<PAGE> 1
As filed with the Securities and Exchange Commission on November 13, 1998
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
----------------------
<TABLE>
<S> <C> <C>
Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------------
Copies to:
<TABLE>
<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III WILLIAM P. LANGDALE, JR.
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD LLP LANGDALE, VALLOTTON, LINAHAN,
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. THRELKELD & WETHERINGTON
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 1007 N. PATTERSON STREET
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 VALDOSTA, GEORGIA 31603
(205) 250-5000 (202) 508-3303 (912) 244-5400
</TABLE>
--------------------
Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate Amount of
to be registered registered per unit* offering price* registration fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 655,340 $11.8432599 $7,761,362 $2,157.66
==========================================================================================================================
</TABLE>
* Calculated in accordance with Rule 457(f), based on the total stockholders'
equity of the company being acquired. The number of shares being registered is
based on an exchange ratio calculated based on an assumed price of the
Registrant's common stock of $30.00 per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a),
shall determine.
<PAGE> 2
<TABLE>
<S> <C>
PROXY STATEMENT PROSPECTUS
VB&T BANCSHARES CORP. REGIONS FINANCIAL CORPORATION
UP TO 655,340 SHARES
OF COMMON STOCK
</TABLE>
-------------------------
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
-------------------------
The Boards of Directors of VB&T Bancshares Corp. and Regions Financial
Corporation have agreed on a merger of VB&T Bancshares and Regions. Regions will
be the surviving corporation in the merger. Regions is a regional bank holding
company headquartered in Birmingham, Alabama. Regions has banking operations in
Alabama, Arkansas, Florida, Georgia, Louisiana, South Carolina, Tennessee, and
Texas. Regions has assets of about $35.1 billion, deposits of about $27.2
billion, and stockholders' equity of about $3.0 billion.
If the merger is completed, VB&T Bancshares stockholders will receive, for each
share of VB&T Bancshares common stock they own, that fraction of a share of
Regions common stock computed to have a value of $28.28. The computation is
based on the average of the last sales prices of Regions common stock on the
Nasdaq National Market over the last ten trading days immediately preceding the
date of the special meeting of VB&T stockholders. Regions stockholders will
continue to own their existing shares of Regions common stock after the merger.
We can't complete the merger unless the stockholders of VB&T Bancshares approve
it. VB&T Bancshares has scheduled a special meeting for its stockholders to vote
on the merger.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the stockholder
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date and mail your proxy card without indicating how
you want to vote, your proxy will be counted as a vote in favor of the merger.
If you don't return your card, the effect will be a vote against the merger.
The date, time, and place of the special meeting of stockholders is as follows:
, 1998
p.m.
Main Office, VB&T Bancshares Corp.
2611 N. Patterson Street
Valdosta, Georgia 31602
This Proxy Statement-Prospectus provides you with detailed information about the
proposed merger. You can also get information about Regions from documents filed
with the Securities and Exchange Commission. We encourage you to read this
entire document carefully. Your Board of Directors strongly supports this merger
of VB&T Bancshares with Regions, and I join with the other members of the Board
of Directors in enthusiastically recommending that you vote in favor of the
merger.
Donald T. Schutt
President and Chief Executive Officer
VB&T Bancshares Corp.
SHARES OF REGIONS COMMON STOCK 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.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE REGIONS COMMON STOCK TO BE ISSUED UPON COMPLETION
OF THE MERGER OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement-Prospectus dated , 1998, and first mailed
to stockholders on , 1998.
<PAGE> 3
We have not authorized anyone to give any information or make any representation
about the merger or our companies that differs from, or adds to, the information
in this Proxy Statement-Prospectus or in Regions' documents that are publicly
filed with the Securities and Exchange Commission. Therefore, if anyone does
give you different or additional information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or sell,
or to ask for offers to exchange or buy, the securities offered by this Proxy
Statement-Prospectus or to ask for proxies, or if you are a person to whom it is
unlawful to direct such activities, then the offer presented by this Proxy
Statement-Prospectus does not extend to you.
The information contained in this Proxy Statement-Prospectus speaks only as of
its date unless the information specifically indicates that another date
applies.
Information in this Proxy Statement-Prospectus about Regions Financial
Corporation has been supplied by Regions, and information about VB&T Bancshares
Corp. has been supplied by VB&T.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Each company makes forward-looking statements in this Proxy
Statement-Prospectus, and in Regions' public documents to which we refer, that
are subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our operations or the
performance of the combined company after the merger. Also, when we use any of
the words "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. Many possible events or factors could affect
the future financial results and performance of each of our companies and the
combined company after the merger. This could cause results or performance to
differ materially from those expressed in our forward-looking statements. You
should consider these risks when you vote on the merger. These possible events
or factors include the following:
1. Regions' revenues after the merger and other recent acquisitions may be
lower than expected, Regions' restructuring charges in recent acquisitions
may be higher than expected, or Regions' operating costs after the merger
and other recent acquisitions may be greater than expected;
2. Competition among depository and other financial institutions may
increase significantly;
3. We may have more trouble obtaining regulatory approvals for the merger
than expected;
4. Regions may have more trouble integrating acquired businesses or
retaining key personnel than expected;
5. Regions' costs savings from the merger and other recent acquisitions may
be less than expected, or Regions may be unable to obtain those cost
savings as soon as expected;
6. Changes in the interest rate environment may reduce operating margins;
7. General economic or business conditions may be worse than we expect;
8. Legislative or regulatory changes may adversely affect our businesses;
9. Technological changes and systems integration may be harder to make or
more expensive than expected; and
10. Adverse changes may occur in the securities markets.
<PAGE> 4
VB&T BANCSHARES CORP.
2611 N. PATTERSON STREET, VALDOSTA, GEORGIA, 31602
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
-------------------------
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of VB&T Bancshares Corp. ("VB&T"), a bank holding company, will be
held at VB&T's main office, located at 2611 N. Patterson Street, Valdosta,
Georgia, 31602 on , 1998, at :00 p.m., local time, for the
following purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated
as of July 6, 1998 (the "Agreement"), by and between VB&T and Regions
Financial Corporation ("Regions") pursuant to which (i) VB&T will merge
with and into Regions with Regions as the surviving corporation (the
"Merger") and (ii) each share of VB&T common stock (excluding certain
shares held by VB&T, Regions, or their respective subsidiaries and
excluding all shares held by stockholders who perfect their dissenters'
rights) will be converted into that fraction of a share of Regions common
stock computed to have a value of $28.28 (based on the average of the last
sales prices of Regions common stock on the Nasdaq National Market over the
last ten trading days immediately preceding the date of the special
meeting), with cash to be paid 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 , 1998, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of VB&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 B.
The Board of Directors of VB&T unanimously recommends that holders of VB&T
common stock vote FOR 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
VB&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
Faye Farr
Corporate Secretary
, 1998
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
The Companies............................................. 1
The Merger................................................ 1
Comparative Per Share Market Price Information............
Reasons for the Merger.................................... 2
The Special Meeting....................................... 2
Recommendations to Stockholders........................... 2
Record Date; Voting Power................................. 2
Vote Required............................................. 2
Conditions to Completion of the Merger.................... 3
Termination of the Merger Agreement....................... 3
Federal Income Tax Consequences........................... 3
Accounting Treatment...................................... 4
Interests of Persons in the Merger That Are Different from
Yours.................................................. 4
Dissenters' Appraisal Rights.............................. 4
Regulatory Approvals...................................... 4
Comparative Per Share Data................................ 5
Selected Financial Data................................... 8
THE SPECIAL MEETING......................................... 12
General................................................... 12
Record Date; Vote Required................................ 12
THE MERGER.................................................. 14
General................................................... 14
Treatment of VB&T Options................................. 15
Background of the Merger.................................. 15
VB&T's Reasons for the Merger............................. 15
Regions' Reasons for the Merger........................... 16
Effective Time of the Merger.............................. 17
Distribution of Regions Stock Certificates and Payment For
Fractional Shares...................................... 17
Conditions to Consummation of the Merger.................. 18
Regulatory Approvals...................................... 19
Waiver, Amendment, and Termination of the Agreement....... 20
Conduct of Business Pending the Merger.................... 21
Management Following the Merger........................... 22
Interests of Certain Persons in the Merger................ 22
Dissenting Stockholders................................... 22
Federal Income Tax Consequences of the Merger............. 25
Accounting Treatment...................................... 26
Expenses and Fees......................................... 27
Resales of Regions Common Stock........................... 27
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS.............. 28
Antitakeover Provisions Generally......................... 28
Authorized Capital Stock.................................. 29
Amendment of Certificate or Articles of Incorporation and
Bylaws................................................. 29
Classified Board of Directors and Absence of Cumulative
Voting................................................. 30
Removal of Directors...................................... 31
Limitations on Director Liability......................... 31
Indemnification........................................... 31
Special Meetings of Stockholders.......................... 32
Actions by Stockholders Without a Meeting................. 33
Stockholder Nominations................................... 33
Mergers, Consolidations, and Sales of Assets Generally.... 33
Business Combinations with Certain Persons................ 34
Dissenters' Rights........................................ 35
Stockholders' Rights to Examine Books and Records......... 35
Dividends................................................. 35
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 37
VB&T MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 39
INFORMATION ABOUT VB&T...................................... 62
Business and Properties................................... 62
Competition............................................... 64
Legal Proceedings......................................... 65
Management................................................ 65
Transactions with Management.............................. 66
Voting Securities and Principal Stockholders of VB&T...... 66
INFORMATION ABOUT REGIONS................................... 67
General................................................... 67
Recent Developments....................................... 68
SUPERVISION AND REGULATION.................................. 70
General................................................... 70
Payment of Dividends...................................... 71
Capital Adequacy.......................................... 72
Prompt Corrective Action.................................. 73
FDIC Insurance Assessments................................ 74
DESCRIPTION OF REGIONS COMMON STOCK......................... 74
STOCKHOLDER PROPOSALS....................................... 75
EXPERTS..................................................... 75
OPINIONS.................................................... 75
WHERE YOU CAN FIND MORE INFORMATION......................... 75
INDEX TO VB&T FINANCIAL STATEMENTS.......................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Copy of Chapter 2, Article 13 of the Georgia
Business Corporation Act, pertaining to dissenters'
rights.................................................... B-1
</TABLE>
ii
<PAGE> 7
SUMMARY
This summary highlights selected information from this Proxy
Statement-Prospectus. It does not contain all of the information that is
important to you. You should carefully read this entire document and the
documents to which we have referred. These will give you a more complete
description of the proposed merger and its legal terms. See "Where You Can Find
More Information" (page ). Each item in this summary includes a page reference
that directs you to a more complete description in this document of the topic
discussed.
THE COMPANIES (PAGES AND )
REGIONS FINANCIAL CORPORATION
417 North 20th Street
Birmingham, Alabama 35203
(205) 326-7100
Regions is incorporated in Delaware and is a regional bank holding company.
Regions provides banking and other financial services. Regions has banking
operations in Alabama, Arkansas, Florida, Georgia, Louisiana, South Carolina,
Tennessee, and Texas. As of September 30, 1998, Regions' total assets were about
$35.1 billion, deposits were about $27.2 billion and stockholders' equity was
about $3.0 billion.
The section of this Proxy Statement-Prospectus under the caption "Where You Find
More Information" refers you to places where you can find more information about
Regions.
VB&T BANCSHARES CORP.
2611 N. Patterson Street
Valdosta, Georgia, 31602
(912) 242-1200
VB&T Bancshares is incorporated in Georgia and is a bank holding company. VB&T
Bancshares owns Valdosta Bank & Trust, a commercial bank, which serves customers
primarily in Lowndes County, Georgia. As of September 30, 1998, VB&T Bancshares'
total assets were about $74.2 million, deposits were about $60.6 million, and
stockholders' equity was about $7.8 million.
THE MERGER (PAGE )
VB&T Bancshares will merge with Regions Financial Corporation. Regions will be
the surviving corporation in the merger. When the merger is completed, you will
receive, for each share of VB&T Bancshares stock that you own, that fraction of
a share of Regions stock computed to have a value of $28.28. The computation is
based on the average of the last sales prices of Regions common stock on the
Nasdaq National Market over the last ten trading days immediately preceding the
date of the special meeting of VB&T stockholders. You will not receive a
fraction of a share. Instead, you will receive a cash payment for any fraction
of a share to which you may become entitled.
If you elect to dissent from the merger under Georgia law and follow the
required procedures, you will receive a cash payment for your shares of VB&T
Bancshares common stock instead of receiving Regions common stock. More
information about your rights to dissent from the Merger, and the procedures you
must follow should you choose to do so, is included under the heading "The
Merger -- Dissenting Stockholders" at page .
1
<PAGE> 8
We have attached the merger agreement to this Proxy Statement-Prospectus as
Appendix A. We encourage you to read the merger agreement. It is the legal
document that establishes the terms and conditions of the merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE )
Shares of Regions are quoted on the Nasdaq National Market. Shares of VB&T
Bancshares are not quoted on any established market. On May 12, 1998, the last
full trading day prior to the public announcement of an agreement in principle
for the merger, Regions stock closed at $43.44 per share. As of that date the
last known price of VB&T Bancshares stock was $14.50 per share. On ,
1998, Regions stock closed at $ per share and the last known price of
VB&T Bancshares stock was $ per share.
Of course, the market price of Regions common stock will fluctuate after the
exchange ratio is fixed.
REASONS FOR THE MERGER (PAGE )
Before deciding to approve and recommend the merger, your Board of Directors
considered the financial condition and prospects of VB&T Bancshares, information
about Regions, the financial terms of the merger, the likelihood the bank
regulators will approve the merger, the federal income tax consequences of the
merger, the advice of your Board's legal advisors, and other factors. Your Board
of Directors decided the merger is advisable and is in your best interests as
stockholders.
To review the background of and reasons for the merger in greater detail, please
see the discussion under the headings "The Merger -- Background of the Merger"
and "The Merger -- VB&T's Reasons for the Merger" at pages and .
THE SPECIAL MEETING (PAGE )
The VB&T Bancshares special meeting will be held at VB&T Bancshares' main
office, 2611 N. Patterson Street, Valdosta, Georgia, 31602, at
p.m. on , 1998. At the special meeting, VB&T Bancshares stockholders
will be asked to approve the merger agreement.
RECOMMENDATIONS TO STOCKHOLDERS (PAGE )
Your Board of Directors believes that the merger is fair to you and in your best
interests. The Board unanimously recommends that you vote "FOR" the proposal to
approve the merger agreement.
RECORD DATE; VOTING POWER (PAGE )
You can vote at the VB&T Bancshares Special Meeting if you owned VB&T Bancshares
common stock as of the close of business on , 1998, the record date.
On that date, shares of VB&T Bancshares common stock were
outstanding and therefore are allowed to vote at the special meeting. You will
be able to cast one vote for each share of VB&T Bancshares common stock you
owned on , 1998. You may
2
<PAGE> 9
vote either by attending the special meeting and voting your shares or by
completing the enclosed proxy card and mailing it to VB&T in the enclosed
envelope.
Regions stockholders will not vote on the merger.
VOTE REQUIRED (PAGE )
In order for the special meeting to be held, a quorum must be present. A quorum
is established when a majority of the shares of VB&T common stock are
represented at the special meeting either in person or by proxy. To approve the
merger, VB&T Bancshares stockholders who hold a majority of the outstanding
shares of common stock on the record date must vote for the merger. If you do
not vote, this will have the same effect as a vote against the Merger.
All together, the directors and officers of VB&T Bancshares can cast about
% of the votes entitled to be cast at the VB&T Bancshares special meeting.
The members of your Board of Directors have agreed to vote all of their shares
in favor of the merger.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE )
The completion of the merger depends on a number of conditions being met,
including the following:
- VB&T Bancshares stockholders approving the merger;
- Receipt of all required regulatory approvals and the expiration of any
regulatory waiting periods;
- The absence of any governmental or court order blocking completion of the
merger, or of any proceedings by a government body trying to block it;
- Receipt of an opinion of counsel that the U.S. federal income tax
treatment of you the stockholders and of VB&T Bancshares in the merger
will generally be tax-free as we've described it to you in this Proxy
Statement-Prospectus; and
- Filing with the National Association of Securities Dealers, Inc. of
Regions' notification for listing of additional shares on the Nasdaq
National Market for the shares of Regions common stock to be issued in
the Merger.
In cases where the law permits, a party to the Merger Agreement could elect to
waive a condition that has not been satisfied and complete the merger although
it is entitled not to. We can't be certain whether or when any of the conditions
we've listed will be satisfied (or waived, where permissible), or that the
merger will be completed.
TERMINATION OF THE MERGER AGREEMENT (PAGE )
We can agree at any time to terminate the merger agreement without completing
the merger, even if you, the stockholders, have already voted to approve it.
Moreover, either of us can terminate the merger agreement in the following
circumstances:
- After a final decision by a governmental authority to prohibit the
merger, or after the rejection of an application for a governmental
approval required to complete the merger;
3
<PAGE> 10
- If the merger isn't completed by March 31, 1999;
- If the VB&T Bancshares stockholders don't approve the merger; or
- If the other party violates, in a significant way, any of its
representations, warranties or obligations under the merger agreement and
the party seeking termination isn't in violation of the merger agreement.
FEDERAL INCOME TAX CONSEQUENCES (PAGE )
We have structured the merger with the intent that you won't recognize any gain
or loss for U.S. federal income tax purposes in the merger when you exchange all
of your shares of VB&T common stock for shares of Regions common stock in the
merger, except in connection with cash received instead of fractional shares. We
have conditioned the merger on our receipt of legal opinions that this will be
the case, but these opinions won't bind the Internal Revenue Service, which
could take a different view.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN VB&T BANCSHARES STOCKHOLDERS,
INCLUDING THE TYPES OF VB&T BANCSHARES STOCKHOLDERS DISCUSSED ON PAGE , AND
WILL NOT APPLY TO ANY VB&T BANCSHARES STOCKHOLDER WHO DISSENTS FROM THE MERGER
UNDER GEORGIA LAW. DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU
CAN BE COMPLICATED. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND MANY
VARIABLES NOT WITHIN OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A
FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
ACCOUNTING TREATMENT (PAGE )
We expect the merger to qualify as a pooling of interests, which means that, for
accounting and financial reporting purposes, we will treat our companies as if
they had always been one company.
INTERESTS OF PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE )
Some of the officers of VB&T Bancshares have benefit and compensation plans that
provide them with interests in the merger that are different from, or in
addition to, their interests as stockholders of VB&T Bancshares. In particular,
they hold outstanding options under VB&T's existing stock option plan, which
will be converted into stock options to acquire Regions stock after the merger.
Also, members of VB&T Bancshares' Board and its officers are entitled to
indemnification under the merger agreement.
The board of directors of VB&T was aware of these interests and considered them
in approving and recommending the merger.
For more information concerning these matters, please refer to the discussion
under the heading "The Merger -- Interests of Certain Persons in the Merger" on
page .
DISSENTERS' APPRAISAL RIGHTS (PAGE )
Georgia law permits you to dissent from the merger and to have the fair value of
your stock appraised by a court and paid to you in cash. To do this, you must
follow certain procedures, including the filing of certain notices and
refraining from voting your shares in favor of the merger. If you dissent from
the merger, your shares of VB&T Bancshares
4
<PAGE> 11
common stock will not be exchanged for shares of Regions common stock in the
merger, and your only right will be to receive the appraised value of your
shares in cash.
REGULATORY APPROVALS (PAGE )
We can't complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System. The U.S. Department of Justice has
input into the Federal Reserve Board's approval process. Federal law requires us
to wait for up to 30 days before completing the merger after the Federal Reserve
Board has approved it, which the Federal Reserve Board may shorten to 15 days.
In addition, the merger is subject to the approval of or notice to the
Department of Banking and Finance of the state of Georgia.
We have filed (or shortly will file) all of the required notices with these
regulatory authorities. While we don't know of any reason why we shouldn't
obtain the remaining regulatory approvals in a timely manner, we can't be
certain when we'll obtain them or that we will obtain them.
COMPARATIVE PER SHARE DATA
The following table shows information about our companies' income per share,
dividends per share and book value per share, and similar information reflecting
the merger of our two companies (which is referred to as "pro forma"
information). In presenting the comparative pro forma information for certain
time periods, we assumed that our companies had been merged throughout those
periods.
In presenting the comparative pro forma information, we also assumed that we
will treat our companies as if they had always been combined for accounting and
financial reporting purposes (a method which is referred to as the "pooling of
interests" method of accounting).
The information listed as "equivalent pro forma" was obtained by multiplying the
pro forma amounts by an assumed exchange ratio of .7801, based on the last sales
price of Regions common stock on the Nasdaq National Market on September 30,
1998. It is intended to reflect the estimate that VB&T Bancshares stockholders
will be receiving .7801 of a share of Regions common stock for each share of
VB&T Bancshares common stock exchanged in the merger. This may not be the actual
exchange ratio, since the exact ratio won't be determined until shortly before
the merger.
The pro forma information, while helpful in illustrating the financial
attributes of the combined company under one set of assumptions, doesn't attempt
to predict or suggest future results. Also, the information we've set forth for
the nine-month period ended September 30, 1998 doesn't indicate what the results
will be for the full 1998 fiscal year.
5
<PAGE> 12
The information in the following table is based on the historical financial
information of our companies. See "Information About Regions -- Recent
Developments," "Where You Can Find More Information" and "Index to VB&T
Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED EXCEPT REGIONS
AND VB&T HISTORICAL)
<S> <C> <C> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE
Regions historical........................... $ 1.34 $ 1.38 $ 1.82 $ 1.64 $ 1.45
Regions historical -- diluted................ 1.32 1.36 1.79 1.61 1.43
VB&T historical.............................. .91 1.05 1.32 1.03 .65
VB&T historical -- diluted................... .90 1.04 1.31 1.02 .64
Regions and VB&T pro forma combined(1)....... 1.34 1.82 1.64 1.45
Regions and VB&T pro forma combined --
diluted(1)................................. 1.32 1.79 1.61 1.43
VB&T pro forma equivalent(2)................. 1.05 1.42 1.28 1.13
VB&T pro forma equivalent -- diluted(2)...... 1.03 1.40 1.26 1.12
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical........................... .69 .60 .80 .70 .66
VB&T historical.............................. .28 .28 .28 .20 .15
VB&T pro forma equivalent(3)................. .54 .47 .62 .55 .51
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical........................... 13.38 12.46 12.75 11.82 10.74
VB&T historical.............................. 12.06 10.96 11.33 10.16 9.57
Regions and VB&T pro forma combined(1)....... 13.38
VB&T pro forma equivalent(2)................. 10.44
</TABLE>
- -------------------------
(1) Represents the combined results of Regions and VB&T as if the Merger were
consummated on January 1, 1995 (or September 30, 1998, in the case of Book
Value Per Share Data), and were accounted for as a pooling of interests.
(2) Represents pro forma combined information multiplied by the exchange ratio
of .7801 of a share of Regions common stock for each share of VB&T common
stock.
(3) Represents historical dividends declared per share by Regions multiplied by
the exchange ratio of .7801 of a share of Regions common stock for each
share of VB&T common stock.
6
<PAGE> 13
(4) The combined and equivalent pro forma per share data assuming minimum and
maximum exchange ratios of .6733 and .9427 of a shares of Regions common
stock for each share of VB&T common stock is as follows:
<TABLE>
<CAPTION>
EXCHANGE RATIO
-----------------------------------------------------------
MINIMUM (.6733) MAXIMUM (.9427)
---------------------------- ----------------------------
NINE MONTHS YEAR NINE MONTHS YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1998 1997 1998 1997
------------- ------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY
ITEM PER COMMON SHARE
Regions and VB&T pro forma
combined........................... $ 1.34 $1.82 $1.34 $1.82
Regions and VB&T pro forma
combined -- diluted................ 1.32 1.79 1.31 1.79
VB&T pro forma equivalent............ .90 1.23 1.26 1.72
VB&T pro forma
equivalent -- diluted.............. .89 1.21 1.23 1.69
DIVIDENDS DECLARED PER
COMMON SHARE
VB&T pro forma equivalent............ .46 .54 .65 .75
BOOK VALUE PER COMMON
SHARE (PERIOD END)
Regions and VB&T pro forma
combined........................... 13.39 13.37
VB&T pro forma equivalent............ 9.02 12.60
</TABLE>
7
<PAGE> 14
SELECTED FINANCIAL DATA
The following tables show summarized historical financial data for each of our
companies.
The information in the following tables is based on the historical financial
information of our companies. All of the summary financial information provided
in the following tables should be read in connection with this historical
financial information and with the more detailed financial information we have
provided in this Proxy Statement-Prospectus, which you can find beginning at
page F-1 and in the documents of Regions incorporated by reference. See
"Information About Regions -- Recent Developments" on page and "Where You Can
Find More Information" on page . The financial information as of or for the
interim periods ended September 30, 1998 and 1997 has not been audited and in
the respective opinions of management reflects all adjustments (consisting only
of normal recurring adjustments) necessary to a fair presentation of such data.
SELECTED HISTORICAL FINANCIAL DATA OF REGIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income.... $ 1,932,506 $ 1,684,430 $ 2,276,584 $ 1,954,283 $ 1,750,427 $ 1,385,512 $ 1,102,493
Total interest expense... 948,247 808,368 1,097,376 942,459 861,242 598,160 446,199
Net interest income...... 984,259 876,062 1,179,208 1,011,824 889,185 787,352 656,294
Provision for loan
losses................. 41,482 58,966 89,663 46,026 37,493 22,058 38,017
Net interest income after
loan loss provision.... 942,777 817,096 1,089,545 965,798 851,692 765,294 618,277
Total noninterest income
excluding security
gains (losses)......... 340,835 283,374 381,400 341,792 280,834 251,837 242,326
Security gains
(losses)............... 3,127 454 498 3,311 (697) 681 3,312
Total noninterest
expense................ 839,939 663,039 901,776 837,034 720,825 653,506 584,044
Income tax expense....... 152,095 147,693 187,563 156,008 134,529 115,853 88,225
Income before
extraordinary item..... 294,705 290,192 382,104 317,859 276,475 248,453 191,646
Extraordinary item....... -- 15,425 15,425 -- -- -- --
Net income............... 294,705 305,617 397,529 317,859 276,475 248,453 191,646
PER SHARE DATA:
Income, before
extraordinary item..... $ 1.34 $ 1.38 $ 1.82 $ 1.64 $ 1.45 $ 1.36 $ 1.14
Net income............... 1.34 1.46 1.89 1.64 1.45 1.36 1.14
Income, before
extraordinary
item -- diluted........ 1.32 1.36 1.79 1.61 1.43 1.34 1.12
Net income -- diluted.... 1.32 1.43 1.86 1.61 1.43 1.34 1.12
Cash dividends........... .69 .60 .80 .70 .66 .60 .52
Book value............... 13.38 12.46 12.75 11.82 10.74 9.58 8.89
OTHER INFORMATION:
Average number of shares
outstanding............ 220,220 209,721 209,781 194,241 190,896 182,903 168,758
Average number of shares
outstanding,
-- diluted............. 223,935 213,940 213,750 197,751 193,579 185,110 171,363
</TABLE>
8
<PAGE> 15
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
DATA (PERIOD END):
Total assets............. $35,076,264 $30,451,527 $31,414,058 $26,993,344 $24,419,249 $22,184,508 $19,126,602
Securities............... 7,696,008 6,192,352 6,315,923 5,742,375 5,618,839 5,143,226 4,861,348
Loans, net of unearned
income................. 23,852,206 21,215,476 21,881,123 18,395,552 16,156,132 14,726,649 11,791,556
Total deposits........... 27,184,895 24,699,371 25,011,021 22,019,412 19,982,422 18,048,906 16,242,208
Long-term debt........... 424,176 456,347 445,529 570,545 762,521 766,774 683,171
Stockholders' equity..... 2,957,653 2,614,863 2,679,821 2,274,563 2,047,398 1,785,026 1,581,143
PERFORMANCE RATIOS:
Return on average
assets(1).............. 1.17%(a) 1.40%(b) 1.35%(c) 1.25%(d) 1.19% 1.23% 1.19%
Return on average
stockholders'
equity(1).............. 13.79(a) 16.02(b) 15.38(c) 14.71(d) 14.30 14.88 14.02
Net interest margin(1)... 4.28 4.42 4.41 4.36 4.27 4.33 4.57
Efficiency(2)............ 62.54(a) 56.32 57.78 61.84(d) 61.61 62.89 63.84
Dividend payout.......... 51.49 41.10 42.33 42.68 45.52 44.12 45.61
ASSET QUALITY RATIOS:
Net charge-offs to
average loans, net of
unearned income(1)..... .22% .23% .27% .18% .15% .18% .24%
Problem assets to net
loans and other real
estate(3).............. .67 .76 .78 .63 .69 .91 1.44
Nonperforming assets to
net loans and other
real estate(4)......... .84 .90 .91 .83 .81 .98 1.59
Allowance for loan losses
to loans, net of
unearned income........ 1.36 1.39 1.39 1.38 1.43 1.41 1.62
Allowance for loan losses
to nonperforming
assets(4).............. 163.04 153.64 151.89 166.41 177.53 144.04 101.66
LIQUIDITY AND CAPITAL
RATIOS:
Average stockholders'
equity to average
assets................. 8.51% 8.74% 8.75% 8.50% 8.36% 8.23% 8.49%
Average loans to average
deposits............... 86.91 84.54 84.94 82.42 82.23 75.90 72.36
Tier 1 risk-based
capital(5)............. 10.64 10.35 10.48 10.81 11.14 10.69 11.13
Total risk-based
capital(5)............. 11.84 11.54 12.93 13.59 14.61 14.29 13.48
Tier 1 leverage(5)....... 7.84 7.35 7.52 7.44 7.49 8.21 10.11
</TABLE>
- -------------------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses) from
security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%. The ratios for prior periods have not been restated to reflect
the combinations with First National Bancorp and First Commercial
Corporation, accounted for as poolings of interests, or any other
pooling-of-interests transactions.
9
<PAGE> 16
(a) Ratios for the nine months ended September 30, 1998, excluding $76.5
million (after tax) for nonrecurring merger and restructuring charges are
as follow: Return on average assets -- 1.48%, Return on average
stockholders' equity - 17.36%, and Efficiency - 54.00%.
(b) Ratios for the nine months ended September 30, 1997, excluding $15.4
million (after tax) for extraordinary gain from divestiture of two banks by
a pooled company are as follow: Return on average assets -- 1.33% and
Return on average stockholders' equity -- 15.21%.
(c) Ratios for 1997 excluding $15.4 million (after tax) for extraordinary gain
from divestiture of two banks by a pooled company are as follow: Return on
average assets -- 1.29% and Return on average stockholders'
equity -- 14.79%.
(d) Ratios for 1996 excluding $19.0 million (after-tax) charged for SAIF
assessment and merger expenses are as follows: Return on average
assets -- 1.40%, Return on average stockholders' equity -- 16.45%, and
Efficiency -- 56.16%.
