<PAGE> 1
As filed with the Securities and Exchange Commission on December 18, 1998
Registration No. 333-
- -------------------------------------------------------------------------------
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)
----------------------
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<CAPTION>
Delaware 6711 63-0589368
<S> <C> <C>
(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:
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<CAPTION>
<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III WALTER E. MAY
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD LLP WRIGHT, LINDSEY & JENNINGS LLP
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. 200 WEST CAPITOL AVENUE
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 SUITE 2200
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 LITTLE ROCK, AR 72201-3699
(205) 250-5000 (202) 756-3303 (501) 212-1342
</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 1,858,143 $13.9904410 $25,996,240 $7,226.96
========================================================================================================
</TABLE>
*Calculated in accordance with Rule 457(f) based on the total stockholders'
equity of the company being acquired at September 30, 1998.
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
PROXY STATEMENT PROSPECTUS
ARKANSAS BANKING COMPANY REGIONS FINANCIAL CORPORATION
_______ SHARES
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Arkansas Banking Company and Regions Financial
Corporation have agreed on a merger of Arkansas Banking Company and Regions.
Regions will be the surviving corporation in the proposed 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 proposed merger is completed, Arkansas Banking Company stockholders will
receive 2.85 shares of Regions common stock for each share of Arkansas Banking
Company common stock they own. Regions stockholders will continue to own their
existing shares of Regions common stock after the proposed merger.
We can't complete the proposed merger unless the stockholders of Arkansas
Banking Company approve it. Arkansas Banking Company has scheduled a special
meeting for its stockholders to vote on the proposed 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 proposed
merger. If you don't return your card, the effect will be a vote against the
proposed merger.
The date, time, and place of the special meeting of stockholders are as
follows:
_______, 1999
_______ p.m.
Main Office, Arkansas Banking Company
515 West Washington
Jonesboro, Arkansas 72403
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
proposed merger of Arkansas Banking Company with Regions, and I join with the
other members of the Board of Directors in enthusiastically recommending that
you vote in favor of the proposed merger.
Sloan Rainwater
Chairman
Arkansas Banking Company
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
<PAGE> 3
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
FOR A DISCUSSION OF RISKS AND UNCERTAINTIES THAT MAY AFFECT THE FUTURE EARNINGS
AND FINANCIAL CONDITION OF REGIONS, SEE "RISK FACTORS" ON PAGE ___.
Proxy Statement-Prospectus dated _______, 1998, and first mailed to
stockholders on _______, 1998.
<PAGE> 4
We have not authorized anyone to give any information or make any
representation about the proposed 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 Arkansas
Banking Company has been supplied by Arkansas Banking Company.
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 proposed 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 proposed 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 proposed merger. These possible events or factors include the following:
1. Regions' revenues after the proposed 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
proposed 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 proposed
merger than expected;
4. Regions may have more trouble integrating acquired businesses or retaining
key personnel than expected;
5. Regions' costs savings from the proposed 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 expected;
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.
For additional information, please refer to the discussion under the heading
"Risk Factors" on page 12.
<PAGE> 5
ARKANSAS BANKING COMPANY
515 WEST WASHINGTON, JONESBORO, ARKANSAS 72403
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD _______, 1999
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Arkansas Banking Company, a bank holding company, will be held at
Arkansas Banking Company's main office, located at 515 West Washington,
Jonesboro, Arkansas 72403 on _______, 1999, 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 September 25, 1998 (the "Merger Agreement"), by and between Arkansas Banking
Company and Regions Financial Corporation ("Regions") pursuant to which (i)
Arkansas Banking Company will merge with and into Regions with Regions as the
surviving corporation and (ii) each share of Arkansas Banking Company common
stock (excluding certain shares held by Arkansas Banking Company, Regions, or
their respective subsidiaries and excluding all shares held by stockholders who
perfect their dissenters' rights) will be converted into 2.85 shares of Regions
common stock, subject to possible adjustment, 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 Arkansas Banking Company have a right to dissent from the
proposed merger and obtain payment of the fair value of their shares in cash by
complying with the applicable provisions of applicable law, which are attached
to the accompanying Proxy Statement-Prospectus as Appendix C.
The Board of Directors of Arkansas Banking Company unanimously recommends that
holders of Arkansas Banking Company 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
Arkansas Banking Company 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
Sharon J. Blackburn
Corporate Secretary
_______, 1998
<PAGE> 6
TABLE OF CONTENTS
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SUMMARY ........................................................................................
The Companies ...................................................................
The Merger ......................................................................
Comparative Per Share Market Price Information ..................................
Reasons for the Merger ..........................................................
Opinion of Financial Advisor ....................................................
The Special Meeting .............................................................
Recommendations to Stockholders .................................................
Record Date; Voting Power .......................................................
Vote Required ...................................................................
Conditions to Completion of the Merger ..........................................
Termination of the Merger Agreement .............................................
Federal Income Tax Consequences .................................................
Accounting Treatment ............................................................
