... 35,819,096 35,576,797 32,015,452 31,775,659
Mortgage loans
available-for-sale......... 905,200 905,200
Loans......................... 78,570,669 80,050,000 62,650,926 63,300,000
Accrued interest receivable... 1,302,378 1,302,378 1,252,626 1,252,626
Financial liabilities:
Deposits...................... 131,671,009 132,114,989 119,510,611 120,125,301
Accrued interest payable...... 1,785,635 1,785,635 1,786,181 1,786,181
</TABLE>
12. BUSINESS COMBINATION
On December 19, 1996, the Company entered into a Definitive Agreement to
merge with Regions Financial Corporation of Birmingham, Alabama. This
transaction is subject to stockholder and regulatory approval.
13. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets as of
December 31, 1996 and 1995 and the related statements of income and cash flows
of SB&T Corporation for each of the three years in the period ended December 31,
1996.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash...................................................... $ 157,222 $ 430,799
Investment in subsidiary.................................. 10,470,571 8,842,753
Other assets.............................................. 308,979 --
----------- -----------
Total assets...................................... $10,936,772 $ 9,273,552
=========== ===========
Liabilities................................................. $ 306,193 $ 280,193
----------- -----------
Stockholders' equity........................................ 10,630,579 8,993,359
----------- -----------
Total liabilities and stockholders' equity........ $10,936,772 $ 9,273,552
=========== ===========
</TABLE>
F-17
<PAGE> 80
SB&T CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income
Dividends from subsidiary............................ $ 308,979 $ -- $ 447,705
Gain on sale of other real estate................. -- -- 145,997
Other............................................. -- 2,599 --
---------- ---------- ----------
308,979 2,599 593,702
Other expense.......................................... 2,766 2,515 3,735
---------- ---------- ----------
Income before income tax (benefits) and equity in
undistributed income of subsidiary................ 306,213 84 589,967
Income tax expense (benefits).......................... (982) 37 48,369
---------- ---------- ----------
Income before equity in undistributed income of
subsidiary........................................ 307,195 47 541,598
Equity in undistributed income of subsidiary........... 1,588,818 1,617,688 758,426
---------- ---------- ----------
Net income................................... $1,896,013 $1,617,735 $1,300,024
========== ========== ==========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................. $ 1,896,013 $ 1,617,735 $1,300,024
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Undistributed income of subsidiary.................. (1,588,818) (1,617,688) (758,426)
Gain on sale of other real estate................... -- -- (145,997)
Other operating activities.......................... -- 159,872 (123,193)
Decrease (increase) in dividends.................... (308,979) 280,604 (25,472)
----------- ----------- ----------
Net cash provided by (used in) operating
activities................................... (1,784) 440,523 246,936
----------- ----------- ----------
INVESTING ACTIVITIES
Proceeds from sale of other real estate................ -- 313,251 158,603
Purchase of land....................................... -- -- (313,251)
----------- ----------- ----------
Net cash provided by (used in) investing
activities................................... -- 313,251 (154,648)
----------- ----------- ----------
FINANCING ACTIVITIES
Dividends paid......................................... (280,193) (330,832) (254,721)
Exercise of stock options.............................. 8,400 -- --
----------- ----------- ----------
Net cash used in financing activities.......... (271,793) (330,832) (254,721)
----------- ----------- ----------
Net increase (decrease) in cash.......................... (273,577) 422,942 (162,433)
Cash at beginning of year................................ 430,799 7,857 170,290
----------- ----------- ----------
Cash at end of year...................................... $ 157,222 $ 430,799 $ 7,857
=========== =========== ==========
</TABLE>
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APPENDIX A
FINAL AGREEMENT
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SB&T CORPORATION
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF DECEMBER 19, 1996
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TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
Parties.............................................................. A-4
Preamble............................................................. A-4
ARTICLE ONE -- TRANSACTIONS AND TERMS OF MERGER...................... A-4
1.1 Merger...................................................... A-4
1.2 Time and Place of Closing................................... A-4
1.3 Effective Time.............................................. A-4
ARTICLE TWO -- TERMS OF MERGER....................................... A-5
2.1 Certificate of Incorporation................................ A-5
2.2 Bylaws...................................................... A-5
2.3 Directors and Officers...................................... A-5
ARTICLE THREE -- MANNER OF CONVERTING SHARES......................... A-5
3.1 Conversion of Shares........................................ A-5
3.2 Anti-Dilution Provisions.................................... A-5
3.3 Shares Held by SB&T or Regions.............................. A-5
3.4 Dissenting Stockholders..................................... A-5
3.5 Fractional Shares........................................... A-6
3.6 Conversion of Stock Options; Restricted Stock............... A-6
ARTICLE FOUR -- EXCHANGE OF SHARES................................... A-6
4.1 Exchange Procedures......................................... A-6
4.2 Rights of Former SB&T Stockholders.......................... A-7
ARTICLE FIVE -- REPRESENTATIONS AND WARRANTIES OF SB&T............... A-7
5.1 Organization, Standing, and Power........................... A-7
5.2 Authority; No Breach by Agreement........................... A-8
5.3 Capital Stock............................................... A-8
5.4 SB&T Subsidiaries........................................... A-8
5.5 Financial Statements........................................ A-9
5.6 Absence of Undisclosed Liabilities.......................... A-9
5.7 Absence of Certain Changes or Events........................ A-9
5.8 Tax Matters................................................. A-10
5.9 Assets...................................................... A-10
5.10 Environmental Matters....................................... A-11
5.11 Compliance With Laws........................................ A-11
5.12 Labor Relations............................................. A-12
5.13 Employee Benefit Plans...................................... A-12
5.14 Material Contracts.......................................... A-13
5.15 Legal Proceedings........................................... A-14
5.16 Statements True and Correct................................. A-14
5.17 Accounting, Tax, and Regulatory Matters..................... A-14
5.18 State Takeover Laws......................................... A-15
5.19 Articles of Incorporation Provisions........................ A-15
5.20 Support Agreements.......................................... A-15
5.21 Derivatives Contracts....................................... A-15
ARTICLE SIX -- REPRESENTATIONS AND WARRANTIES OF REGIONS............. A-15
6.1 Organization, Standing, and Power........................... A-15
6.2 Authority; No Breach by Agreement........................... A-15
6.3 Capital Stock............................................... A-16
6.4 SEC Filings; Financial Statements........................... A-16
6.5 Absence of Undisclosed Liabilities.......................... A-16
</TABLE>
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<TABLE>
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<S> <C> <C>
6.6 Absence of Certain Changes or Events........................ A-16
6.7 Compliance With Laws........................................ A-16
6.8 Legal Proceedings........................................... A-17
6.9 Statements True and Correct................................. A-17
6.10 Accounting, Tax, and Regulatory Matters..................... A-17
ARTICLE SEVEN -- CONDUCT OF BUSINESS PENDING CONSUMMATION............ A-18
7.1 Covenants of Both Parties................................... A-18
7.2 Covenants of SB&T........................................... A-18
7.3 Covenants of Regions........................................ A-19
7.4 Adverse Changes in Condition................................ A-19
7.5 Reports..................................................... A-20
ARTICLE EIGHT -- ADDITIONAL AGREEMENTS............................... A-20
Registration Statement; Proxy Statement; Stockholder
8.1 Approval.................................................... A-20
8.2 Nasdaq/NMS Listing.......................................... A-20
8.3 Applications................................................ A-20
8.4 Agreement as to Efforts to Consummate....................... A-20
8.5 Investigation and Confidentiality........................... A-21
8.6 Press Releases.............................................. A-21
8.7 Certain Actions............................................. A-21