SELECTED HISTORICAL FINANCIAL DATA OF VB&T
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- --------- ------- --------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total interest income................... $ 4,376 $ 4,047 $ 5,492 $ 4,919 $ 4,267 $ 3,045 $ 2,486
Total interest expense.................. 2,431 2,216 3,014 2,784 2,440 1,524 1,149
Net interest income..................... 1,945 1,831 2,478 2,135 1,827 1,521 1,337
Provision for loan losses............... 144 37 87 67 82 189 259
Net interest income after loan loss
provision............................. 1,801 1,794 2,391 2,068 1,745 1,332 1,078
Total noninterest income excluding
security gains........................ 305 325 432 387 245 174 164
Security gains.......................... 4 -- -- 8 28 4 --
Total noninterest expense............... 1,252 1,186 1,599 1,523 1,417 1,127 1,243
Income tax expense (benefit)............ 277 284 403 311 209 (154) --
Net income (loss)....................... 581 649 821 629 392 537 (1)
PER SHARE DATA:
Net income.............................. $ .91 $ 1.05 $ 1.32 $ 1.03 $ .65 .93 $ --
Net income -- diluted................... .90 1.04 1.31 1.02 .64 .92 --
Cash dividends.......................... .28 .28 .28 .20 .15 -- --
Book value.............................. 12.06 10.96 11.33 10.16 9.57 8.33 7.74
OTHER INFORMATION:
Average number of shares outstanding
basic................................. 638 620 622 613 603 578 517
Average number of shares outstanding --
diluted............................... 646 626 629 618 609 583 523
STATEMENT OF CONDITION DATA (PERIOD
END):
Total assets............................ $74,176 $ 70,365 $72,070 $ 64,710 $55,949 $47,384 $39,754
Securities.............................. 11,666 17,349 17,723 16,733 17,712 12,343 7,729
Loans, net of unearned income........... 49,921 45,648 48,047 41,342 34,494 29,531 25,186
Total deposits.......................... 60,616 60,749 62,259 55,461 48,794 40,061 34,508
Long-term debt.......................... 5,000 2,000 2,000 2,000 -- -- --
Stockholders' equity.................... 7,761 6,818 7,146 6,243 5,847 4,961 4,335
PERFORMANCE RATIOS:
Return on average assets(1)............. 1.06% 1.28% 1.20% 1.04% .76% 1.23% .00%
Return on average stockholders'
equity(1)............................. 10.40 13.24 12.26 10.41 7.25 11.55 .00
Net interest margin(1).................. 3.81 3.86 3.88 3.75 3.81 3.79 4.13
</TABLE>
10
<PAGE> 17
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- --------- ------- --------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Efficiency (2).......................... 55.64% 55.01% 54.95% 60.39% 68.39% 66.49% 82.81%
Dividend payout......................... 30.01 25.40 20.09 18.46 22.00 .00 .00
ASSET QUALITY RATIOS:
Net charge-offs to average loans, net of
unearned income(1).................... .02 .02 .10 (.01) .22 .61 .43
Problem assets to net loans and other
real estate (3)....................... .86 .09 .25 .12 .19 .22 .26
Nonperforming assets to net loans and
other real estate (4)................. .86 .09 .25 .12 .19 .29 .28
Allowance for loan losses to loans, net
of unearned income.................... 1.35 1.16 1.13 1.21 1.24 1.42 1.57
Allowance for loan losses to
nonperforming assets (4).............. 185.44 1,230.23 254.93 1,028.17 653.98 639.90 657.18
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to average
assets................................ 10.19% 9.67% 9.79% 10.02% 10.46% 10.67% 10.90%
Average loans to average deposits....... 79.73 74.86 75.93 72.74 72.06 73.38 75.93
Tier 1 risk-based capital (5)........... 16.10 15.75 16.50 10.40 12.20 12.06 15.33
Total risk-based capital (5)............ 17.30 17.00 16.50 10.40 12.20 13.83 16.46
Tier 1 leverage (5)..................... 10.10 9.59 10.10 10.00 6.80 11.76 12.67
</TABLE>
- -------------------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses) from
security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%.
11
<PAGE> 18
THE SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is being furnished to the stockholders of VB&T
Bancshares Corp. in connection with the solicitation by the VB&T Board of
Directors of proxies for use at a special meeting of stockholders, at which VB&T
stockholders will be asked to vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of July 6, 1998, by and between VB&T and Regions
Financial Corporation.
The Special Meeting will be held at :00 p.m., local time, on
, 1998, at the main offices of VB&T, located at 2611 N. Patterson
Street, Valdosta, Georgia, 31602.
VB&T stockholders are requested promptly to sign, date, and return the
accompanying proxy card to VB&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 VB&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 VB&T a
signed proxy card bearing a later date, provided that such notice or proxy card
is actually received by VB&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 VB&T Bancshares Corp., 2611 N. Patterson Street,
Valdosta, Georgia, 31602, Attention: Faye Farr, Corporate Secretary. A proxy
will not be revoked by death or 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 VB&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, VB&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 VB&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.
VB&T stockholders should not forward any stock certificates with their proxy
cards.
RECORD DATE; VOTE REQUIRED
VB&T's Board of Directors has established the close of business on ,
1998, as the record date for determining the VB&T stockholders entitled to
notice of and to vote at the Special Meeting. Only VB&T stockholders of record
as of the record date will be
12
<PAGE> 19
entitled to vote at the Special Meeting. As of the record date, there were
approximately holders of shares of the $5.00 par
value common stock of VB&T outstanding and entitled to vote at the Special
Meeting, with each share entitled to one vote. For information as to persons
known by VB&T to beneficially own more than 5.0% of the outstanding shares of
VB&T common stock as of the record date, see "Information About VB&T -- Voting
Securities and Principal Stockholders of VB&T."
The presence, in person or by proxy, of a majority of the outstanding shares of
VB&T common stock is necessary to constitute a quorum of the stockholders. A
quorum must be present before a vote on the Merger Agreement can be taken at the
Special Meeting. For these purposes, shares of VB&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 for any reason, including broker nonvotes. Generally, a
broker who holds shares of VB&T common stock in "street" name on behalf of a
beneficial owner lacks authority to vote such shares in the absence of specific
voting instructions from the beneficial owner.
Once a quorum is established, approval of the Agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of VB&T common stock
entitled to vote at the Special Meeting. A failure to vote, in person or by
proxy, for any reason, including failure to return a properly executed proxy, an
abstention, or a broker nonvote, has the same effect as a vote against the
Agreement.
The directors and executive officers of VB&T and their affiliates beneficially
owned, as of the record date, shares (or approximately % of
the outstanding shares) of VB&T common stock. The directors and executive
officers of Regions and their affiliates beneficially owned, as of the record
date, no shares of VB&T common stock. As of that date, no subsidiary of either
VB&T or Regions held any shares of VB&T common stock in a fiduciary capacity for
others.
13
<PAGE> 20
THE MERGER
The following material describes certain aspects of the merger of VB&T with and
into Regions. 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
The Agreement provides generally for the acquisition of VB&T by Regions pursuant
to the Merger of VB&T with and into Regions. Regions will be the surviving
corporation resulting from the Merger.
On the date and at the time that the Merger becomes effective, each share of
VB&T common stock (excluding shares held by VB&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 excluding all shares held by
stockholders who perfect their dissenters' rights) issued and outstanding at the
effective time of the Merger will be converted into shares of the $.625 par
value common stock of Regions at a ratio specified in the Agreement. The
Agreement establishes the exchange ratio as that multiple (or fraction as the
case may be) of a share of Regions common stock equal to the quotient obtained
by dividing (i) $28.28 by (ii) the average of the last sales prices of Regions
common stock on the Nasdaq National Market over the ten consecutive trading days
ending on the trading day before the date of the special meeting of VB&T
stockholders (the "Average Closing Price").
The formulation of the exchange ratio in the Agreement reflects the parties'
agreement that VB&T common stock will be converted in the Merger into Regions
common stock having a value of approximately $28.28 per VB&T share as of the
date of the Special Meeting, regardless of any fluctuations in the market price
of Regions common stock prior to that date. Accordingly, the holders of VB&T
common stock do not bear the risk of any decrease in the trading price of
Regions common stock prior to the specified valuation period, but would not
benefit from any increase in such trading price prior to the valuation period.
Moreover, because the exchange ratio is based on an average of quoted last sale
prices of Regions common stock over a ten-business-day period, and because the
valuation period will occur prior to the effective time of the Merger, the
equivalent per share value of the Regions common stock issued in the Merger
(that is, the exchange ratio multiplied by the quoted per share price of Regions
common stock on the Nasdaq National Market as of any given date) may be more or
less than $28.28 per share of VB&T common stock as of the effective time of the
Merger.
Each share of Regions common stock outstanding immediately prior to the
effective time of the Merger 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 VB&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 trading day prior to the effective time of the Merger.
14
<PAGE> 21
TREATMENT OF VB&T OPTIONS
The Agreement provides that all rights with respect to VB&T common stock
pursuant to stock options or stock appreciation rights granted by VB&T under its
stock option plans which are outstanding at the effective time of the Merger,
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 time, 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. Those options that were issued as incentive stock
options will be adjusted in accordance with Section 424 of the Internal Revenue
Code in order to avoid certain tax consequences for the option holder.
The executive officers or directors of VB&T held in the aggregate exercisable
options to purchase 54,400 shares of VB&T common stock, as of the date of this
Proxy Statement-Prospectus.
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.
VB&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 VB&T could obtain a fair price for its
stockholders. Accordingly, VB&T and Regions entered into negotiations which
culminated in the Agreement.
VB&T'S REASONS FOR THE MERGER.
In approving the Merger, the directors of VB&T considered a number of factors.
Without assigning any relative or specific weights to the factors, the VB&T
Board of Directors considered the following material factors:
- the information presented to the directors by the management of VB&T
concerning the business, operations, earnings, asset quality, and
financial condition of VB&T, including compliance with regulatory capital
requirements on an historical and prospective basis;
- the financial terms of the Merger, including the relationship of the
merger price to the book value and earnings per share of VB&T common
stock and the partial protection against a decline in the market value of
Regions common stock;
- the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of VB&T common stock for Regions common
stock for federal and state income tax purposes;
- the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
15
<PAGE> 22
- stockholders of VB&T will receive shares of Regions common stock, which
is publicly traded on NASDAQ; there is no current public market for VB&T
common stock;
- affiliation with a larger holding company would provide the opportunity
to realize economies of scale and increase efficiencies of operations to
the benefit of stockholders and customers. Affiliation with Regions will
also enhance the development of new products and services, the
development and provision of which are becoming increasingly difficult to
address by smaller banks;
- potential benefits and opportunities for employees of VB&T, as a result
of both employment in a larger enterprise and Regions' benefit plans and
policies; and
- growth of VB&T without affiliation with a larger holding company would
likely be limited because of VB&T's need for increasing capital resources
to support that growth. Without such a combination, the VB&T Board of
Directors believed it would be necessary to obtain additional capital
resources beyond those which could be obtained from operations, in order
to achieve a size which the VB&T Board of Directors believed would be
necessary to maintain VB&T as a viable independent entity.
The terms of the Merger were the result of arms-length negotiations between
representatives of VB&T and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of VB&T
unanimously approved the Merger as being in the best interests of VB&T and its
stockholders. Each member of the Board of Directors of VB&T has agreed to vote
those shares of VB&T common stock over which such member has voting authority
(other than in a fiduciary capacity) in favor of the Merger.
VB&T's Board of Directors unanimously recommends that VB&T stockholders vote for
approval of the Agreement.
REGIONS' REASONS FOR THE MERGER.
In approving the Agreement and the Merger, the Regions Board considered a number
of factors concerning the benefits of the Merger, including the following:
- Information Concerning VB&T: The Regions Board considered information
concerning the business, operations, earnings, asset quality, and
financial condition of VB&T, and aspects of the VB&T franchise, including
the market position of VB&T in each of the markets in which it operates
and the compatibility of the community bank orientation of the operations
of VB&T to that of Regions. The Regions Board concluded that VB&T is a
sound, well managed financial institution which is well positioned in its
market areas and which presents an attractive opportunity for Regions to
add to its franchise in the Georgia market.
- Financial Terms of the Merger: The Regions Board considered various
financial aspects of the Merger as reported by Regions' management
including (1) the anticipated effect of the Merger on Regions' per share
earnings (with the Merger anticipated to have no significant effect on
Regions' earnings per share), (2) the anticipated effect of the Merger on
Regions' book value per share (with the Merger anticipated not to dilute
significantly Regions' book value per share), (3) a comparison of VB&T to
selected peer banks and a comparison of pricing aspects of
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the Merger to pricing characteristics of other merger transactions
involving financial institutions, and (4) the anticipated accounting
treatment of the Merger as a pooling of interests.
- Nonfinancial Terms of the Merger. The Regions Board considered various
nonfinancial aspects of the Merger, including the treatment of the Merger
as a tax-free exchange of VB&T common stock for Regions common stock for
federal income tax purposes and the likelihood of the Merger being
approved by applicable regulatory authorities without undue conditions or
delay.
The foregoing discussion of the information and factors considered by the
Regions Board is not intended to be exhaustive but includes all material factors
considered by the Regions Board. In reaching its determination to approve the
Merger and the Agreement, the Regions Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. After deliberating with respect to
the Merger and the other transactions contemplated by the Agreement, and
considering, among other things, the matters discussed above, the Regions Board
determined that the Merger is in the best interests of Regions and its
stockholders and unanimously approved the Agreement.
EFFECTIVE TIME OF THE MERGER
Subject to the satisfaction or waiver of the conditions to the obligations of
the parties to effect the Merger, the effective time of the Merger 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 VB&T, and subject to the
satisfaction or waiver of the conditions to the obligations of the parties to
effect the Merger, the parties will use their reasonable efforts to cause the
effective time to occur on the last business day of the month in which the last
of the following occurs: (i) the effective date (including the expiration of any
applicable waiting period) of the last federal or state regulatory approval
required for the Merger and (ii) the date on which the Agreement is approved by
the requisite vote of VB&T stockholders; or such later date within 30 days
thereof as may be specified by Regions.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and VB&T anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the fourth quarter of 1998. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or VB&T generally may terminate the
Agreement if the Merger is not consummated by March 31, 1999, 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 time of the Merger, Regions will cause an exchange
agent selected by Regions (the "Exchange Agent") to mail to the former
stockholders of VB&T a form letter of transmittal, together with instructions
for the exchange of such
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stockholders' certificates representing shares of VB&T common stock for
certificates representing shares of Regions common stock.
VB&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 VB&T common stock, together with a properly completed
letter of transmittal, there will be issued and mailed to each holder of VB&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 time, to the extent permitted by
law, VB&T stockholders of record as of the effective time will be entitled to
vote at any meeting of holders of Regions common stock the number of whole
shares of Regions common stock into which their VB&T common stock has been
converted, regardless of whether such stockholders have surrendered their VB&T
common stock certificates. No dividend or other distribution payable after the
effective time of the Merger with respect to Regions common stock, however, will
be paid to the holder of any unsurrendered VB&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.
After the effective time of the Merger, a VB&T stockholder will be unable to
transfer shares of VB&T common stock. If certificates representing shares of
VB&T common stock are presented for transfer after the effective time, 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:
- approval from the Board of Governors of the Federal Reserve System and
the Department of Banking and Finance of the state of Georgia and the
expiration of all applicable waiting periods associated with these
approvals, without any conditions or restrictions (excluding requirements
relating to the raising of additional capital or the disposition of
assets or deposits) that would, in the reasonable judgment of Regions'
Board of Directors, so materially adversely impact the economic benefits
of the transactions contemplated by the Agreement as to render
inadvisable the consummation of the Merger;
- the approval by the holders of the requisite number of shares of VB&T
common stock;
- the absence of any action by any court or governmental authority of
competent jurisdiction restricting, prohibiting, or making illegal the
consummation of the Merger and the other transactions contemplated by the
Agreement;
- 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, with the effects described under "-- Federal
Income Tax Consequences of the Merger," including, among others, that the
exchange of VB&T common stock for Regions
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common stock will not give rise to recognition of gain or loss to VB&T
stockholders, except to the extent of any cash received; and
- filing with the NASD of notification for listing of additional shares on
the Nasdaq National Market for 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 which are customary in
transactions of this nature, including, among others: (i) the delivery by
Regions and VB&T of opinions of their respective counsel and certificates
executed by their respective duly authorized officers as to the satisfaction of
certain conditions and obligations set forth in the Agreement and (ii) as of the
effective time of the Merger, the accuracy of certain representations and
warranties and the compliance in all material respects with the agreements and
covenants of each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained or as to the timing of such approvals. It is also possible that any
such approval may be accompanied by a conditional requirement which causes such
approval 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 VB&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 Board, pursuant to
Section 3 of the Bank Holding Company of 1956. In granting its approval under
Section 3 of the Bank Holding Company Act, the Federal Reserve Board 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
Board 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 Board 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 Bank Holding Company Act, the Merger may not
be consummated until the 30th day following the date of Federal Reserve Board
approval, which may be shortened by the Federal Reserve Board 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 Board's approval, unless a court
specifically orders otherwise.
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The Merger also is subject to the approval of the Georgia Department of Banking
and Finance. In the evaluation, the Georgia Department will take into account
considerations similar to those applied by the Federal Reserve Board.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the effective time of the Merger, and to the extent permitted by law,
any provision of the Agreement generally may be (i) waived by the party
benefited by the provision or (ii) amended by a written agreement between
Regions and VB&T approved by their respective Boards of Directors; provided,
however, that after approval by the VB&T stockholders, no amendment that
pursuant to the Georgia Business Corporation Act requires further approval of
the VB&T stockholders, including decreasing the consideration to be received by
VB&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 time of the Merger, either before or after approval by VB&T
stockholders, under certain circumstances, including:
- by the Board of Directors of either party upon final denial of any
required consent of any regulatory authority, if such denial is
nonappealable or was not appealed within the time limit for appeal;
- by the Board of Directors of either party, if the holders of the
requisite number of shares of VB&T common stock shall not have approved
the Agreement;
- by mutual consent of the Boards of Directors of Regions and VB&T;
- by the Board of Directors of either party (provided the terminating party
is not in material breach of any representation, warranty, covenant, or
agreement included in the Agreement), in the event of any inaccuracy in
any representation or warranty by the other party 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;
- by the Board of Directors of either party (provided the terminating party
is not in material breach of any representation, or warranty included in
the Agreement), in the event of a breach by the other party of any
covenant or agreement included in the Agreement that cannot be cured
within 30 days after giving notice to the breaching party; and
- by the Board of Directors of either party if the Merger shall not have
been consummated by March 31, 1999, but only if the failure to consummate
the Merger by such date has not been caused by the terminating party's
breach of the Agreement.
If the Agreement is terminated, the parties will have no further obligations,
except with respect to certain provisions, including those providing for payment
of expenses and restricting disclosure of confidential information. Further,
termination generally will not relieve the parties from the consequences of any
uncured willful breach of the Agreement giving rise to such termination.
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CONDUCT OF BUSINESS PENDING THE MERGER
Each of VB&T and Regions generally has agreed to operate its business only in
the usual, regular, and ordinary course, and to preserve intact its business
organizations and assets and maintain its rights and franchises. Each has also
agreed to take no action which would materially adversely affect the ability of
either party to obtain any consents required for the Merger or to perform its
covenants and agreements under the Agreement and to consummate the Merger. The
foregoing shall not prevent Regions or any subsidiary of Regions from
discontinuing or disposing of any of its assets or business. Nor is Regions
prevented from acquiring or agreeing to acquire any other entity or any assets
thereof, if such action is, in the judgment of Regions, desirable in the conduct
of the business of Regions and its subsidiaries. In addition, the Agreement
includes certain other restrictions applicable to the conduct of the business of
VB&T prior to consummation of the Merger, as described below.
VB&T. VB&T has agreed not to take certain actions relating to the operation of
its business pending consummation of the Merger without the prior written
consent of Regions, which Regions has agreed shall not be unreasonably withheld.
The actions VB&T has agreed not to take are in the general categories of:
- amending Articles of Incorporation, Bylaws, or other governing
instruments;
- incurring indebtedness;
- acquiring any of its outstanding shares or making distributions in
respect to its outstanding shares;
- issuing additional securities;
- reclassifying capital stock or selling or encumbering assets;
- acquiring or investing in other entities;
- increasing employees' salaries and benefits or accelerating the vesting
of any stock-based compensation or employee benefits;
- entering into or amending employment contracts;
- adopting employee benefit plans or amending existing plans;
- changing accounting methods or practices;
- commencing or settling litigation; or
- entering into or terminating material contracts.
The specific agreements not to take certain actions of such character, including
the exceptions and contractually permitted actions, are set forth in the
Agreement, which is attached as Appendix A. See Article 7 of the Agreement.
In addition, VB&T has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. VB&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, VB&T has agreed to use
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reasonable efforts to cause its advisors and other representatives not to engage
in any of the foregoing activities.
MANAGEMENT FOLLOWING THE MERGER
Upon consummation of the Merger, the present officers and directors of Regions
will retain their respective positions with Regions. Information pertaining to
the directors and executive officers of Regions, executive compensation, certain
relationships and related transactions, and other related matters is included in
Regions' Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated herein by reference. See "Where You Can Find More Information."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will indemnify and hold harmless
each person entitled to indemnification from VB&T or any of its subsidiaries to
the full extent permitted by Georgia law and by VB&T's Articles of Incorporation
or Bylaws as in effect on the date of the Agreement, and that such rights will
continue in full force and effect for six years from the effective time of the
Merger with respect to matters occurring at or prior to the effective time.
The Agreement also provides that, after the effective time of the Merger,
Regions will provide generally to officers and employees of VB&T and its
subsidiaries who, at or after the effective time, 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 VB&T or its subsidiaries prior to the effective time of the
Merger will be treated as service with Regions or its subsidiaries. The
Agreement further provides that Regions will cause VB&T to honor all employment,
severance, consulting, and other compensation contracts previously disclosed to
Regions between VB&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 time under VB&T's benefit plans.
As described above under "-- Treatment of VB&T Options," the Agreement also
provides that all rights with respect to VB&T common stock pursuant to stock
options or stock appreciation rights granted by VB&T under its stock option and
other stock-based compensation plans which are outstanding at the effective
time, whether or not then exercisable, will be converted into and will become
rights with respect to Regions common stock, and Regions will assume each of
such options in accordance with its terms.
As of the record date, directors and executive officers of VB&T owned no shares
of Regions common stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 2, Article 13 of the Georgia Business
Corporation Act, if the Merger is consummated, any holder of record of VB&T
common stock who (i) gives to VB&T, prior to the vote at the Annual Meeting with
respect to the approval of the Agreement, written notice of such holder's intent
to demand payment for such holder's
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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 time of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger. A copy of the
pertinent provisions of Chapter 2, Article 13 of the Georgia Business
Corporation Act is reproduced as Appendix B to this Proxy Statement-Prospectus.
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 VB&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 Annual Meeting. Any holder of VB&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: VB&T Bancshares Corp. 2611 N. Patterson
Street, Valdosta, Georgia, 31602, Attention: Corporate Secretary.
If the Merger is authorized at the Annual Meeting, VB&T must deliver a written
dissenters' notice to all holders of VB&T common stock who satisfied the
foregoing requirements. The Dissenters' Notice must be sent within ten days
after the effective time of the Merger and must (i) state where the demand for
payment must be sent and where and when certificates for shares of VB&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 VB&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 Business Corporation 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 time of the Merger 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
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effective time. Such offer of payment must be accompanied by (i) certain recent
VB&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 Business Corporation Act, and (v) a copy of the Article
13 of the Georgia Business Corporation 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, payment must be made
within 60 days after the later of the making of the offer or the effective time.
If the Merger is not effected within 60 days after the date set forth demanding
payment and depositing share certificates, VB&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 Business Corporation Act provides that a
dissenting stockholder may notify the surviving corporation in writing of such
holder's own estimate of the fair value or such holder's shares and the interest
due, and may demand payment of such holder's estimate, if (i) such holder
believes that the amount offered by the surviving corporation is less than the
fair value of such holder's shares or that the interest due has been calculated
incorrectly, or (ii) VB&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 time of the
Merger 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 Lowndes 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
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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 Business Corporation 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 Business Corporation 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 benefited. No action
by any dissenting stockholder to enforce dissenters' rights may be brought more
than three years after the effective time of the Merger, regardless of whether
notice of the Merger and of the right to dissent was given by VB&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
VB&T, but is qualified in its entirety by reference to Article 13 of the Georgia
Business Corporation Act, included in Appendix B to this Prospectus/Proxy
Statement. Any VB&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
VB&T stockholders, except as indicated above or otherwise required by law.
Any dissenting VB&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 "-- Federal Income
Tax Consequences of the Merger."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER TO HOLDERS OF VB&T COMMON STOCK. THIS DISCUSSION MAY NOT APPLY TO
SPECIAL SITUATIONS, SUCH AS VB&T STOCKHOLDERS, IF ANY, WHO HOLD VB&T COMMON
STOCK OTHER THAN AS A CAPITAL ASSET, WHO RECEIVED VB&T COMMON STOCK UPON THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, WHO HOLD VB&T
COMMON STOCK AS PART OF A "STRADDLE" OR "CONVERSION TRANSACTION," OR WHO ARE
INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN
PERSONS, AND DOES NOT DISCUSS ANY ASPECTS OF STATE, LOCAL, OR FOREIGN TAXATION.
THIS DISCUSSION IS BASED UPON LAWS, REGULATIONS, RULINGS AND DECISIONS NOW IN
EFFECT AND ON PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE (POSSIBLY
WITH RETROACTIVE EFFECT) BY LEGISLATION, ADMINISTRATIVE ACTION, OR JUDICIAL
DECISION. NO RULING HAS BEEN OR WILL BE REQUESTED FROM THE INTERNAL REVENUE
SERVICE ON ANY MATTER RELATING TO THE TAX CONSEQUENCES OF THE MERGER.
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Consummation of the Merger is conditioned upon receipt by Regions and VB&T of an
opinion from Alston & Bird LLP, special counsel to Regions, concerning the
material federal income tax consequences of the Merger. Based upon the
assumption that the Merger is consummated in accordance with the Agreement and
upon factual statements and factual representations made by Regions and VB&T, it
is such firm's opinion that:
- The Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and VB&T and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code.
- No gain or loss will be recognized by holders of VB&T common stock upon
the exchange in the Merger of all of their VB&T common stock solely for
shares of Regions common stock (except with respect to any cash received
in lieu of fractional share interests in Regions common stock).
- The aggregate tax basis of the Regions common stock received by the VB&T
stockholders in the Merger will, in each instance, be the same as the
aggregate tax basis of the VB&T common stock surrendered in exchange
therefor, less the basis of any fractional share of Regions common stock
settled by cash payment.
- The holding period of the Regions common stock received by the VB&T
stockholders in the Merger will, in each instance, include the holding
period of the VB&T common stock surrendered in exchange therefor,
provided that such VB&T common stock is held as a capital asset at the
effective time of the Merger.
- The payment of cash to VB&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
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
Internal Revenue Code.
- Where solely cash is received by a VB&T stockholder in exchange for VB&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
VB&T common stock, subject to the provisions and limitations of Section
302 of the Internal Revenue Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. VB&T STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX REPORTING REQUIREMENTS AND TAX CONSEQUENCES
UNDER STATE, LOCAL, AND FOREIGN LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests as that term is used pursuant to generally accepted accounting
principles, 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.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding VB&T common stock
must be
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exchanged for Regions common stock with substantially similar terms. There are
certain other criteria that must be satisfied in order for the Merger to qualify
as a pooling of interests, some of which criteria cannot be satisfied until
after the effective time of the Merger. See "Summary -- Comparative Per Share
Data" and "--Resales of Regions Common Stock."
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 VB&T stockholders in the Merger has
been registered under the Securities Act of 1933, but that registration does not
cover resales of those shares by persons who control, are controlled by, or are
under common control with, VB&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 Rule 145 promulgated by the Securities and Exchange Commission under the
Securities Act or in accordance with a legal opinion satisfactory to Regions
that such sale or transfer is otherwise exempt from the Securities Act
registration requirements.
Rule 145 promulgated under the Securities Act restricts the sale of Regions
common stock received in the Merger by affiliates and certain of their family
members and related interests. Under the rule, during the one-year period
following the effective time of the Merger, affiliates of VB&T may resell
publicly the Regions common stock received by them in the Merger subject to
certain limitations as to the amount of Regions common stock sold in any
three-month period and as to the manner of sale, and subject to Regions'
periodic reporting obligations with the Securities and Exchange Commission
remaining current. After the one-year period and within two years following the
effective time of the Merger, affiliates of VB&T who are not affiliates of
Regions may effect such resales subject only to the Regions' periodic reporting
requirements remaining current. After two years, such affiliates of VB&T who are
not affiliates of Regions may resell their shares without restriction. Persons
who are affiliates of Regions after the effective time of the Merger may
publicly resell the Regions common stock received by them in the Merger subject
to similar limitations and subject to certain filing requirements specified in
SEC Rule 144. Affiliates will receive additional information regarding the
effect of Rule 145 on their ability to resell Regions common stock received in
the Merger. Affiliates also would be permitted to resell Regions common stock
received in the Merger pursuant to an effective registration statement under the
Securities Act or an available exemption from the Securities Act registration
requirements. This Joint Proxy Statement does not cover any resales of Regions
common stock received by persons who may be deemed to be affiliates of VB&T or
Regions.
Each person who VB&T reasonably believes will be an affiliate of VB&T has
delivered to Regions a written agreement providing that such person generally
will not sell, pledge,
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transfer, or otherwise dispose of any Regions common stock to be received by
such person upon consummation of the Merger, except in compliance with the
Securities Act and the rules and regulations of the SEC promulgated thereunder.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of VB&T common stock will be exchanging their
shares of a Georgia corporation governed by the Georgia Business Corporation Act
and VB&T's Articles of Incorporation, as amended, and Bylaws, for shares of
Regions, a Delaware corporation governed by the Delaware General Corporation Law
and Regions' Certificate of Incorporation and Bylaws. Significant differences
exist between the rights of VB&T stockholders and those of Regions stockholders.
The material differences are summarized below. In particular, Regions'
Certificate and Bylaws contain several provisions that under certain
circumstances may 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 Business Corporation Act
and the Delaware General Corporation Law as well as to Regions' Certificate and
Bylaws and VB&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 or
Articles of Incorporation and Bylaws," "-- Classified Board of Directors and
Absence of Cumulative Voting," "-- Removal of Directors," "-- Limitations on
Director Liability," "-- Special Meetings of Stockholders," "-- Actions by
Stockholders Without a Meeting," "-- Stockholder Nominations," and "-- Mergers,
Consolidations, and Sales of Assets Generally," and the provisions of the
Delaware General Corporation Law 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
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otherwise would prevail. In addition, the protective provisions may decrease the
market price of Regions common stock by making the stock less attractive to
persons who invest in securities in anticipation of price increases from
potential acquisition attempts. The protective provisions also may make it more
difficult and time consuming for a potential acquirer to obtain control of
Regions through replacing the Board of Directors and management. Furthermore,
the protective provisions may make it more difficult for Regions' stockholders
to replace the Board of Directors or management, even if a majority of the
stockholders believes such replacement is in the best interests of Regions. As a
result, the protective provisions may tend to perpetuate the incumbent Board of
Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 500,000,000 shares of
Regions common stock, of which 221,111,474 shares were issued as of September
30, 1998, none of which were held as treasury shares, and 5,000,000 shares of
preferred stock, none of which are outstanding. Regions' Board of Directors may
authorize the issuance of additional shares of Regions common stock or preferred
stock without further action by Regions' stockholders, unless such action is
required in a particular case by applicable laws or regulations or by any stock
exchange upon which Regions' capital stock may be listed. The Certificate does
not provide preemptive rights to Regions stockholders.
The authority to issue additional shares of Regions capital stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions common stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Regions. In
addition, the sale of a substantial number of shares of Regions common stock to
persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
common stock (or the right to receive Regions common stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions. Regions has committed not to
issue shares of preferred stock for any antitakeover purpose, including any
purpose to make a change in control of Regions more costly or difficult.
VB&T. VB&T's authorized capital stock consists of 10,000,000 shares of VB&T
common stock, of which shares were issued and outstanding as of
the record date.
Pursuant to the Georgia Business Corporation Act, VB&T's Board of Directors may
authorize the issuance of additional shares of VB&T common stock without further
action by VB&T's stockholders. The Articles of Incorporation do not provide the
stockholders of VB&T with preemptive rights to purchase or subscribe to any
unissued authorized shares of VB&T common stock or any option or warrant for the
purchase thereof.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
Regions. The Delaware General Corporation Law 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
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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 Regions' 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.
VB&T. The Georgia Business Corporation 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. VB&T's Articles
do not provide for a higher or lower voting requirement.
VB&T's Bylaws provide that the board of directors has the power to alter, amend,
or repeal the Bylaws and to adopt new Bylaws, and that the stockholders have the
power to alter, amend, or repeal any Bylaw provision adopted by the board of
directors, and to adopt new Bylaws. Further, the stockholders may provide that
any Bylaw provision adopted by the stockholders may not be altered, amended, or
repealed by the board of directors.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Certificate provides that Regions' Board of Directors is divided
into three classes, with each class to be as nearly equal in number as possible.
The directors in each class serve three-year terms of office.
The effect of Regions' having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year;
consequently, two annual meetings are effectively required for Regions'
stockholders to change a majority of the members of the Board.
Pursuant to Regions' 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.
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VB&T. VB&T's Articles do not provide for a classified board of directors.
However, as is the case with Regions, VB&T's Articles do not provide for
cumulative voting in the election of directors.
REMOVAL OF DIRECTORS
Regions. Under the Certificate of Incorporation, 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.