Interests of Persons in the Merger That Are Different from Yours ................
Dissenters' Appraisal Rights ....................................................
Regulatory Approvals ............................................................
Comparative Per Share Data ......................................................
Selected Financial Data .........................................................
RISK FACTORS ...................................................................................
THE SPECIAL MEETING ............................................................................
General .........................................................................
Record Date; Vote Required ......................................................
THE MERGER .....................................................................................
General .........................................................................
Possible Adjustment of Exchange Ratio ...........................................
Treatment of Arkansas Banking Company Options ...................................
Background of the Merger ........................................................
Arkansas Banking Company's Reasons for the Merger ...............................
Regions' Reasons for the Merger .................................................
Opinion of Arkansas Banking Company's Financial Advisor .........................
Effective Time of the Merger ....................................................
Distribution of Regions Stock Certificates and Payment For Fractional Shares ....
Conditions to Consummation of the Merger ........................................
Regulatory Approvals ............................................................
Waiver, Amendment, and Termination of the Merger Agreement ......................
Conduct of Business Pending the Merger ..........................................
Management Following the Merger .................................................
Interests of Certain Persons in the Merger ......................................
Dissenting Stockholders .........................................................
Federal Income Tax Consequences of the Merger ...................................
Accounting Treatment ............................................................
Expenses and Fees ...............................................................
Resales of Regions Common Stock .................................................
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS .................................................
Antitakeover Provisions Generally ...............................................
Authorized Capital Stock ........................................................
Amendment of Certificate or Articles of Incorporation and Bylaws ................
</TABLE>
<PAGE> 7
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Classified Board of Directors and Absence of Cumulative Voting ..................
Removal of Directors ............................................................
Limitations on Director Liability ...............................................
Indemnification .................................................................
Special Meetings of Stockholders ................................................
Actions by Stockholders Without a Meeting .......................................
Stockholder Nominations .........................................................
Mergers, Consolidations, and Sales of Assets Generally ..........................
Business Combinations with Certain Persons ......................................
Dissenters' Rights ..............................................................
Stockholders' Rights to Examine Books and Records ...............................
Dividends .......................................................................
COMPARATIVE MARKET PRICES AND DIVIDENDS ........................................................
ARKANSAS BANKING COMPANY MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ......................................
INFORMATION ABOUT ARKANSAS BANKING COMPANY .....................................................
Business and Properties .........................................................
Competition .....................................................................
Legal Proceedings ...............................................................
Management ......................................................................
Transactions with Management ....................................................
Voting Securities and Principal Stockholders ....................................
INFORMATION ABOUT REGIONS ......................................................................
General .........................................................................
Recent Developments .............................................................
SUPERVISION AND REGULATION .....................................................................
General .........................................................................
Payment of Dividends ............................................................
Capital Adequacy ................................................................
Prompt Corrective Action ........................................................
FDIC Insurance Assessments ......................................................
DESCRIPTION OF REGIONS COMMON STOCK ............................................................
STOCKHOLDER PROPOSALS ..........................................................................
EXPERTS ........................................................................................
OPINIONS .......................................................................................
WHERE YOU CAN FIND MORE INFORMATION ............................................................
INDEX TO ARKANSAS BANKING COMPANY FINANCIAL STATEMENTS ......................................... F-1
APPENDIX A--Agreement and Plan of Merger ....................................................... A-1
APPENDIX B--Opinion of Stephens Inc. ........................................................... B-1
APPENDIX C--Sections 14-27-1301 et seq. of the Arkansas Business Corporation Act,
pertaining to dissenters' rights .......................................................... C-1
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<PAGE> 8
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 (page __)
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 through 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 Can
Find More Information" refers you to places where you can find more information
about Regions.
ARKANSAS BANKING COMPANY (page __)
515 West Washington
Jonesboro, Arkansas 72403
(870) 932-2131
Arkansas Banking Company is incorporated in Arkansas and is a bank holding
company. Arkansas Banking Company owns four commercial banks which serve
customers primarily in Lawrence, Craighead, Greene, Independence, Jackson, Clay
and Mississippi counties in northeastern Arkansas. As of September 30, 1998,
Arkansas Banking Company's total assets were about $350.3 million, deposits
were about $311.2 million, and stockholders' equity was about $26.0 million.
THE MERGER (PAGE __)
Arkansas Banking Company proposes to merge with Regions Financial Corporation.
Regions will be the surviving corporation in the proposed merger. When the
proposed merger is completed, you will receive 2.85 shares of Regions stock for
each share of Arkansas Banking Company stock that you own. 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 proposed merger under Arkansas law and follow
the required procedures, you will receive a cash payment for your shares of
Arkansas Banking Company common stock instead of receiving Regions common
stock. More information about your rights to dissent from the proposed merger,
and the procedures you must follow should you choose to do so, is included
under the heading "The Merger -- Dissenting Stockholders" at page __.