8.8 Tax Matters................................................. A-21
8.9 Agreement of Affiliates..................................... A-22
8.10 Employee Benefits and Contracts............................. A-22
8.11 Indemnification............................................. A-22
8.12 State Takeover Laws......................................... A-23
8.13 Articles of Incorporation Provisions........................ A-23
ARTICLE NINE -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.... A-23
9.1 Conditions to Obligations of Each Party..................... A-23
9.2 Conditions to Obligations of Regions........................ A-24
9.3 Conditions to Obligations of SB&T........................... A-25
ARTICLE TEN -- TERMINATION........................................... A-26
10.1 Termination................................................. A-26
10.2 Effect of Termination....................................... A-27
10.3 Non-Survival of Representations and Covenants............... A-27
ARTICLE ELEVEN -- MISCELLANEOUS...................................... A-27
11.1 Definitions................................................. A-27
11.2 Expenses.................................................... A-31
11.3 Brokers and Finders......................................... A-31
11.4 Entire Agreement............................................ A-32
11.5 Amendments.................................................. A-32
11.6 Waivers..................................................... A-32
11.7 Assignment.................................................. A-32
11.8 Notices..................................................... A-32
11.9 Governing Law............................................... A-33
11.10 Counterparts................................................ A-33
11.11 Captions.................................................... A-33
11.12 Severability................................................ A-33
Signatures........................................................... A-34
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of December 19, 1996, by and between SB&T CORPORATION ("SB&T"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located in Smyrna, Georgia, and REGIONS FINANCIAL
CORPORATION ("Regions"), a corporation organized and existing under the laws of
the State of Delaware, with its principal office located in Birmingham, Alabama.
PREAMBLE
The Boards of Directors of SB&T 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 SB&T by
Regions pursuant to the merger of SB&T into and with Regions. At the effective
time of such merger, the outstanding shares of the capital stock of SB&T shall
be converted into shares of the common stock of Regions (except as provided
herein). As a result, stockholders of SB&T shall become stockholders of Regions
and each of the subsidiaries of SB&T 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 SB&T, the
Board of Governors of the Federal Reserve System, and the appropriate state
regulatory authorities and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the merger (i) for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code and (ii) for accounting purposes shall be accounted for as a "pooling of
interests."
As a condition and inducement to Regions' willingness to consummate the
transactions contemplated by this Agreement, prior to the execution of this
Agreement, each of SB&T's directors will execute and deliver to Regions an
agreement (a "Support Agreement"), in substantially the form of Exhibit 1 to
this Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE ONE
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, SB&T shall be merged into and with Regions in accordance with
the provisions of Sections 14-2-1103 and 14-2-1107 of the GBCC and with the
effect provided in Section 14-2-1106 of the GBCC and of Section 258 of the DGCL
and with the effect provided in Section 259 of the DGCL (the "Merger"). Regions
shall be the Surviving Corporation of the Merger and shall continue to be
governed by the Laws of the State of Delaware. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the Boards of Directors of SB&T 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 Georgia
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia and the Delaware Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Delaware (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the duly
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time
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to occur on the last day of the month in which occurs the last to occur of
(i)'the effective date (including expiration of any applicable waiting period)
of the last required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger, and (ii)'the date on which the
stockholders of SB&T approve this Agreement to the extent such approval is
required by applicable Law.
ARTICLE TWO
TERMS OF MERGER
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Regions in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Regions in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Regions in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Regions in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE THREE
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of SB&T Common Stock (excluding shares held by SB&T 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 .50 of a share of Regions Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event SB&T changes the number of
shares of SB&T Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock, the Exchange Ratio shall be proportionately adjusted. In
the event Regions changes the number of shares of Regions Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.3 Shares Held by SB&T or Regions. Each of the shares of SB&T Common
Stock held by any SB&T 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 SB&T Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Sections 14-2-1301 et seq. of the GBCC 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
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such dissenting stockholder has complied with the applicable provisions of the
GBCC and surrendered to SB&T 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 SB&T 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 SB&T Common Stock is entitled under this Article Three (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of SB&T Common Stock held by such holder. SB&T 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 SB&T.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of SB&T Common Stock exchanged pursuant to the
Merger, or of options to purchase shares of SB&T 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 SB&T Common Stock
pursuant to stock options or stock appreciation rights ("SB&T Options") granted
by SB&T under the SB&T 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 SB&T Option, in
accordance with the terms of the SB&T Stock Plan and stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each SB&T 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 SB&T Option shall be equal to the number of
shares of SB&T Common Stock subject to such SB&T Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such SB&T Option shall be adjusted by dividing the per
share exercise price under each such SB&T Option by the Exchange Ratio and
rounding down to the nearest cent. It is intended that the foregoing assumption
shall be undertaken in a manner that will not constitute a "modification" as
defined in Section 424 of the Internal Revenue Code, as to any stock option
which is an "incentive stock option." SB&T 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 SB&T Common
Stock awarded under the SB&T Stock Plans or any other plan, program, or
arrangement of any SB&T 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 SB&T appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
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<PAGE> 87
certificates theretofore representing shares of SB&T Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of SB&T 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 SB&T 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 SB&T
Common Stock is entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the shares of SB&T Common
Stock for exchange as provided in this Section 4.1. The certificate or
certificates of SB&T Common Stock so surrendered shall be duly endorsed as the
Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither Regions, SB&T, nor the Exchange Agent shall be liable
to a holder of SB&T 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 SB&T Stockholders. At the Effective Time, the stock
transfer books of SB&T shall be closed as to holders of SB&T Common Stock
immediately prior to the Effective Time, and no transfer of SB&T 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 SB&T 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 SB&T
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 SB&T Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing SB&T 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 SB&T
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this
Agreement. However, upon surrender of such SB&T 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 SB&T
SB&T hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. SB&T is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Assets. SB&T 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
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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 SB&T.