VB&T. Pursuant to VB&T's Bylaws, the entire board of directors or any director
may be removed with or without cause by majority vote of the stockholders. The
stockholders may take such action only at a meeting of stockholders for which
notice of the removal action has been given.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or other
equitable relief as a remedy for a breach of duty by a director, it does limit
the remedies available to a stockholder who has a valid claim that a director
acted in violation of such director's duties, if the action is among those as to
which liability is limited. This provision may reduce the likelihood of
stockholder derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefited
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.
VB&T. The Georgia Business Corporation Act permits a corporation's articles of
incorporation to relieve directors from liability for monetary damages for any
action taken, or any failure to take any action, as a director, except liability
for (i) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation; (ii) acts or omissions that involve
intentional misconduct or a knowing violation of law; (iii) liability under
Section 14-2-832 (or any successor provision or redesignation thereof) of the
Georgia Business Corporation Act; and (iv) any transaction from which the
director received an improper personal benefit. VB&T's Articles provide that
VB&T directors shall not be liable for money damages for breach of duty as a
director to the full extent permitted by the Georgia Business Corporation Act.
INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its officers,
directors, employees, and agents to the full extent permitted by the Delaware
General Corporation Law. Under Section 145 of the Delaware General Corporation
Law as currently in effect,
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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.
VB&T. Under VB&T's bylaws, VB&T must indemnify persons who are parties to any
civil, criminal, administrative or investigative action, suit or proceeding by
reason of the fact that such person was or is a director of VB&T. Except as
noted below, directors are indemnified against expenses (including but not
limited to attorneys' fees and court costs), and against any judgments, fines
and amounts paid in settlement actually and reasonably incurred by them.
Directors also are entitled to have VB&T advance any such expenses prior to
final disposition of the proceeding, upon an undertaking to repay VB&T if it is
ultimately determined that they are not entitled to indemnification. Directors
will not be indemnified against expenses, judgments, fines and amounts paid in
settlement attributable to circumstances as to which, under applicable
provisions of the Georgia Business Corporation Act as in effect from time to
time, such indemnification may not be authorized by action of the Board, the
stockholders, or otherwise. The Georgia Business Corporation Act currently
provides that a director may not be indemnified for liability resulting from (i)
any appropriation, in violation of his duties, of any business opportunity of
VB&T, (ii) acts or omissions involving intentional misconduct or a knowing
violation of law, (iii) the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Act, or (iv) any transaction from which the
director receives an improper personal benefit.
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
Regions' 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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VB&T. Under the Bylaws, a special meeting of stockholders may be called by a
majority of the members of the Board of Directors, by the Chairman of the Board,
or by the Chief Executive Officer, and must be called upon written request by
the holders of at least 25% of the shares of VB&T common stock that would be
entitled to vote at the meeting.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Certificate provides that any action required or permitted to be
taken by Regions stockholders must be effected at a duly called meeting of
stockholders and may not be effected by any written consent by the stockholders.
These provisions would prevent stockholders from taking action, including action
on a business combination, except at an annual meeting or special meeting called
by the Board of Directors, chief executive officer, or secretary, even if a
majority of the stockholders were in favor of such action.
VB&T. Under VB&T's Bylaws, any action that VB&T stockholders are permitted to
take at a meeting may be taken by consent of all the stockholders who would be
entitled to vote on the action a a meeting. The practical effect of the
requirement of unanimous consent is to make it difficult to obtain action by
consent instead of at a meeting 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 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.
VB&T. Neither VB&T's Articles nor Bylaws contains any provisions governing or
restricting the means by which stockholders may nominate individuals to be
directors of VB&T.
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 General Corporation Law generally requires the approval
of a
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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 General
Corporation Law, Regions may enter into a merger transaction without stockholder
approval if (i) Regions is the surviving corporation, (ii) the agreement of
merger does not amend in any respect Regions' Certificate, (iii) each share of
Regions stock outstanding immediately prior to the effective date of the merger
is to be an identical outstanding or treasury share of Regions after the
effective date of the merger, and (iv) either no shares of Regions common stock
and no shares, securities, or obligations convertible into such stock are to be
issued or delivered under the plan of merger, or the authorized unissued shares
or the treasury shares of Regions common stock to be issued or delivered under
the plan of merger plus those initially issuable upon conversion of any other
shares, securities, or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of Regions common stock outstanding immediately
prior to the effective date of the merger.
VB&T. The Georgia Business Corporation Act generally provides that such
transactions require the approval by the corporation's board of directors and by
a majority of the corporation's outstanding shares. Neither VB&T's Articles nor
Bylaws include provisions that alter the vote required to approve the Merger.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware General Corporation Law 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.
VB&T. The provisions of the Georgia Business Corporation Act comparable to
Section 203 of the Delaware General Corporation Law, and which provide for
special approval requirements for business combinations with interested
stockholders not applicable
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to VB&T. Such provisions are applicable to a corporation only if the
corporation's bylaws expressly provide that they will be.VB&T's Bylaws provide
for the applicability of such provisions. However, such provisions are not
applicable to the Merger.
DISSENTERS' RIGHTS
Regions. The rights of dissenting stockholders of Regions are governed by the
Delaware General Corporation Law. Pursuant thereto, except as described below,
any stockholder has the right to dissent from any merger of which Regions could
be a constituent corporation. No appraisal rights are available, however, for
(i) the shares of any class or series of stock that is either listed on a
national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 stockholders or (ii) any shares of stock of the
constituent corporation surviving a merger if the merger did not require the
approval of the surviving corporation's stockholders, unless, in either case,
the holders of such stock are required by an agreement of merger or
consolidation to accept for that stock something other than: (a) shares of stock
of the corporation surviving or resulting from the merger or consolidation; (b)
shares of stock of any other corporation that will be listed at the effective
date of the merger on a national securities exchange, quoted on the Nasdaq
National Market, or held of record by more than 2,000 stockholders; (c) cash in
lieu of fractional shares of stock described in clause (a) or (b) immediately
above; or (d) any combination of the shares of stock and cash in lieu of
fractional shares described in clauses (a) through (c) immediately above.
Because Regions common stock is quoted on the Nasdaq National Market and is held
of record by more than 2,000 stockholders, unless the exception described
immediately above applies, holders of Regions common stock do not have
dissenters' rights.
VB&T. The rights of dissenting stockholders under Georgia law are generally
similar to those afforded under the Delaware General Corporation Law. A summary
of the pertinent provisions of the Georgia Business Corporation Act pertaining
to dissenters' rights is set forth under the caption "The Merger--Dissenting
Stockholders," and such provisions are included as Appendix B.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware General Corporation Law 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.
VB&T. Pursuant to the Georgia Business Corporation Act, upon written notice of
a demand to inspect corporate records, a stockholder is entitled to inspect
specified corporate records, including articles of incorporation and bylaws,
minutes of stockholder meetings and certain resolutions adopted at director
meetings, stockholder list, and all stockholder communications for the preceding
three years, including financial statements. Upon demonstration of a proper
purpose, a stockholder may be entitled to inspect other corporate records.
DIVIDENDS
Regions. The Delaware General Corporation Law 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
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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."
VB&T. Pursuant to the Georgia Business Corporation 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.
36
<PAGE> 43
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions common stock is quoted on the Nasdaq National Market under the symbol
"RGBK." VB&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 VB&T common stock and the cash dividends declared per
share of Regions common stock and VB&T common stock for the indicated periods.
The prices indicated for VB&T are based on actual transactions in VB&T common
stock of which VB&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 VB&T common stock in the indicated
periods, and no assurance can be given that the indicated prices represent the
actual market value of the VB&T common stock. The amounts indicated for Regions
have been adjusted to reflect a 2-for-1 stock split effected by Regions on June
13, 1997.
<TABLE>
<CAPTION>
REGIONS VB&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> <C>
1996
First Quarter........ $24.00 $20.38 $.175 $12.50 $12.50 $.05
Second Quarter....... 24.19 21.13 .175 12.50 12.50 .05
Third Quarter........ 24.32 21.82 .175 12.50 12.50 .05
Fourth Quarter....... 26.88 24.38 .175 12.50 12.50 .00
1997
First Quarter........ 30.94 25.69 .20 13.50 13.50 .14
Second Quarter....... 33.25 27.38 .20 13.50 13.50 .00
Third Quarter........ 39.13 32.06 .20 13.50 13.50 .14
Fourth Quarter....... 44.75 36.56 .20 13.50 13.50 .00
1998
First Quarter........ 43.50 37.94 .23 14.50 14.50 .14
Second Quarter....... 45.25 38.66 .23 14.50 14.50 .00
Third Quarter........ 42.69 33.81 .23 14.50 14.50 .14
Fourth Quarter
(through
,
1998)...........
</TABLE>
On , 1998, the last reported sale price of Regions common stock as
reported on the Nasdaq National Market, and the price of VB&T common stock in
the last known transaction, which occurred in , were $ and
$ , respectively. On May 12, 1998, the last business day prior to public
announcement of an agreement in principle for the proposed Merger, the last
reported sale price of Regions common stock as reported on the Nasdaq National
Market was $43.44, and the last known price of VB&T common stock was $14.50.
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
37
<PAGE> 44
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. Regions' subsidiary depository institutions
are subject to certain legal restrictions on the amount of dividends they are
permitted to pay. See "Supervision and Regulation -- Payment of Dividends."
VB&T's dividend policy has been to pay dividends as declared by the Board of
Directors, but not to exceed 30% of net income and to pay no dividends if equity
is less than $5,400,000.
38
<PAGE> 45
VB&T
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This analysis has been prepared to provide insight into the consolidated
financial condition of VB&T and addresses the factors which have affected VB&T's
results of operations. Unless otherwise noted, the financial and other
information presented with respect to VB&T in this discussion and elsewhere in
this joint proxy statement/prospectus includes the accounts of VB&T's subsidiary
bank (Valdosta Bank & Trust). VB&T's consolidated financial statements and
accompanying notes which follow are an integral part of this review and should
be read in conjunction with it.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
RESULTS OF OPERATIONS
VB&T, including the operation of its subsidiary bank, reported consolidated net
income of $580,901 ($.90 diluted earnings per share) for the nine months ended
September 30, 1998 compared to $648,940 ($1.04 diluted earnings per share) for
the nine months ended September 30, 1997. Net interest income after provision
for loan losses was $1,800,754 and $1,793,561 for the nine months ended
September 30, 1998 and 1997, respectively. The provision for loan losses was
$144,000 and $37,000 for the nine months ended September 30, 1998 and 1997,
respectively. Non-interest income totalled $309,431 and $325,095 for the nine
months ended September 30, 1998 and 1997, respectively, and non-interest
expenses totalled $1,251,753 and $1,186,309 for the nine months ended September
30, 1998 and 1997, respectively.
The following table summarizes the results of operations of VB&T for the three
and nine month periods ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- -----------------
1997 1998 1997 1998
------ ------ ------- -------
<S> <C> <C> <C> <C>
Interest income............................... $1,392 $1,460 $ 4,047 $ 4,376
Interest expense.............................. (768) (811) (2,216) (2,431)
------ ------ ------- -------
Net interest income........................... 624 649 1,831 1,945
Provision for loan losses..................... (14) (85) (37) (144)
Non-interest income........................... 104 120 325 309
Non-interest expense.......................... (402) (416) (1,186) (1,252)
------ ------ ------- -------
Income before taxes........................... 312 268 933 858
Income taxes.................................. (109) (107) (284) (277)
------ ------ ------- -------
Net Income.................................. $ 203 $ 161 $ 649 $ 581
====== ====== ======= =======
</TABLE>
39
<PAGE> 46
COMPARISON OF THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND 1997
Operations for the nine months ended September 30, 1998 resulted in a net income
of approximately $581,000 compared to a net income of approximately $649,000 for
the nine months ended September 30, 1997. Operations for the three months ended
September 30, 1998 resulted in a net income of approximately $161,000 compared
to a net income of approximately $203,000, for the three months ended September
30, 1997.
INTEREST INCOME
Total interest income increased approximately $329,000 for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997. This
increase is attributed to the factors explained in the following paragraphs.
Interest earned on loans increased from approximately $3,086,000 for the nine
months ended September 30, 1997 to approximately $3,395,000 for the nine months
ended September 30, 1998, an increase of $309,000. This increase was the net
effect of an increase in the average loan portfolio balance from approximately
$43.5 million for the nine months ended September 30, 1997 to $49.0 million for
the nine months ended September 30, 1998 and a decrease in the rate earned on
the loan portfolio from 9.46% for the nine months ended September 30, 1997 to
9.24% for the nine months ended September 30, 1998. Interest earned on loans
increased from approximately $1,069,000 for the quarter ended September 30, 1997
to approximately $1,139,000 for the quarter ended September 30, 1998, an
increase of $70,000.
Interest earned on taxable investment securities decreased from approximately
$857,000 for the nine months ended September 30, 1997 to approximately $808,000
for the nine months ended September 30, 1998, a decrease of $49,000. This
decrease was the net effect of a decrease in the average taxable investment
portfolio balance from approximately $16.9 million for the nine months ended
September 30, 1997 to approximately $14.5 million for the nine months ended
September 30, 1998 and an increase in the rate earned on the taxable investment
portfolio from 6.76% for the nine months ended September 30, 1997 to 7.44% for
the nine months ended September 30, 1998. Interest earned on the taxable
investment portfolio decreased from approximately $275,000 for the quarter ended
September 30, 1997 to approximately $249,000 for the quarter ended September 30,
1998, a decrease of $26,000.
Interest earned on non-taxable investment securities was unchanged at
approximately $6,000 for the nine months ended September 30, 1998 and 1997. The
average non-taxable investment portfolio balance was unchanged at approximately
$189,000 and the rate earned on the non-taxable investment portfolio was
unchanged at 4.56%. Interest earned on the non-taxable investments was unchanged
at approximately $2,000 for the quarter ended September 30, 1998 and 1997.
Interest earned on interest-bearing deposits in banks increased from
approximately $11,000 for the nine months ended September 30, 1997 to
approximately $27,000 for the nine months ended September 30, 1998, an increase
of $16,000. This increase was the combined effect of an increase in the average
interest-bearing deposits balance from approximately $.2 million for the nine
months ended September 30, 1997 to approximately $.4 million for the nine months
ended September 30, 1998 and an increase in the rate earned on the
interest-bearing deposits from 6.17% for the nine months ended
40
<PAGE> 47
September 30, 1997 to 8.06% for the nine months ended September 30, 1998.
Interest earned on the interest-bearing deposits increased from approximately
$6,000 for the quarter ended September 30, 1997 to approximately $9,000 for the
quarter ended September 30, 1998, an increase of $3,000.
Interest earned on federal funds sold increased from approximately $86,000 for
the nine months ended September 30, 1997 to approximately $140,000 for the nine
months ended September 30, 1998, an increase of $54,000. This increase was the
net effect of an increase in the average federal funds sold balance from
approximately $2.4 million for the nine months ended September 30, 1997 to
approximately $4.7 million for the nine months ended September 30, 1998 and a
decrease in the rate earned on the federal funds sold from 4.75% for the nine
months ended September 30, 1997 to 4.03% for the nine months ended September 30,
1998. Interest earned on federal funds sold increased from approximately $39,000
for the quarter ended September 30, 1997 to approximately $61,000 for the
quarter ended September 30, 1998, an increase of $22,000.
INTEREST EXPENSE
Total interest expense increased approximately $215,000 for the nine months
ended September 30, 1998 compared to the nine months ended September 30, 1997.
This increase is attributed to the factors explained in the following
paragraphs.
This increase was the net effect of an increase in the average balance of
interest-bearing deposits from approximately $51.7 million for the nine months
ended September 30, 1997 to approximately $55.0 million for the nine months
ended September 30, 1998 and a decrease in the average rate paid on deposits
from 5.50% for the nine months ended September 30, 1997 to 5.41% for the nine
months ended September 30, 1998. The effect of these changes increased interest
expense on interest-bearing deposits from approximately $2,136,000 for the nine
months ended September 30, 1997 to approximately $2,230,000 for the nine months
ended September 30, 1998, an increase of $94,000. Interest expense on
interest-bearing deposits increased from approximately $741,000 for the quarter
ended September 30, 1997 to approximately $743,000 for the quarter ended
September 30, 1998, an increase of $2,000.
All other interest expense consisting principally of interest on advances from
the Federal Home Loan Bank, increased from approximately $81,000 for the nine
months ended September 30, 1997 to approximately $202,000 for the nine months
ended September 30, 1998, an increase of $121,000. This increase was the effect
of an increase in the average balance of Federal Home Loan Bank advances from
approximately $2.0 million for the nine months ended September 30, 1997 to
approximately $5.0 million for the nine months ended September 30, 1998. The
average rate was unchanged at 5.38%.
Interest of $505 was paid on federal funds purchased during the nine months
ended September 30, 1998 and $63 during the nine months ended September 30,
1997. There was no federal funds purchased outstanding at September 30, 1998 or
1997. There was no interest on federal funds purchased during the quarter ended
September 30, 1998 or 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997 increased approximately
$107,000. The balance of the allowance for loan losses was approximately
$675,000 at September 30,
41
<PAGE> 48
1998 and approximately $529,000 at September 30, 1997. Actual loan charge-offs
net of recoveries were approximately $12,000 for the nine months ended September
30, 1998 and approximately $9,000 for the nine months ended September 30, 1997.
Non-accrual loans were approximately $370,000 at September 30, 1998 as compared
to $43,000 at September 30, 1997. There were no loans 90 days or more past due
and still accruing at September 30, 1998 or 1997. In determining an adequate
level of loan loss reserves, such loans were included in such consideration. The
amount of the provision for loan losses is a result of the amount of loans
charged-off, the amount of loans recovered and management's conclusion
concerning the level of the allowance for loan losses. The level of the
allowance for loan losses is based upon a number of factors, including VB&T's
subsidiary bank's past loan loss experience, management's evaluation of the
collectibility of loans, the general state of the economy, specific impaired
loans and other relevant factors.
NON-INTEREST INCOME
The following table presents the principal components of non-interest income for
the three month and nine month periods ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1997 1998 1997 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Service charges on deposit accounts........... $ 32 $ 37 $100 $106
Securities gains.............................. -- -- -- 4
Mortgage banking fees......................... 51 66 160 139
Gain on sale of assets........................ -- -- -- 5
Other income.................................. 21 17 65 55
---- ---- ---- ----
Total Non-Interest Income........... $104 $120 $325 $309
==== ==== ==== ====
</TABLE>
Non-interest income for the nine months ended September 30, 1998 as compared to
the nine months ended September 30, 1997 decreased approximately $16,000. Most
of the decrease was attributed to a reduction in mortgage banking fees.
42
<PAGE> 49
NON-INTEREST EXPENSES
The following table presents the principal components of non-interest expenses
for the three month and nine month periods ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ----------------
1997 1998 1997 1998
----- ----- ------ ------
<S> <C> <C> <C> <C>
Compensation............................... $182 $178 $ 521 $ 523
Other personnel expenses................... 64 58 184 183
Occupancy expense of bank premises......... 34 36 102 105
Furniture and equipment expense............ 24 24 71 71
Federal deposit insurance.................. 2 2 5 6
Postage and courier services............... 7 8 21 26
Supplies................................... 11 11 34 31
Data processing............................ 35 51 100 152
Advertising and business development....... 7 5 22 21
Other operating expenses................... 36 43 126 134
---- ---- ------ ------
Total Non-Interest Expense....... $402 $416 $1,186 $1,252
==== ==== ====== ======
</TABLE>
Non-interest expenses for the nine months ended September 30, 1998 as compared
to the nine months ended September 30, 1997, increased approximately $66,000 or
5.6%.
Compensation and other personnel expenses increased approximately $1,000. All
other expenses increased approximately $65,000 or 13.5% with the primary
increase being in data processing costs.
INCOME TAXES
The effective tax rate for the nine months ended September 30, 1998 was 32.3%
compared to 30.4% for the nine months ended September 30, 1997.
FINANCIAL CONDITION
VB&T, including its subsidiary bank, reported consolidated total assets of
approximately $72.1 million at December 31, 1997 and $74.2 million at September
30, 1998 representing an increase of approximately $2.1 million for the nine
months ended September 30, 1998. Loan growth exceeded deposit growth as loans
increased approximately $1.9 million and deposits decreased approximately $1.6
million. Additionally, funds were provided by operations of $1.0 million,
issuance of capital stock of $.1 million, decrease in investments of $6.1
million, increase in advances from the Federal Home Loan Bank of $3.0 million
and decrease in cash and due from banks $.7 million. These funds were used to
purchase additional bank premises and equipment of $.1 million and increase in
federal funds sold $7.3 million.
The changes in interest rates as previously discussed are reflective of interest
rates in general and market conditions, including competition. Changes in
short-term funds, including cash and due from banks, federal funds sold,
interest-bearing deposits and investment securities, are reflective of the
liquidity position of VB&T.
43
<PAGE> 50
VB&T's capital-to-assets ratio as of September 30, 1998 and December 31, 1997
was 10.5% and 9.9%, respectively.
VB&T and its subsidiary bank is subject to various regulatory capital
requirements administered by the State and 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 VB&T's and its subsidiary bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, VB&T and its subsidiary bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance sheets items as calculated under regulatory accounting practices.
The capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to insure capital adequacy
require the maintenance of minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1998 and December
31, 1997, that VB&T and its subsidiary bank meets all capital adequacy
requirements to which they are subject.
As of September 30, 1998, the most recent notification from banking regulators
categorized VB&T and its subsidiary bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
adequately capitalized, VB&T and its subsidiary bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the
table. There have been no conditions or events since that notification that
management believes has changed the institution's category.
VB&T's actual capital amounts and ratios and the minimum amounts and ratios
under the capital adequacy and prompt corrective action provisions are presented
below:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER
PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES: PROVISIONS:
-------------- -------------- --------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1998
Total Capital (to Risk Weighted Assets).............. $8,087 17.3% $3,740 >8.0% $4,675 >10.0%
- -
Tier 1 Capital (to Risk Weighted Assets)............. 7,503 16.1% 1,864 >4.0% 2,796 >6.0%
- -
Tier 1 Capital (to Average Assets)................... 7,503 10.1% 2,971 >4.0% 3,714 >5.0%
- -
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow requirements of
customers, for the withdrawal of funds or the funding of additional loans, and
the ability of VB&T's subsidiary bank to meet those requirements. Management
monitors and maintains appropriate levels of assets and liabilities so that
maturities of assets are such that adequate funds are provided to meet estimated
customer withdrawals and loan requests.
VB&T's subsidiary bank's liquidity position depends primarily upon the liquidity
of its assets relative to its need to respond to short-term demand for funds
caused by withdrawals from deposit accounts and loan funding commitments.
Primary sources of
44
<PAGE> 51
liquidity are scheduled payments on its loans and interest on its subsidiary
bank's investments. VB&T's subsidiary bank may also utilize its cash and due
from banks, short-term deposits with financial institutions, federal funds sold
and investment securities to meet liquidity requirements. At September 30, 1998,
VB&T's subsidiary bank's cash and due from banks was approximately $1.0 million
(after reduction for its required reserves of $.2 million), its short-term
deposits with financial institutions were $.4 million and its federal funds sold
were $8.3 million. The effect of the required reserves is to reduce available
liquidity. All of the above can be converted to cash on short notice. The sale
of investments, which had a market value of approximately $11.7 million at
September 30, 1998, can also be used to meet liquidity requirements, to the
extent the investments are not pledged to secure public funds on deposit as
required by law. Securities with a market value of $1.2 million were pledged as
of September 30, 1998.
VB&T's subsidiary bank's funding needs are based primarily on the volume of
lending. The primary funding source is from new deposits. VB&T's subsidiary bank
seeks to attract new deposits by paying rates of interest on deposit accounts
which are competitive in its primary service area. VB&T's subsidiary bank
generally does not pay brokers' commissions in connection with the obtaining of
deposits or have deposits outside the primary service area. VB&T's subsidiary
bank does not pay premiums to attract deposits. As of September 30, 1998, the
average cost for deposit liabilities was approximately 5.41%. VB&T's subsidiary
bank continues to expect that new deposits will serve as its primary funding
source.
VB&T's subsidiary bank also has the ability, on a short-term basis, to borrow
and purchase federal funds from other financial institutions. VB&T's subsidiary
bank is a member of the Federal Home Loan Bank of Atlanta and as such has the
ability to secure advances therefrom, although the cost of such advances exceed
lower cost alternatives such as deposits from the local community. VB&T's
subsidiary bank has advances outstanding from the Federal Home Loan Bank of
Atlanta of $5.0 million at September 30, 1998 at an average rate of 5.38%.
Management is not aware of any trends, events or uncertainties that will have or
that are reasonably likely to have a material effect on VB&T's liquidity,
capital resources or operations, including recommendations by regulatory
authorities which would have such an effect.
INTEREST RATE SENSITIVITY
The relative interest rate sensitivity of VB&T's assets and liabilities
indicates the extent to which VB&T's net interest income may be affected by
interest rate movements. VB&T's ability to reprice assets and liabilities in the
same dollar amounts and at the same time minimizes interest rate risks. One
method of measuring the impact of interest rate changes on net income is to
measure, in a number of time frames, the interest sensitivity gap, by
subtracting interest-sensitive liabilities from interest-sensitive assets, as
reflected in the following table. Such interest sensitivity gap represents the
risk, or opportunity, in repricing. If more assets than liabilities are repriced
at a given time in a rising rate environment, net interest income improves; in a
declining rate environment, net interest income deteriorates. Conversely, if
more liabilities than assets are repriced while interest rates are rising, net
interest income deteriorates; if interest rates are falling, net interest income
improves. VB&T's strategy in minimizing interest rate risk is to minimize the
impact of short term interest rate movements on its net interest income while
managing its
45
<PAGE> 52
middle and long-term interest sensitivity gap in light of overall economic
trends in interest rates. The following table illustrates the relative
sensitivity of VB&T to changing interest rates as of September 30, 1998:
<TABLE>
<CAPTION>
0-90 DAYS 91-365 DAYS ONE TO FIVE YEARS OVER FIVE YEARS
--------- -------------------- -------------------- --------------------
CURRENT CURRENT CUMULATIVE CURRENT CUMULATIVE CURRENT CUMULATIVE
--------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-sensitive
assets:
Federal funds sold... $ 8,280 -- 8,280 -- 8,280 -- 8,280
Time deposits........ 396 -- 396 -- 396 -- 396
Loans................ 15,570 3,452 19,022 11,447 30,469 19,452 49,921
Investment
securities......... 779 -- 779 4,351 5,130 6,536 11,666
------- ------ ------- ------ ------- ------ ------
Total interest-
sensitive
assets....... 25,025 3,452 28,477 15,798 44,275 25,988 70,263
------- ------ ------- ------ ------- ------ ------
Interest-sensitive
liabilities:
NOW, money market and
savings accounts... 16,599 -- 16,599 -- 16,599 -- 16,599
Certificates of
deposits........... 6,993 20,570 27,563 10,127 37,690 -- 37,690
Borrowings........... -- -- -- -- -- 5,000 5,000
------- ------ ------- ------ ------- ------ ------
Total interest-
sensitive
liabilities... 23,592 20,570 44,162 10,127 54,289 5,000 59,289
------- ------ ------- ------ ------- ------ ------
Interest-sensitivity
gap.................. $ 1,433 (17,118) (15,685) 5,671 (10,014) 20,988 10,974
======= ====== ======= ====== ======= ====== ======
</TABLE>
Since all interest rates and yields do not adjust at the same velocity, the
interest rate sensitivity gap is only an indicator of the potential effects of
interest rate changes on net interest income.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company has developed a plan of action to become Year 2000
compliant including actions, time tables and cost estimates. The Company is
progressing on schedule and has established a goal to become 100% compliant by
January 31, 1999. The Company has established a cost estimate of approximately
$29,000 to become Year 2000 compliant, a portion of which would represent costs
that would be recorded as assets and amortized. The Company does not expect the
amounts required to be expensed to become Year 2000 compliant to have a material
effect on its financial position or results of operations. The amount expensed
in 1997 and 1998 was immaterial.
YEARS ENDED DECEMBER 31, 1997 AND 1996
RESULTS OF OPERATIONS
VB&T, including the operation of its subsidiary bank, reported consolidated net
income of $820,530 ($1.31 diluted earnings per share) for the year ended
December 31, 1997
46
<PAGE> 53
compared to $628,710 ($1.02 diluted earnings per share) for the year ended
December 31, 1996. Net interest income after provision for loan losses was
$2,391,247 and $2,068,385 for the years ended December 31, 1997 and 1996,
respectively. The provision for loan losses was $87,000 and $67,000 for the
years ended December 31, 1997 and 1996, respectively. Non-interest income
totalled $431,702 and $394,831 for the years ended December 31, 1997 and 1996,
respectively, and non-interest expenses totalled $1,598,617 and $1,522,953 for
the years ended December 31, 1997 and 1996, respectively.
The following table summarizes the results of operations of VB&T for the two
years ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest income.......................................... $ 4,919 $ 5,493
Interest expense......................................... (2,784) (3,014)
------- -------
Net interest income...................................... 2,135 2,479
Provision for loan losses................................ (67) (87)
Non-interest income...................................... 395 432
Non-interest expense..................................... (1,523) (1,599)
------- -------
Income before taxes...................................... 940 1,225
Income taxes............................................. (311) (404)
------- -------
Net Income............................................. $ 629 $ 821
======= =======
Return on assets (net income divided by average
assets)................................................ 1.04% 1.20%
Return on equity (net income divided by average
equity)................................................ 10.41% 12.26%
Dividend payout ratio (dividends declared per share
divided by diluted net income per share)............... 18.46% 20.09%
Equity to assets ratio (average equity divided by average
assets)................................................ 10.02% 9.79%
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Operations for the year ended December 31, 1997 resulted in a net income of
approximately $821,000 compared to a net income of approximately $629,000 for
the year ended December 31, 1996.
INTEREST INCOME
Total interest income increased approximately $574,000 for 1997 compared to
1996. This increase is attributed to the factors explained in the following
paragraphs.
Interest earned on loans increased from approximately $3,697,000 in 1996 to
approximately $4,197,000 in 1997, an increase of $500,000. This increase was the
net effect of an increase in the average loan portfolio balance from
approximately $37.9 million in 1996 to $44.7 million in 1997 and a decrease in
the rate earned on the loan portfolio from 9.75% in 1996 to 9.39% in 1997.
Interest earned on taxable investment securities increased from approximately
$1,114,000 in 1996 to approximately $1,148,000 in 1997, an increase of $34,000.
This increase was the combined effect of an increase in the average taxable
investment portfolio balance from
47
<PAGE> 54
approximately $17.0 million in 1996 to approximately $17.1 million in 1997 and
an increase in the rate earned on the taxable investment portfolio from 6.57% in
1996 to 6.73% in 1997.
Interest earned on non-taxable investment securities decreased from
approximately $16,000 in 1996 to approximately $9,000 in 1997, a decrease of
$7,000. This decrease was the net effect of a decrease in the average
non-taxable investment portfolio balance from approximately $.4 million in 1996
to approximately $.1 million in 1997 and an increase in the rate earned on the
non-taxable investment portfolio from 4.11% in 1996 to 4.76% in 1997.
Interest earned on interest-bearing deposits in banks decreased from
approximately $19,000 in 1996 to approximately $18,000 in 1997, a decrease of
$1,000. This decrease was the primary effect of a decrease in the rate earned on
the interest-bearing deposits from 7.42% in 1996 to 6.06% in 1997. The average
balance was unchanged at approximately $.3 million.
Interest earned on federal funds sold increased from approximately $73,000 in
1996 to approximately $120,000 in 1997, an increase of $47,000. This increase
was the combined effect of an increase in the average federal funds sold balance
from approximately $1.5 million in 1996 to approximately $1.7 million in 1997
and an increase in the rate earned on the federal funds sold from 4.98% in 1996
to 7.27% in 1997.
INTEREST EXPENSE
Total interest expense increased approximately $230,000 in 1997 compared to
1996. This increase is attributed to the factors explained in the following
paragraphs.
This increase was the net effect of an increase in the average balance of
interest-bearing deposits from approximately $46.4 million in 1996 to
approximately $52.3 million in 1997 and a decrease in the average rate paid on
deposits from 5.69% in 1996 to 5.55% in 1997. The effect of these changes
increased interest expense on interest-bearing deposits from approximately
$2,640,000 for the year ended December 31, 1996 to approximately $2,906,000 for
the year ended December 31, 1997, an increase of $266,000.