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<PAGE> 9
The merger agreement protects you as stockholders against a sharp decline,
before the Special Meeting, in the trading price of Regions stock compared to
stock prices of other bank holding companies. If the average price of Regions
stock over a ten-day period prior to the special meeting is less than $28.65
and also underperforms a group of bank holding company stocks by more than 15%
between September 25, 1998 and the date of the special meeting, then your Board
of Directors can terminate the merger agreement unless Regions agrees to issue
more Regions stock in exchange for your shares of Arkansas Banking Company
stock. This mechanism is explained in detail under the heading "The
Merger--Possible Adjustment of Exchange Ratio" at page ___.
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 proposed merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Shares of Regions are quoted on the Nasdaq National Market. Shares of Arkansas
Banking Company are not quoted on any established market. On August 5, 1998,
the last full trading day prior to the public announcement of the proposed
merger, Regions stock closed at $37.88 per share. On _______, 1998, Regions
stock closed at $_______ per share. The last known sale of Arkansas Banking
Company stock took place on __________ at a price of $_______ per share.
Based on the exchange ratio in the proposed merger, which is 2.85, the market
value of the consideration that Arkansas Banking Company stockholders will
receive in the proposed merger for each share of Arkansas Banking Company
common stock would be $107.96 based on Regions' August 5, 1998 closing price
and $_______ based on Regions' _______, 1998 closing price. Of course, the
market price of Regions common stock will fluctuate prior to and after
completion of the proposed merger, while the exchange ratio is fixed.
Therefore, you should obtain current stock price quotations for Regions common
stock.
REASONS FOR THE MERGER (PAGE ___)
Before deciding to approve and recommend the proposed merger, your Board of
Directors considered the financial condition and prospects of Arkansas Banking
Company, information about Regions, the financial terms of the proposed merger,
the likelihood the bank regulators will approve the proposed merger, the
federal income tax consequences of the proposed merger, the advice of your
Board's legal and financial advisors, and other factors. Your Board of
Directors decided the proposed merger is advisable and is in your best
interests as stockholders.
To review the background of and reasons for the proposed merger in greater
detail, please see the discussion under the headings "The Merger--Background of
the Merger" and "The Merger--Arkansas Banking Company's Reasons for the Merger"
at pages ___ and ___.
OPINION OF FINANCIAL ADVISOR (PAGE ___)
In deciding to approve the proposed merger, your Board considered the opinion
of its financial advisor, Stephens Inc., that as of the date of the opinion the
consideration you are to receive in the merger was fair from a financial point
of view to you as Arkansas Banking Company stockholders. We have attached this
opinion as Appendix B to this Proxy Statement-Prospectus. You should read it
carefully.
2
<PAGE> 10
THE SPECIAL MEETING (PAGE ___)
The Arkansas Banking Company special meeting will be held at Arkansas Banking
Company's main office, 515 West Washington, Jonesboro, Arkansas 72403, at
_______ p.m. on _______, 1999. At the special meeting, Arkansas Banking Company
stockholders will be asked to approve the merger agreement.
RECOMMENDATIONS TO STOCKHOLDERS (PAGE ___)
Your Board of Directors believes that the proposed 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 Arkansas Banking Company Special Meeting if you owned
Arkansas Banking Company common stock as of the close of business on _______,
1998, the record date. On that date, [586,980] shares of Arkansas Banking
Company 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 Arkansas
Banking Company common stock you owned on _______, 1998.
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 Arkansas Banking Company common
stock are represented at the special meeting either in person or by proxy. In
order for the proposed merger to be approved, Arkansas Banking Company
stockholders holding a majority of the outstanding shares of common stock on
the record date must vote in favor of the proposed merger.
All together, the directors and officers of Arkansas Banking Company can cast
about 93% of the votes entitled to be cast at the Arkansas Banking Company
special meeting. The members of your Board of Directors have agreed to vote all
of their shares (other than those that they hold as fiduciaries) in favor of
the proposed merger.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE ___)
The completion of the proposed merger depends on a number of conditions being
met, including the following:
- - Arkansas Banking Company stockholders approving the proposed 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
proposed 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 Arkansas Banking Company in the
proposed merger will generally be tax-free as we've described it to you in
this Proxy Statement-Prospectus;
- - 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
proposed merger; and
3
<PAGE> 11
- - Arkansas Banking Company receiving an opinion from Stephens Inc., its
financial advisor, that the Exchange Ratio is fair to the stockholders of
Arkansas Banking Company from a financial point of view,(such opinion
having been delivered ______________, 1998).
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 proposed 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 proposed merger will be completed.
TERMINATION OF THE MERGER AGREEMENT (PAGE ___)
We can agree at any time to terminate the merger agreement without completing
the proposed 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
proposed merger or after the rejection of an application for a
governmental approval required to complete the proposed merger;
- - If the proposed merger isn't completed by June 30, 1999;
- - If the Arkansas Banking Company stockholders don't approve the proposed
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.