5.2 Authority; No Breach by Agreement.
(a) SB&T has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of this Agreement by
the holders of a majority of the outstanding shares of SB&T 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 SB&T, subject to the approval of this Agreement by the holders of
a majority of the outstanding shares of SB&T Common Stock. Subject to such
requisite approval, this Agreement represents a legal, valid, and binding
obligation of SB&T, enforceable against SB&T in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by SB&T, nor the
consummation by SB&T of the transactions contemplated hereby, nor compliance by
SB&T with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of SB&T's Articles of Incorporation or Bylaws, or (ii)
except as disclosed in Section 5.2(b) of the SB&T Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any SB&T Company under, any
Contract or Permit of any SB&T 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 SB&T Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SB&T, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by SB&T of the Merger
and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of SB&T consists of 5,000,000 shares of
SB&T Common Stock, of which 1,020,644 shares are issued and outstanding as of
the date of this Agreement and not more than 1,022,844 shares will be issued and
outstanding at the Effective Time. All of the issued and outstanding shares of
SB&T Common Stock are duly and validly issued and outstanding and are fully paid
and nonassessable. None of the outstanding shares of SB&T Common Stock has been
issued in violation of any preemptive rights of the current or past stockholders
of SB&T. SB&T has reserved 120,000 shares of SB&T Common Stock for issuance
under the SB&T Stock Plans, pursuant to which options to purchase not more than
2,200 shares of SB&T Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement, there are no
shares of capital stock or other equity securities of SB&T 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 SB&T or
contracts, commitments, understandings, or arrangements by which SB&T is or may
be bound to issue additional shares of SB&T capital stock or options, warrants,
or rights to purchase or acquire any additional shares of its capital stock.
5.4 SB&T Subsidiaries. SB&T has disclosed in Section 5.4 of the SB&T
Disclosure Memorandum all of the SB&T Subsidiaries as of the date of this
Agreement. Except as disclosed, SB&T or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each SB&T Subsidiary. No
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equity securities of any SB&T Subsidiary are or may become required to be issued
(other than to a SB&T 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
SB&T Subsidiary is bound to issue (other than to a SB&T 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 SB&T Company
is or may be bound to transfer any shares of the capital stock of any SB&T
Subsidiary (other than to a SB&T Company). There are no Contracts relating to
the rights of any SB&T Company to vote or to dispose of any shares of the
capital stock of any SB&T Subsidiary. All of the shares of capital stock of each
SB&T Subsidiary held by a SB&T Company are duly authorized, validly issued, and
fully paid and nonassessable (except pursuant to 12 U.S.C. Section 55 in the
case of national banks and comparable, applicable state Law, if any, in the case
of state depository institutions) under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the SB&T Company free and clear of any Lien. Each SB&T Subsidiary is a
corporation, and is duly organized, validly existing, and in good standing under
the Laws of the jurisdiction in which it is incorporated or organized, and has
the corporate power and authority necessary for it to own, lease, and operate
its Assets and to carry on its business as now conducted. Each SB&T 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 SB&T. Each SB&T
Subsidiary that is a depository institution is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund, as appropriate.
5.5 Financial Statements. SB&T has disclosed in Section 5.5 of the SB&T
Disclosure Memorandum, and has delivered to Regions copies of, all SB&T
Financial Statements prepared for periods ended prior to the date hereof and
will deliver to Regions copies of all SB&T Financial Statements prepared
subsequent to the date hereof. The SB&T 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 SB&T
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 SB&T Companies as of the
dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the SB&T Companies for the periods
indicated, in accordance with GAAP (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments that are
not material).
5.6 Absence of Undisclosed Liabilities. No SB&T Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SB&T, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of SB&T as of
September 30, 1996 included in the SB&T Financial Statements or reflected in the
notes thereto. No SB&T Company has incurred or paid any Liability since
September 30, 1996, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on SB&T.
5.7 Absence of Certain Changes or Events. Since September 30, 1996, except
as disclosed in the SB&T 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 SB&T, and (ii)
the SB&T 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 SB&T provided in Article
Seven of this Agreement.
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5.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf of any of the SB&T
Companies have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1995 and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, to the Knowledge of SB&T, and all returns filed
are complete and accurate to the Knowledge of SB&T. 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 SB&T, except to the extent reserved against in the SB&T
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 SB&T 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
SB&T Companies for the period or periods through and including the date of the
respective SB&T Financial Statements has been made and is reflected on such SB&T
Financial Statements.
(d) Deferred Taxes of the SB&T Companies have been adequately provided for
in the SB&T Financial Statements.
(e) Each of the SB&T 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 SB&T.
(f) None of the SB&T Companies has made any payments, is obligated to make
any payments, or is a party to any contract, agreement, or other arrangement
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Liens with respect to Taxes upon any of the assets of the
SB&T Companies.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the SB&T Companies that occurred during or after any
Taxable Period in which the SB&T Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1994.
(i) No SB&T Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(j) All material elections with respect to Taxes affecting the SB&T
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the SB&T Disclosure Memorandum. After the date
hereof, no election with respect to Taxes will be made without the prior written
consent of Regions, which consent will not be unreasonably withheld.