All other interest expense consisting principally of interest on advances from
the Federal Home Loan Bank, decreased from approximately $143,000 for the year
ended December 31, 1996 to approximately $108,000 for the year ended December
31, 1997, a decrease of $35,000. This decrease was the combined effect of a
decrease in the average balance of Federal Home Loan Bank advances from
approximately $2.5 million in 1996 to approximately $2.0 million in 1997 and a
decrease in the average rate from 5.64% in 1996 to 5.40% in 1997.
Interest of approximately $2,000 was paid on federal funds purchased during the
year ended December 31, 1996. There was no federal funds purchased outstanding
at December 31, 1997 or 1996.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the year ended December 31, 1997 as compared
to 1996 increased approximately $20,000. The balance of the allowance for loan
losses was approximately $543,000 at December 31, 1997 and approximately
$501,000 at December 31, 1996. Actual loan charge-offs net of recoveries were
approximately $45,000
48
<PAGE> 55
for the year ended December 31, 1997 and approximately $5,000 of net recoveries
for the year ended December 31, 1996. Non-accrual loans were approximately
$121,000 at December 31, 1997 as compared to $48,000 at December 31, 1996. Loans
90 days or more past due and still accruing amounted to approximately $92,000 at
December 31, 1997. There were no loans 90 days or more past due and still
accruing at December 31, 1996. In determining an adequate level of loan loss
reserves, such loans were included in such consideration. The amount of the
provision for loan losses is a result of the amount of loans charged-off, the
amount of loans recovered and management's conclusion concerning the level of
the allowance for loan losses. The level of the allowance for loan losses is
based upon a number of factors, including VB&T's subsidiary bank's past loan
loss experience, management's evaluation of the collectibility of loans, the
general state of the economy, specific impaired loans and other relevant
factors.
NON-INTEREST INCOME
The following table presents the principal components of non-interest income for
the years ended December 31, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1996 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Service charges on deposit accounts......................... $130 $133
Securities gains............................................ 8 -0-
Mortgage banking fees....................................... 196 206
Gain on sale of assets...................................... -0- 1
Other income................................................ 61 92
---- ----
Total Non-Interest Income......................... $395 $432
==== ====
</TABLE>
Non-interest income for the year ended December 31, 1997 as compared to 1996
increased approximately $37,000. Other income included earnings on life
insurance policies of approximately $25,000 for the year ended December 31, 1997
with no similar earnings for 1996. These policies related to an indexed deferred
compensation plan for the benefit of directors which was implemented in 1996.
All other income increased approximately $12,000 for the year ended December 31,
1997 compared to 1996.
49
<PAGE> 56
NON-INTEREST EXPENSES
The following table presents the principal components of non-interest expenses
for the years ended December 31, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Compensation............................................... $ 667 $ 704
Other personnel expenses................................... 219 241
Occupancy expense of bank premises......................... 131 132
Furniture and equipment expense............................ 100 100
Federal deposit insurance.................................. 2 7
Postage and courier services............................... 33 30
Supplies................................................... 46 48
Data processing............................................ 118 134
Advertising and business development....................... 31 33
Amortization............................................... 2 --
Other operating expenses................................... 174 170
------ ------
Total Non-Interest Expense....................... $1,523 $1,599
====== ======
</TABLE>
Non-interest expenses for the year ended December 31, 1997 as compared to 1996,
increased approximately $76,000 or 5.0%.
Compensation and other personnel expenses increased approximately $59,000
reflecting an increase in the number of employees, in wage levels and in the
cost of employee benefits. All other expenses increased approximately $17,000 or
2.7%. The increases were primarily attributed to a larger volume of business.
INCOME TAXES
The effective tax rate for the year ended December 31, 1996 was 33.0% compared
to 33.0% for the year ended December 31, 1997.
FINANCIAL CONDITION
VB&T, including its subsidiary bank, reported consolidated total assets of
approximately $72.1 million at December 31, 1997 and $64.7 million at December
31, 1996 representing an increase of approximately $7.4 million for the year
ended December 31, 1997. Loan growth and deposit growth were approximately the
same as loans increased approximately $6.7 million and deposits increased
approximately $6.8 million. Additionally, funds were provided by operations of
$.5 million, issuance of capital stock of $.1 million and decrease in federal
funds sold of $1.3 million. These funds were used to purchase additional bank
premises and equipment of $.1 million, increase interest-bearing deposits $.4
million, increase cash by $.5 million and increase investment securities $1.0
million.
The changes in interest rates as previously discussed are reflective of interest
rates in general and market conditions, including competition. Changes in
short-term funds, including cash and due from banks, federal funds sold,
interest-bearing deposits and investment securities, are reflective of the
liquidity position of VB&T.
50
<PAGE> 57
VB&T's capital-to-assets ratio as of December 31, 1997 and 1996 was 9.9% and
9.7%, respectively.
VB&T and its subsidiary bank is subject to various regulatory capital
requirements administered by the State and 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 VB&T's and its subsidiary bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, VB&T and its subsidiary bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance sheets items as calculated under regulatory accounting practices.
The capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to insure capital adequacy
require the maintenance of minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997 and 1996, that
VB&T and its subsidiary bank meets all capital adequacy requirements to which
they are subject.
As of December 31, 1997, the most recent notification from banking regulators
categorized VB&T and its subsidiary bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
adequately capitalized, VB&T and its subsidiary bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the
table. There have been no conditions or events since that notification that
management believes has changed the institution's category.
VB&T's actual capital amounts and ratios and the minimum amounts and ratios
under the capital adequacy and prompt corrective action provisions are presented
below:
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES: ACTION PROVISIONS:
-------------- -------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk
Weighted Assets).......... $6,014 10.4% $4,606 8.0% $5,758 $ 6.0%
Tier 1 Capital (to Risk
Weighted Assets).......... 6,014 10.4% 2,303 4.0% 3,455 $ 6.0%
Tier 1 Capital (to Average
Assets)................... 6,014 10.0% 2,405 4.0% 3,006 $ 5.0%
As of December 31, 1997
Total Capital (to Risk
Weighted Assets).......... 6,916 16.5% 3,353 8.0% 4,191 $ 10.0%
Tier 1 Capital (to Risk
Weighted Assets).......... 6,914 16.5% 1,676 4.0% 2,515 $ 6.0%
Tier 1 Capital (to Average
Assets)................... 6,914 10.1% 2,728 4.0% 3,410 $ 5.0%
</TABLE>
51
<PAGE> 58
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow requirements of
customers, for the withdrawal of funds or the funding of additional loans, and
the ability of VB&T's subsidiary bank to meet those requirements. Management
monitors and maintains appropriate levels of assets and liabilities so that
maturities of assets are such that adequate funds are provided to meet estimated
customer withdrawals and loan requests.
VB&T's subsidiary bank's liquidity position depends primarily upon the liquidity
of its assets relative to its need to respond to short-term demand for funds
caused by withdrawals from deposit accounts and loan funding commitments.
Primary sources of liquidity are scheduled payments on its loans and interest on
its subsidiary bank's investments. VB&T's subsidiary bank may also utilize its
cash and due from banks, short-term deposits with financial institutions,
federal funds sold and investment securities to meet liquidity requirements. At
December 31, 1997, VB&T's subsidiary bank's cash and due from banks was
approximately $1.8 million (after reduction for its required reserves of $.2
million), its short-term deposits with financial institutions were $.5 million
and its federal funds sold were $1.0 million. The effect of the required
reserves is to reduce available liquidity. All of the above can be converted to
cash on short notice. The sale of investments, which had a market value of
approximately $17.7 million at December 31, 1997, can also be used to meet
liquidity requirements, to the extent the investments are not pledged to secure
public funds on deposit as required by law. Securities with a market value of
$1.1 million were pledged as of December 31, 1997.
VB&T's subsidiary bank's funding needs are based primarily on the volume of
lending. The primary funding source is from new deposits. VB&T's subsidiary bank
seeks to attract new deposits by paying rates of interest on deposit accounts
which are competitive in its primary service area. VB&T's subsidiary bank
generally does not pay brokers' commissions in connection with the obtaining of
deposits or have deposits outside the primary service area. VB&T's subsidiary
bank does not pay premiums to attract deposits. As of December 31, 1997, the
average cost for deposit liabilities was approximately 5.55%. VB&T's subsidiary
bank continues to expect that new deposits will serve as its primary funding
source.
VB&T's subsidiary bank also has the ability, on a short-term basis, to borrow
and purchase federal funds from other financial institutions. VB&T's subsidiary
bank is a member of the Federal Home Loan Bank of Atlanta and as such has the
ability to secure advances therefrom, although the cost of such advances exceed
lower cost alternatives such as deposits from the local community. VB&T's
subsidiary bank has advances outstanding from the Federal Home Loan Bank of
Atlanta of $2.0 million at December 31, 1997 at an average rate of 5.38%.
Management is not aware of any trends, events or uncertainties that will have or
that are reasonably likely to have a material effect on VB&T's liquidity,
capital resources or operations, including recommendations by regulatory
authorities which would have such an effect.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
The following section includes statistical disclosures relevant to bank holding
companies. These disclosures have been prepared to provide additional insight
into the consolidated
52
<PAGE> 59
financial condition and results of operations of VB&T and its subsidiary bank
for the years ended December 31, 1997 and 1996.
AVERAGE BALANCE SHEETS
The following table presents average balance sheets for the years ended December
31, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Due From Banks..................................... $ 1,385 $ 1,723
Interest-Bearing Deposits in Banks.......................... 256 297
Investment Securities....................................... 17,223 17,228
Federal Funds Sold.......................................... 1,466 1,650
Loans, Net of Allowance for Loan Losses and Unearned
Interest.................................................. 37,453 44,173
Bank Premises and Equipment................................. 1,961 1,915
Accrued Interest Receivable................................. 562 624
Cash surrender value of life insurance...................... 312 621
Other Assets................................................ 133 160
------- -------
Total Assets...................................... $60,751 $68,391
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.................................................... $ 4,838 $ 6,513
NOW....................................................... 10,205 13,506
Savings................................................... 1,349 1,604
Time...................................................... 34,856 37,237
------- -------
51,248 58,860
Federal Funds Purchased..................................... 47 --
Advances from Federal Home Loan Bank........................ 2,500 2,000
Accrued Interest............................................ 566 502
Income taxes payable........................................ 153 119
Other Liabilities........................................... 192 215
------- -------
Total Liabilities................................. 54,706 61,696
------- -------
Stockholders' Equity:
Common Stock.............................................. 2,912 2,961
Additional Paid in Capital................................ 2,500 2,580
Retained Earnings......................................... 633 1,167
Unrealized gains (losses) on available-for-sale
securities............................................. -- (13)
------- -------
6,045 6,695
------- -------
Total Liabilities and Stockholders' Equity........ $60,751 $68,391
======= =======
</TABLE>
53
<PAGE> 60
AVERAGE YIELDS EARNED AND RATES PAID
The following table presents the average balances, average yields and interest
earned on interest-earning assets and average rates and interest paid on
interest-bearing liabilities for the years ended December 31, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1997
----------------------------- -----------------------------
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES EXPENSE RATES BALANCES EXPENSE RATES
-------- -------- ------- -------- -------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Average yield on loans (1)(2)........ $37,918 $3,697 9.75% $44,695 $4,197 9.39%
Average yield on taxable investment
securities......................... 16,958 1,114 6.57 17,060 1,148 6.73
Average yield on tax-exempt
investment securities.............. 389 16 4.11 189 9 4.76
Average yield on interest-bearing
deposits in banks.................. 256 19 7.42 297 18 6.06
Average yield on Federal Funds
sold............................... 1,466 73 4.98 1,650 120 7.27
------- ------ ---- ------- ------ ----
Average yield on all interest-earning
assets............................. $56,987 $4,919 8.63% $63,891 $5,492 8.60%
======= ====== ==== ======= ====== ====
Average rate paid on NOW account
deposits........................... $10,205 $ 389 3.81% $13,506 $ 563 4.17%
Average rate paid on savings
deposits........................... 1,349 42 3.11 1,604 50 3.12
Average rate paid on time deposits... 34,856 2,209 6.34 37,237 2,293 6.16
Average rate paid on federal funds
purchased.......................... 47 2 4.26 -- -- .00
Average rate paid on advances from
Federal Home Loan Bank............. 2,500 141 5.64 2,000 108 5.40
------- ------ ---- ------- ------ ----
Average rate paid on all
interest-bearing liabilities....... $48,957 $2,783 5.68% $54,347 $3,014 5.55%
======= ====== ==== ======= ====== ====
Average net yield on interest-earning
assets (net interest income as a
percentage of average
interest-earning assets)........... 3.75% 3.88%
==== ====
</TABLE>
Non-accruing loans have been included in the "average amount outstanding" and
average loans have not been reduced by the allowance for loan losses.
- -------------------------
(1) Loan fees included in interest income amounted to approximately $130,152 in
1996 and $144,555 in 1997.
(2) Average balances were computed over the term in which the related interest
was earned or incurred.
54
<PAGE> 61
The table below sets forth certain information regarding changes in interest
income and interest expense for the periods indicated. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (1) changes in volume (changes in volume
multiplied by old rate); (2) changes in rates (change in rate multiplied by old
volume); (3) changes in rate-volume (changes in rate multiplied by the change in
volume). The net change attributable to both volume and rate, which cannot be
segregated, has been allocated proportionately to change due to volume and
change due to rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 VS. 1996 1996 VS. 1997
-------------------- ---------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
-------------------- ---------------------
VOLUME RATE NET VOLUME RATE NET
------ ---- ---- ------ ----- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans............................... $576 $(25) $551 $630 $(130) $500
Taxable investment securities....... 128 (45) 83 7 27 34
Tax-exempt investment securities.... 8 (1) 7 (10) 3 (7)
Interest-bearing deposits in
banks............................ -- -- -- 7 (8) (1)
Federal Funds Sold.................. 17 (6) 11 10 37 47
---- ---- ---- ---- ----- ----
Total....................... 729 (77) 652 644 (71) 573
---- ---- ---- ---- ----- ----
Interest Expense:
NOW account deposits................ 85 1 86 134 40 174
Savings deposits.................... (1) (2) (3) 8 -- 8
Time deposits....................... 277 (67) 210 144 (60) 84
Federal funds purchased............. 1 -- 1 (1) (1) (2)
Advances from Federal Home Loan
Bank............................. 59 (11) 48 (27) (6) (33)
---- ---- ---- ---- ----- ----
Total....................... 421 (79) 342 258 (27) 231
---- ---- ---- ---- ----- ----
Net Interest Income................... $308 $ 2 $310 $386 $ (44) $342
==== ==== ==== ==== ===== ====
</TABLE>
55
<PAGE> 62
INVESTMENT PORTFOLIO
The following table presents the book value of investments and obligations of
(1) U.S. Treasury and other U.S. government agencies and corporations, (2)
states of the U.S. and political subdivisions and (3) other securities as of
December 31, 1996 and 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1996 1997
----------------------- -----------------------
SECURITIES SECURITIES SECURITIES SECURITIES
AVAILABLE- HELD-TO AVAILABLE- HELD-TO-
FOR-SALE MATURITY FOR-SALE MATURITY
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government
agencies and corporations................ $16,135 $255 $17,097 $211
States of the U.S. and political
subdivisions............................. -- 189 -- 189
Other securities........................... 200 -- 224 --
------- ---- ------- ----
Total............................ 16,335 444 17,321 400
Unrealized gains (losses) on
available-for-sale securities............ (46) -- 2 --
------- ---- ------- ----
Total............................ $16,289 $444 $17,323 $400
======= ==== ======= ====
</TABLE>
Securities available-for-sale are carried at market value and securities
held-to-maturity are carried at amortized cost.
The following table presents the book value of investments and obligations of
(1) U.S. Treasury and other U.S. government agencies and corporations, (2)
states of the U.S. and political subdivisions and (3) other securities as of
December 31, 1997 that are due (1) in one year or less, (2) after one year
through five years, (3) after five years through ten years and (4) after ten
years. In addition, the table provides the weighted average yield for each range
of maturities.
<TABLE>
<CAPTION>
AMOUNT AT DECEMBER 31, 1997 DUE IN
-----------------------------------------------------------------------------------
AFTER ONE AFTER FIVE
ONE YEAR THROUGH THROUGH AFTER
OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
-------------- -------------- -------------- -------------- ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ ----- ------- -----
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government Agencies and
Corporations.............. $1,157 5.23% $6,487 6.36% $8,911 6.66% $753 7.76% $17,308 6.50%
States of the U.S. and
Political
Subdivisions(1)(2)........ -- .00 -- .00 189 4.45 -- .00 189 4.45
Other securities(2)(3)...... -- .00 -- .00 -- .00 224 8.21 224 8.21
------ ---- ------ ---- ------ ---- ---- ---- ------- ----
Total............... $1,157 5.23% $6,487 6.36% $9,100 6.62% $977 7.87% $17,721 6.50%
====== ==== ====== ==== ====== ==== ==== ==== ======= ====
</TABLE>
- -------------------------
(1) Yields on tax exempt obligations have not been computed on a tax equivalent
basis.
(2) As of December 31, 1997, there was no aggregate book values of any issuer
which exceeded 10% of stockholders' equity.
(3) Yield represents yield earned for 1997.
56
<PAGE> 63
LOAN PORTFOLIO
The loan portfolio totalled approximately $48.0 million at December 31, 1997,
which was an increase of approximately $6.7 million from December 31, 1996.
During the year ended December 31, 1997, average loans before reduction for the
allowance for loan losses were approximately $44.7 million and $37.9 million
during the year ended December 31, 1996.
The following table sets forth information summarizing the composition of the
loan portfolio at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial, financial and agricultural...................... $ 8,248 $ 9,766
Real estate -- construction................................. 292 723
Real estate -- mortgage..................................... 28,800 33,810
Installment loans to individuals and other.................. 3,994 3,736
Overdrafts.................................................. 8 13
Foreign loans............................................... -- --
All Other................................................... -- --
------- -------
41,342 48,048
Unearned interest and fees.................................. -- --
------- -------
41,342 48,048
Allowance for loan losses................................... (501) (543)
------- -------
Loans, Net........................................ $40,841 $47,505
======= =======
</TABLE>
The following table sets forth certain information at December 31, 1997
regarding the dollar amount of loans for the categories indicated maturing based
on their contractual terms to maturity. Demand loans, loans having no stated
schedule of repayments and no stated maturity and overdrafts are reported as due
in one year or less.
<TABLE>
<CAPTION>
AMOUNTS AT DECEMBER 31, 1997 DUE IN
--------------------------------------------
AFTER ONE
YEAR
ONE YEAR THROUGH DUE AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural... $7,724 $1,619 $423 $ 9,766
Real estate -- construction.............. 723 -- -- 723
Overdrafts............................... 13 -- -- 13
------ ------ ---- -------
Total.......................... $8,460 $1,619 $423 $10,502
====== ====== ==== =======
</TABLE>
The following table presents the total amount of loans shown in the preceding
table which are due after one year and which have fixed interest rates and have
variable interest rates.
<TABLE>
<S> <C> <C>
Loans maturing after one year with:
Fixed interest rates................................... $1,619 $423
Variable interest rates................................ -- --
------ ----
Total............................................. $1,619 $423
====== ====
</TABLE>
57
<PAGE> 64
The following table presents information concerning outstanding balances of
nonperforming loans at December 31, 1996 and 1997. Nonperforming loans consists
of loans which have been placed on nonaccrual status or are past due more than
ninety days with respect to principal or interest.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Loans accounted for on a nonaccrual basis(1)................ $48 $121
Accruing loans which are contractually past due 90 days or
more as to principal or interest payments(1).............. -- 92
Other loans which are "troubled debt restructurings"(1)..... -- --
</TABLE>
- -------------------------
(1) There are no foreign loans.
A loan is placed on non-accrual status when it is determined by management that
it is reasonably possible that full collection of principal and interest will
not be made.
As of December 31, 1997, in the opinion of management, there are no problem
loans of significance which are not now disclosed under information concerning
non-accrual, past due and restructured loans.
As of December 31, 1997, there are no loan concentrations exceeding 10% of total
loans which are not otherwise disclosed previously as a category of loans.
As of December 31, 1997, there are no other interest-bearing assets that would
be required to be disclosed as nonaccrual, past due or restructured loans if
such assets were loans.
ALLOWANCE FOR LOAN LOSSES
An allowance for loan losses is established through a provision for loan losses
charged to expenses. Loans are charged against the allowance for loan losses
when management believes that the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible based on
evaluations of the collectibility of loans and prior loan loss experience (when
sufficient time elapses to establish experience). The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem and/or impaired
loans and current economic conditions that may affect the borrowers' ability to
pay.
The allowance for loan losses was approximately 1.1% and 1.2% of outstanding
loans at December 31, 1997 and 1996, respectively. Management believes that the
allowance for loan losses of approximately $543,000 at December 31, 1997 is
adequate due to the fact that approximately $34.5 million or 72% of the Bank's
loan portfolio consisted of loans secured by real estate.
58
<PAGE> 65
The following table sets forth an analysis of loss experience for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
----- -----
($ IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period.............................. $429 $501
---- ----
Charge-Off's:
Domestic:
Commercial, financial and agricultural................. -- --
Real estate -- construction............................ -- --
Real estate -- mortgage................................ -- 37
Installment loans to individuals....................... 18 11
Loans secured by deposits.............................. -- --
Overdrafts............................................. -- --
Foreign................................................... -- --
---- ----
18 48
---- ----
Recoveries:
Domestic:
Commercial, financial and agricultural................. 17 --
Real estate -- construction............................ -- --
Real estate -- mortgage................................ -- --
Installment loans to individuals....................... 6 3
Loans secured by deposits.............................. -- --
Overdrafts............................................. -- --
Foreign................................................... -- --
---- ----
23 3
---- ----
Net (Recoveries) Charge-Off's............................... (5) 45
---- ----
Additions charged to operations............................. 67 87
---- ----
Balance at end of period.................................... $501 $543
==== ====
Ratio of net charge-off's during the period to average loans
outstanding during the period............................. (.01)% .10%
==== ====
</TABLE>
59
<PAGE> 66
The Bank has allocated the allowance for loan losses according to the amounts
deemed to be reasonably necessary at each year end to provide for the
possibility of losses being incurred within the categories of loans set forth in
the table below based on management's evaluation of the loan portfolio. The
amounts of such components of the reserve for possible loan losses at December
31, 1996 and 1997 and the percent of loans in each category to total loans are
presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1996 1997
-------------------- --------------------
PERCENT PERCENT
OF LOANS OF LOANS
IN EACH IN EACH
CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ -----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Domestic:
Commercial, financial and
agricultural.............. $100 19.95% $110 20.33%
Real
estate -- construction.... 4 .71 8 1.50
Real estate -- mortgage...... 349 69.66 382 70.37
Installment loans to
individuals............... 48 9.66 43 7.78
Overdrafts................... -- .02 -- .02
Other........................ -- .00 -- .00
Foreign........................ -- .00 -- .00
Unallocated.................... -- .00 -- .00
---- ------ ---- ------
$501 100.00% $543 100.00%
==== ====== ==== ======
</TABLE>
DEPOSIT AVERAGE BALANCES AND RATES
The following table sets forth an analysis of the average amount outstanding and
the average rate paid for all deposits for the categories and periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1997
------------------- -------------------
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE PAID AMOUNT RATE PAID
------- --------- ------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits in domestic bank offices:
Noninterest-bearing demand
deposits....................... $ 4,838 .00% $ 6,513 .00%
Interest-bearing demand
deposits....................... 10,205 3.81 13,506 4.17
Savings deposits.................. 1,349 3.11 1,604 3.12
Time deposits..................... 34,856 6.34 37,237 6.16
Deposits in foreign banking
offices........................... -- .00 -- .00
------- -------
Total..................... $51,248 $58,860
======= =======
</TABLE>
DEPOSIT MATURITIES
The principal sources of funds for the Bank's loans and investments are demand,
time, savings and other deposits and borrowings. The Bank offers a variety of
deposit accounts including checking and NOW accounts, savings and time accounts,
certificates of deposit and money market accounts. As of December 31, 1997,
total deposits were approximately $62.3 million. Although in some instances time
deposits greater than $100,000 may be
60
<PAGE> 67
more sensitive to changes in interest rates, substantially all the Bank's
deposits are derived from within its primary service areas which management
believes are not as interest rate sensitive as are more urban service areas. The
Bank does not have any brokered deposits.
The following table summarizes maturity information for time deposits greater
than $100,000 at December 31, 1997.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Three months or less........................................ $2,741
Over three through twelve months............................ 4,023
Over twelve months.......................................... 2,242
------
Total............................................. $9,006
======
</TABLE>
ADVANCES FROM THE FEDERAL HOME LOAN BANK
The following table shows the Bank's borrowings from the Federal Home Loan Bank
and the weighted average interest rates thereon at the end of each of the last
two years. Also provided are the maximum amount of borrowings and the average
amounts outstanding as well as weighted average interest rates for the last two
years.
<TABLE>
<CAPTION>
($ IN THOUSANDS)
----------------
<S> <C>
Balance at December 31:
1997...................................................... $2,000
1996...................................................... 2,000
Weighted Average Interest Rate At Year End:
1997...................................................... 5.38%
1996...................................................... 5.38
Maximum Amount Outstanding At Any Month's End:
1997...................................................... $2,000
1996...................................................... 3,500
Average Amount Outstanding During The Year:
1997...................................................... $2,000
1996...................................................... 2,500
Weighted Average Interest Rate During The Year:
1997...................................................... 5.38%
1996...................................................... 5.64%
</TABLE>
61
<PAGE> 68
RETURN ON EQUITY AND ASSETS
The following table represents the Company's return on equity and assets for the
two years ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1996 1997
----- -----
<S> <C> <C>
Return on equity (net income divided by average equity)..... 10.41% 12.26%
Return on assets (net income divided by average total
assets)................................................... 1.04% 1.20%
Dividend payment ratio (dividends declared per share divided
by net income per share).................................. 18.46% 20.09%
Equity to assets ratio (average equity divided by average
total assets)............................................. 10.02% 9.79%
</TABLE>
INFORMATION ABOUT VB&T
VB&T is a bank holding company organized under the laws of the state of Georgia
with its principal executive office located in Valdosta, Georgia. VB&T operates
principally through Valdosta Bank & Trust, which is a state-chartered commercial
bank and which provides a range of consumer and commercial banking services
through its office in Valdosta, Georgia. At September 30, 1998, VB&T had total
consolidated assets of approximately $74.2 million, total consolidated deposits
of approximately $60.6 million, and total consolidated stockholders' equity of
approximately $7.8 million.
BUSINESS AND PROPERTIES
The Company. VB&T's business is to provide banking services to individuals and
businesses through its commercial bank subsidiary, Valdosta Bank & Trust in
Valdosta, Georgia (the "Bank"). VB&T was organized in 1990 to own 100% of the
stock of Valdosta Bank & Trust. Effective December, 1990, VB&T became a bank
holding company, registered with the Federal Reserve Board and the Georgia
Department of Banking and Finance.
VB&T's offices are located in Valdosta Bank & Trust's main office at 2611 North
Patterson Street, Valdosta, Georgia 31602, and its telephone number is (912)
242-1200.
Holding Company Business Plan. VB&T is authorized to engage in any activity
permitted by law to a corporation, subject to applicable federal and state
regulatory restrictions on the activities of bank holding companies. VB&T's
holding company structure provides it with greater flexibility than a Bank would
otherwise have to expand and diversify its business activities through
newly-formed subsidiaries, or through acquisitions. While VB&T has no present
plans to engage actively in any other business activities, management from time
to time studies the feasibility of establishing or acquiring subsidiaries to
engage in other business activities to the extent permitted by law.
Valdosta Bank & Trust. Valdosta Bank & Trust commenced operations in August,
1990, as a state-chartered commercial bank. Customer deposits with Valdosta Bank
& Trust are insured to the maximum extent provided by law through the Federal
Deposit Insurance Corporation. Valdosta Bank & Trust is located in Valdosta,
Lowndes County, Georgia, its primary service area.
62
<PAGE> 69
The Valdosta Chamber of Commerce estimates the current population of Valdosta to
be approximately 40,000 and the population of Lowndes County to be approximately
76,000. Valdosta is the county seat of Lowndes County and is approximately 18
miles north of the Georgia-Florida line. Leading businesses and employers in the
area include clothing manufacturing, paper manufacturing, Moody Air Force Base,
South Georgia Medical Center and Valdosta State University.
Banking Services and Operations. Valdosta Bank & Trust offers a full range of
commercial banking services to individuals, professional and business customers
in its primary service area. These services include personal and business
checking accounts and savings and other types of certificates of deposit.
Valdosta Bank & Trust issues credit cards and acts a merchant depository for
cardholder drafts under both VISA and MasterCard. Valdosta Bank & Trust offers
night depository and bank-by-mail services and sells bank drafts and travelers
checks (issued by an independent entity). It also offers trust and fiduciary
services and has a mortgage banking department.
The Principal sources of income for Valdosta Bank & Trust are interest and fees
collected on loans and interest on investment securities. The principal expenses
of the bank are interest paid on savings deposits, interest paid on other
borrowings by the bank, employee compensation, office expenses, and other
operating expenses.
Lending. Valdosta Bank & Trust seeks to attract deposits from the general
public and use such deposits, together with borrowings and other sources of
funds, to originate and purchase loans. The bank offers a full range of short
and medium commercial, consumer and real estate loans. Commercial lending
activities are directed principally toward businesses whose demand for funds
falls within the bank's lending limits. Consumer lending has been oriented
primarily to the needs of the bank's customers for such purposes as home
remodeling, education, and automobiles. Real estate lending is oriented toward
construction loans and short-term commercial loans. The bank also originates
fixed and variable-rate residential and other mortgage loans for its own
account. The lending policies and procedures of the bank are established and
periodically reviewed by the bank's Board of Directors.
Valdosta Bank & Trust's loan portfolio totaled $49.3 million at September 30,
1998, which was comprised of approximately 20% commercial and agribusiness
loans, 8% consumer loans, and 72% residential and commercial real estate
mortgage loans. Valdosta Bank & Trust's loan to deposit ratio at September 30,
1998 was approximately 82%.
Deposits. Checking, savings, money market accounts, and other time deposits are
the principal sources of Valdosta Bank & Trust's funds for loans and
investments. Most of the bank's deposits are obtained from individuals and small
businesses. At September 30, 1998, Valdosta Bank and Trust had deposits of
approximately $60.6 million.
Valdosta Bank & Trust seeks to attract new deposits by paying rates of interest
on certificates of deposit and money market accounts which are competitive in
their respective primary service areas. The bank generally does not pay brokers'
commissions in connection with the obtaining of deposits.
Asset and Liability Management. The primary assets of Valdosta Bank & Trust
consists of its loan portfolio and investment account. Consistent with the
requirements of prudent banking necessary to maintain liquidity, management
seeks to match maturities and rates of loans and the investment portfolio with
those of deposits, although exact matching is not always possible. Management
seeks to invest the largest portion of the bank's assets in
63
<PAGE> 70
commercial and agribusiness, consumer and residential real estate loans. The
bank anticipates that loans will be limited to approximately 75% of deposits and
capital funds. It is anticipated that the bank's investment account will consist
primarily of marketable securities of the United States government, federal
agencies and state and municipal governments, generally with varied maturities.
Valdosta Bank & Trust's investment policy provides for a portfolio divided among
issues purchased to meet one or more of the following objectives: (i) to
complement strategies developed in asset/liquidity management, including desired
liquidity levels; (ii) to maximize after tax income from funds not needed for
day-to-day operations and loan demands; and (iii) to provide collateral
necessary for acceptance of public funds. Management anticipates that its policy
will allow the bank to deal with seasonal deposits fluctuations and to provide
for basic liquidity consistent with the bank's loan demand. When possible,
maturation will match anticipated liquidity demands. Longer term securities may
be selected for a combination of yield and exemption from federal income
taxation when appropriate.
Deposit accounts will represent the majority of the liabilities of Valdosta Bank
& Trust. These will include transaction accounts, time deposits and certificates
of deposit.
Valdosta Bank & Trust derives its income principally from interest charged on
loans and, to a lesser extent, from interest earned on investments, from fees
received in connection with the origination of loans and from other services.
The bank's principal expenses are interest expense on deposits and operating
expenses. The funds for such activities are provided principally by operating
revenues, deposit growth, purchase of federal funds from other banks, repayment
of outstanding loans and sale of loans and investment securities.