In addition, Arkansas Banking Company could decide to terminate the merger
agreement based on the market price of Regions' common stock during a ten-day
period before the date stockholders approve the proposed merger, if the average
price during the period is less than $28.65 and underperforms a group of bank
holding company stocks by 15% or more during the period following our entering
into the merger agreement.
However, Arkansas Banking Company will not be able to terminate the merger
agreement upon such a decline if Regions elects to issue more shares of Regions
common stock in exchange for shares of Arkansas Banking Company common stock.
FEDERAL INCOME TAX CONSEQUENCES (PAGE ___)
We have structured the proposed merger with the intent that you won't recognize
any gain or loss for U.S. federal income tax purposes in the proposed merger
when you exchange all of your shares of Arkansas Banking Company common stock
for shares of Regions common stock in the proposed merger, except in connection
with cash received instead of fractional shares. We have conditioned the
proposed 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 ARKANSAS BANKING COMPANY
STOCKHOLDERS, INCLUDING THE TYPES OF ARKANSAS BANKING COMPANY STOCKHOLDERS
DISCUSSED ON PAGE ___, AND WILL NOT APPLY TO ANY ARKANSAS BANKING COMPANY
STOCKHOLDER WHO DISSENTS FROM THE PROPOSED MERGER UNDER ARKANSAS LAW.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE PROPOSED MERGER TO YOU CAN BE
COMPLICATED.
4
<PAGE> 12
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 PROPOSED MERGER'S TAX CONSEQUENCES.
ACCOUNTING TREATMENT (PAGE __)
We expect the merger to qualify for purchase accounting treatment, meaning that
the assets and liabilities of Arkansas Banking Company will be recorded at their
estimated fair values as of the date the merger is completed and added to those
of Regions.
INTERESTS OF PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE __)
Some of the officers of Arkansas Banking Company have benefit and compensation
plans that provide them with interests in the proposed merger that are
different from, or in addition to, their interests as stockholders of Arkansas
Banking Company. In particular, they hold outstanding options under Arkansas
Banking Company's existing stock option plan, which will be converted into
stock options to acquire Regions stock after the proposed merger. Also, members
of Arkansas Banking Company's Board and its officers are entitled to
indemnification under the merger agreement.
The board of directors of Arkansas Banking Company 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 __)
Arkansas law permits you to dissent from the proposed 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 proposed merger.
If you dissent from the proposed merger, your shares of Arkansas Banking
Company common stock will not be exchanged for shares of Regions common stock
in the proposed 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 proposed 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 proposed merger
after the Federal Reserve Board has approved it, which the Federal Reserve
Board may shorten to 15 days.
In addition, the proposed merger is subject to the approval of the Arkansas
Bank Commissioner.
We have filed 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 proposed merger of our two companies (which
5
<PAGE> 13
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
Regions will record Arkansas Banking Company's assets and liabilities at their
estimated fair values and add them to the assets and liabilities of Regions for
accounting and financial reporting purposes (a method which is referred to as
the "purchase" method of accounting).
The information listed as "pro forma equivalent" was obtained by multiplying
the pro forma amounts by the exchange ratio of 2.85. It is intended to reflect
the fact that Arkansas Banking Company stockholders will be receiving 2.85
shares of Regions common stock for each share of Arkansas Banking Company
common stock exchanged in the proposed 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.
The information in the following table is based on the historical financial
information of our companies. See "Where You Can Find More Information" on page
___ and "Index to Arkansas Banking Company Financial Statements" on page F-1.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
-------------------- DECEMBER 31,
1998 1997 1997
(Unaudited) ----
(Unaudited except Regions
and ABC historical)
<S> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE
Regions historical .......................... $ 1.34 $ 1.38 $ 1.82
Regions historical - diluted ................ 1.32 1.36 1.79
ABC historical .............................. 5.04 4.18 5.86
ABC historical - diluted .................... 5.04 4.18 5.86
Regions and ABC pro forma combined(1) ....... 1.34 1.82
Regions and ABC pro forma combined
diluted(1) ............................. 1.31 1.78
ABC pro forma equivalent(2) ................. 3.82 5.19
ABC pro forma equivalent-
diluted(2) ............................. 3.73 5.07
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical .......................... .69 .60 .80
ABC historical .............................. -- -- --
ABC pro forma equivalent(3) ................. 1.97 1.71 2.28
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical .......................... 13.38 12.46 12.75
ABC historical .............................. 39.44 32.18 33.99
Regions and ABC pro forma combined(1) ....... 13.38
ABC pro forma equivalent(2) ................. 38.13
</TABLE>
(1) Represents the combined results of Regions and Arkansas Banking Company as
if the proposed merger were consummated on January 1, 1997 (or September
30, 1998, in the case of Book Value Per Common Share data), and were
accounted for as a purchase.
(2) Represents pro forma combined information multiplied by the exchange ratio
of 2.85 shares of Regions common stock for each share of Arkansas Banking
Company common stock. The exchange ratio is subject to upward adjustment
under certain conditions if the average of the closing sales prices of
Regions common stock over a specified period is less than
6
<PAGE> 14
$28.65. See "The Merger--Possible Adjustment of Exchange Ratio." The
presentation of pro forma equivalent information would be affected by any
increase in the exchange ratio.