(k) No SB&T 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 SB&T Financial
Statements, the SB&T 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 SB&T Companies. All material tangible properties used in the businesses
of the SB&T Companies are in good condition, reasonable wear and tear excepted,
and are usable in the ordinary course of business consistent with SB&T's past
practices. All Assets which are material to the business of the SB&T Companies,
which are held under leases or subleases by any of the SB&T 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
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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 SB&T, each SB&T Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on SB&T.
(b) To the Knowledge of SB&T, there is no Litigation pending or threatened
before any court, governmental agency, or authority, or other forum in which any
SB&T 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 SB&T 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 SB&T.
(c) To the Knowledge of SB&T, there is no Litigation pending or threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or SB&T 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 SB&T.
(d) To the Knowledge of SB&T, 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 SB&T.
(e) To the Knowledge of SB&T, during the period of (i) any SB&T Company's
ownership or operation of any of their respective current properties, (ii) any
SB&T Company's participation in the management of any Participation Facility,
or, (iii) any SB&T Company's holding of a security interest in a Loan Property,
there have been no releases of Hazardous Material or oil in, on, under, or
affecting such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SB&T. Prior to
the period of (i) any SB&T Company's ownership or operation of any of their
respective current properties, (ii) any SB&T Company's participation in the
management of any Participation Facility, or (iii) any SB&T Company's holding of
a security interest in a Loan Property, to the Knowledge of SB&T, there were no
releases of Hazardous Material or oil in, on, under, or affecting any such
property, Participation Facility, or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on SB&T.
5.11 Compliance With Laws. Each SB&T 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 SB&T, 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 SB&T. Except as disclosed in Section
5.11 of the SB&T Disclosure Memorandum, none of the SB&T Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SB&T; 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 SB&T
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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 SB&T, (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 SB&T,
or (iii) requiring any SB&T Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its
management, or the payment of dividends.
5.12 Labor Relations. No SB&T Company is the subject of any Litigation
asserting that it or any other SB&T 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 SB&T Company to bargain with any
labor organization as to wages or conditions of employment, nor is any SB&T
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 SB&T Company, pending
or threatened, or to its Knowledge, is there any activity involving any SB&T
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) SB&T has disclosed in Section 5.13 of the SB&T 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 SB&T 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 "SB&T Benefit Plans"). Any of the SB&T 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 "SB&T ERISA Plan."
Any SB&T 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 "SB&T Pension Plan." On or after September 26, 1980,
neither SB&T nor any SB&T Company has had an "obligation to contribute" (as
defined in ERISA Section 4212) to a "multiemployer plan" (as defined in ERISA
Sections 4001(a)(3) and 3(37)(A)). The only "employee benefit pension plan," as
defined in Section 3(2) of ERISA, ever maintained by any SB&T Company that was
intended to qualify under Section 401(a) of the Internal Revenue Code, is the
Smyrna Bank & Trust Company 401(k) Profit Sharing Plan and Trust.
(b) SB&T 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 SB&T Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such SB&T Benefit Plans or amendments, all determination letters,
rulings, opinion letters, information letters, or advisory opinions issued by
the Internal Revenue Service, the United States Department of Labor, or the
Pension Benefit Guaranty Corporation after December 31, 1974, (iii) annual
reports or returns, audited or unaudited financial statements, actuarial
valuations and reports, and summary annual reports prepared for any SB&T 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 SB&T Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SB&T. Each SB&T ERISA Plan which is
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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
SB&T is not aware of any circumstances which will or could result in revocation
of any such favorable determination letter. Each trust created under any SB&T
ERISA Plan has been determined to be exempt from Tax under Section 501(a) of the
Internal Revenue Code and SB&T is not aware of any circumstance which will or
could result in revocation of such exemption. With respect to each SB&T Benefit
Plan, except as disclosed in Section 5.13(c) of the SB&T Disclosure Memorandum,
to the Knowledge of SB&T, no event has occurred which will or could give rise to
a loss of any intended Tax consequences under the Internal Revenue Code or to
any Tax under Section 511 of the Internal Revenue Code. There is no material
pending or threatened Litigation relating to any SB&T ERISA Plan. No SB&T
Company has engaged in a transaction with respect to any SB&T Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any SB&T Company to a 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 SB&T.
(d) No SB&T 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 SB&T Pension Plan, (ii) no change in the actuarial assumptions with respect
to any SB&T Pension Plan, and (iii) no increase in benefits under any SB&T
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 SB&T or materially adversely affect the funding status of any
such plan. Neither any SB&T Pension Plan nor any "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any SB&T Company, or the single-employer plan of any entity which is considered
one employer with SB&T 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 SB&T
Company has provided, or is required to provide, security to a SB&T 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 SB&T Company with respect to any defined benefit plan currently
or formerly maintained by any of them or by any ERISA Affiliate).
(f) Except as set forth in Section 5.13(f) of the Disclosure Memorandum, no
SB&T Company has any obligations for retiree health and retiree life benefits
under any of the SB&T Benefit Plans.
(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 SB&T Company from
any SB&T Company under any SB&T Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any SB&T 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 SB&T Benefit Plans has been made to employees of any of the SB&T
Companies prior to the date hereof which is not in accordance with the written
or otherwise preexisting terms and provisions of such plans. All SB&T 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 SB&T 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 SB&T
Disclosure Memorandum, none of the SB&T 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
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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 SB&T Company or the guarantee by any SB&T 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
SB&T 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 SB&T with the
Securities and Exchange Commission (the "SEC") as of the date of this Agreement
if SB&T 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 "SB&T
Contracts"). None of the SB&T Companies is in Default under any SB&T Contract
which, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on SB&T.
5.15 Legal Proceedings. Except to the extent specifically reserved against
in the SB&T Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of SB&T,
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 SB&T 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 SB&T, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any SB&T Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SB&T.
5.16 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any SB&T 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
SB&T 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 SB&T Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to SB&T's stockholders in connection with the
Stockholders' Meeting, and any other documents to be filed by a SB&T 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 SB&T, 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 SB&T Company
or any Affiliate thereof is responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to form
in all material respects with the provisions of applicable Law.