Property. Valdosta Bank & Trust's business is conducted at its banking office
located at 2611 North Patterson Street, Valdosta, Georgia 31602. The bank's main
office building contains approximately 9,350 square feet and is located on
approximately 1.75 acres. The bank's main office and the land are owned by the
bank. The bank's main office includes a drive-through teller lane.
Employees. At September 30, 1998, Valdosta Bank & Trust employed 20 full-time
employees and 5 part-time employees. VB&T has no separate employees. The bank
considers its relationship with its employees to be good.
COMPETITION
VB&T encounters vigorous competition in its market areas for the provision of
depository institution financial services from a number of sources, including
bank holding companies and commercial banks, savings and loan associations and
other thrift institutions, other financial institutions, and financial
intermediaries that operate in VB&T's market area. Regional interstate banking
laws and other recent federal and state laws have resulted in increased
competition from both conventional banking institutions and other businesses
offering financial services and products. The bank also competes for interest
bearing funds with a number of other financial intermediaries and nontraditional
consumer investment alternatives, including brokerage firms, consumer finance
companies, commercial finance companies, credit unions, money market funds, and
federal, state, and municipal issuers of short term obligations. Many of these
competitors have greater financial resources than Valdosta Bank & Trust. At
September 30, 1998, there were approximately 9 commercial
64
<PAGE> 71
banks, 3 savings banks, and 3 credit unions competing with the bank in the
bank's Lowndes County market area.
LEGAL PROCEEDINGS
VB&T and Valdosta Bank & Trust are not parties to any material legal proceedings
other than ordinary routine litigation incidental to their business.
MANAGEMENT
The following table presents information about the directors and executive
officers of VB&T and Valdosta Bank & Trust. Unless otherwise indicated, each
person has sole voting and investment powers over the indicated shares.
Information relating to beneficial ownership of VB&T is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Exchange Act. Under
such rules a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or to
direct the voting of such security, or "investment power," which includes the
power to dispose or to direct the disposition of such security. Under the rules,
more than one person may be deemed to be a beneficial owner of the same
securities. A person is also deemed to be a beneficial owner of any security of
which that person has the right to acquire beneficial ownership within 60 days
from the record date. The footnotes to the table indicate how many shares each
person has the right to acquire within 60 days of the record date. The shares of
VB&T which are issuable to a person listed below upon exercise of the vested
portion of the outstanding options are assumed to be outstanding for the purpose
of determining the percentage of shares beneficially owned by that person.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
OWNED
PRESENT OCCUPATION POSITION AND DIRECTOR OR AT THE RECORD
AND PRINCIPAL OFFICES HELD EXECUTIVE DATE
OCCUPATION FOR WITH VB&T OFFICER AND PERCENT OF
NAME LAST FIVE YEARS AND BANK SINCE CLASS
- ---- ------------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Thomas E. Hatcher........ Banking Chairman of the Board, 1990 30,380 4.35%
Chief Financial Officer
Owen D. Harris........... Operator of three Director 1990 67,608 9.68
Kentucky Fried
Chicken Restaurants
Donald T. Schutt......... Banking Chief Executive Officer 1993 17,954 2.57
Director, Vice Chairman
of the Board
William W. Broadfoot..... Dentist Director 1990 47,943 6.87
James D. Carroll, Jr..... Owner of meat packing Director 1990 42,686 6.11
company
Walter C. Copeland, Insurance Director 1990 17,897 2.56
III....................
C. William DeCoudres..... Banking President of Valdosta Bank 1990 3,420 .49
and Trust and Director
Larry Dean............... Construction Director 1991 70,473 10.09
W. Wayne Fann............ Real Estate Director 1990 16,103 2.31
Rudolph R. McCall, Jr.... Architect Director 1990 29,886 4.28
C. Dave Richards......... Veteranarian Director 1990 15,686 2.25
C. W. Fackler............ Banking Executive Vice President 1997 2,641 .38
</TABLE>
65
<PAGE> 72
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, Valdosta Bank & Trust has loans, deposits
and other transactions with its executive officers, directors, and organizations
with which such persons are associated. Such transactions are on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with others. The aggregate amount of loans
to the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of September 30, 1998, were approximately $2,331,000.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF VB&T
The following table sets forth certain information concerning the beneficial
owners of more than 5.0% of VB&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......... Owen D. Harris 67,608 9.68%
3310 Bellemeade
Valdosta, GA 31602
Common Stock......... Dr. William W. Broadfoot 47,943 6.87
2518 Rolling Road
Valdosta, GA 31602
Common Stock......... James D. Carroll, Jr 42,686 6.11
P.O. Box 633
Lake Park, GA 31636
Common Stock......... Larry Dean 70,473 10.09
5932 Loch Laurel Road
Lake Park, GA 31636
Common Stock......... Walter F. Carroll, II 34,948 5.01
803 Pine Point Circle
Valdosta, GA 31602
</TABLE>
- -------------------------
(1) The information shown above is based upon information furnished by the named
persons. Information relating to beneficial ownership is based upon
"beneficial ownership" concepts set forth in rules promulgated under the
Exchange Securities Act. Under such rules a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to dispose or to direct the voting of such
security, or "investment power," which includes the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to
acquire beneficial ownership within 60 days. Under the rules, more than one
person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he
or she has no beneficial interest. The shares of VB&T common stock issuable
upon exercise of outstanding options held by a person are assumed to be
outstanding for the purpose of determining the percentage of shares
beneficially owned by that person.
66
<PAGE> 73
INFORMATION ABOUT 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 713 banking offices located in Alabama, Arkansas, Florida,
Georgia, Louisiana, South Carolina, Tennessee, and Texas as of September 30,
1998. At that date, Regions had total consolidated assets of approximately $35.1
billion, total consolidated deposits of approximately $27.2 billion, and total
consolidated stockholders' equity of approximately $3.0 billion. Regions has
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.
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
"Where You Can Find More Information."
67
<PAGE> 74
RECENT DEVELOPMENTS
Since December 31, 1997, and as of the date of this Proxy Statement-Prospectus,
Regions has completed the acquisitions of eleven financial institutions (the
"Recently Completed Acquisitions") and has entered into definitive agreements to
acquire four financial institutions in addition to the Merger (the "Other
Pending Acquisitions"). Certain aspects of the completed and other pending
acquisitions are presented in the following table:
<TABLE>
<CAPTION>
CONSIDERATION
-------------------------
APPROXIMATE
------------------------ ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
RECENTLY COMPLETED ACQUISITIONS:
Greenville Financial Corporation,
located in Greenville,
South Carolina................... $ 134 $ 34 Regions Common Pooling of
Stock Interests
PALFED, Inc., located in
Aiken, South Carolina............ 665 145 Regions Common Pooling of
Stock Interests
First United Bancorporation,
located in
Anderson, South Carolina......... 292 80 Regions Common Pooling of
Stock Interests
St. Mary Holding Corporation,
located in Franklin, Louisiana... 113 31 Regions Common Pooling of
Stock Interests
Key Florida Bancorp, Inc., located
in
Bradenton, Florida............... 212 39 Regions Common Pooling of
Stock Interests
First State Corporation, located in
Albany, Georgia.................. 540 161 Regions Common Pooling of
Stock Interests
First Commercial Corporation,
located in Little Rock,
Arkansas......................... 7,382 2,597 Regions Common Pooling of
Stock Interests
Village Bankshares, inc. located in
Tampa, Florida................... 211 46 Regions Common Pooling of
Stock Interests
Jacobs Bank, located in
Scottsboro, Alabama.............. 186 47 Regions Common Pooling of
Stock Interests
Etowah Bank, located in
Canton, Georgia.................. 409 99 Regions Common Pooling of
Stock Interests
First Community Banking Services,
Inc., located in
Peachtree City, Georgia.......... 125 30 Regions Common Pooling of
Stock Interests
</TABLE>
68
<PAGE> 75
<TABLE>
<CAPTION>
CONSIDERATION
-------------------------
APPROXIMATE
------------------------ ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
OTHER PENDING ACQUISITIONS:
Bullsboro BancShares, Inc., located
in Newnan, Georgia............... 108 36 Regions Common Pooling of
Stock Interests
Meigs County Bancshares, Inc.
located in Decatur, Tennessee.... 103 19 Regions Common Pooling of
Stock Interests
St. James Bancorporation, Inc.,
located in Lutcher, Louisiana.... 152 43 Regions Common Purchase
Stock
Arkansas Banking Company, located
in Jonesboro, Arkansas........... 343 64 Regions Common Purchase
Stock
</TABLE>
- -------------------------
(1) Calculated as of the date of consummation in the case of the completed
acquisitions and as of the date of announcement of the transaction in the
case of pending acquisitions.
Consummation of the Other Pending Acquisitions is subject to the approval of
certain regulatory agencies and approval of the stockholders of the institutions
to be acquired. Moreover, the closing of each transaction is subject to various
contractual conditions precedent. No assurance can be given that the conditions
precedent to consummating the transactions will be satisfied in a manner that
will result in their consummation.
If the Other Pending Acquisitions and the Merger had been consummated on
September 30, 1998, as of that date Regions' total consolidated assets would
have been increased by approximately $751 million to approximately $35.8
billion; its total consolidated deposits would have increased by approximately
$696 million to approximately $27.9 billion; and its total consolidated
stockholders' equity would have increased by approximately $26 million to
approximately $3.0 billion.
The First Commercial Acquisition. On July 31, 1998, Regions completed a
business combination with First Commercial Corporation, Little Rock, Arkansas.
Additional information concerning this business combination is included in
Regions' current reports on Form 8-K, dated as of February 8, 1998, July 31,
1998, and November 6, 1998. Such current reports are incorporated in this Proxy
Statement-Prospectus by reference.
Regions accounted for the First Commercial Acquisition as a pooling of
interests. All historical financial information of Regions presented in this
Proxy Statement-Prospectus has been restated to reflect Regions' business
combination with First Commercial Corporation, and other significant business
combinations consummated in the first quarter of 1998 which are accounted for as
poolings of interests. Supplemental historical consolidated financial statements
of Regions giving effect to such poolings of interests combinations are included
in Regions Current Report on Form 8-K dated November 6, 1998. See "Where You Can
Find More Information."
69
<PAGE> 76
SUPERVISION AND REGULATION
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 VB&T. Additional information
is available in Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1997. See "Where You Can Find More Information."
GENERAL
Regions and VB&T are both bank holding companies registered with the Federal
Reserve Board under the Bank Holding Company Act. As such, Regions and VB&T and
their non-bank subsidiaries are subject to the supervision, examination, and
reporting requirements of the Bank Holding Company Act and the regulations of
the Federal Reserve Board.
The Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve Board 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.
The Bank Holding Company Act further provides that the Federal Reserve Board 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 Board
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.
The Bank Holding Company Act, as amended by the interstate banking provisions of
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits
any bank holding company located in Alabama to acquire a bank located in any
other state, and any bank holding company located outside Alabama to acquire any
Alabama-based bank, regardless of state law to the contrary, 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, unless a state "opted out" and prohibited interstate branching
altogether. None of the states in which the banking subsidiaries of Regions or
VB&T are located has "opted out." Accordingly, Regions has the ability to
consolidate all of its bank subsidiaries into a single bank with interstate
branches.
The Bank Holding Company Act generally prohibits Regions and VB&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 Board to be so closely related to banking or
managing or controlling banks as to be a
70
<PAGE> 77
proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve Board 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.
Each of the subsidiary depository institutions of Regions and VB&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 agency.
The regulatory agencies having supervisory jurisdiction over the respective
subsidiary institutions of Regions and VB&T (the FDIC and the applicable state
authority) 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 VB&T are legal entities separate and distinct from their banking,
thrift, and other subsidiaries. The principal sources of cash flow of both
Regions and VB&T, including cash flow to pay dividends to their respective
stockholders, are dividends from their subsidiary depository institutions. There
are statutory and regulatory limitations on the payment of dividends by these
subsidiary depository institutions to Regions and VB&T, as well as by Regions
and VB&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.
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 current federal law, an
insured institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "-- Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements which
provide that bank holding companies and insured banks should generally pay
dividends only out of current operating earnings.
At September 30, 1998, under dividend restrictions imposed under federal and
state laws, the subsidiary depository institutions of Regions and VB&T, without
obtaining governmental approvals, could declare aggregate dividends to Regions
and VB&T of approximately $252 million and $326,000 respectively.
71
<PAGE> 78
The payment of dividends by Regions and VB&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, VB&T, and their respective subsidiary depository institutions are
required to comply with the capital adequacy standards established by the
Federal Reserve Board in the case of Regions and VB&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 Board: 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 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, qualifying 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 certain subordinated debt, certain
hybrid capital instruments and other qualifying preferred stock, and a limited
amount of loan loss reserves ("Tier 2 Capital"). At September 30, 1998, Regions'
consolidated Total Capital Ratio was 11.84% and its Tier 1 Capital Ratio (i.e.,
the ratio of Tier 1 Capital to risk-weighted assets) was 10.64%. At that date,
VB&T's consolidated Total Capital Ratio was 17.30% and its Tier 1 Capital Ratio
was 16.10%.
In addition, the Federal Reserve Board 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 an
additional cushion of 100 to 200 basis points above the stated minimums. 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 Board 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. Regions' Leverage Ratio at September 30, 1998
was 7.84% and VB&T's Leverage Ratio was 10.10%.
Each of Regions' and VB&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 Board. Each of the subsidiary depository institutions was in compliance
with applicable minimum capital requirements as of September 30, 1998. Neither
Regions, VB&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
72
<PAGE> 79
insurance by the FDIC, a prohibition on the taking of brokered deposits, and to
certain other restrictions on its business. As described below, substantial
additional restrictions can be imposed upon FDIC-insured depository institutions
that fail to meet applicable capital requirements. See "-- Prompt Corrective
Action."
The Federal Reserve Board, the Office of the Comptroller of the Currency, and
the FDIC also have recently adopted final regulations requiring regulators to
consider interest rate risk (when the interest rate sensitivity of an
institution's assets does not match the sensitivity of its liabilities or its
off-balance-sheet position) in the evaluation of a bank's capital adequacy. The
bank regulatory agencies' methodology for evaluating interest rate risk requires
banks with excessive interest rate risk exposure to hold additional amounts of
capital against such exposures.
PROMPT CORRECTIVE ACTION
Current federal law establishes a system of prompt corrective action to resolve
the problems of undercapitalized institutions. Under this system the federal
banking regulators have established five capital categories ("well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized") and must 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, current federal law requires the
banking regulator to appoint a receiver or conservator for an institution that
is critically undercapitalized.
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. 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 to fund a capital
73
<PAGE> 80
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 the law.
At September 30, 1998, all of the subsidiary depository institutions of Regions
and VB&T had the requisite capital levels to qualify as well capitalized.
FDIC INSURANCE ASSESSMENTS
The FDIC currently uses 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.
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 500,000,000 shares of Regions common stock, of
which 221,111,474 shares were issued at September 30, 1998, none of which were
held as treasury shares, and 5,000,000 shares of preferred stock, none of which
are outstanding. No other class of stock is authorized.
Holders of Regions common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor. The
ability of Regions to pay dividends is affected by the ability of its subsidiary
institutions to pay dividends, which is limited by applicable regulatory
requirements and capital guidelines. At September 30, 1998, under such
requirements and guidelines, Regions' subsidiary
74
<PAGE> 81
institutions had $252 million of undivided profits legally available for the
payment of dividends. See "Supervision and Regulation -- 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 1999. Under SEC rules, proposals of Regions stockholders intended to
be presented at that meeting must be received by Regions at its principal
executive offices within a reasonable time prior to the mailing of Regions' 1999
annual meeting proxy statement, for consideration by Regions for possible
inclusion in such proxy statement.
EXPERTS
The consolidated financial statements and the supplemental consolidated
financial statements of Regions at December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, incorporated by reference
in this Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon which are included
in the Annual Report to Stockholders which is incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1997 and in the
Current Report on Form 8-K as of November 6, 1998. The financial statements
audited by Ernst & Young LLP have been incorporated herein by reference in
reliance on their reports given on their authority as experts in accounting and
auditing.
The consolidated financial statements of VB&T, included in this Registration
Statement, have been audited by Stewart, Fowler & Stalvey, P.C., independent
auditors, for the periods indicated in their report thereon which is included
herein. The financial statements audited by Stewart, Fowler & Stalvey, P.C. have
been included herein in reliance on their report given on their authority as
experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions common stock to be issued in the Merger
will be passed upon by Lange, Simpson, Robinson & Somerville LLP, Birmingham,
Alabama. Henry E. Simpson, partner in the law firm of Lange, Simpson, Robinson &
Somerville LLP, is a member of the Board of Directors of Regions. As of
, 1998, attorneys in the law firm of Lange, Simpson, Robinson &
Somerville LLP owned an aggregate of shares of Regions common stock.
Certain tax consequences of the transaction have been passed upon by Alston &
Bird LLP, Atlanta, Georgia.
WHERE YOU CAN FIND MORE INFORMATION
Regions files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that
75
<PAGE> 82
Regions files with the SEC at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. These
filings are also available at the Internet world wide web site maintained by the
SEC at "http://www.sec.gov."
Regions filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the SEC the Regions common stock to be issued to
VB&T stockholders in the Merger. This Proxy Statement-Prospectus is a part of
that Registration Statement and constitutes a prospectus of Regions. As allowed
by SEC rules, this Proxy Statement-Prospectus does not contain all the
information you can find in Regions' Registration Statement or the exhibits to
that Registration Statement.
SEC regulations allow Regions to "incorporate by reference" information into
this Proxy Statement-Prospectus, which means that Regions can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered part of this
Proxy Statement-Prospectus, except for any information superseded by information
contained directly in this Proxy Statement-Prospectus or in later filed
documents incorporated by reference in this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus incorporates by reference the documents set
forth below that Regions has previously filed with the SEC. These documents
contain important information about Regions and its finances. Some of these
filings have been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
REGIONS SEC FILINGS (FILE NO. 0-6159) PERIOD/AS OF DATE
- ------------------------------------- -----------------
<S> <C>
Annual Report on Form 10-K............ Year ended December 31, 1997
Quarterly Reports on Form 10-Q........ Quarters ended March 31, June 30, and
September 30, 1998
Current Reports on Form 8-K........... February 8, 1998, July 31, 1998, and
November 6, 1998
</TABLE>
Regions also incorporates by reference additional documents that may be filed
with the SEC between the date of this Proxy Statement-Prospectus and the
consummation of the Merger or the termination of the Merger Agreement. These
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Regions has supplied all information contained or incorporated by reference in
this Proxy Statement-Prospectus relating to Regions, and VB&T has supplied all
such information relating to VB&T.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through Regions, the
SEC or the SEC's Internet web site as described above.
76
<PAGE> 83
Documents incorporated by reference are available from Regions without charge,
excluding all exhibits, except that if Regions has specifically incorporated by
reference an exhibit in this Proxy Statement-Prospectus, the exhibit will also
be available without charge. Stockholders may obtain documents incorporated by
reference in this Proxy Statement-Prospectus by requesting them in writing or by
telephone from Regions at the following address:
Regions Financial Corporation
417 North 20th Street
Birmingham, AL 35203
Attention: Shareholder Relations
Telephone: (205) 326-7090
You should rely only on the information contained or incorporated by
reference in this Proxy Statement-Prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
Proxy Statement-Prospectus. This Proxy Statement-Prospectus is dated
1998. You should not assume that the information contained in this Proxy
Statement-Prospectus is accurate as of any date other than that date. Neither
the mailing of this Proxy Statement-Prospectus to stockholders nor the issuance
of Regions common stock in the Merger creates any implication to the contrary.
77
<PAGE> 84
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VB&T Bancshares Corp. and Subsidiary
Independent Auditor's Report................................ F-2
Consolidated Balance Sheets -- December 31, 1997 and 1996... F-3
Consolidated Statements of Income -- Years Ended December
31, 1997 and 1996......................................... F-4
Consolidated Statements of Stockholders' Equity -- Years
Ended December 31, 1997 and 1996.......................... F-5
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1997 and 1996................................ F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Balance Sheets -- September 30, 1998
(Unaudited) and December 31, 1997......................... F-19
Consolidated Statements of Income -- Three Months and Nine
Months Ended September 30, 1998 and 1997.................. F-20
Unaudited Consolidated Statements of Comprehensive
Income -- Three Months and Nine Months Ended September 30,
1998 and 1997............................................. F-21
Consolidated Statements of Stockholders' Equity -- Nine
Months Ended September 30, 1998 and 1997.................. F-22
Unaudited Consolidated Statements of Cash Flows -- Nine
Months Ended September 30, 1998 and 1997.................. F-23
Notes to Unaudited Consolidated Financial Statements........ F-24
</TABLE>
F-1
<PAGE> 85
INDEPENDENT AUDITOR'S REPORT
Board of Directors
VB&T Bancshares Corp. and Subsidiary
Valdosta, Georgia
We have audited the accompanying consolidated balance sheets of VB&T
Bancshares Corp. and Subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These consolidated 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, in all material respects, the consolidated financial position of VB&T
Bancshares Corp. and Subsidiary as of December 31, 1997 and 1996 and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ STEWART, FOWLER & STALVEY, P.C.
---------------------------------------------
Valdosta, Georgia
January 28, 1998
F-2
<PAGE> 86
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and Due From Banks............................. $ 1,981,579 $ 1,463,854
Federal Funds Sold.................................. 1,020,000 2,280,000
----------- -----------
Total Cash and Cash Equivalents............. 3,001,579 3,743,854
Interest-bearing deposits in banks.................... 495,000 99,000
Investment Securities (Fair value of $17,722,585 in
1997 and $16,726,573 in 1996), Notes 1 and 2........ 17,722,735 16,733,194
Loans, Net of Allowance for Loan Losses of $542,823
(1996 -- $500,998), Notes 1 and 4................... 47,504,532 40,840,623
Bank Premises and Equipment, Notes 1 and 3............ 1,891,665 1,938,375
Accrued Interest Receivable........................... 691,563 556,530
Cash surrender value of life insurance, Note 6........ 639,708 601,316
Other Assets, Notes 1 and 7........................... 123,609 196,828
----------- -----------
Total Assets................................ $72,070,391 $64,709,720
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.............................................. $ 6,631,941 $ 6,394,281
NOW................................................. 15,631,668 11,381,421
Savings............................................. 1,739,595 1,467,814
Time, $100,000 and over............................. 9,006,154 6,702,316
Other time.......................................... 29,249,831 29,514,938
----------- -----------
62,259,189 55,460,770
Advances from Federal Home Loan Bank, Note 5.......... 2,000,000 2,000,000
Accrued Interest...................................... 444,296 559,877
Income taxes payable.................................. 309 237,529
Other Liabilities, Note 6............................. 220,724 208,216
----------- -----------
Total Liabilities........................... 64,924,518 58,466,392
----------- -----------
Stockholders' Equity:
Common stock, $5 par value, 10,000,000 shares
authorized, 600,482 shares (1996 -- 584,036)
issued and 600,482 (1996 -- 584,036) shares
outstanding...................................... 3,002,411 2,920,180
Surplus............................................. 2,646,815 2,513,717
Retained earnings, Note 10.......................... 1,494,834 839,132
Unrealized gains (losses) on available-for-sale
securities, net of applicable deferred income
taxes............................................ 1,813 (29,701)
----------- -----------
7,145,873 6,243,328
----------- -----------
Total Liabilities and Stockholders'
Equity................................... $72,070,391 $64,709,720
=========== ===========
</TABLE>
F-3
<PAGE> 87
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest Income:
Interest and fees on loans, Note 1.................... $4,197,161 $3,696,821
Interest on investment securities:
Taxable............................................ 1,148,420 1,114,439
Tax exempt......................................... 8,606 15,989
Interest on Federal funds sold........................ 119,836 73,297
Interest on deposits in banks......................... 18,233 18,943
---------- ----------
Total......................................... 5,492,256 4,919,489
---------- ----------
Interest Expense:
Interest on deposits.................................. 2,906,345 2,640,434
Other interest........................................ 107,664 143,670
---------- ----------
Total......................................... 3,014,009 2,784,104
---------- ----------
Net Interest Income..................................... 2,478,247 2,135,385
Provision for Loan Losses, Notes 1 and 4................ 87,000 67,000
---------- ----------
Net Interest Income After Provision for Loan Losses..... 2,391,247 2,068,385
---------- ----------
Other Income:
Service charges on deposit accounts................... 133,376 130,460
Other income.......................................... 91,437 60,991
Gains (loss) on sale of assets........................ 1,178 --
Securities gains (losses), Note 1..................... 199 7,744
Mortgage banking fees................................. 205,512 195,636
---------- ----------
Total......................................... 431,702 394,831
---------- ----------
Other Expenses:
Compensation.......................................... 704,048 667,248
Other personnel expenses, Note 6...................... 241,036 219,237
Occupancy expense of bank premises.................... 131,953 130,960
Furniture and equipment expense....................... 99,652 99,663
Federal deposit insurance............................. 6,563 2,000
Postage and courier services.......................... 29,846 32,822
Supplies.............................................. 48,474 45,915
Data processing....................................... 134,216 118,081
Advertising and business development.................. 32,769 30,555
Amortization.......................................... -- 1,897
Other operating expenses.............................. 170,060 174,575
---------- ----------
Total......................................... 1,598,617 1,522,953
---------- ----------
Income Before Income Taxes.............................. 1,224,332 940,263
Income Taxes, Notes 1 and 7............................. 403,802 311,553
---------- ----------
Net Income.............................................. $ 820,530 $ 628,710
========== ==========
</TABLE>
F-4
<PAGE> 88
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON AVAILABLE-
FOR-SALE
SECURITIES,
NET OF
APPLICABLE
COMMON RETAINED TREASURY DEFERRED
STOCK SURPLUS EARNINGS STOCK INCOME TAXES TOTAL
---------- ---------- ---------- -------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1995.................. $2,903,385 $2,487,066 $ 326,505 $ -- $ 130,259 $5,847,215
Net Income.............. -- -- 628,710 -- -- 628,710
Issuance of 3,359
shares................ 16,795 26,301 -- -- -- 43,096
Purchase of 1,995 shares
of treasury stock..... -- -- -- 24,887 -- (24,887)
Sale of 1,995 shares of
treasury stock........ -- 350 -- (24,887) -- 25,237
Dividends............... -- -- (116,083) -- -- (116,083)
Change in unrealized
gains (losses) on
available-for-sale
securities, net of
applicable deferred
income taxes.......... -- -- -- -- (159,960) (159,960)
---------- ---------- ---------- -------- --------- ----------
Balances, December 31,
1996.................. 2,920,180 2,513,717 839,132 -- (29,701) 6,243,328
Net Income.............. -- -- 820,530 -- -- 820,530
Issuance of 16,446
shares................ 82,231 133,098 -- -- -- 215,329
Purchase of 150 shares
of treasury stock..... -- -- -- 2,100 -- 2,100
Sale of 150 shares of
treasury stock........ -- -- -- (2,100) -- (2,100)
Dividends............... -- -- (164,828) -- -- (164,828)
Change in unrealized
gains (losses) on
available-for-sale
securities, net of
applicable deferred
income taxes.......... -- -- -- -- 31,514 31,514
---------- ---------- ---------- -------- --------- ----------
Balances, December 31,
1997.................. $3,002,411 $2,646,815 $1,494,834 $ -- $ 1,813 $7,145,873
========== ========== ========== ======== ========= ==========
</TABLE>
F-5
<PAGE> 89
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 820,530 $ 628,710
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 123,839 130,997
Amortization............................................ -- 1,897
Amortization (accretion) on investment securities....... (8,629) (8,813)
Provision for loan losses............................... 87,000 67,000
Securities (gains) losses............................... (199) (7,744)
(Gain) Loss on sale of fixed assets..................... (1,178) --
Deferred income taxes (credit).......................... 56,897 (35,416)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable...... (135,033) 9,996
(Increase) decrease in other assets..................... 88 (10,976)
Increase (decrease) in other liabilities................ 12,508 32,840
Increase (decrease) in accrued interest payable......... (115,581) (13,076)
Increase (decrease) in accrued income taxes............. (237,220) 168,406
----------- ----------
Net Cash Provided by Operating Activities.......... 603,022 963,821
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (77,276) (85,105)
(Increase) decrease in interest-bearing deposits.......... (396,000) 100,000
Purchase of available-for-sale securities................. (9,658,751) (7,848,263)
Purchase of held-to-maturity securities................... -- (200,268)
Proceeds from sales of available-for-sale securities...... 6,181,601 4,898,330
Proceeds from calls of available-for-sale securities...... 2,250,000 2,500,000
Proceeds from maturities of available-for-sale
securities.............................................. 250,000 1,350,000
Principal payments on mortgage backed securities.......... 44,185 53,274
Proceeds from sale of fixed assets........................ 1,325 --
Net (increase) decrease in loans.......................... (6,750,909) (6,842,419)
(Increase) decrease in cash surrender value of life
insurance............................................... (38,392) (556,317)
----------- ----------
Net Cash Provided (Used) by Investing Activities... (8,194,217) (6,630,768)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in time deposits.................. 2,038,731 2,722,422
Net increase (decrease) in other deposits................. 4,759,688 3,944,276
Payments on notes payable and Federal Home Loan Bank
advances................................................ -- (5,500,000)
Issuance of stock......................................... 87,052 --
Purchase of treasury stock................................ (2,100) (24,887)
Proceeds from sale of treasury stock...................... 2,100 25,237
Proceeds of Federal Home Loan Bank advances............... -- 7,500,000
Payment of dividends...................................... (36,551) (72,987)
Net increase (decrease) in Federal funds purchased........ -- (490,000)
----------- ----------
Net Cash Provided (Used) by Financing Activities........ 6,848,920 8,104,061
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (742,275) 2,437,114
Cash and Cash Equivalents at Beginning of Period............ 3,743,854 1,306,740
----------- ----------
Cash and Cash Equivalents at End of Period.................. $ 3,001,579 $3,743,854
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID
DURING THE PERIOD FOR:
Interest.................................................. $ 3,129,590 $2,797,180
=========== ==========
Income Tax................................................ $ 584,125 $ 178,563
=========== ==========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Total increase (decrease) in unrealized losses on securities
available-for-sale........................................ $ (47,748) $ 242,364
=========== ==========
Dividends reinvested through dividend reinvestment plan..... $ 128,277 $ 43,096
=========== ==========
</TABLE>
F-6
<PAGE> 90
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
VB&T Bancshares Corp. is engaged in the activity of providing traditional
banking services through its banking subsidiary, Valdosta Bank & Trust. The Bank
is a state chartered bank. The Bank primarily grants commercial, consumer and
real estate loans with a market area that includes predominately Lowndes County,
Georgia and the immediate outlying areas. The composition of the Bank's loan
portfolio is detailed in note 4 of these financial statements. The Bank
primarily limits investment securities to U.S. Treasury obligations, obligations
of other U.S. government agencies and corporations and obligations of state and
political subdivisions. The Bank also purchases time deposits with other banks
in denominations generally not exceeding $100,000 per bank and sells federal
funds to major correspondent banks.
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts of VB&T
Bancshares Corp. and its wholly-owned subsidiary, Valdosta Bank & Trust. All
inter-company transactions and accounts have been eliminated in consolidation.
INVESTMENT SECURITIES
Effective January 1, 1994, debt securities that management has the ability and
intent to hold to maturity are classified as held-to-maturity and carried at
cost adjusted for amortization of premiums and accretion of discounts using
methods approximating the interest method. Other securities are classified as
available-for-sale and are carried at fair value. Unrealized gains and losses on
securities available-for-sale are recognized as direct increases or decreases in
stockholders' equity. Cost of securities sold is determined using the specific
identification method.
BANK PREMISES AND EQUIPMENT AND RELATED DEPRECIATION
Depreciation of bank premises and equipment is computed using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance, repairs, removals and betterments which do not materially prolong
the useful lives of the assets are charged to income as incurred. The cost of
property retired or sold, and the related accumulated depreciation, is removed
from the accounts, and any gain or loss, after taking into consideration
proceeds from sale, is transferred to income.