(3) Represents historical dividends declared per share by Regions multiplied by
the exchange ratio of 2.85 shares of Regions common stock for each share of
Arkansas Banking Company common stock.
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 "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.
7
<PAGE> 15
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)
INCOME STATEMENT DATA:
<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 before
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
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 1.19% 1.23% 1.19%
Return on average stockholders'
equity(1) ....................... 13.79 a 16.02 b 15.38 c 14.71 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 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
</TABLE>
8
<PAGE> 16
Selected Historical Financial Data of Regions -- Continued
<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>
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.
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) charge 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%.
9
<PAGE> 17
Selected Historical Financial Data of Arkansas Banking Company
<TABLE>
<CAPTION>
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income ................................. $ 19,287 $ 16,810 $ 22,921 $ 18,096 $ 14,217
Total interest expense ................................ 10,144 8,630 11,875 8,745 7,709
Net interest income ................................... 9,143 8,180 11,046 9,351 6,508
Provision for loan losses ............................. 424 411 583 665 532
Net interest income after
loan loss provision .............................. 8,719 7,769 10,463 8,686 5,976
Total noninterest income
excluding security gains ......................... 2,087 1,755 2,733 2,285 1,836
Security gains ........................................ 19 2 15 1 2
Total noninterest expense ............................. 6,200 5,622 7,999 7,435 5,872
Income tax expense .................................... 1,659 1,468 1,787 1,271 677
Net income ............................................ 2,966 2,436 3,425 2,266 1,265
PER SHARE DATA:
Net income ............................................ $ 5.04 $ 4.18 $ 5.86 $ 3.89 $ 2.17
Net income--fully diluted ............................. 5.04 4.18 5.86 3.89 2.17
Cash dividends ........................................ -- -- -- -- --
Book value ............................................ 39.44 32.18 33.99 27.41 24.88
OTHER INFORMATION:
Average number of shares outstanding .................. 588 583 585 582 583
Average number of shares outstanding--diluted.......... 588 583 585 582 583
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets........................................... $350,261 315,394 $320,618 274,875 213,928
Securities available for sale ......................... 67,688 65,532 67,596 68,863 64,718
Loans, net of unearned income ......................... 248,401 217,053 213,880 166,748 119,413
Total deposits ........................................ 311,160 278,464 289,077 247,455 192,757
Long term debt......................................... 9,061 10,215 5,510 5,570 2,700
Stockholders' equity .................................. 25,996 22,066 23,047 19,354 17,152
PERFORMANCE RATIOS:
Return on average assets(1) ........................... 1.08% 1.01% 1.13% .94% .60%
Return on average stockholders' equity(1) ............. 12.14 12.00 16.45 12.53 7.37
Net interest margin(1) ................................ 3.93 4.02 3.99 4.28 3.41
Efficiency(2) ......................................... 55.21 56.59 58.05 63.90 70.37
Dividend payout ....................................... -- -- -- -- --
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income(1) ........................ .16% .06% .10% .19% .23%
Problem assets to net loans and
other real estate (3) ............................ .26 .18 .29 .30 .75
Nonperforming assets to net loans
and other real estate(4) ......................... .32 .41 .37 .50 .82
Allowance for loan losses to loans,
net of unearned income ........................... .99 1.03 1.08 1.15 1.10
Allowance for loan losses to
nonperforming assets(4) .......................... 311.70 253.01 297.81 234.35 135.65
</TABLE>
10
<PAGE> 18
Selected Historical Financial Data of Arkansas Banking Company -- Continued
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity
to average assets .................................. 7.21% 6.82% 6.86% 7.49% 8.10%
Average loans to average deposits ....................... 74.56 70.84 71.51 68.58 52.68
Tier 1 risk-based capital(5) ............................ 6.58 8.77 9.42 9.49 11.60
Total risk-based capital(5) ............................. 8.13 9.80 10.50 10.61 12.63
Tier 1 leverage(5) ...................................... 6.61 6.25 6.37 5.99 6.91
</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> 19
RISK FACTORS
If the merger is consummated, you will receive shares of Regions common stock
in exchange for your shares of Arkansas Banking Company common stock. You
should be aware of particular risks and uncertainties that are applicable to an
investment in Regions common stock. Specifically, there are risks and
uncertainties that could affect Regions' future financial results and that may
cause Regions' future earnings and financial condition to be less favorable
than Regions' expectations.
Some of the risks and uncertainties relate to economic conditions generally and
would affect other financial institutions in similar ways. These aspects are
discussed above under the heading "Caution About Forward Looking Statements."
This section addresses particular risks and uncertainties that are specific to
Regions.