5.17 Accounting, Tax, and Regulatory Matters. No SB&T Company or any
Affiliate thereof has taken any action, or agreed to take any action, or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or treatment as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, or (ii)
materially impede or delay receipt of any Consents of Regulatory Authorities
referred to in Section 9.1(b) of this Agreement. To the Knowledge of SB&T, there
exists no fact, circumstance, or reason why the requisite Consents referred to
in Section 9.1(b) of this Agreement cannot be received in a timely manner
without imposition of any condition of the type described in the second sentence
of such Section 9.1(b).
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5.18 State Takeover Laws. Each SB&T 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 Georgia (collectively,
"Takeover Laws"), including Sections 14-2-1111 and 14-2-1132 of the GBCC.
5.19 Articles of Incorporation Provisions. Each SB&T 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 SB&T 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 SB&T Company that may be acquired or controlled by it.
5.20 Support Agreements. Each of the directors of SB&T has executed and
delivered to Regions an agreement in substantially the form of Exhibit 1 to this
Agreement.
5.21 Derivatives Contracts. Neither SB&T 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).
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to SB&T as follows
6.1 Organization, Standing, and Power. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Assets. Regions is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 Authority; No Breach by Agreement.
(a) Regions has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Regions. This Agreement
represents a legal, valid, and binding obligation of Regions, enforceable
against Regions in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i)'conflict with
or result in a breach of any provision of Regions' Certificate of Incorporation
or Bylaws, or (ii)'constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
Regions Company under, any Contract or Permit of any Regions Company, or
(iii)'subject to receipt of the requisite approvals referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to any Regions
Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit
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Guaranty Corporation with respect to any employee benefit plans and other than
Consents, filings, or notifications which, if not obtained or made, is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by Regions of the Merger and the
other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Regions consists of
120,000,000 shares of Regions Common Stock, of which 62,810,998 shares were
issued and outstanding and 260,000 shares were held as treasury shares as of
September 30, 1996. All of the issued and outstanding shares of Regions Common
Stock are, and all of the shares of Regions Common Stock to be issued in
exchange for shares of SB&T 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 SB&T 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, 1992, other than registration
statements on Forms S-4 and S-8 (collectively, the "Regions SEC Reports"). The
Regions SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Regions SEC Reports or necessary in
order to make the statements in such Regions SEC Reports, in light of the
circumstances under which they were made, not misleading.
(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented or will fairly present the consolidated financial
position of Regions and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
6.5 Absence of Undisclosed Liabilities. No Regions Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Regions as of
September 30, 1996 included in the Regions Financial Statements or reflected in
the notes thereto. No Regions Company has incurred or paid any Liability since
September 30, 1996, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions.
6.6 Absence of Certain Changes or Events. Since September 30, 1996, except
as disclosed in the Regions Financial Statements filed with the SEC after such
date and prior to the date of this Agreement, there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions.
6.7 Compliance With Laws. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, and there has occurred no
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Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions. None of the Regions Companies:
(a) Is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) Has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the material Laws or material Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, (ii) threatening to revoke
any Permits, the revocation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, or
(iii) requiring any Regions Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its
management, or the payment of dividends.
6.8 Legal Proceedings. Except to the extent specifically reserved against
in the Regions Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of Regions,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Regions Company, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any Regions Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions.
6.9 Statements True and Correct. No statement, certificate, instrument, or
other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to SB&T 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 SB&T'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 SB&T, be false or misleading with respect to
any material fact, or contain any misstatement of material fact, or omit to
state any material fact required to be stated thereunder or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Stockholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact required to be stated thereunder or necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting. All documents that any Regions Company or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.10 Accounting, Tax, and Regulatory Matters. No Regions Company or any
Affiliate thereof has taken any action, or agreed to take any action, or has any
Knowledge of any fact or circumstance that is
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reasonably likely to (i) prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting or treatment as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement. To the Knowledge of
Regions, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without imposition of any condition of the type described in the
second sentence of such Section 9.1(b).
ARTICLE SEVEN
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Covenants of Both Parties. Unless the prior written consent of the
other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to (i) operate its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organizations and Assets and maintain its
rights and franchises, and (iii) take no action which would materially adversely
affect the ability of any Party to (a) obtain any Consents required for the
transactions contemplated hereby, or (b) perform its covenants and agreements
under this Agreement in all material respects and to consummate the Merger;
provided, that the foregoing shall not prevent any Regions Company from
discontinuing or disposing of any of its Assets or business, or from acquiring
or agreeing to acquire any other Person or any Assets thereof, if such action
is, in the judgment of Regions, desirable in the conduct of the business of
Regions and its Subsidiaries.
7.2 Covenants of SB&T. Except as specifically contemplated or permitted by
this Agreement, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, SB&T covenants and agrees
that it will not do or agree or commit to do, or permit any of its Subsidiaries
to do or agree or commit to do, any of the following without the prior written
consent of a duly authorized officer of Regions:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any SB&T 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 SB&T Company to another SB&T Company) in excess of
an aggregate of $100,000 (for the SB&T Companies on a consolidated basis)
except in the ordinary course of the business of SB&T Companies consistent
with past practices (which shall include, for SB&T, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Home
Loan Bank or the Federal Reserve Bank, and entry into repurchase agreements
fully secured by U.S. government or agency securities), or, except as
disclosed in Section 7.2(b) of the SB&T Disclosure Memorandum, forgive any
such indebtedness of any Person to any SB&T Company (in excess of an
aggregate of $25,000), or impose, or suffer the imposition, on any share of
stock held by any SB&T 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 SB&T Company, or declare or pay any dividend or
make any other distribution in respect of any SB&T Common Stock; provided
that SB&T may (to the extent legally able to do so), but shall not be
obligated to, declare and pay regular annual cash dividends on the SB&T
Common Stock at a rate not in excess of $0.30 per share with record and
payment dates in accordance with SB&T's past record dates for cash
dividends as disclosed in Section 7.2(c) of the SB&T Disclosure Memorandum;
or
(d) except pursuant to the exercise of stock options outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of SB&T Common Stock or any other capital stock
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of any SB&T 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
SB&T Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of SB&T Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any SB&T Subsidiary (unless any such shares of stock
are sold or otherwise transferred to another SB&T Company) or any Assets
having in the aggregate a book value in excess of $100,000 other than in
the ordinary course of business for reasonable and adequate consideration;
or
(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 SB&T
in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any SB&T Company except as disclosed in Section 7.2(g) of the
SB&T 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 SB&T Disclosure Memorandum; enter into or amend any
severance agreements with officers of any SB&T Company except as disclosed
in Section 7.2(g) of the SB&T Disclosure Memorandum; grant any increase in
fees or other increases in compensation or other benefits to directors of
any SB&T Company; or
(h) except as disclosed in Section 7.2(h) of the SB&T Disclosure
Memorandum, enter into or amend any employment Contract between any SB&T
Company and any Person (unless such amendment is required by Law) that the
SB&T Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(i) except as disclosed in Section 7.2(i) of the SB&T Disclosure
Memorandum, adopt any new employee benefit plan or program of any SB&T
Company or make any material change in or to any existing employee benefit
plans or programs of any SB&T Company other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan; or
(j) make any significant change in any accounting methods, principles,
or practices or systems of internal accounting controls, except as may be
necessary to conform to changes in regulatory accounting requirements or
GAAP; or
(k) commence or settle any Litigation other than in accordance with
past practice; provided that, except to the extent specifically reserved
against in the SB&T Financial Statements dated prior to the date of this
Agreement, no SB&T Company shall settle any Litigation involving any
Liability of any SB&T Company for money damages in excess of $25,000 or
restrictions upon the operations of any SB&T Company; or
(l) except in the ordinary course of business, enter into or terminate
any material Contract or make any change in any material lease or Contract,
other than renewals of leases and Contracts without material adverse
changes of terms or as disclosed pursuant to Sections 7.2(g), (h), or (i)
of the SB&T Disclosure Memorandum.