LOANS AND ALLOWANCE FOR LOSSES ON LOANS
Loans are stated at the amount of unpaid principal, reduced by an allowance for
loan losses. Interest on loans is calculated by using the simple interest method
on daily balances of the principal amount outstanding. The Bank provides for
loan losses in amounts based upon management's evaluation of the collectibility
of loans and other relevant factors including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans and economic conditions. Allowances for impaired loans
F-7
<PAGE> 91
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are generally determined based on collateral values or the present value of
estimated cash flows. The allowance is increased by a provision for loan losses,
which is charged to expense, and reduced by charge-off's, net of recoveries.
Accrual of interest is discontinued when management believes that the borrowers'
financial condition is such that collection of interest is doubtful. The Bank
currently recognizes any loan origination fees as income at the time charged to
the customer and does not capitalize any of the direct cost of loan origination
as provided by Statement of Financial Accounting Standards No. 91. The method of
accounting used is in conformity with generally accepted accounting principles
in all material respects.
OTHER REAL ESTATE OWNED
Real estate acquired in settlement of loans is recorded at fair value minus
estimated costs to sell at acquisition and subsequently carried at the lower of
cost or fair value minus estimated costs to sell.
INCOME TAXES
The tax effects of transactions are recognized in the same period as they are
reported for financial statement purposes, regardless of the period in which
such items are recognized for tax purposes. The Company and its Subsidiary file
a consolidated income tax return. Other assets include net deferred tax assets
of $72,917 and $146,048 at December 31, 1997 and 1996, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and Federal Funds sold.
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, the Bank has entered into off balance sheet
financial instruments consisting of commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CERTAIN SIGNIFICANT ESTIMATES
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired
F-8
<PAGE> 92
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in connection with foreclosures or in satisfaction of loans. In connection with
the determination of allowances for losses on loans and the valuation of
foreclosed real estate, management obtains independent appraisals for
significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances for losses on loans and foreclosed real estate. Such agencies may
require the Bank to recognize additions to the allowances based on their
judgements about information available to them at the time of their examination.
It is at least reasonably possible that the allowances for losses on loans and
foreclosed real estate may change in the near term.
ADVERTISING COSTS
The Bank expenses advertising costs as they are incurred. Advertising costs
charged to expenses were $22,946 and $22,114 for the years ended December 31,
1997 and 1996, respectively.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
The Company has elected to disclose the proforma effect on net income as if the
fair value based method for accounting for stock options had been used.
NOTE 2. INVESTMENT SECURITIES
Investment securities are carried in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Available-for-sale.................................... $17,323,201 $16,289,684
Held-to-maturity...................................... 399,534 443,510
----------- -----------
$17,722,735 $16,733,194
=========== ===========
</TABLE>
F-9
<PAGE> 93
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SECURITIES AVAILABLE-FOR-SALE CONSIST OF THE FOLLOWING:
As of December 31, 1997:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U. S. Treasury Obligations........ $ 197,875 $ 2,344 $ -- $ 200,219
Obligations of other U.S
government agencies and
corporation..................... 16,898,779 40,041 39,638 16,899,182
Stock in Federal Home Loan Bank... 223,800 -- -- 223,800
----------- ------- ------- -----------
$17,320,454 $42,385 $39,638 $17,323,201
=========== ======= ======= ===========
</TABLE>
As of December 31, 1996:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U. S. Treasury Obligations........... $ 196,069 $ 3,181 $ -- $ 199,250
Obligations of other U.S government
agencies and corporation........... 15,938,614 77,899 126,079 15,890,434
Stock in Federal Home Loan Bank...... 200,000 -- -- 200,000
----------- ------- -------- -----------
$16,334,683 $81,080 $126,079 $16,289,684
=========== ======= ======== ===========
</TABLE>
SECURITIES HELD-TO-MATURITY CONSIST OF THE FOLLOWING:
As of December 31, 1997:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions......................... $189,018 $2,374 $ -- $191,392
Mortgage-backed securities............. 210,516 -- 2,524 207,992
-------- ------ ------ --------
$399,534 $2,374 $2,524 $399,384
======== ====== ====== ========
</TABLE>
As of December 31, 1996:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions......................... $188,867 $ -- $1,506 $187,361
Mortgage-backed securities............. 254,643 230 5,345 249,528
-------- ---- ------ --------
$443,510 $230 $6,851 $436,889
======== ==== ====== ========
</TABLE>
F-10
<PAGE> 94
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated market value of debt securities at December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES SECURITIES
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------- -------------------------
MARKET MARKET
COST VALUE COST VALUE
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less............ $157,998 $156,876 $ 998,627 $ 993,738
Due after one year through five
years............................ -- -- 6,487,340 6,492,621
Due after five years through ten
years............................ 189,018 191,393 8,910,687 8,915,378
Due after ten years................ 52,518 51,115 700,000 697,664
-------- -------- ----------- -----------
$399,534 $399,384 $17,096,654 $17,099,401
======== ======== =========== ===========
</TABLE>
Proceeds from sales of available-for-sale securities during 1997 were $6,181,601
with gross gains of $17,072 and gross losses of $16,873 being realized. Proceeds
from calls of available-for-sale securities during 1997 were $2,250,000 with
gross gains of $-0- being realized. Proceeds from maturities of
available-for-sale securities during 1997 were $250,000.
Proceeds from sales of available-for-sale securities during 1996 were $4,898,330
with gross gains of $22,790 and gross losses of $17,243 being realized. Proceeds
from calls of available-for-sale securities during 1996 were $2,500,000 with
gross gains of $2,197 being realized.
Securities with a book value of approximately $1,145,030 (market
value -- $1,149,782) and $606,796 (market value -- $619,335) at December 31,
1997 and 1996, respectively, were pledged to secure public monies as required by
law.
NOTE 3. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation and
include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- ESTIMATED
1997 1996 USEFUL LIVES
---------- ---------- ------------
<S> <C> <C> <C>
Land......................................... $ 382,883 $ 382,883
Bank premises and improvements............... 1,543,935 1,536,091 5-30 years
Furniture, fixtures and equipment............ 645,216 585,089 5-15 years
Automobiles.................................. 38,564 38,564 3-5 years
---------- ----------
2,610,598 2,542,627
Less accumulated depreciation................ 718,933 604,252
---------- ----------
$1,891,665 $1,938,375
========== ==========
</TABLE>
F-11
<PAGE> 95
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense amounted to $123,839 and $130,997 for the years ended
December 31, 1997 and 1996, respectively.
NOTE 4. LOANS
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commercial and industrial............................. $37,792,491 $29,132,922
Real estate -- construction........................... 396,066 737,243
Real estate -- mortgage............................... 5,809,897 5,045,332
Loans to individuals and other........................ 4,035,958 6,418,566
Overdrafts............................................ 12,943 7,558
----------- -----------
48,047,355 41,341,621
Allowance for loan losses............................. 542,823 500,998
----------- -----------
Loans, Net.......................................... $47,504,532 $40,840,623
=========== ===========
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced amounted
to approximately $120,575 and $48,727 at December 31, 1997 and 1996,
respectively. If interest on those loans had been accrued, such income would
have approximated $14,569 and $596 for 1997 and 1996, respectively. Interest
income on those loans, which is recorded only when received, amounted to
approximately $12,963 and $5,797 for 1997 and 1996, respectively. As of December
31, 1997 and 1996, the Bank did not have any loans classified as impaired.
First mortgage loans on residential (one-to-four units) real estate are pledged
to secure advances from the Federal Home Loan Bank (See Note 5). The advances
must be fully secured after discounting the qualifying loans at 75% of the
principal balances outstanding.
Transactions in the allowance for losses on loans are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Balance, January 1..................................... $500,998 $428,892
Provision for losses charged to operating expenses..... 87,000 67,000
Recoveries on loans previously charged off............. 2,525 22,971
-------- --------
Total........................................ 590,523 518,863
Less loans charged off................................. 47,700 17,865
-------- --------
Balance, December 31................................... $542,823 $500,998
======== ========
</TABLE>
F-12
<PAGE> 96
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Advance payable -- Federal Home Loan Bank of
Atlanta, bearing interest at 5.38%, due January
23, 1998, collateralized as provided in Note 4.... $2,000,000 $2,000,000
========== ==========
</TABLE>
NOTE 6. DEFERRED COMPENSATION PLAN
On June 1, 1990, the Bank entered into deferred compensation agreements with
certain officers for future compensation which is payable over a period of ten
years beginning at age 65. Dates of the future compensation payments occur
during various years through 2023. In the case of death of an officer covered by
the agreements, a named beneficiary will receive the payments. At December 31,
1997 and 1996, $175,114 and $126,364, respectively, had been accrued under the
agreements using the present value method. While the plan is to be funded from
the general assets of the Company, life insurance policies were acquired for
certain of the covered officers for the purpose of serving as a partial funding
source. As of December 31, 1997 and 1996, the cash values of these policies were
$71,950 and $58,196, respectively.
Effective January 22, 1996, the Company adopted an indexed deferred compensation
plan for the benefit of its directors. While the plan is to be funded from the
general assets of the Company, life insurance policies were acquired for the
purpose of serving as the primary funding source. As of December 31, 1997, the
cash values of these policies were $567,758 and $543,120, respectively, and no
liability is yet accruable for benefits payable under the plan.
NOTE 7. INCOME TAXES
The consolidated provision for income taxes for 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Current Federal tax expense................................ $346,905 $346,969
Deferred Federal tax expense (credit)...................... 56,897 (35,416)
-------- --------
$403,802 $311,553
======== ========
</TABLE>
F-13
<PAGE> 97
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for Federal income taxes differs from that computed by applying
Federal statutory rates to income before income taxes as indicated in the
following analysis:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Expected tax provision at a 34% rate....................... $416,273 $319,690
Effect of tax exempt income................................ (2,351) (4,847)
Other...................................................... (10,120) (3,290)
-------- --------
$403,802 $311,553
======== ========
</TABLE>
Deferred tax liabilities have been provided for taxable temporary differences
related to accumulated depreciation. Deferred tax assets have been provided for
deductible temporary differences related to unrealized losses on
available-for-sale securities, the allowance for loan losses, deferred
compensation plan accruals, the cash method of accounting and amortization of
start-up costs. The net deferred tax assets in the accompanying balance sheets
include the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax liabilities................................... $(51,532) $(51,221)
Deferred tax assets........................................ 124,449 197,269
-------- --------
Net deferred tax assets.................................... $ 72,917 $146,048
======== ========
</TABLE>
No valuation allowance was established in view of the Company's tax strategies
coupled with anticipated future taxable income as evidenced by the Company's
earnings potential.
NOTE 8. COMMITMENTS AND FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The financial statements do not reflect various commitments and contingent
liabilities which arise in the normal course of business and which involve
elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit. A summary of the Bank's commitments and contingent
liabilities is as follows:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Commitments to extend credit............................ $3,191,612 $5,863,200
Standby letters of credit............................... 120,500 148,642
</TABLE>
Commitments to extend credit and standby letters of credit all include exposure
to some credit loss in the event of nonperformance by the customer. The Bank's
credit policies and procedures for credit commitments are the same as those for
extensions of credit that are reported in the financial statements. Because
these instruments have fixed maturity dates
F-14
<PAGE> 98
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and because many of them expire without being drawn upon, they do not generally
present any significant liquidity risk to the Bank. The Bank has not incurred
any losses on its commitments in either 1997 or 1996.
NOTE 9. RELATED PARTY TRANSACTIONS
At December 31, 1997 and 1996, loans to all officers, directors and employees
and their associates aggregated approximately $2,168,847 and $2,137,242,
respectively. These individuals maintain customary deposit accounts with the
Bank. Management believes that all of the above transactions were entered into
in the normal course of business.
NOTE 10. RESTRICTIONS ON RETAINED EARNINGS
The Bank is limited by banking regulations as to the amount of dividends that
may be paid without prior approval of the Bank's regulatory agency. Retained
earnings of the Bank against which dividends may be charged was approximately
$1,578,494 at December 31, 1997 and the amount of dividends which may be paid
within one year is approximately $409,965.
NOTE 11. STOCK OPTIONS AND WARRANTS
The organizing directors of the Company had warrants to purchase approximately
135,025 additional shares of common stock at the greater of $10 per share or the
book value of the stock at the most recent quarter's end immediately prior to
the exercise of the warrants. During 1993, warrants were exercised for 117,625
additional common shares. Warrants representing 17,400 shares are still
outstanding.
The Company adopted a Directors Stock Option Plan (the Plan), which was approved
by the stockholders on March 20, 1997. The purpose is to reward long-term and
continued active service of the members of the Board of Directors of the
Company. The Plan authorizes the granting of stock options for up to 72,000
shares of common stock. Under the Plan, the exercise price of each option equals
the greater of $13.50 per share or the book value per share as of December 31 of
the year for which the option was granted. An option's maximum term is seven
years. Options are granted as administered by the Board of Directors. During
1997, options were issued for previous board service. Commencing on or before
March 1, 1998 and annually thereafter during the term of the Plan, which is for
a period of five years or until termination by the Board, whichever occurs
first, each Director who attended, during the previous calendar year, at least
75% of the meetings of the Company's Board and Committees for which such
Director was a member (unless a majority of the entire Board determines to
excuse for good cause such lack of attendance), an option to purchase 1,500
shares of the Company's common stock shall be granted automatically on that date
to each Director of the Company for such board service. The fair value of each
option grant is estimated on the grant date using an option-pricing model with
the following weighted-average assumptions used for grants in 1997: dividend
yield of 2.00%, risk-free interest rate of 5.57%, expected lives of 7 years for
the options and a volatility rate of 7.3%.
F-15
<PAGE> 99
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Plan as of December 31, 1997 and the changes
during the year then ended is presented below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-------------------
WEIGHTED-
AVERAGE
EXERCISE
FIXED OPTIONS SHARES PRICE
- ------------- ------ ---------
<S> <C> <C>
Outstanding at beginning of year......................... -- $ .00
Granted.................................................. 22,000 13.50
Exercised................................................ -- .00
Forfeited................................................ -- .00
------
Outstanding at end of year............................... 22,000 13.50
======
Exercisable at December 31............................... 22,000 13.50
Weighted-average fair value of options granted during the
year................................................... $ 2.69
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------------------- EXERCISABLE OPTIONS
RANGE WEIGHTED- --------------------------
OF OR AVERAGE WEIGHTED NUMBER WEIGHTED-
ACTUAL NUMBER REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE AT EXERCISE
PRICES AT 12/31/97 LIFE PRICE 12/31/97 PRICE
--------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1$3.50.. 22,000 7 Years $13.50 22,000 $13.50
====== ======
</TABLE>
If the Company had used the fair value based method of accounting for its stock
option plan, as prescribed by Statement of Financial Accounting Standards No.
123, directors compensation cost in net income for the year ended December 31,
1997 would have increased by $59,180, resulting in net income of $761,350, net
of tax.
NOTE 12. CONTINGENCIES
The nature of the business of the Bank is such that it is ordinarily subjected
to a certain amount of litigation. In the opinion of management and counsel for
the Bank, there is no litigation in which the outcome will have a material
effect on the financial statements.
NOTE 13. CONCENTRATIONS OF CREDIT RISK
In addition to the concentrations of credit risk disclosures in notes one and
four, the Bank maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits and sells federal funds to correspondent banks.
The Bank has not experienced any losses in such accounts. The Bank believes it
is not exposed to any significant credit risk on cash and cash equivalents and
federal funds sold.
F-16
<PAGE> 100
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
\NOTE 14. DIVIDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN
On July 15, 1996, the Company's Board of Directors approved a dividend
reinvestment and common stock purchase plan. The purpose of the plan is to
provide shareholders of record of the Company's common stock, who elect to
participate in the plan, with a simple and convenient means to reinvest
automatically cash dividends and make additional voluntary cash purchases of
shares of common stock without the expense of brokerage commissions or other
fees. Eligible participants may purchase common stock through automatic
reinvestment of common stock dividends on all of their shares or not less than
50% of their shares and make additional voluntary cash payments of not less than
$50 nor more than $1,000, in the aggregate, for each calendar year. The price of
common stock purchased with dividends will be equal to 95% of the fair market
value determined by the Company's Board of Directors prior to the date of
purchase. The price of common stock purchased with voluntary cash payments will
be 100% of the fair market value determined by the Company's Board of Directors
prior to the date of purchase. During the year ended December 31, 1997, 16,446
shares were issued through the plan at an average of $13.09 per share. During
the year ended December 31, 1996, 3,359 shares were issued through the Plan at
an average of $12.83 per share.
NOTE 15. REGULATORY MATTERS
The Bank is required to maintain average cash balances as a reserve requirement.
The average amount of these reserves for the year ended December 31, 1997 was
approximately $222,000.
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of June 30, 1997, 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
F-17
<PAGE> 101
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
table. There have been no conditions or events since that notification that
management believes have changed the institution's category.
The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES: ACTION PROVISIONS:
------------------- ------------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk
Weighted Assets).......... $6,013,854 10.4% $4,606,457 >8.0% $5,758,071 >6.0%
- -
Tier 1 Capital (to Risk
Weighted Assets).......... 6,013,854 10.4% 2,303,228 >4.0% 3,454,843 >6.0%
- -
Tier 1 Capital (to Average
Assets)................... 6,013,854 10.0% 2,405,131 >4.0% 3,006,414 >5.0%
- -
As of December 31, 1997
Total Capital (to Risk
Weighted Assets).......... 6,915,798 16.5% 3,352,960 >8.0% 4,191,200 >10.0%
- -
Tier 1 Capital (to Risk
Weighted Assets).......... 6,913,985 16.5% 1,676,480 >4.0% 2,514,720 >6.0%
- -
Tier 1 Capital (to Average
Assets)................... 6,913,985 10.1% 2,727,602 >4.0% 3,409,503 >5.0%
- -
</TABLE>
F-18
<PAGE> 102
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash and due from banks......................... $ 1,246,009 1,981,579
Federal funds sold.............................. 8,280,000 1,020,000
----------- ----------
Total Cash and Cash Equivalents......... 9,526,009 3,001,579
Interest-bearing deposits in banks................ 396,000 495,000
Investment securities (fair value of $11,670,322
in 1997 and $17,722,585 in 1997)................ 11,666,266 17,722,735
Loans, net of allowance for loan losses of
$674,510 (1997 -- $542,823)..................... 49,246,313 47,504,532
Bank premises and equipment....................... 1,933,153 1,891,665
Foreclosed real estate............................ 60,700 --
Accrued interest receivable....................... 509,773 691,563
Cash surrender value of life insurance............ 660,276 639,708
Other assets...................................... 178,001 123,609
----------- ----------
Total Assets............................ $74,176,491 72,070,391
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.......................................... $ 6,326,310 6,631,941
NOW............................................. 13,913,498 15,631,668
Savings......................................... 2,685,749 1,739,595
Time, $100,000 and over......................... 10,072,181 9,006,154
Other time...................................... 27,617,953 29,249,831
----------- ----------
60,615,691 62,259,189
Advances from Federal Home Loan Bank.............. 5,000,000 2,000,000
Accrued interest.................................. 436,826 444,296
Income taxes payable.............................. -- 309
Dividends payable................................. 90,186 --
Other liabilities................................. 272,426 220,724
----------- ----------
Total Liabilities....................... 66,415,129 64,924,518
----------- ----------
Stockholders' Equity:
Common stock, $5 par value, 10,000,000 shares
authorized, 644,185 shares (1997 -- 600,482)
issued and 643,804 (1997 -- 600,482) shares
outstanding.................................. 3,220,923 3,002,411
Additional paid in capital...................... 3,060,721 2,646,815
Retained earnings............................... 1,462,313 1,494,834
Accumulated other comprehensive income.......... 28,153 1,813
----------- ----------
7,772,110 7,145,873
Treasury stock, at cost (381 shares)............ (10,748) --
----------- ----------
7,761,362 7,145,873
----------- ----------
Total Liabilities and Stockholders'
Equity................................ $74,176,491 72,070,391
=========== ==========
</TABLE>
F-19
<PAGE> 103
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.......... $1,138,719 $1,068,940 $3,394,630 $3,085,819
Interest on investment securities:
Taxable.......................... 248,750 274,892 807,980 857,226
Tax exempt....................... 2,152 2,152 6,455 6,455
Interest on federal funds sold...... 61,065 39,080 140,390 85,981
Interest on deposits in banks....... 9,342 6,456 26,919 11,453
---------- ---------- ---------- ----------
Total....................... 1,460,028 1,391,520 4,376,374 4,046,934
---------- ---------- ---------- ----------
Interest Expense:
Interest on deposits................ 743,289 740,537 2,229,620 2,135,536
Other interest...................... 67,998 27,416 202,000 80,837
---------- ---------- ---------- ----------
Total....................... 811,287 767,953 2,431,620 2,216,373
---------- ---------- ---------- ----------
Net Interest Income................... 648,741 623,567 1,944,754 1,830,561
Provision for Loan Losses............. 85,000 14,000 144,000 37,000
---------- ---------- ---------- ----------
Net Interest Income After Provision
for Loan Losses..................... 563,741 609,567 1,800,754 1,793,561
---------- ---------- ---------- ----------
Other Income:
Service charges on deposit
accounts......................... 37,450 32,383 105,538 99,945
Other income........................ 17,010 21,077 55,649 64,503
Gain (loss) on sale of assets....... -- -- 5,000 --
Securities gains (losses)........... 11 (146) 4,187 47
Mortgage banking fees............... 65,298 50,780 139,057 160,600
---------- ---------- ---------- ----------
Total....................... 119,769 104,094 309,431 325,095
---------- ---------- ---------- ----------
Other Expenses:
Compensation........................ 177,790 182,491 522,733 520,418
Other personnel expenses............ 57,751 63,559 183,169 184,326
Occupancy expense of bank
premises......................... 35,562 34,229 104,555 102,150
Furniture and equipment expense..... 24,371 23,504 71,189 71,336
Federal deposit insurance........... 1,836 1,769 5,623 4,749
Postage and courier services........ 8,407 7,463 26,147 21,177
Supplies............................ 10,936 11,054 31,212 34,339
Data processing..................... 51,383 34,844 151,755 99,587
Advertising and business
development...................... 5,246 7,036 21,458 22,178
Other operating expenses............ 42,846 35,993 133,912 126,049
---------- ---------- ---------- ----------
Total....................... 416,128 401,942 1,251,753 1,186,309
---------- ---------- ---------- ----------
Income Before Income Taxes............ 267,382 311,719 858,432 932,347
Income Taxes.......................... 106,791 109,119 277,531 283,407
---------- ---------- ---------- ----------
Net Income............................ $ 160,591 202,600 580,901 648,940
========== ========== ========== ==========
Earnings Per Share:
Basic............................... $ .25 $ .33 $ .91 $ 1.05
========== ========== ========== ==========
Diluted............................. .25 .32 .90 1.04
========== ========== ========== ==========
</TABLE>
F-20
<PAGE> 104
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income........................... $160,591 $202,600 $580,901 $648,940
-------- -------- -------- --------
Other comprehensive income, net of
tax:
Unrealized gains (losses) on
securities:
Unrealized holding gains
(losses) arising during
period........................ 29,417 109,543 29,103 (11,951)
Less: reclassification
adjustment for (gains) losses
included in net income........ (7) 96 (2,763) (31)
-------- -------- -------- --------
Other comprehensive income......... 29,410 109,639 26,340 (11,982)
-------- -------- -------- --------
Comprehensive Income................. $190,001 $312,239 $607,241 $636,958
======== ======== ======== ========
</TABLE>
F-21
<PAGE> 105
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED INCOME TREASURY
STOCK CAPITAL EARNINGS (LOSS) STOCK TOTAL
---------- ---------- ---------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
December 31,
1996............. $2,920,180 $2,513,717 $ 839,132 $(29,701) $ -- $6,243,328
Net income........... -- -- 648,940 -- -- 648,940
Issuance of 7,851
shares............. 39,255 63,425 -- -- -- 102,680
Cash dividends....... -- -- (164,831) -- -- (164,831)
Other comprehensive
income (loss)...... -- -- -- (11,982) -- (11,982)
---------- ---------- ---------- -------- -------- ----------
BALANCES,
September 30, 1997
(unaudited)........ $2,959,435 $2,577,142 $1,323,241 $(41,683) $ -- $6,818,135
========== ========== ========== ======== ======== ==========
BALANCES,
December 31,
1997............. $3,002,411 $2,646,815 $1,494,834 $ 1,813 $ -- $7,145,873
Net Income........... -- -- 580,901 -- -- 580,901
Issuance of 13,419
shares............. 67,092 123,944 -- -- -- 191,036
Purchase of 1,307
shares of treasury
stock.............. -- -- -- -- 24,487 (24,487)
Sale of 926 shares of
treasury stock..... -- 2,264 -- -- (13,739) 16,003
Cash dividends....... -- -- (174,304) -- -- (174,304)
Stock dividends
(30,284 shares).... 151,420 287,698 (439,118) -- -- --
Other comprehensive
income (loss)...... -- -- -- 26,340 -- 26,340
---------- ---------- ---------- -------- -------- ----------
BALANCES,
September 30, 1998
(unaudited)........ $3,220,923 $3,060,721 $1,462,313 $ 28,153 $ 10,748 $7,761,362
========== ========== ========== ======== ======== ==========
</TABLE>
F-22
<PAGE> 106
VB&T BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1998 1997
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 580,901 $ 648,940
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 90,000 90,000
Amortization (accretion) on investment securities....... (19,469) (5,634)
Provision for loan losses............................... 144,000 37,000
Securities (gains) losses............................... (4,187) (47)
(Gain) Loss on sale of fixed assets..................... (5,000) --
Deferred income taxes (credit).......................... -- --
Increase in cash value of life insurance................ (20,568) (18,479)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable...... 181,790 (64,014)
(Increase) decrease in other assets..................... (54,392) 11,289
Increase (decrease) in other liabilities................ 51,702 13,435
Increase (decrease) in accrued interest payable......... (7,470) (82,242)
Increase (decrease) in accrued income taxes............. (309) (221,846)
------------ ----------
Net Cash Provided by Operating Activities........... 936,998 408,402
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (131,488) (25,371)
(Increase) decrease in interest-bearing deposits.......... 99,000 (297,000)
Purchase of available-for-sale securities................. (11,812,334) (5,963,551)
Purchase of held-to-maturity securities................... -- --
Proceeds from sales of available-for-sale securities...... 3,769,960 4,549,625
Proceeds from calls of available-for-sale securities...... 13,582,842 750,000
Proceeds from maturities of available-for-sale
securities.............................................. 500,000 --
Principal payments on mortgage backed securities.......... 65,999 35,253
Proceeds from sale of fixed assets........................ 5,000 --
Net (increase) decrease in loans.......................... (1,946,481) (4,316,032)
------------ ----------
Net Cash Provided (Used) by Investing Activities.... 4,132,498 (5,267,076)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in time deposits.................. (565,851) 2,200,127
Net increase (decrease) in other deposits................. (1,077,647) 3,088,301
Payments on notes payable and Federal Home Loan Bank
advances................................................ (2,000,000) --
Issuance of stock......................................... 124,440 39,326
Purchase of treasury stock................................ (24,487) --
Proceeds from sale of treasury stock...................... 16,003 --
Proceeds of Federal Home Loan Bank advances............... 5,000,000 --
Payment of dividends...................................... (17,524) (18,615)
Net increase (decrease) in Federal funds purchased........ -- --
------------ ----------
Net Cash Provided (Used) by Financing Activities.... 1,454,934 5,309,139
------------ ----------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 6,524,430 450,465
Cash and Cash Equivalents at Beginning of Period............ 3,001,579 3,743,854
------------ ----------
Cash and Cash Equivalents at End of Period.................. $ 9,526,009 $4,194,319
============ ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest.................................................. $ 23,439,090 $2,298,615
============ ==========
Income Tax................................................ $ 366,824 $ 505,253
============ ==========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Total increase (decrease) in unrealized losses on securities
available-for-sale........................................ $ (39,910) $ 18,153
============ ==========
Dividends reinvested through dividend reinvestment plan..... $ 66,594 $ 63,354
============ ==========
</TABLE>
F-23
<PAGE> 107
VB&T BANCSHARES CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of VB&T
Bancshares Corp. and its wholly owned subsidiary, Valdosta Bank & Trust. The
accompanying unaudited consolidated financial statements do not include all
information and notes necessary for a fair presentation of financial position,
results of operations, and cash flows in conformity with generally accepted
accounting principles. All adjustments consisting of normal recurring accruals
which, in the opinion of management, are necessary to a fair statement of the
financial position and results of operations for the periods covered by this
report have been included.
NOTE 2. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with the provisions of
Statements of the Financial Accounting Standards Board. SFAS No. 128 requires
presentation of earnings per share on a basic computation and a diluted
computation. The basic computation divides net income by only the weighted
average number of common shares outstanding for the year and the diluted
computation gives effect to all diluted common shares that were outstanding
during the year.
Earnings per share amounts for the year 1997 have been restated to give effect
to the application of this new standard.
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income available to common stockholders:
Used in basic earnings per share...... $160,591 $202,600 $580,901 $648,940
======== ======== ======== ========
Used in diluted earnings per share.... $160,591 $202,600 $580,901 $648,940
======== ======== ======== ========
Weighted average number of common shares
used in basic earnings per share...... 642,959 622,159 637,615 620,002
Effect of dilutive securities:
Stock options......................... 8,434 6,917 8,434 6,917
-------- -------- -------- --------
Weighted average number of common and
dilutive potential common shares used
in diluted earnings per share......... 651,393 629,076 646,049 626,919
======== ======== ======== ========
</TABLE>
F-24
<PAGE> 108
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
VB&T BANCSHARES CORP.
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF JULY 6, 1998
<PAGE> 109
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties............................................................... 1
Preamble.............................................................. 1
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER......................... 1
1.1 Merger...................................................... 1
1.2 Time and Place of Closing................................... 1
1.3 Effective Time.............................................. 2
1.4 Execution of Support Agreements............................. 2
ARTICLE 2 -- TERMS OF MERGER.......................................... 2
2.1 Certificate of Incorporation................................ 2
2.2 Bylaws...................................................... 2
2.3 Directors and Officers...................................... 2
ARTICLE 3 -- MANNER OF CONVERTING SHARES.............................. 3
3.1 Conversion of Shares........................................ 3
3.2 Anti-Dilution Provisions.................................... 3
3.3 Shares Held by VB&T or Regions.............................. 3
3.4 Dissenting Stockholders..................................... 3
3.5 Fractional Shares........................................... 4
3.6 Conversion of Stock Rights.................................. 4
ARTICLE 4 -- EXCHANGE OF SHARES....................................... 5
4.1 Exchange Procedures......................................... 5
4.2 Rights of Former VB&T Stockholders.......................... 5
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF VB&T................... 6
5.1 Organization, Standing, and Power........................... 6
5.2 Authority; No Breach By Agreement........................... 6
5.3 Capital Stock............................................... 7
5.4 VB&T Subsidiaries........................................... 7
5.5 Financial Statements........................................ 8
5.6 Absence of Undisclosed Liabilities.......................... 8
5.7 Absence of Certain Changes or Events........................ 8
5.8 Tax Matters................................................. 9
5.9 Assets...................................................... 10
5.10 Environmental Matters....................................... 10
5.11 Compliance with Laws........................................ 11
5.12 Labor Relations............................................. 12
5.13 Employee Benefit Plans...................................... 12
5.14 Material Contracts.......................................... 14
5.15 Legal Proceedings........................................... 15
5.16 Reports..................................................... 15
5.17 Statements True and Correct................................. 15
5.18 Accounting, Tax, and Regulatory Matters..................... 16
5.19 State Takeover Laws......................................... 16
5.20 Charter Provisions.......................................... 16
5.21 Support Agreements.......................................... 16
5.22 Derivatives................................................. 16
5.23 Year 2000................................................... 16
</TABLE>
i
<PAGE> 110
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS................ 16
6.1 Organization, Standing, and ower............................ 16
6.2 Authority; No Breach By Agreement........................... 17
6.3 Capital Stock............................................... 17
6.4 Regions Subsidiaries........................................ 18
6.5 SEC Filings; Financial Statements........................... 18
6.6 Absence of Undisclosed Liabilities.......................... 19
6.7 Absence of Certain Changes or Events........................ 19
6.8 Compliance with Laws........................................ 19
6.9 Legal Proceedings........................................... 20
6.10 Reports..................................................... 20
6.11 Statements True and Correct................................. 20
6.12 Accounting, Tax, and Regulatory Matters..................... 20
6.13 Derivatives................................................. 21
6.14 Year 2000................................................... 21
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION................. 21
7.1 Affirmative Covenants of Both Parties....................... 21
7.2 Negative Covenants of VB&T.................................. 21
7.3 Adverse Changes in Condition................................ 23
7.4 Reports..................................................... 23
ARTICLE 8 -- ADDITIONAL AGREEMENTS.................................... 24
8.1 Registration Statement; Proxy Statement; Stockholder
Approval.................................................... 24
8.2 Exchange Listing............................................ 24
8.3 Applications................................................ 24
8.4 Filings with State Offices.................................. 24
8.5 Agreement as to Efforts to Consummate....................... 25
8.6 Investigation and Confidentiality........................... 25
8.7 Press Releases.............................................. 25
8.8 Certain Actions............................................. 26
8.9 Accounting and Tax Treatment................................ 26
8.10 State Takeover Laws......................................... 26
8.11 Charter Provisions.......................................... 26
8.12 Agreement of Affiliates..................................... 26
8.13 Employee Benefits and Contracts............................. 27
8.14 Indemnification............................................. 27
8.15 Certain Modifications....................................... 28
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........ 29
9.1 Conditions to Obligations of Each Party..................... 29
9.2 Conditions to Obligations of Regions........................ 30
9.3 Conditions to Obligations of VB&T........................... 31
ARTICLE 10 -- TERMINATION............................................. 32
10.1 Termination................................................. 32
10.2 Effect of Termination....................................... 33
10.3 Non-Survival of Representations and Covenants............... 33
</TABLE>
ii
<PAGE> 111
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 11 -- MISCELLANEOUS........................................... 33
11.1 Definitions................................................. 33
11.2 Expenses.................................................... 40
11.3 Brokers and Finders......................................... 40
11.4 Entire Agreement............................................ 40
11.5 Amendments.................................................. 40
11.6 Waivers..................................................... 41
11.7 Assignment.................................................. 41
11.8 Notices..................................................... 41
11.9 Governing Law............................................... 42
11.10 Counterparts................................................ 42
11.11 Captions.................................................... 42
11.12 Interpretations............................................. 42
11.13 Enforcement of Agreement.................................... 42
11.14 Severability................................................ 43
Signatures............................................................ 43
</TABLE>
iii
<PAGE> 112
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1. -- Form of Support Agreement. (sec. 1.4).