Since December 31, 1997, Regions has acquired 11 financial institutions and has
pending five such acquisitions, including the proposed merger. The most
significant transaction was the merger of First Commercial Corporation with
Regions, by virtue of the size of First Commercial relative to Regions.
Information about Regions' recently completed and pending acquisitions is
presented on page __ under the heading "Information About Regions--Recent
Developments."
Regions' expectations concerning future earnings depend in part on Regions
being able to combine the operations of the acquired institutions with Regions'
own operations promptly and efficiently, and also on Regions being correct in
its assumptions about the financial impact of the acquisitions.
The risks and uncertainties that may affect Regions' future earnings and
financial condition include the following:
- - Regions' revenues after the proposed merger and other recent acquisitions
may be lower than expected.
Particularly in connection with the First Commercial acquisition, Regions
estimated that it could enhance revenues from First Commercial's operations.
There is a risk that such revenue enhancements may not be achieved and also a
risk that the revenues of other acquired institutions may erode over time.
- - Regions' restructuring charges in recent acquisitions may be higher than
expected.
Regions has recorded restructuring and merger-related charges in connection
with the First Commercial acquisition and the other recently completed
acquisitions. There is a risk that there may be additional costs and charges
resulting from such transactions that exceed the charges Regions has recorded
for financial reporting and accounting purposes.
- - Regions may have more trouble integrating acquired businesses or retaining
key personnel than expected.
Converting the systems and procedures of each acquired institution to Regions'
systems is an important part of Regions' acquisition program. There is a risk
that the conversion of an acquired institution may not be completed on schedule
or may be more difficult and costly than expected. There is also a risk that
Regions may not be able to retain key personnel of an acquired institution,
which could cause the acquired operations to perform below expectations.
12
<PAGE> 20
- - Regions' operating costs after the merger and other recent acquisitions
may be greater than expected, and 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.
Regions has estimated that it can achieve cost savings as a result of the First
Commercial acquisition and the other recently completed acquisitions. There is
a risk the cost savings may not be realized or may be less than Regions
expects.
You should also refer to the discussion above under the heading "Caution About
Forward-Looking Statements."
13
<PAGE> 21
THE SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is being furnished to the stockholders of
Arkansas Banking Company in connection with the solicitation by the Arkansas
Banking Company Board of Directors of proxies for use at a special meeting of
stockholders, at which Arkansas Banking Company stockholders will be asked to
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
September 25, 1998, by and between Arkansas Banking Company and Regions
Financial Corporation.
The Special Meeting will be held at _______:00 p.m., local time, on _______,
1999, at the main offices of Arkansas Banking Company, located at 515 West
Washington, Jonesboro, Arkansas 72403.
Arkansas Banking Company stockholders are requested promptly to sign, date, and
return the accompanying proxy card to Arkansas Banking Company 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 merger agreement.
Any Arkansas Banking Company 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 Arkansas Banking Company a signed proxy card bearing a later
date, provided that such notice or proxy card is actually received by Arkansas
Banking Company 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 Arkansas Banking Company, 515 West Washington, Jonesboro,
Arkansas 72403, Attention: Sharon J. Blackburn, 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 Arkansas Banking Company 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 MERGER 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 MERGER AGREEMENT. As of the date of this Proxy
Statement-Prospectus, Arkansas Banking Company is unaware of any other matter
to be presented at the Special Meeting.
Arkansas Banking Company will solicit proxies by mail and perhaps also by
telephone, telegram, or in person by the directors, officers, and employees of
Arkansas Banking Company. Such persons 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.
Arkansas Banking Company stockholders should not forward any stock certificates
with their proxy cards.
RECORD DATE; VOTE REQUIRED
Arkansas Banking Company's Board of Directors has established the close of
business on _______, 1998, as the record date for determining the Arkansas
Banking Company stockholders entitled to notice of and to vote at the Special
Meeting. Only Arkansas Banking Company stockholders of record as of the record
date
14
<PAGE> 22
will be entitled to vote at the Special Meeting. As of the record date, there
were approximately 70 holders of [586,980] shares of the $.01 par value common
stock of Arkansas Banking Company outstanding and entitled to vote at the
Special Meeting. Each share is entitled to one vote. For information as to
persons known by Arkansas Banking Company to beneficially own more than 5.0% of
the outstanding shares of Arkansas Banking Company common stock as of the
record date, see "Information About Arkansas Banking Company--Voting
Securities and Principal Stockholders."
The presence, in person or by proxy, of a majority of the outstanding shares of
Arkansas Banking Company 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
Arkansas Banking Company 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 merger agreement
for any reason, including broker nonvotes. Generally, a broker who holds shares
of Arkansas Banking Company 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 merger agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
Arkansas Banking Company 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 merger agreement.
The directors and executive officers of Arkansas Banking Company and their
affiliates beneficially owned, as of the record date, 567,311 shares (or
approximately 93% of the outstanding shares) of Arkansas Banking Company common
stock. The directors of Arkansas Banking Company have agreed to vote those
shares of Arkansas Banking Company common stock over which they have voting
control (other than in a fiduciary capacity) in favor of the proposed merger.