7.3 Covenants of Regions. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that it will not, without the prior written consent of a
duly authorized officer of SB&T 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 SB&T Common Stock.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material
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Adverse Effect on it or (ii) is reasonably likely to cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and SB&T shall deliver to Regions copies of all
such reports filed by SB&T 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.
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 SB&T has provided, on a
reasonably timely basis, all information concerning SB&T necessary for inclusion
in the Registration Statement, and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act as soon as
reasonably practicable after the filing thereof and take any action required to
be taken under the applicable state Blue Sky or securities Laws in connection
with the issuance of the shares of Regions Common Stock upon consummation of the
Merger. SB&T shall promptly furnish all information concerning it and the
holders of its capital stock as Regions may reasonably request in connection
with such action. SB&T 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) SB&T 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 SB&T 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 SB&T 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 SB&T 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 SB&T 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
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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, after the 30th day after
execution of this Agreement, shall not interfere unreasonably with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) SB&T shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
acquisition transaction with SB&T to preserve the confidentiality of the
information relating to SB&T provided to such parties.
8.6 Press Releases. Prior to the Effective Time, SB&T 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 SB&T Company nor any Affiliate thereof nor
any investment banker, attorney, accountant, or other representative
(collectively, "Representatives") retained by any SB&T Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of SB&T's Board of Directors as
advised in writing by counsel to such Board of Directors, no SB&T 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 SB&T 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. SB&T shall
promptly notify Regions orally and in writing in the event that it receives any
inquiry or proposal relating to any such transaction. SB&T shall immediately
cease and cause to be terminated as of the date of this Agreement any existing
activities, discussions, or negotiations with any Persons conducted heretofore
with respect to any of the foregoing.
8.8 Tax Matters. The Parties agree to use their reasonable efforts to
obtain written opinions of Alston & Bird to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) the exchange in the Merger of SB&T Common Stock for Regions
Common Stock will not give rise to gain or loss to the stockholders of SB&T with
respect to such exchange (except to the extent of any cash received), and (iii)
each of SB&T 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 SB&T and Regions reasonably satisfactory in form
and substance to such counsel. Each of the Parties undertakes and agrees to
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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. SB&T has disclosed in Section 8.9 of the SB&T
Disclosure Memorandum each Person whom it reasonably believes is an "affiliate"
of SB&T for purposes of Rule 145 under the 1933 Act. SB&T shall use its
reasonable efforts to cause each such Person to deliver to Regions not later
than 30 days prior to the Effective Time a written agreement, substantially in
the form of Exhibit 2, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of SB&T 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 SB&T 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
SB&T in exchange for shares of SB&T Common Stock shall not be transferable until
such time as financial results covering at least 30 days of combined operations
of Regions and SB&T have been published within the meaning of Section 201.01 of
the SEC's Codification of Financial Reporting Policies, regardless of whether
each such affiliate has provided the written agreement referred to in this
Section 8.9 (and Regions shall be entitled to place restrictive legends upon
certificates for shares of Regions Common Stock issued to affiliates of SB&T
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 SB&T 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 SB&T
should be treated as service under Regions' qualified defined benefit plans,
(ii) service under any qualified defined contribution plans of SB&T shall be
treated as service under Regions' qualified defined contribution plans, and
(iii) service under any other employee benefit plans of SB&T shall be treated as
service under any similar employee benefit plans maintained by Regions. Subject
to the provisions of Section 9.1(h) of this Agreement, Regions also shall cause
SB&T and its Subsidiaries to honor all employment, severance, consulting, and
other compensation Contracts disclosed in Section 8.10 of the SB&T Disclosure
Memorandum to Regions between any SB&T 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
SB&T Benefit Plans.
8.11 Indemnification.
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six (6) years after the Effective Time, Regions shall, and shall cause
SB&T to, indemnify, defend, and hold harmless each person entitled to
indemnification from a SB&T 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 Georgia Law and SB&T's Articles
of Incorporation and Bylaws, in each case as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the defense of
any Litigation. Without limiting the foregoing, in any case in which approval by
the SB&T is required to effectuate any indemnification, Regions shall cause the
SB&T 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.
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(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a), upon learning of any such Liability or Litigation, shall promptly notify
Regions thereof. In the event of any such Litigation (whether arising before or
after the Effective Time), (i) Regions or SB&T 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 SB&T 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 SB&T and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Regions or SB&T
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 SB&T 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 SB&T Company shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws,
including Sections 14-2-1111 and 14-2-1132 of the GBCC.
8.13 Articles of Incorporation Provisions. Each SB&T 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 SB&T 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
SB&T 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 SB&T 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
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of Regions would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(f) Nasdaq/NMS Listing. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the
Nasdaq/NMS.