2. -- Form of Affiliate Agreement. (sec.sec. 8.12, 9.2(d)).
3. -- Form of Claims Letter. (sec. 9.2(e)).
4. -- Opinion of VB&T Counsel (sec. 9.2(f)).
5. -- Opinion of Regions Counsel (sec. 9.3(d)).
</TABLE>
iv
<PAGE> 113
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as
of July 6, 1998, by and between VB&T BANCSHARES CORP. ("VB&T"), a corporation
organized and existing under the Laws of the State of Georgia, with its
principal office located in Valdosta, 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 VB&T and Regions are of the opinion that the
transactions described herein are in the best interests of the parties to this
Agreement and their respective stockholders. This Agreement provides for the
acquisition of VB&T by Regions pursuant to the merger (the "Merger") of VB&T
with and into Regions. At the effective time of the Merger, the outstanding
shares of the capital stock of VB&T shall be converted into shares of the common
stock of Regions (except as provided herein). As a result, stockholders of VB&T
shall become stockholders of Regions, and each of the subsidiaries of VB&T shall
continue to conduct its business and operations as a subsidiary of Regions. The
transactions described in this Agreement are subject to the approvals of the
stockholders of VB&T, the Board of Governors of the Federal Reserve System, and
certain 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 qualify for treatment as a
pooling of interests.
As a condition and inducement to Regions' willingness to enter into this
Agreement, each of VB&T's directors is executing and delivering to Regions an
agreement (a "Support Agreement"), in substantially the form of Exhibit 1.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, VB&T shall be merged with and into Regions in accordance with
the provisions of Sections 14-2-1101, 14-2-1103, and 14-2-1105 of the GBCC and
Section 252 of the DGCL and with the effect provided in Section 14-2-1106 of the
GBCC and Section 259 of the DGCL (the "Merger"). Regions shall be the Surviving
Corporation resulting from the Merger and shall continue to be governed by the
Laws of the State of Delaware. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of VB&T and Regions.
1.2 Time and Place of Closing. The consummation of the Merger (the "Closing")
shall take place at 9:00 A.M. on the date that the Effective Time occurs (or the
immediately
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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 such location as may be mutually agreed
upon by the Parties.
1.3 Effective Time. The Merger and the 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 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 by the duly authorized officers of each
Party, the Parties shall use their reasonable efforts to cause the Effective
Time to occur on the last business day of the month in which the last of the
following occurs: (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 VB&T approve the matters relating to this Agreement required
to be approved by such stockholders by applicable Law; or such later day within
30 days thereof as may be specified by Regions.
1.4 Execution of Support Agreements. Immediately prior to the execution of this
Agreement and as a condition hereto, each of the directors of VB&T is executing
and delivering to Regions a Support Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 Certificate of Incorporation. The Certificate of Incorporation of Regions
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Regions in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation after the Effective Time
until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Regions in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Regions in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
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ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at the
Effective Time, by virtue of the Merger and without any action on the part of
Regions or VB&T, or the stockholders of either of the foregoing, 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 VB&T Common Stock (excluding shares held by any VB&T
Company or any Regions Company, 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 that multiple of
a share of Regions Common Stock equal to the quotient (rounded to the
nearest one-ten-thousandth) obtained by dividing (i) $28.28 by (ii) the
Average Closing Price (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event VB&T changes the number of shares of
VB&T Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, recapitalization, or similar transaction 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, recapitalization, or similar transaction 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 VB&T or Regions. Each of the shares of VB&T Common Stock
held by any VB&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 VB&T Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Article 13 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 such dissenting stockholder has complied with the applicable
provisions of the GBCC and surrendered to the Surviving Corporation 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
VB&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 VB&T Common Stock is
entitled under this Article Three (without interest) upon surrender by such
holder of the certificate or certificates representing shares of VB&T Common
Stock held by such holder. VB&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 VB&T.
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3.5 Fractional Shares. Notwithstanding any other provision of this Agreement,
each holder of shares of VB&T Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Regions
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Regions Common Stock multiplied by
the market value of one share of Regions Common Stock at the Effective Time. The
market value of one share of Regions Common Stock at the Effective Time shall be
the last sale price of Regions Common Stock on the Nasdaq NMS (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Regions) on the last trading day preceding the Effective
Time. No such holder will be entitled to dividends, voting rights, or any other
rights as a stockholder in respect of any fractional shares.
3.6 Conversion of Stock Rights.
(a) At the Effective Time, each award, option, or other right to purchase
or acquire shares of VB&T Common Stock pursuant to stock options, stock
appreciation rights, or stock awards ("VB&T Rights") granted by VB&T under
the VB&T Stock Plans or pursuant to warrant agreements, 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 VB&T Right, in accordance with the terms of the
VB&T Stock Plan and stock option agreement or warrant agreement by which it
is evidenced, except that from and after the Effective Time, (i) Regions
and its Compensation Committee shall be substituted for VB&T and the
Committee of VB&T's Board of Directors (including, if applicable, the
entire Board of Directors of VB&T) administering such VB&T Stock Plan, (ii)
each VB&T Right assumed by Regions may be exercised solely for shares of
Regions Common Stock (or cash in the case of stock appreciation rights),
(iii) the number of shares of Regions Common Stock subject to such VB&T
Right shall be equal to the number of shares of VB&T Common Stock subject
to such VB&T Right immediately prior to the Effective Time multiplied by
the Exchange Ratio, and (iv) the per share exercise price (or similar
threshold price, in the case of stock awards) under each such VB&T Right
shall be adjusted by dividing the per share exercise (or threshold) price
under each such VB&T Right by the Exchange Ratio and rounding up to the
nearest cent. Notwithstanding the provisions of clause (iii) of the
preceding sentence, Regions shall not be obligated to issue any fraction of
a share of Regions Common Stock upon exercise of VB&T Rights and any
fraction of a share of Regions Common Stock that otherwise would be subject
to a converted VB&T Right shall represent the right to receive a cash
payment equal to the product of such fraction and the difference between
the market value of one share of Regions Common Stock and the per share
exercise price of such Right. The market value of one share of Regions
Common Stock shall be the last sale price of Regions Common Stock on the
Nasdaq NMS (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Regions) on the last
trading day preceding the Effective Time. In addition, notwithstanding the
provisions of clauses (iii) and (iv) of the first sentence of this Section
3.4, each VB&T Right which is an "incentive stock option" shall be adjusted
as required by Section 424 of the Internal Revenue Code, so as not to
constitute a modification, extension, or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Regions agrees to
take all necessary steps to effectuate the foregoing provisions of this
Section 3.4.
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(b) All restrictions or limitations on transfer with respect to VB&T Common
Stock awarded under the VB&T Stock Plans or any other plan, program,
arrangement, or warrant agreement of any VB&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 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Regions and VB&T
shall cause the exchange agent selected by Regions (the "Exchange Agent") to
mail to the former stockholders of VB&T appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of VB&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 VB&T Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement or with respect to which
dissenters' rights of appraisal are perfected pursuant to Section 3.4 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 VB&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 VB&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 VB&T Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates of VB&T Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
Any other provision of this Agreement notwithstanding, neither the Surviving
Corporation nor the Exchange Agent shall be liable to a holder of VB&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 VB&T Stockholders. At the Effective Time, the stock
transfer books of VB&T shall be closed as to holders of VB&T Common Stock
immediately prior to the Effective Time and no transfer of VB&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 VB&T Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Agreement or with
respect to which dissenters' rights of appraisal are perfected pursuant to
Section 3.4 of this Agreement) shall from and after the Effective Time represent
for all purposes only the right to receive the consideration provided in
Sections 3.1 and 3.5 of this Agreement in exchange therefor, subject, however,
to the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by VB&T in respect of such shares
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of VB&T Common Stock in accordance with the terms of this Agreement and which
remain unpaid at the Effective Time. To the extent permitted by Law, former
stockholders of record of VB&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 VB&T Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing VB&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 VB&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 VB&T
Common Stock certificate, both the Regions Common Stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF VB&T
VB&T hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. VB&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 Material Assets. VB&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 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 VB&T.
5.2 Authority; No Breach By Agreement.
(a) VB&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. 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 VB&T, subject to the approval of this Agreement by the holders of a
majority of the outstanding shares of VB&T Common Stock entitled to be cast
thereon, which is the only stockholder vote required for approval of this
Agreement and consummation of the Merger by VB&T. Subject to such requisite
stockholder approval, this Agreement represents a legal, valid, and binding
obligation of VB&T, enforceable against VB&T in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorgani-
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zation, receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by VB&T, nor the
consummation by VB&T of the transactions contemplated hereby, nor
compliance by VB&T with any of the provisions hereof or thereof, will (i)
conflict with or result in a breach of any provision of VB&T's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under,
or require any Consent pursuant to, or result in the creation of any Lien
on any Asset of any VB&T Company under, any Contract or Permit of any VB&T
Company, where such Default or Lien, or any failure to obtain such Consent,
is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on VB&T, or (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, violate any Law
or Order applicable to any VB&T Company or any of their respective Material
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on VB&T,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by VB&T of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of VB&T consists, as of the date of this
Agreement, of 10,000,000 shares of VB&T Common Stock, of which 640,797
shares are issued and outstanding as of the date of this Agreement and not
more than 695,197 shares will be issued and outstanding at the Effective
Time. All of the issued and outstanding shares of VB&T Common Stock are
duly and validly issued and outstanding and are fully paid and
nonassessable under the GBCC. None of the outstanding shares of VB&T Common
Stock has been issued in violation of any preemptive rights of the current
or past stockholders of VB&T.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the VB&T Disclosure Memorandum, there are no shares of capital
stock or other equity securities of VB&T outstanding and no outstanding
Rights relating to the capital stock of VB&T.
5.4 VB&T Subsidiaries. VB&T has disclosed in Section 5.4 of the VB&T Disclosure
Memorandum all of the VB&T Subsidiaries as of the date of this Agreement. VB&T
or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock of each VB&T Subsidiary. No equity securities of any VB&T
Subsidiary are or may become required to be issued (other than to another VB&T
Company) by reason of any Rights, and there are no Contracts by which any VB&T
Subsidiary is bound to issue (other than to another VB&T Company) additional
shares of its capital stock or Rights or by which any VB&T Company is or may be
bound to transfer any shares of the capital stock of any
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VB&T Subsidiary (other than to another VB&T Company). There are no Contracts
relating to the rights of any VB&T Company to vote or to dispose of any shares
of the capital stock of any VB&T Subsidiary. All of the shares of capital stock
of each VB&T Subsidiary held by a VB&T Company are duly authorized, validly
issued, and fully paid and, except as provided in statutes pursuant to which
depository institution Subsidiaries are organized, nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the VB&T Company free and clear of
any Lien. Each VB&T Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each VB&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 VB&T. Each VB&T Subsidiary that
is a depository institution is an "insured depository 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 Savings Association
Insurance Fund.
5.5 Financial Statements. VB&T has disclosed in Section 5.5 of the VB&T
Disclosure Memorandum, and has delivered to Regions copies of, all VB&T
Financial Statements prepared for periods ended prior to the date hereof and
will deliver to Regions copies of all VB&T Financial Statements prepared
subsequent to the date hereof. The VB&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 VB&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 past business practices, and (ii) present or will present, as the case may
be, fairly the consolidated financial position of the VB&T Companies as of the
dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the VB&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 which
were not or are not expected to be Material in amount or effect).
5.6 Absence of Undisclosed Liabilities. No VB&T Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on VB&T, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of VB&T as of March 31, 1998, included in the
VB&T Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to March 31,
1998. No VB&T Company has incurred or paid any Liability since March 31, 1998,
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 VB&T.
5.7 Absence of Certain Changes or Events. Since March 31, 1998, except as
disclosed in the VB&T Financial Statements delivered prior to the date of the
Agreement or as otherwise disclosed in the VB&T Disclosure Memorandum, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in
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the aggregate, a Material Adverse Effect on VB&T, and (ii) the VB&T Companies
have conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the VB&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, 1997, and, to the Knowledge of VB&T, all Tax Returns filed are
complete and accurate in all Material respects. All Tax Returns for periods
ending on or before the date of the most recent fiscal year end immediately
preceding the Effective Time will be timely filed or requests for
extensions will be timely filed. All Taxes shown on filed Tax 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 VB&T, except to the extent reserved against in the VB&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 VB&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
VB&T Companies for the period or periods through and including the date of
the respective VB&T Financial Statements has been made and is reflected on
such VB&T Financial Statements.
(d) Each of the VB&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 VB&T.
(e) None of the VB&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.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the VB&T Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the VB&T Companies that occurred during or after
any Taxable Period in which the VB&T Companies incurred a net operating
loss that carries over to any Taxable Period ending after December 31,
1997.
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(h) No VB&T Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of Regions, which consent will
not be unreasonably withheld.
(j) No VB&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. The VB&T Companies have good and marketable title, free and clear
of all Liens, to all of their respective Assets. All tangible properties used in
the businesses of the VB&T Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
VB&T's past practices. All Assets which are Material to VB&T's business on a
consolidated basis, held under leases or subleases by any of the VB&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 creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect. The VB&T Companies currently maintain
insurance in amounts, scope, and coverage reasonably necessary for their
operations. None of the VB&T Companies has received notice from any insurance
carrier that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. The Assets of the VB&T
Companies include all Material Assets required to operate the business of the
VB&T Companies as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of VB&T, each VB&T Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with
all Environmental Laws, except those instances of non-compliance which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on VB&T.
(b) There is no Litigation pending or, to the Knowledge of VB&T, threatened
before any court, governmental agency, or authority, or other forum in
which any VB&T Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may reasonably be expected to 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, whether or not occurring
at, on, under, or involving a site owned, leased, or operated by any VB&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 VB&T.
(c) There is no Litigation pending, or to the Knowledge of VB&T, threatened
before any court, governmental agency, or board, or other forum in which
any of its Loan Properties (or VB&T in respect of such Loan Property) has
been or, with respect to threatened Litigation, may reasonably be expected
to be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any
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predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring
at, on, under, or involving a 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 VB&T.
(d) To the Knowledge of VB&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 VB&T.
(e) To the Knowledge of VB&T, during the period of (i) any VB&T Company's
ownership or operation of any of their respective current properties, (ii)
any VB&T Company's participation in the management of any Participation
Facility, or (iii) any VB&T Company's holding of a security interest in a
Loan Property, there have been no releases of Hazardous Material in, on,
under, or affecting (or potentially affecting) such properties, except such
as are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on VB&T. Prior to the period of (i) any VB&T
Company's ownership or operation of any of their respective current
properties, (ii) any VB&T Company's participation in the management of any
Participation Facility, or (iii) any VB&T Company's holding of a security
interest in a Loan Property, to the Knowledge of VB&T, there were no
releases of Hazardous Material 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 VB&T.
5.11 Compliance with Laws. VB&T is duly registered as a bank holding company
under the BHC Act. Each VB&T Company has in effect all Permits necessary for it
to own, lease, or operate its Material Assets and to carry on its business as
now conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
VB&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 VB&T. None of the VB&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 VB&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 VB&T Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on VB&T, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on VB&T, or (iii) requiring any VB&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 credit or reserve policies, its
management, or the payment of dividends.
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5.12 Labor Relations. No VB&T Company is the subject of any Litigation
asserting that it or any other VB&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 VB&T Company to bargain with any
labor organization as to wages or conditions of employment, nor is any VB&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 VB&T Company, pending
or threatened, or to the Knowledge of VB&T, is there any activity involving any
VB&T Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.13 Employee Benefit Plans.
(a) VB&T has disclosed to Regions in writing prior to the execution of the
Agreement and in Section 5.13 of the VB&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 Material VB&T
Benefits Plans. For purposes of this Agreement, "VB&T Benefit Plans" means
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 VB&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. Any of the VB&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 "VB&T ERISA Plan." Any VB&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
"VB&T Pension Plan." Neither VB&T nor any VB&T Company has 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)). Each "employee
pension benefit plan," as defined in Section 3(2) of ERISA, ever maintained
by any VB&T Company that was intended to qualify under Section 401(a) of
the Internal Revenue Code and with respect to which any VB&T Company has
any Liability, is disclosed as such in Section 5.13 of the VB&T Disclosure
Memorandum.
(b) VB&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 VB&T
Benefit Plans (including insurance contracts), and all amendments thereto,
(ii) with respect to any such VB&T Benefit Plans or amendments, all
determination letters, Material rulings, Material opinion letters, Material
information letters, or Material advisory opinions issued by the Internal
Revenue Service, the United States Department of Labor, or the Pension
Benefit Guaranty Corporation after December 31, 1994, (iii) annual reports
or returns, audited or unaudited financial statements, actuarial valuations
and reports, and summary annual reports prepared for any VB&T Benefit Plan
with
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respect to the most recent plan year, and (iv) the most recent summary plan
descriptions and any Material modifications thereto.
(c) All VB&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 is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on VB&T. Each VB&T ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue
Service, and VB&T is not aware of any circumstances which will or could
reasonably result in revocation of any such favorable determination letter.
Each trust created under any VB&T ERISA Plan has been determined to be
exempt from Tax under Section 501(a) of the Internal Revenue Code and VB&T
is not aware of any circumstance which will or could reasonably result in
revocation of such exemption. With respect to each VB&T Benefit Plan to the
Knowledge of VB&T, no event has occurred which will or could reasonably
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
that is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on VB&T. There is no Material pending or, to the
Knowledge of VB&T, threatened Litigation relating to any VB&T ERISA Plan.
(d) No VB&T Company has engaged in a transaction with respect to any VB&T
Benefit Plan that, assuming the Taxable Period of such transaction expired
as of the date of this Agreement, would subject any VB&T Company to a
Material tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on VB&T. Neither VB&T nor any administrator or fiduciary of any VB&T
Benefit Plan (or any agent of any of the foregoing) has engaged in any
transaction, or acted or failed to act in any manner which could subject
VB&T to any direct or indirect Liability (by indemnity or otherwise) for
breach of any fiduciary, co-fiduciary, or other duty under ERISA, where
such Liability, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on VB&T. No oral or written representation
or communication with respect to any aspect of the VB&T Benefit Plans has
been made to employees of any VB&T Company which is not in accordance with
the written or otherwise preexisting terms and provisions of such plans,
where any Liability with respect to such representation or disclosure is
reasonably likely to have a Material Adverse Effect on VB&T.
(e) No VB&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 or funded status of any VB&T Pension Plan, (ii) no change in the
actuarial assumptions with respect to any VB&T Pension Plan, and (iii) no
increase in benefits under any VB&T Pension Plan as a result of plan
amendments or changes in applicable Law, any of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
VB&T. Neither any VB&T Pension Plan nor any "single-employer plan," within
the meaning of
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Section 4001(a)(15) of ERISA, currently or formerly maintained by any VB&T
Company, or the single-employer plan of any entity which is considered one
employer with VB&T under Section 4001 of ERISA or Section 414 of the
Internal Revenue Code or Section 302 of ERISA (whether or not waived) (a
"VB&T ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA. All contributions with respect to a VB&T Pension Plan or any
single-employer plan of a VB&T ERISA Affiliate have or will be timely made
and there is no lien or expected to be a lien under Internal Revenue Code
Section 412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code
Section 4971. No VB&T Company has provided, or is required to provide,
security to a VB&T Pension Plan or to any single-employer plan of a VB&T
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue
Code. All premiums required to be paid under ERISA Section 4006 have been
timely paid by VB&T, except to the extent any failure would not have a
Material Adverse Effect on VB&T.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any VB&T Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any VB&T ERISA
Affiliate that has not been satisfied in full (other than Liability for
Pension Benefit Guaranty Corporation premiums, which have been paid when
due, except to the extent any failure would not have a Material Adverse
Effect on VB&T).
(g) No VB&T Company has any obligations for retiree health and retiree life
benefits under any of the VB&T Benefit Plans other than with respect to
benefit coverage mandated by applicable Law.
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, by themselves,
(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 VB&T Company from any VB&T Company
under any VB&T Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any VB&T Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
5.14 Material Contracts. Except as set forth in Section 5.14 of the VB&T
Disclosure Memorandum, none of the VB&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 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 VB&T Company or the
guarantee by any VB&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 of depository
institution Subsidiaries, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), and
(iii) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by VB&T with the SEC as of the
date of this Agreement if VB&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 "VB&T Contracts"). With respect to each VB&T Contract:
(i) the Contract is in full force and effect; (ii) no VB&T Company is in
Default thereunder, other than Defaults which are not reasonably likely
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to have, individually or in the aggregate, a Material Adverse Effect on
VB&T; (iii) no VB&T Company has repudiated or waived any Material provision
of any such Contract; and (iv) no other party to any such Contract is, to
the Knowledge of VB&T, in Default in any respect, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on VB&T, or has repudiated or waived any Material
provision thereunder. Except for Federal Home Loan Bank advances, all of
the indebtedness of any VB&T Company for money borrowed is prepayable at
any time by such VB&T Company without penalty or premium.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge of
VB&T, threatened against any VB&T Company, or against any Asset, employee
benefit plan, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
VB&T, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any VB&T
Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on VB&T.
(b) Section 5.15(b) of the VB&T Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any VB&T
Company is a party and which names a VB&T Company as a defendant or cross-
defendant.
5.16 Reports. Since December 31, 1994, or the date of organization if later,
each VB&T Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on VB&T. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
5.17 Statements True and Correct. None of the information supplied or to be
supplied by any VB&T Company or any Affiliate thereof regarding VB&T or such
Affiliate 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 VB&T Company or any Affiliate
thereof for inclusion in the Proxy Statement to be mailed to VB&T's stockholders
in connection with the Stockholders' Meeting will, when first mailed to the
stockholders of VB&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 VB&T Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with
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the transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.
5.18 Accounting, Tax, and Regulatory Matters. No VB&T Company or any Affiliate
thereof has taken or agreed to take any action, and VB&T has no Knowledge of any
fact or circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.19 State Takeover Laws. Each VB&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 those Laws contained within Sections 14-2-1110 et
seq. and 14-2-1131 et seq. of the GBCC.
5.20 Charter Provisions. Each VB&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 under the Articles of Incorporation, Bylaws,
or other governing instruments of any VB&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 VB&T Company that may
be directly or indirectly acquired or controlled by it.
5.21 Support Agreements. Each of the directors of VB&T has executed and
delivered to Regions a Support Agreement in substantially the form as Exhibit 1
to this Agreement.
5.22 Derivatives. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for VB&T's own account, or for the account of one or more
the VB&T Subsidiaries or their customers, were entered into (i) in accordance
with prudent business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
5.23 Year 2000. VB&T represents and warrants that all computer software
necessary for the conduct of its business (the "Software") is designed to be
used prior to, during, and after the calendar year 2000 A.D., and that the
Software will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century. VB&T further represents and warrants that the Software accepts,
calculates, sorts, extracts and otherwise processes date inputs and date values,
and returns and displays date values, in a consistent manner regardless of the
dates used, whether before, on, or after January 1, 2000.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to VB&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
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corporate power and authority to carry on its business as now conducted and to
own, lease, and operate its Material Assets. Regions is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions.
6.2 Authority; No Breach By Agreement.
(a) Regions has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its
terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Regions' Certificate of
Incorporation or Bylaws, (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on
any Asset of any Regions Company under, any Contract or Permit of any
Regions Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, or (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any Regions Company or any of their
respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Regions, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by Regions of the Merger and
the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Regions consists, as of the
date of this Agreement, of 240,000,000 shares of Regions Common Stock, of which
149,797,609 shares were issued and outstanding and no shares were as treasury
shares as of March 31, 1998. 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 VB&T Common Stock upon consummation of the Merger, when
issued in accordance with the terms of
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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 VB&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 Regions Subsidiaries. Regions or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each Regions Subsidiary. No
equity securities of any Regions Subsidiary are or may become required to be
issued (other than to another Regions Company) by reason of any Rights, and
there are no Contracts by which any Regions Subsidiary is bound to issue (other
than to another Regions Company) additional shares of its capital stock or
Rights or by which any Regions Company is or may be bound to transfer any shares
of the capital stock of any Regions Subsidiary (other than to another Regions
Company). There are no Contracts relating to the rights of any Regions Company
to vote or to dispose of any shares of the capital stock of any Regions
Subsidiary. All of the shares of capital stock of each Regions Subsidiary held
by a Regions Company are fully paid and, except as provided in statutes pursuant
to which depository institution Subsidiaries are organized, nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Regions Company free and clear of
any Lien. Each Regions Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each Regions 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 Regions. Each Regions Subsidiary
that is a depository institution is an "insured depository 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
Savings Association Insurance Fund.
6.5 SEC Filings; Financial Statements.
(a) Regions has filed and made available to VB&T all forms, reports, and
documents required to be filed by Regions with the SEC since January 1 of
the second fiscal year prior to the date of this Agreement (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
1933 Act and the 1934 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. Except for Regions Subsidiaries that
are registered as a broker, dealer, or investment advisor or filings
required due to fiduciary holdings of the Regions Subsidiaries, none of
Regions Subsidiaries is required to file any forms, reports, or other
documents with the SEC.
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(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions
SEC Reports filed after the date of this Agreement until the Effective
Time, complied or will comply as to form in all Material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was or will be prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC), and fairly presented or will fairly
present the consolidated financial position of Regions and its Subsidiaries
as at the respective dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be Material in amount or
effect.
6.6 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 March 31, 1998,
included in the Regions Financial Statements or reflected in the notes thereto
and except for Liabilities incurred in the ordinary course of business
subsequent to March 31, 1998. No Regions Company has incurred or paid any
Liability since March 31, 1998, 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.
6.7 Absence of Certain Changes or Events. Since March 31, 1998, except as
disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, and (ii) the Regions Companies have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
6.8 Compliance with Laws. Regions is duly registered as a bank holding company
under the BHC Act. Each Regions Company has in effect all Permits necessary for
it to own, lease, or operate its Material Assets and to carry on its business as
now conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions. None of the Regions Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a
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Material Adverse Effect on Regions, (ii) threatening to revoke any Permits,
the revocation of which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions, or (iii) requiring any
Regions Company (x) to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.9 Legal Proceedings. There is no Litigation instituted or pending, or, to the
Knowledge of Regions, threatened against any Regions Company, or against any
Asset, employee benefit plan, 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.
6.10 Reports. Since December 31, 1994, or the date of organization if later,
each Regions Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
6.11 Statements True and Correct. None of the information supplied or to be
supplied by any Regions Company or any Affiliate thereof regarding Regions or
such Affiliate 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 VB&T's
stockholders in connection with the Stockholders' Meeting, will, when first
mailed to the stockholders of VB&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 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.
6.12 Accounting, Tax, and Regulatory Matters. No Regions Company or any
Affiliate thereof has taken or agreed to take any action, and Regions has no
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue
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Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
6.13 Derivatives. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for Regions' own account, or for the account of one or more
the Regions Subsidiaries or their customers, were entered into (i) in accordance
with prudent business practices and all applicable Laws, and (ii) with
counterparties believed to be financially responsible.
6.14 Year 2000. Regions has disclosed to VB&T a complete and accurate copy of
Regions' plan, including an estimate of the anticipated associated costs, for
implementing modifications to Regions' hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, Regions
shall endeavor to continue its efforts to implement such plan.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative 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 organization and Assets and maintain its
rights and franchises, (iii) use its reasonable efforts to maintain its current
employee relationships, and (iv) take no action which would (a) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement; provided, that the foregoing shall not prevent
any Regions Company from discontinuing or disposing of any of its Assets or
business, 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 Negative Covenants of VB&T. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, VB&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 Regions, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any VB&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 VB&T Company to another VB&T Company) in excess of an
aggregate of $100,000 (for the VB&T Companies on a consolidated basis),
except in the ordinary course of the business consistent with past
practices (which shall include, for VB&T Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of
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federal funds, advances from the Federal Reserve Bank or Federal Home Loan Bank,
and entry into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any VB&T
Company of any Lien or permit any such Lien to exist (other than in connection
with deposits, repurchase agreements, bankers acceptances, "treasury tax and
loan" accounts established in the ordinary course of business, the satisfaction
of legal requirements in the exercise of trust powers, and Liens in effect as of
the date hereof that are disclosed in the VB&T Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any VB&T Company, or declare or pay any dividend or
make any other distribution in respect of VB&T's capital stock, provided
that VB&T may (to the extent legally and contractually permitted to do so),
but shall not be obligated to, declare and pay regular semi-annual cash
dividends on the shares of VB&T Common Stock in an aggregate amount not to
exceed $84,000 with usual and regular record and payment dates in
accordance with past practice as disclosed in Section 7.2(c) of the VB&T
Disclosure Memorandum and such dates may not be changed without the prior
consent of Regions; provided that, notwithstanding the provisions of
Section 1.3 of this Agreement, the Parties shall cooperate in selecting the
Effective Time to ensure that, with respect to the quarterly period in
which the Effective Time occurs, the holders of VB&T Common Stock do not
receive both a dividend in respect of their VB&T Common Stock and a
dividend in respect of Regions Common Stock or fail to receive any
dividends; or
(d) except for this Agreement or pursuant to the exercise of Rights
outstanding as of the date of this Agreement and pursuant to the terms
thereof in existence on the date of this Agreement, issue, sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of VB&T Common Stock or any
other capital stock of any VB&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 VB&T
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of VB&T Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any VB&T Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another VB&T Company) or (ii)
any Asset other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or
less, purchase any securities or make any Material investment, either by
purchase of stock or securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly-owned VB&T
Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of
new wholly-owned Subsidiaries organized to conduct or continue activities
otherwise permitted by this Agreement; or
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(g) grant any increase in compensation or benefits to the employees or
officers of any VB&T Company, except as required by Law or in accordance
with past practice; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement; enter into or amend any severance agreements with
officers of any VB&T Company; grant any increase in fees or other increases
in compensation or other benefits to directors of any VB&T Company; or
voluntarily accelerate the vesting of any stock options or other stock-
based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any VB&T Company
and any Person (unless such amendment is required by Law) that the VB&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) adopt any new employee benefit plan of any VB&T Company or make any
Material change in or to any existing employee benefit plans of any VB&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 Tax or accounting methods or systems
of internal accounting controls, except as may be appropriate to conform to
changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability
of any VB&T Company for Material money damages or restrictions upon the
operations of any VB&T Company; or
(l) except in the ordinary course of business, modify, amend, or terminate
any Material Contract or waive, release, compromise, or assign any Material
rights or claims.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all reports required to
be filed by it with Regulatory Authorities between the date of this Agreement
and the Effective Time and shall deliver to the other Party copies of all such
reports promptly after the same are filed. If financial statements are contained
in any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the entity filing such statements
as of the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash 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
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contained in any other reports to another Regulatory Authority shall be prepared
in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Stockholder Approval. As soon as
reasonably practicable after execution of this Agreement, Regions shall file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of Regions Common
Stock upon consummation of the Merger. VB&T shall furnish all information
concerning it and the holders of its capital stock as Regions may reasonably
request in connection with such action. VB&T shall call a Stockholders' Meeting,
to be held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement and such other related matters as it deems appropriate. In connection
with the Stockholders' Meeting, (i) VB&T shall prepare and file with the SEC a
Proxy Statement and mail such Proxy Statement to its stockholders, (ii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Proxy Statement, (iii) the Board
of Directors of VB&T shall recommend to its stockholders the approval of the
matters submitted for approval, and (iv) the Board of Directors and officers of
VB&T shall use their reasonable efforts to obtain such stockholders' approval,
provided that each of Regions and VB&T may withdraw, modify, or change in an
adverse manner to the other Party its recommendations if the Board of Directors
of such Party, after having consulted with and based upon the advice of outside
counsel, determines in good faith that the failure to so withdraw, modify, or
change its recommendation could constitute a breach of the fiduciary duties of
VB&T's Board of Directors under applicable Law. In addition, nothing in this
Section 8.1 or elsewhere in this Agreement shall prohibit accurate disclosure by
VB&T of information that is required to be disclosed in the Registration
Statement or the Proxy Statement or in any other document required to be filed
with the SEC (including, without limitation, a Solicitation/ Recommendation
Statement on Schedule 14D-9) or otherwise required to be publicly disclosed by
applicable Law or regulations or rules of the NASD.