The directors and executive officers of Regions and their affiliates
beneficially owned, as of the record date, no shares of Arkansas Banking
Company common stock. As of that date, no subsidiary of either Arkansas Banking
Company or Regions held any shares of Arkansas Banking Company common stock in
a fiduciary capacity for others.
15
<PAGE> 23
THE MERGER
The following material describes certain aspects of the merger of Arkansas
Banking Company 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 merger 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 merger agreement provides generally for the acquisition of Arkansas Banking
Company by Regions pursuant to the proposed merger of Arkansas Banking Company
with and into Regions, with Regions as the surviving corporation resulting from
the merger.
On the date and at the time that the proposed merger becomes effective, each
share of Arkansas Banking Company common stock (excluding shares held by
Arkansas Banking Company, 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 proposed merger will be converted into 2.85 shares of the $.625 par
value common stock of Regions, subject to possible adjustment as described
below under the caption "--Possible Adjustment of Exchange Ratio." Each share
of Regions common stock outstanding immediately prior to the effective time of
the proposed merger will remain outstanding and unchanged as a result of the
proposed merger.
No fractional shares of Regions common stock will be issued in connection with
the proposed merger. In lieu of issuing fractional shares, Regions will make a
cash payment equal to the fractional part of a share which an Arkansas Banking
Company 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 proposed merger.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the exchange ratio could be
adjusted pursuant to certain provisions of the merger agreement. UNDER NO
CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE LESS THAN 2.85 SHARES OF REGIONS
COMMON STOCK FOR EACH SHARE OF ARKANSAS BANKING COMPANY COMMON STOCK. An
adjustment could occur only if the Arkansas Banking Company Board elects to
terminate the merger agreement pursuant to the provisions of the merger
agreement described below and if Regions then elects to avoid termination of
the merger agreement by increasing the exchange ratio.
For purposes of the description of these provisions and their operation, the
following definitions apply.
The "Average Closing Price" is the average of the daily last sale prices of
Regions common stock as reported on the Nasdaq National Market (as reported by
The Wall Street Journal, or, if not reported thereby, another authoritative
source as chosen by Regions) for 10 consecutive full trading days in which such
shares are traded on the Nasdaq National Market ending at the close of trading
on the Determination Date.
16
<PAGE> 24
The "Determination Date" is the later of the date the proposed merger is
approved by the stockholders of Arkansas Banking Company and the date the
Federal Reserve Board approves the merger.
The "Regions Ratio" is the number obtained by dividing the Average Closing
Price by $35.81.
The "Index Price" is the weighted average of the last sale prices of the common
stock of the bank holding companies defined as the "Index Group" in the merger
agreement as of a given date.
The "Index Ratio" is the number obtained by dividing the Index Price on the
Determination Date by the Index Price as of September 25, 1998, less 15%.
If both:
(i) the Average Closing Price is less than $28.65; and
(ii) the Regions Ratio is less than the Index Ratio,
then Arkansas Banking Company may elect to terminate the merger agreement
unless Regions increases the exchange ratio such that the number of shares of
Regions common stock issued in exchange for each share of Arkansas Banking
Company common stock has a value (based on the Average Closing Price) equal to
the lesser of (i) $81.65 or (ii) the value (based on the Average Closing Price)
of the number of shares of Regions common stock that would have been exchanged
for each share of Arkansas Banking Company common stock if the relative
performance of Regions common stock as determined above was 15% lower than the
relative performance of the Index Group. If the proposed merger is approved by
the Arkansas Banking Company stockholders, the Arkansas Banking Company Board
may elect not to terminate the merger agreement and to consummate the proposed
merger without resoliciting the Arkansas Banking Company stockholders even if
Arkansas Banking Company's termination right is triggered and, as a result of
the exchange ratio, the value of shares of Regions common stock (valued at the
Average Closing Price) issued in exchange for each share of Arkansas Banking
Company common stock would be less than the lesser of (i) $81.65 or (ii) the
value (based on the Average Closing Price) of the number of shares of Regions
common stock that would have been exchanged for each share of Arkansas Banking
Company common stock if the relative performance of Regions common stock as
determined above was 15% lower than the relative performance of the Index
Group.
These conditions reflect the parties' agreement that Arkansas Banking Company's
stockholders will assume the risk of declines in the value of Regions common
stock to $28.65. Any adjustment of the exchange ratio reflecting a decline in
the price of Regions common stock to below $28.65 would be dependent on whether
the Average Closing Price of Regions common stock lags behind a market basket
of comparable bank holding company common stocks (the Index Group referenced
above) by more than 15%.