(g) Tax Matters. Each Party shall have received a copy of the Tax
Opinions referred to in Section 8.8 of this Agreement. Each Party shall
have delivered to the other a Certificate, dated as of the 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.
(h) Employment Agreement Matters. The employment agreement currently
in effect, as amended, by and between SB&T and B. J. Alexander, President
and Chief Executive Officer of SB&T, shall be terminated by written
agreement between SB&T and Mr. Alexander, and Regions or the appropriate
Regions Subsidiary, shall have entered into a new employment agreement with
Mr. Alexander on terms reasonably acceptable to Regions.
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 SB&T 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 SB&T set forth in Section 5.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of SB&T 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 SB&T 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 SB&T; 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 SB&T to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
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(c) Certificates. SB&T 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
SB&T's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Regions and its
counsel shall request.
(d) Claims Letters. Each of the directors and officers of SB&T shall
have executed and delivered to Regions letters in substantially the form of
Exhibit 3 to this Agreement.
(e) Legal Opinion. Regions shall have received a written opinion,
dated as of the Effective Time, of counsel to SB&T, in substantially the
form of Exhibit 4 to this Agreement.
(f) Affiliate Agreements. Regions shall have received from each
affiliate of SB&T the affiliates agreement referred to in Section 8.9 of
this Agreement.
(g) Pooling Letter. Regions shall have received a letter from Ernst &
Young, LLP, dated as of the Effective Time, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance
with this Agreement.
9.3 Conditions to Obligations of SB&T. The obligations of SB&T 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 SB&T 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 SB&T (i)'a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that, to the best knowledge of such
officers, after due inquiry, the conditions of its obligations set forth in
Sections 9.3(a) and 9.3(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by Regions' Board of Directors
and stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, as
appropriate, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as SB&T and its counsel shall request.
(d) Legal Opinion. SB&T shall have received a written opinion, dated
as of the Effective Time, of counsel to Regions, in substantially the form
of Exhibit 5 to this Agreement.
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ARTICLE TEN
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of SB&T,
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 SB&T; 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 SB&T and Section 9.3(a) in
the case of Regions or in material breach of any covenant or other
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such inaccuracy and
which inaccuracy would provide the terminating Party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of SB&T 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 SB&T 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 SB&T fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the Laws of the State of
Georgia at the SB&T Stockholders' Meeting where the transactions were
presented to such stockholders for approval and voted upon; or
(e) By the Board of Directors of SB&T or by the Board of Directors of
Regions in the event that the Merger shall not have been consummated by
September 30, 1997, 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 SB&T and Section 9.3(a) in
the case of Regions or in material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement)
cannot be satisfied or fulfilled by the date specified in Section 10.1(e)
of this Agreement as the date after which such Party may terminate this
Agreement; or
(g) By the Board of Directors of Regions, at any time prior to the
45th day after execution of this Agreement without any Liability in the
event that the review of the Assets, business, financial condition, results
of operations, and prospects of SB&T undertaken by Regions during such time
period or any of the disclosures contained in the SB&T Disclosure
Memorandum causes the Board of Directors of Regions to determine, in its
reasonable good faith judgment, that a fact or circumstance exists or is
likely to exist or result which materially and adversely impacts one or
more of the economic benefits to Regions
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of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article Eleven and Section 8.5(b) of this Agreement shall survive any
such termination, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c),
or 10.1(f) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination. Each of the Support Agreements
shall be governed by its own terms as to its termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles Two, Three, Four, and Eleven and Sections 8.9, and 8.11 of this
Agreement.
ARTICLE ELEVEN
MISCELLANEOUS
11.1 Definitions. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person, (ii) any officer, 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, SB&T, other than
the formation of a newly organized holding company for SB&T in which the
shares of SB&T 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 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et seq., or
any similar federal, state, or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person shall mean the knowledge
after due inquiry of the chairman, president, chief financial officer,
chief accounting officer, chief credit officer, general counsel, any
assistant or deputy general counsel, or any senior or executive vice
president of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting, or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including, without limitation, those
promulgated, interpreted, or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including,
without limitation, costs of investigation, collection, and defense),
claim, deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of
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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, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "material
adverse effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall mean the merger of SB&T with and into Regions referred
to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq/NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"Party" shall mean either SB&T or Regions and "Parties" shall mean
both SB&T and Regions.
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"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 SB&T 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
SB&T.
"Regions Common Stock" shall mean the $.625 par value common stock of
Regions.
"Regions Companies" shall mean, collectively, Regions and all Regions
Subsidiaries.
"Regions Disclosure Memorandum" shall mean the written information
entitled "Regions Financial Corporation Disclosure Memorandum" delivered
prior to the date of this Agreement to SB&T describing in reasonable detail
the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"Regions Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Regions as of September 30, 1996, and the restated consolidated statements
of condition (including related notes and schedules, if any) of Regions as
of December 31, 1995 and 1994, the related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) for the nine months ended September 30, 1996 and the
related restated statements of income, changes in stockholders' equity, and
cash flows (including related notes and schedules, if any) for each of the
three years ended December 31, 1995, 1994, and 1993, as filed by Regions in
SEC Documents and reflecting the acquisition of First National Bancorp
accounted for as a pooling of interests and (ii) the consolidated
statements of condition of Regions (including related notes and schedules,
if any) and related statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to September
30, 1996.
"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.
"SB&T Benefit Plans" shall have the meaning set forth in Section 5.13
of this Agreement.
"SB&T Common Stock" shall mean the $1.00 par value common stock of
SB&T.
"SB&T Companies" shall mean, collectively, SB&T and all SB&T
Subsidiaries.
"SB&T Disclosure Memorandum" shall mean the written information
entitled "SB&T Disclosure Memorandum" delivered prior to the 14th day
following execution of this Agreement to Regions describing in reasonable
detail the matters contained therein and, with respect to each disclosure
made therein, specifically referencing each Section of this Agreement under
which such disclosure is being made.
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"SB&T Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of SB&T as of
December 31, 1995 and 1994, and the related statements of income, changes
in stockholders' equity, and cash flows (including related notes and
schedules, if any) for each of the three fiscal years ended December 31,
1995, 1994, and 1993, included in the SB&T Disclosure Memorandum, (ii) the
Call Reports filed by the banking Subsidiary of SB&T, with its principal
Regulatory Authority as of September 30, 1996 and for the nine months ended
September 30, 1996, and (iii) the Call Reports filed by the banking
Subsidiary of SB&T, with its principal Regulatory Authority with respect to
periods ended subsequent to September 30, 1996.