8.2 Exchange Listing. Regions shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of Regions Common Stock to be issued to the holders of VB&T
Common Stock pursuant to the Merger.
8.3 Applications. Regions shall promptly prepare and file, and VB&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.
8.4 Filings with State Offices. Upon the terms and subject to the conditions of
this Agreement, Regions shall execute and file the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware and the Georgia
Certificate of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
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8.5 Agreement as to Efforts to Consummate. Subject to the terms and conditions
of this Agreement, each Party agrees to use, and to cause its Subsidiaries to
use, its reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper, or advisable under
applicable Laws to consummate and make effective, as soon as reasonably
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including, without limitation, using its reasonable efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it
and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation
shall be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily 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 or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information
received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the
other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a
Material breach of any representation, warranty, covenant, or agreement of
the other Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights of its customers,
jeopardize the attorney-client or similar privilege with respect to such
information or contravene any Law, rule, regulation, Order, judgment,
decree, fiduciary duty, or agreement entered into prior to the date of this
Agreement. The Parties will use their reasonable efforts to make
appropriate substitute disclosure arrangements, to the extent practicable,
in circumstances in which the restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, Regions and VB&T 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;
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provided, that nothing in this Section 8.7 shall be deemed to prohibit any Party
from making any disclosure which its counsel deems necessary or advisable in
order to satisfy such Party's disclosure obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the transactions
contemplated hereby, no VB&T Company nor any Affiliate thereof nor any
Representatives thereof retained by any VB&T Company shall directly or
indirectly solicit or engage in negotiations concerning any Acquisition
Proposal, or provide any confidential information or assistance to, or have any
discussions with, any Person with respect to an Acquisition Proposal.
Notwithstanding the foregoing, VB&T may, and may authorize and permit its
Representatives to, provide Persons with confidential information, have
discussions or negotiations with, or otherwise facilitate an effort or attempt
by such Person to make or implement an Acquisition Proposal not solicited in
violation of this Agreement if VB&T's Board of Directors, after having consulted
with, and based upon the advice of, outside counsel, determines in good faith
that the failure to take such actions could constitute a breach of the fiduciary
duties of VB&T's Board of Directors under applicable Law; provided, that VB&T
shall promptly advise Regions following the receipt of any Acquisition Proposal
and the Material details thereof; and, provided further, that prior to delivery
of confidential information relating to VB&T or access to VB&T's books, records,
or properties in connection therewith, the other Person shall have entered into
a confidentiality agreement substantially similar to the Confidentiality
Agreement previously entered into between VB&T and Regions. Nothing contained in
this Section 8.8 shall prohibit the Board of Directors of VB&T from complying
with Rule 14e-2, promulgated under the 1934 Act. VB&T shall (i) immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (ii) direct and use its reasonable efforts to cause of all its
Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and agrees to
use its reasonable efforts to cause the Merger, and to take no action which
would cause the Merger not, to qualify for treatment as a pooling of interests
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each VB&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.
8.11 Charter Provisions. Each VB&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 VB&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 VB&T Company
that may be directly or indirectly acquired or controlled by it.
8.12 Agreement of Affiliates. VB&T has disclosed in Section 8.12 of the VB&T
Disclosure Memorandum each Person whom it reasonably believes may be deemed an
"affiliate" of VB&T for purposes of Rule 145 under the 1933 Act. VB&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, in substantially
the form of Exhibit 2,
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providing that such Person will not sell, pledge, transfer, or otherwise dispose
of the shares of VB&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 VB&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 VB&T in exchange for shares of VB&T Common
Stock shall not be transferable until such time as financial results covering at
least 30 days of combined operations of Regions and VB&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 8.12 (and Regions shall be
entitled to place restrictive legends upon certificates for shares of Regions
Common Stock issued to affiliates of VB&T pursuant to this Agreement to enforce
the provisions of this Section 8.12). Regions shall not be required to maintain
the effectiveness of the Registration Statement under the 1933 Act for the
purposes of resale of Regions Common Stock by such affiliates.
8.13. Employee Benefits and Contracts. Following the Effective Time, Regions
shall provide generally to officers and employees of the VB&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 8.13), on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the Regions Companies to
their similarly situated officers and employees. For purposes of participation
and vesting (but not accrual of benefits) under such employee benefit plans, (i)
service under any qualified defined benefit plans of VB&T shall be treated as
service under Regions' qualified defined benefit plans, (ii) service under any
qualified defined contribution plans of VB&T shall be treated as service under
Regions' qualified defined contribution plans, and (iii) service under any other
employee benefit plans of VB&T shall be treated as service under any similar
employee benefit plans maintained by Regions. Regions also shall cause VB&T and
its Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 0.13 of the VB&T Disclosure
Memorandum to Regions between any VB&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
VB&T Benefit Plans.
8.14 Indemnification.
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six (6) years after the Effective Time, Regions shall indemnify,
defend, and hold harmless each Person entitled to indemnification from a
VB&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 VB&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
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approval by VB&T is required to effectuate any indemnification, Regions shall
cause VB&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.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) above, upon learning of any such Liability or Litigation, shall
promptly notify Regions thereof. In the event of any such Litigation
(whether arising before or after the Effective Time), (i) Regions or VB&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 VB&T elects
not to assume such defense or counsel for the Indemnified Parties advises
in writing that there are Material substantive issues which raise conflicts
of interest between Regions or VB&T and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Regions or
VB&T shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that (i) Regions shall be obligated pursuant to this paragraph (b)
to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate (to the extent
reasonably appropriate under the circumstances) in the defense of any such
Litigation, and (iii) Regions shall not be liable for any settlement
effected without its prior written consent; and provided further that
Regions shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law.
(c) If Regions or any of its successors or assigns shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or
substantially all of its Assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of
Regions shall assume the obligations set forth in this Section 8.14.
(d) The provisions of this Section 8.14 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
8.15 Certain Modifications. Regions and VB&T shall consult with respect to
their loan, litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) and VB&T shall make such
modifications or changes to its policies and practices, if any, prior to the
Effective Time, as may be mutually agreed upon. Regions and VB&T also shall
consult with respect to the character, amount, and timing of restructuring and
Merger-related expense charges to be taken by each of the Parties in connection
with the transactions contemplated by this Agreement and shall take such charges
in accordance with GAAP as may be mutually agreed upon by the Parties. Neither
Party's representations, warranties, and covenants contained in this Agreement
shall be deemed to be inaccurate or breached in any respect or deemed to have a
Material Adverse Effect on VB&T as a consequence of any modifications or charges
undertaken solely on account of this Section 8.15.
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of each
Party to perform this Agreement and to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approval. The stockholders of VB&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 and by
the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force
and effect and all waiting periods required by Law shall have expired. No
Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (excluding requirements relating to the raising of
additional capital or the disposition of Assets or deposits) which in the
reasonable good faith judgment of the Board of Directors of Regions would
so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party. No Consent obtained which is
necessary to consummate the transactions 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 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.
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(f) Exchange Listing. The shares of Regions Common Stock issuable pursuant
to the Merger shall have been approved for listing on the Nasdaq NMS,
subject to official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion from
Alston & Bird LLP, in a form reasonably satisfactory to such Party (the
"Tax Opinion"), dated the date of the Effective Time, substantially to the
effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, (ii) no gain or
loss will be recognized by holders of VB&T Common Stock who exchange all of
their VB&T Common Stock solely for Regions Common Stock pursuant to the
Merger (except with respect to any cash received in lieu of a fractional
share interest in Regions Common Stock), (iii) the tax basis of the Regions
Common Stock received by holders of VB&T Common Stock who exchange all of
their VB&T Common Stock solely for Regions Common Stock in the Merger will
be the same as the tax basis of the VB&T Common Stock surrendered in
exchange for the Regions Common Stock (reduced by an amount allocable to a
fractional share interest in Regions Common Stock for which cash is
received), and (iv) the holding period of the Regions Common Stock received
by holders who exchange all of their VB&T Common Stock solely for Regions
Common Stock in the Merger will be the same as the holding period of the
VB&T Common Stock surrendered in exchange therefor, provided that such VB&T
Common Stock is held as a capital asset at the Effective Time. In rendering
such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of VB&T and Regions reasonably satisfactory in
form and substance to such counsel.
(h) Pooling Letter. Each Party shall have received a letter, dated as of
the Effective Time, in a form reasonably acceptable to such Party, from
Ernst & Young LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
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 VB&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 VB&T set
forth in Section 5.3 of this Agreement shall be true and correct (except
for inaccuracies which are de minimis in amount). The representations and
warranties of VB&T set forth in Sections 5.18, 5.19, and 5.20 of this
Agreement shall be true and correct in all Material respects. There shall
not exist inaccuracies in the representations and warranties of VB&T set
forth in this Agreement (including the representations and warranties set
forth in Sections 5.3, 5.18, 5.19, and 5.20) such that the aggregate effect
of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on VB&T; provided that, for purposes of this sentence only,
those representations and warranties which are qualified by references to
"material, "Material," "Material Adverse Effect," or variations thereof, or
to the "Knowledge" of VB&T or to a matter being "known" by VB&T shall be
deemed not to include such qualifications.
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(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of VB&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.
(c) Certificates. VB&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 Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by VB&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) Affiliate Agreements. Regions shall have received from each affiliate
of VB&T the affiliates agreement referred to in Section 8.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of
Regions that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(e) Claims Letters. Each of the directors and executive officers of VB&T
shall have executed and delivered to Regions, letters in substantially the
form of Exhibit 3.
(f) Legal Opinion. Regions shall have received a written opinion, dated as
of the Effective Time, of counsel to VB&T, in substantially the form of
Exhibit 4.
9.3 Conditions to Obligations of VB&T. The obligations of VB&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 VB&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 minimis in amount). The
representations and warranties of Regions set forth in Section 6.12 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 6.12) 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," "Material," "Material Adverse Effect," or variations thereof,
or to the "Knowledge" of Regions or to a matter being "known" by Regions
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
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(c) Certificates. Regions shall have delivered to VB&T (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 Section 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, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as VB&T and its counsel
shall request.
(d) Legal Opinion. VB&T shall have received a written opinion, dated as of
the Effective Time, of counsel to Regions, in substantially the form of
Exhibit 5.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the stockholders of VB&T or
Regions, 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 VB&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 VB&T and Section 9.3(a) of
this Agreement in the case of Regions or in Material breach of any covenant
or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of VB&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 VB&T and Section 9.3(a) in
the case of Regions) in the event of a Material breach by the other Party
of any covenant or agreement contained in this Agreement which cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Regions or VB&T fail to vote their approval of the matters
submitted for the approval by such stockholders at the
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Stockholders' Meeting where the transactions were presented to such stockholders
for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the Merger
shall not have been consummated by March 31, 1999, 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 VB&T and Section 9.3(a) of
this Agreement in the case of Regions or in Material breach of any covenant
or other agreement contained in this Agreement) in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement.
10.2 Effect of Termination. In the event of the termination and abandonment of
this Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.6(b) of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to 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.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 and Sections 8.12 and 8.14 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the
stock or Assets of, or other business combination involving such Party or
any of its Subsidiaries or the acquisition of a substantial equity interest
in, or a substantial portion of the Assets of, such Party or any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
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"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"AVERAGE CLOSING PRICE" shall mean the average of the daily last sales
prices of Regions Common Stock as reported on the Nasdaq NMS (as reported
by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Regions) for the ten consecutive full
trading days in which such shares are traded on the Nasdaq NMS ending at
the close of trading on the date preceding the Stockholders' Meeting.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CONFIDENTIALITY AGREEMENTS" shall mean those certain Confidentiality
Agreements, entered into prior to the date of this Agreement, between VB&T
and Regions.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach
or violation of or default under any Contract, Order, or Permit, or (iii)
any occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke, change
the current terms of, or renegotiate, or to accelerate, increase, or impose
any Liability under, any Contract, Order, or Permit, where, in any such
event, such Default is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"DELAWARE CERTIFICATE OF MERGER" shall mean the certificate of merger to be
executed by Regions and filed with the Secretary of State of the State of
Delaware, relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response
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Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXHIBITS" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code as amended.
"GEORGIA CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Regions and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, chief financial officer, chief
accounting officer, chief credit officer, general counsel, or any executive
vice president of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued,
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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 property Taxes not
yet due and payable, and (ii) for depository institution Subsidiaries of a
Party, pledges to secure deposits, and other Liens incurred in the ordinary
course of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned, leased, or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security or other interest (including an interest in a
fiduciary capacity), 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 condition,
results of operations, or business 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, and (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NMS" shall mean the National Market System of The Nasdaq Stock
Market.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
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"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, but not limited to, participating in a fiduciary capacity) and,
where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or
property.
"PARTY" shall mean either VB&T or Regions, and "PARTIES" shall mean both
VB&T and Regions.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PROXY STATEMENT" shall mean the proxy statement used by VB&T to solicit
the approval of its stockholders of the transactions contemplated by this
Agreement, which shall include the prospectus of Regions relating to the
issuance of the Regions Common Stock to holders of VB&T Common Stock.
"REGIONS COMMON STOCK" shall mean the $.625 par value common stock of
Regions.
"REGIONS COMPANIES" shall mean, collectively, Regions and all Regions
Subsidiaries.
"REGIONS FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of Regions as
of March 31, 1998 and as of December 31, 1997 and 1996, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1998 and for each of the three years ended December 31, 1997,
1996, and 1995, as filed by Regions in SEC Documents, 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 March 31, 1998.
"REGIONS SUBSIDIARIES" shall mean the Subsidiaries of Regions and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Regions in the future and owned by Regions at the Effective
Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Regions under the
1933 Act with respect to the shares of Regions Common Stock to be issued to
the stockholders of VB&T in connection with the transactions contemplated
by this Agreement.
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"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 the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders of VB&T
to be held pursuant to Section 8.1 of this Agreement, including any
adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 50% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, there
shall not be included any such entity acquired through foreclosure or any
such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"SURVIVING CORPORATION" shall mean Regions as the surviving corporation
resulting from the Merger.
"TAX" or "TAXES" shall mean all federal, state, local, and foreign taxes,
charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property, personal
property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
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"TAXABLE PERIOD" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
"TAX RETURN" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"VB&T COMMON STOCK" shall mean the $5.00 par value common stock of VB&T.
"VB&T COMPANIES" shall mean, collectively, VB&T and all VB&T Subsidiaries.
"VB&T DISCLOSURE MEMORANDUM" shall mean the written information entitled
"VB&T Disclosure Memorandum" delivered prior to the date of this Agreement
to Regions describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing
each Section or subsection of this Agreement under which such disclosure is
being made. Information disclosed with respect to one Section or subsection
shall not be deemed to be disclosed for any other purpose hereunder. The
inclusion of any matter in this document shall not be deemed an admission
or otherwise to imply that any such matter is Material for purposes of this
Agreement.
"VB&T FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of VB&T as of
March 31, 1998 and as of December 31, 1997 and 1996, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
March 31, 1998 and for each of the three years ended December 31, 1997,
1996, and 1995, included in the VB&T Disclosure Memorandum, and (ii) the
consolidated statements of condition of VB&T (including related notes and
schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to periods ended subsequent to March 31,
1998.
"VB&T STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of VB&T.
"VB&T SUBSIDIARIES" shall mean the Subsidiaries of VB&T, which shall
include the VB&T Subsidiaries described in Section 5.4 of this Agreement
and any corporation, bank, savings association, or other organization
acquired as a Subsidiary of VB&T in the future and owned by VB&T at the
Effective Time.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Claim................................. Section 8.15(a)
Closing............................... Section 1.2
Effective Time........................ Section 1.3
Exchange Agent........................ Section 4.1
Exchange Ratio........................ Section 3.1(b)
Indemnified Party..................... Section 8.14
Merger................................ Section 1.1
Regions SEC Reports................... Section 6.5(a)
</TABLE>
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<TABLE>
<S> <C>
Takeover Laws......................... Section 5.19
Tax Opinion........................... Section 9.1(g)
VB&T Benefit Plans.................... Section 5.13(a)
VB&T Contracts........................ Section 5.14
VB&T ERISA Affiliate.................. Section 5.13(e)
VB&T ERISA Plan....................... Section 5.13(a)
VB&T Rights........................... Section 3.6(a)
VB&T Pension Plan..................... Section 5.13(a)
VB&T SEC Reports...................... Section 5.5(a)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and
fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that Regions shall bear and pay
the filing fees payable in connection with the Registration Statement and
the Proxy Statement and one-half of the printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party
of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his, her, or
its representing or being retained by or allegedly representing or being
retained by VB&T or Regions, each of VB&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 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 8.12 and 8.14 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, whether before or after stockholder
approval of this Agreement has been obtained; provided, that the provisions of
this Agreement relating to the manner or basis in which shares of VB&T Common
Stock will be exchanged for
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Regions Common Stock shall not be amended after the Stockholders' Meeting
without the requisite approval of the holders of the issued and outstanding
shares of Regions Common Stock and VB&T Common Stock, as the case may be,
entitled to vote thereon.
11.6 Waivers.
(a) Prior to or at the Effective Time, Regions, acting through its Board of
Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by VB&T, to waive or extend the
time for the compliance or fulfillment by VB&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, VB&T, acting through its Board of
Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Regions, to waive or extend
the time for the compliance or fulfillment by Regions of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of VB&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 VB&T.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
<TABLE>
<S> <C>
VB&T: VB&T BANCSHARES CORP.
2611 N. Patterson Street
Valdosta, Georgia 31602
Telecopy Number: (912) 241-6753
Attention: Donald T. Schutt
President and Chief Executive Officer
</TABLE>
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<TABLE>
<S> <C>
Copy to Counsel: LANGDALE, VALLOTTON, LINAHAN,
THRELKELD & WETHERINGTON
1007 North Patterson Street
Valdosta, Georgia 31603-1547
Telecopy Number: (912) 244-0453
Attention: William P. Langdale, Jr.
Regions: REGIONS FINANCIAL CORPORATION
417 N. 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 N. 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7751
Attention: Samuel E. Upchurch, Jr.
General Counsel
</TABLE>
11.9 Governing Law. 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, except to the extent that the Laws of the State of
Georgia relate to the consummation of the Merger.
11.10 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against any Party, whether under any rule
of construction or otherwise. No Party to this Agreement shall be considered the
draftsman. The Parties acknowledge and agree that this Agreement has been
reviewed, negotiated, and accepted by all Parties and their attorneys and shall
be construed and interpreted according to the ordinary meaning of the words used
so as fairly to accomplish the purposes and intentions of the Parties.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
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11.14 Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: VB&T BANCSHARES CORP.
By: By:
--------------------------------------------- ---------------------------------------------
Faye Farr Donald T. Schutt
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: By:
--------------------------------------------- ---------------------------------------------
Samuel E. Upchurch, Jr. Richard D. Horsley
Corporate Secretary Vice Chairman and Executive Financial Officer
[CORPORATE SEAL]
</TABLE>
43
<PAGE> 156
APPENDIX B
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required for
the merger by Code Section 14-2-1103 or the articles of incorporation
and the shareholder is entitled to vote on the merger; or
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(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;
(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
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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.
(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.
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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.
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.
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<PAGE> 160
(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
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shares and the amount of interest due and demand payment of his estimate of
the fair value of his shares and interest due.
14-2-1330 Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding, which shall
have the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in the proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law for
the service of a summons and complaint, and upon each nonresident dissenting
shareholder either by registered or certified mail or by publication, or in any
other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts for
the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted
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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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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the Registrant
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
II-1
<PAGE> 164
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the
stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such
expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
II-2
<PAGE> 165
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court
of Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
The Registrant has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
II-3
<PAGE> 166
director or officer whose actions in his capacity result in liability, or to
the Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on
inside information, illegal payments, dishonesty, accounting of securities
profits in violation of Section 16(b) of the Securities Exchange Act of 1934
and acts within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of July 6, 1998, by and between VB&T Bancshares Corp. and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation--incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 333-67153.
4.2 -- By-laws of Regions Financial Corporation--incorporated by reference from S-4 Registration Statement
of Regions Financial Corporation, file no. 333-67153.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Stewart, Fowler & Stalvey, P.C.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP-- included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
registration statement.
99. -- Form of proxy.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
II-4
<PAGE> 167
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on this the 12th day of November, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
/s/ Richard D. Horsley
BY: --------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney- in-fact and agents, or their substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ Carl E. Jones, Jr.
- -------------------------- President and Chief Executive November 12, 1998
Carl E. Jones, Jr. Officer and Director
(principal executive officer)
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and November 12, 1998
Richard D. Horsley Executive Financial Officer
and Director
(principal financial officer)
/s/ Robert P. Houston
- -------------------------- Executive Vice President and November 12, 1998
Robert P. Houston Comptroller
(principal accounting officer)
</TABLE>
II-6
<PAGE> 169
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ Sheila S. Blair
- -------------------------- Director November 12, 1998
Sheila S. Blair
/s/ James B. Boone, Jr.
- -------------------------- Director November 12, 1998
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director November 12, 1998
Albert P. Brewer
/s/ James S.M. French
- -------------------------- Director November 12, 1998
James S.M. French
- -------------------------- Director
Barnett Grace
- -------------------------- Director
Frank D. Hickingbotham
/s/ Olin B. King
- -------------------------- Director November 12, 1998
Olin B. King
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board November 12, 1998
J. Stanley Mackin and Director
- -------------------------- Director
Michael W. Murphy
/s/ Henry E. Simpson
- -------------------------- Director November 12, 1998
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director November 12, 1998
Lee J. Styslinger, Jr.
- -------------------------- Director
Robert J. Williams
</TABLE>
II-7
<PAGE> 170
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of July 6, 1998, by and between VB&T Bancshares Corp. and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation--incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 333-67153.
4.2 -- By-laws of Regions Financial Corporation--incorporated by reference from S-4 Registration Statement
of Regions Financial Corporation, file no. 333-67153.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Stewart, Fowler & Stalvey, P.C.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- included in Exhibit 8.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
registration statement.
99. -- Form of proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
November 12, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with VB&T Bancshares Corp.
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of VB&T Bancshares Corp.
("VB&T") with and into Regions (the "Merger") and in connection with the
registration of shares of common stock of Regions, par value $.625 per share
("Regions Common Stock"), on Form S-4 under the Securities Act of 1933. The
Merger provides for issuance of shares of common stock of Regions, par value
$.625 per share, to the stockholders of VB&T upon consummation of the Merger.
The maximum number of shares of Regions to be issued in the Merger is estimated
to be 655,340
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission, as such registration
statement has been amended to date. We have examined and are familiar with the
records relating to the organization of Regions and the documents and records as
we have deemed relevant for purposes of rendering this opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such conditions
capable of being waived, and upon consummation of the Merger, the shares of
Regions Common Stock issued pursuant to the Merger will be duly authorized,
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville LLP under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
/s/ Lange, Simpson, Robinson & Somerville LLP
<PAGE> 1
EXHIBIT 8
[ALSTON&BIRD LLP LETTERHEAD]
November 13, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
VB&T Bancshares Corp.
2611 N. Patterson Street
Valdosta, Georgia 31602
Re: Merger Involving Regions Financial Corporation
and VB&T Bancshares Corp.
Ladies and Gentlemen:
We have served as special counsel to Regions Financial Corporation, a
corporation organized under the laws of the State of Delaware ("Regions"), in
connection with the reorganization of Regions and VB&T Bancshares Corp., a
corporation organized under the laws of the State of Georgia ("VB&T"), pursuant
to the Agreement and Plan of Merger dated as of July 6, 1998 (the "Agreement"),
which sets forth the terms of the merger of VB&T with and into Regions (the
"Merger"). In our capacity as special counsel to Regions, our opinion has been
requested with respect to certain of the federal income tax consequences of the
Merger.
Pursuant to the Merger, and as more fully described in the Agreement,
at the Effective Time, each share of VB&T Common Stock issued and outstanding at
the Effective Time shall be converted into a certain number of shares of Regions
Common Stock, as computed using the Exchange Ratio. As a result, stockholders of
VB&T shall become stockholders of Regions, and each of the subsidiaries of VB&T
shall continue to conduct its business and operations as a subsidiary of
Regions. All terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all section
references herein are to the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE> 2
Regions Financial Corporation
VB&T Bancshares Corp.
November 13, 1998
Page 2
In rendering the opinions expressed herein, we have examined such
documents as we deemed appropriate, including (i) the Agreement and (ii) the
Registration Statement on Form S-4 filed by Regions with the Securities and
Exchange Commission under the Securities Act of 1933, on November 13, 1998, as
amended, including the Proxy Statement/Prospectus constituting part thereof
(together the "Registration Statement"). In rendering the opinions expressed
herein, we have assumed with the consent of Regions and VB&T, that the Agreement
and the Registration Statement accurately and completely describe the Merger and
that the Merger will be consummated in accordance with the Agreement and as
described in the Registration Statement.
In rendering the opinions expressed herein, we have relied, with the
consent of Regions and VB&T, upon the accuracy and completeness of the factual
statements and factual representations (which factual statements and factual
representations we have neither investigated nor verified) contained in the
certificates of Regions and VB&T to us dated October 19, 1998 (together, the
"Certificates"), which we have assumed are complete and accurate as of the date
hereof and will be complete and accurate as of the date on which the Merger is
consummated.
Based on the foregoing, we are of the opinion that, under presently
applicable federal income tax law:
(1) The Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, and VB&T and Regions will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by holders of VB&T Common
Stock upon the exchange in the Merger of all of their VB&T Common Stock solely
for shares of Regions Common Stock (except with respect to any cash received in
lieu of a fractional share interest in Regions Common Stock).
(3) The aggregate tax basis of the Regions Common Stock received
by holders of VB&T Common Stock who exchange all of their VB&T Common Stock
solely for Regions Common Stock in the Merger will be the same as the tax basis
of the VB&T Common Stock surrendered in exchange therefor, less the basis of any
fractional share of Regions Common Stock settled by cash payment.
(4) The holding period of the Regions Common Stock received by
holders who exchange all of their VB&T Common Stock solely for Regions Common
Stock in the Merger will include the holding period of the VB&T Common Stock
surrendered in
<PAGE> 3
Regions Financial Corporation
VB&T Bancshares Corp.
November 13, 1998
Page 3
exchange therefor, provided that such VB&T Common Stock is held
as a capital asset at the Effective Time.
(5) The payment of cash to holders of VB&T Common Stock in lieu of
fractional share interests of Regions Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of the
exchange and then were redeemed by Regions. These cash payments will be treated
as having been received as distributions in full payment in exchange for the
Regions Common Stock redeemed, as provided in Section 302(a) of the Code.
(6) Where solely cash is received by a holder of VB&T Common Stock
in exchange for VB&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 VB&T Common Stock, subject to the provisions and limitations of Section
302 of the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. The federal income tax consequences described herein may not
apply to certain shareholders of VB&T with special situations, including,
without limitation, shareholders who hold their VB&T Common Stock other than as
a capital asset, who received their VB&T Common Stock upon the exercise of
employee stock options or otherwise as compensation, who hold their VB&T Common
Stock as part of a "straddle" or "conversion transaction" for federal income tax
purposes, or are foreign persons, insurance companies, or securities dealers.
In addition, our opinions are based solely on the documents that we
have examined, and the factual statements and factual representations set out in
the Certificates, which we have assumed were true on the date of the
Certificates, and are true on the date hereof. Our opinions cannot be relied
upon if any of the facts pertinent to the Federal income tax treatment of the
Merger stated in such documents or any of the factual statements or factual
representations set out in the Certificates is, or later becomes, inaccurate.
Our opinions are limited to the tax matters specifically covered thereby, and we
have not been asked to address, nor have we addressed, any other tax
consequences of the Merger, including for example any issues related to
intercompany transactions, accounting methods, or changes in accounting methods
resulting from the Merger, or the consequences of the Merger under state, local
or foreign law. These opinions are provided solely for the benefit and use of
Regions and VB&T. No other party or person is entitled to rely on the opinions.
<PAGE> 4
Regions Financial Corporation
VB&T Bancshares Corp.
November 13, 1998
Page 4
We hereby consent to the use of this opinion and to the references made
to Alston & Bird LLP in the Registration Statement under the captions
"Summary--Federal Income Tax Consequences of the Merger" and "Description of
Transaction--Federal Income Tax Consequences of the Merger" and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Philip C. Cook
----------------------------
Philip C. Cook, Partner
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 655,340 shares of its common stock and
to the incorporation by reference therein of our report dated February 9, 1998
(except for Note Q as to which the date is February 13, 1998) with respect to
the consolidated financial statements of Regions Financial Corporation
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1997 and our report dated July 31, 1998 (except for
Note Q as to which the date is November 3, 1998) with respect to the
supplemental consolidated financial statements of Regions Financial Corporation
included in its Current Report on Form 8-K dated November 6, 1998,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
November 12, 1998
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANT'S CONSENT
The Board of Directors
VB&T Bancshares Corp.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ STEWART, FOWLER & STALVEY, P.C.
------------------------------
STEWART, FOWLER & STALVEY, P.C.
Valdosta, Georgia
November 12, 1998
<PAGE> 1
VB&T Bancshares Corp.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints ________ _______, ________
_______, and _______ _______, and each or any one of them, with full power of
substitution, as Proxies to represent and to vote as designated below, all the
shares of common stock of VB&T Bancshares Corp. (the "Company") held of
record by the undersigned on _______, 1998, at the Special Meeting of
Stockholders (the "Special Meeting") to be held on _______, 1998, or any
adjournments thereof.
1. Proposal to approve the Agreement and Plan of Merger, dated as of
July 6, 1998 (the "Agreement"), by and between the Company and Regions Financial
Corporation ("Regions") pursuant to which the Company will merge with and into
Regions and each share of the Company's common stock (except for certain shares
held by the Company, Regions, or their respective subsidiaries) will be
converted into that portion of a share of Regions common stock determined by
dividing $28.28 by the average of the closing prices of Regions common stock
over a specified period, and under such other terms and conditions as are set
forth in the Agreement:
____ FOR ____ AGAINST ____ ABSTAIN
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder, and in the discretion of the persons
named as Proxies on all other matters which may properly come before the Special
Meeting or any adjournment thereof. If no direction is made, this proxy will be
voted in favor of Proposal 1.
[Reverse]
This Proxy revokes all prior proxies with respect to the Special Meeting
and may be revoked prior to its exercise.
Please date and sign exactly as name appears on your stock certificate.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated:___________________________________________, 1998.
_____________________________________________
<PAGE> 2
(Print Name of Stockholder)
_____________________________________________
(Signature of Stockholder)
_____________________________________________
(Print Name of Stockholder)
_____________________________________________
(Signature of Stockholder)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