"SB&T Subsidiaries" shall mean the Subsidiaries of SB&T, which shall
include the SB&T Subsidiaries described in Section 5.4 of this Agreement
and any corporation, bank, savings association, or other organization
acquired as a Subsidiary of SB&T in the future and owned by SB&T at the
Effective Time.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with
any Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
SB&T to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"Subsidiary" or collectively "Subsidiaries" shall mean all those
corporations, banks, associations, or other entities of which the entity in
question owns or controls fifty percent (50%) or more of the outstanding
equity securities either directly or through an unbroken chain of entities
as to each of which fifty percent (50%) or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided,
however, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"Support Agreements" shall mean the various Support Agreements, each
in substantially the form of Exhibit 1 to this Agreement.
"Surviving Corporation" shall mean Regions as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, of any nature whatsoever,
including interest, penalties, and additions imposed thereon or with
respect thereto.
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, except that Regions shall bear and pay the filing fees payable in
connection with the Registration Statement and the Proxy Statement and printing
costs incurred in connection with the printing of the Registration Statement and
the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection
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with this Agreement or the transactions contemplated hereby except for the fee
paid to The Carson Medlin Company. 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 SB&T or Regions, each of SB&T 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 SB&T Common Stock, there shall be made no
amendment decreasing the consideration to be received by SB&T 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 SB&T, to waive or extend the time for the compliance or fulfillment
by SB&T 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, SB&T, 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 SB&T 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 SB&T.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so received:
<TABLE>
<S> <C>
SB&T: SB&T Corporation
P.O. Box 813000
Smyrna, Georgia 30081
Telecopy Number: (770) 434-8043
Attention: B. J. Alexander
President and Chief Executive Officer
</TABLE>
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Copy to Counsel: Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E., Sixteenth Floor
Atlanta, Georgia 30303
Telecopy Number: (404) 572-5958
Attention: Walter G. Moeling IV
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive
Financial Officer
Copy to Counsel: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7099
Attention: Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
11.9 Governing Law. Except to the extent the laws of the State of Georgia
apply to the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in 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: SB&T CORPORATION
By: /s/ LEONARD W. THOMAS By: /s/ B. J. ALEXANDER
------------------------------------------------- -------------------------------------------------
Leonard W. Thomas B. J. Alexander
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
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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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1. -- Form of Support Agreement. (sec. 11.1).
2. -- Form of agreement of affiliates of SB&T. (sec. 8.9).
3. -- Form of Claims Letter. (sec. 9.2).
4. -- Form of Opinion Letter of SB&T's Counsel. (sec. 9.2).
5. -- Form of Opinion Letter of Regions' Counsel. (sec. 9.3).
</TABLE>
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<PAGE> 116
APPENDIX B
April 25, 1997
Board of Directors
SB&T Corporation
888 Concord Road, SE
Smyrna, Georgia 30080
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the Exchange Ratio, as defined below, to the stockholders of SB&T
Corporation ("SB&T") under the terms of a certain Agreement and Plan of Merger
dated December 19, 1996 (the "Agreement") pursuant to which SB&T will merge with
and into Regions Financial Corporation ("Regions") (the "Merger"). Under the
terms of the Agreement, each of the outstanding shares of SB&T common stock
shall be converted into the right to receive .50 of a share of Regions common
stock (the "Exchange Ratio"). The Exchange Ratio will be proportionately
adjusted if Regions effects a proposed 2 for 1 stock split prior to the
effective date of the Merger. The foregoing summary of the Merger is qualified
in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Georgia and the Southeast and the major
commercial banks operating in that market. We have been retained by SB&T in a
financial advisory capacity to render our opinion hereunder, for which we will
receive compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of Regions and SB&T. We have reviewed:
(i) the Agreement; (ii) the annual reports to stockholders of Regions, including
audited financial statements for the five years ended December 31, 1996; (iii)
the annual reports to stockholders of SB&T, including audited financial
statements of SB&T for the five years ended December 31, 1996; (iv) the Proxy
Statement of SB&T dated February 15, 1996 for the annual meeting of the
stockholders of SB&T held on March 21, 1996; (v) the Proxy Statement of Regions
dated April 1, 1997 for the annual meeting of the stockholders of Regions to be
held on May 14, 1997; (vi) interim financial statements of SB&T through February
28, 1997; (vii) a preliminary copy of the Proxy Statement/Prospectus prepared in
connection with a special meeting of the stockholders of SB&T to consider the
Merger; and (viii) certain other financial and operating information with
respect to the business, operations and prospects of Regions and SB&T. We also:
(i) held discussions with members of the senior management of SB&T and Regions
regarding historical and current business operations, financial conditions and
future prospects; (ii) reviewed the historical market prices and trading
activity for the common stocks of Regions and SB&T and compared them with those
of certain publicly traded companies which we deemed to be relevant; (iii)
compared the results of operations of Regions and SB&T with those of certain
banking companies which we deemed to be relevant; (iv) compared the proposed
financial terms of the Merger with the financial terms, to the extent publicly
available, of certain other recent business combinations of commercial banking
organizations; (v) analyzed the pro forma financial impact of the Merger on
Regions; and (vi) conducted such other studies, analyses, inquiries and
examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
SB&T or Regions. The opinion we express herein is necessarily based upon market,
economic and other relevant considerations as they exist and can be evaluated as
of the date of this letter.
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Board of Directors
SB&T Corporation
April 25, 1997
Page 2
Based upon the foregoing, it is our opinion that the Exchange Ratio
provided for in the Agreement is fair, from a financial point of view, to the
shareholders of SB&T.
Very truly yours,
/s/ THE CARSON MEDLIN COMPANY
- ------------------------------
The Carson Medlin Company
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APPENDIX C
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
14-2-1320 Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321 Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
14-2-1324 Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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14-2-1325 Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated; (4) A statement
of the dissenter's right to demand payment under Code Section 14-2-1327;
and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326 Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
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14-2-1330 Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332 Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
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