In deciding whether to terminate the merger agreement, the Arkansas Banking
Company Board will take into account, consistent with its fiduciary duties, all
relevant facts and circumstances that exist at such time, including, without
limitation, information concerning the business, financial condition, results
of operations, and prospects of Regions (including the recent performance of
Regions common stock, the historical financial data of Regions, customary
statistical measurements of Regions's financial performance, and the future
prospects for Regions common stock following the proposed merger), and the
advice of its financial advisors and legal counsel. If the Arkansas Banking
Company Board elects to terminate the merger agreement, Regions would then
determine whether to proceed with the proposed merger at the higher exchange
ratio. In making this determination, the principal factors Regions will
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<PAGE> 25
consider include the projected effect of the proposed merger on Regions' pro
forma earnings per share and whether Regions' assessment of Arkansas Banking
Company's earning potential as part of Regions justifies the issuance of an
increased number of Regions' shares. If Regions declines to adjust the exchange
ratio, Arkansas Banking Company may elect to proceed without the adjustment,
provided it does so within 12 days after the Determination Date. Regions is
under no obligation to adjust the exchange ratio.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, it has been assumed that the initial
exchange ratio is 2.85, the Starting Price of Regions Common stock is $35.81,
and the Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is $28.65 or
greater. Under this scenario, regardless of any comparison between the Regions
Ratio and the Index Ratio, there would be no possible adjustment to the
exchange ratio, even though the value of the consideration to be received by
Arkansas Banking Company stockholders could have fallen from a pro forma
$102.07 per share, as of the Starting Date, to as little as a pro forma $81.65
per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is less than
$28.65, but does not represent a decline from the Starting Price of more than
15% than the decline of the common stock prices of the Index Group. Under this
scenario, there also would be no possible adjustment to the exchange ratio,
even though the value of the consideration to be received by Arkansas Banking
Company stockholders would have fallen from a pro forma $102.07 per share, as
of the Starting Date, to an amount based on the then lower Average Closing
Price of Regions common stock, as of the Determination Date, of less than a pro
forma $81.65 per share.
(3) The third scenario occurs if the Average Closing Price declines below
$28.65 and the Regions Ratio is below the Index Ratio. Under this scenario, the
adjustment in the exchange ratio is designed to ensure that the Arkansas
Banking Company stockholders receive shares of Regions common stock having a
value (based upon the Average Closing Price) that corresponds to at least
$81.65 or a 15% decline from the stock price performance reflected by the Index
Group, whichever is less.
For example, if the Average Closing Price were $26.00, and the ending Index
Price, as of the Determination Date, were $90, the Regions Ratio (.7260) would
be below the Index Ratio (.75, or .90 minus .15), and Arkansas Banking Company
could terminate the merger agreement unless Regions elected within five days to
increase the exchange ratio to equal 2.9442, which represents the lesser of (a)
3.1405 [the result of dividing $81.65 (the product of $28.65 and the 2.85
exchange ratio) by the Average Closing Price ($26.00), rounded to the nearest
ten-thousandth] and (b) 2.9442 [the result of dividing the Index Ratio (.75)
times 2.85 by the Regions Ratio (.7260), rounded to the nearest
ten-thousandth]. Based upon the assumed $26.00 Average Closing Price, the new
exchange ratio would represent a pro forma value to the Arkansas Banking
Company stockholders of $76.55 per Arkansas Banking Company share.
If the Average Closing Price were $26.00, and the ending Index Price, as of the
Determination Date, were $100, the Regions Ratio (.7260) would be below the
Index Ratio (.85, or 1.00 minus .15), and Arkansas Banking Company could
terminate the merger agreement unless Regions elected within five days to
increase the exchange ratio to equal 3.1405, which represents the lesser of (a)
3.1405 [the result of dividing $81.65 (the product of $28.65 and the 2.85
exchange ratio) by the Average Closing Price ($26.00), rounded to the nearest
ten-thousandth] and (b) 3.3368 [the result of dividing the Index Ratio (.85)
times 2.85 by the Regions Ratio (.7260), rounded to the nearest
ten-thousandth]. Based upon the assumed $26.00 Average Closing Price, the new
exchange ratio would represent a value to the Arkansas Banking Company
stockholders of $81.65 per Arkansas Banking Company share.
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<PAGE> 26
The actual market value of a share of Regions common stock at the effective
time of the proposed merger and at the time certificates for those shares are
delivered following surrender and exchange of certificates for shares of
Arkansas Banking Company common stock may be more or less than the Average
Closing Price. Arkansas Banking Company stockholders are urged to obtain
current market quotations for Regions common stock. See "Comparative Market
Prices and Dividends."
TREATMENT OF ARKANSAS BANKING COMPANY OPTIONS
The merger agreement provides that all rights with respect to Arkansas Banking
Company common stock pursuant to stock options or stock appreciation rights
granted by Arkansas Banking Company under its stock option plans which are
outstanding at the effective time of the proposed 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 of the proposed
merger, 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, as it may be
adjusted. 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 Arkansas Banking Company held in the
aggregate options to purchase 65,000 shares of Arkansas Banking Company common
stock, as of the date of this Proxy Statement-Prospectus.
BACKGROUND OF THE MERGER
In May 1998, a representative of First Commercial Corporation ("First
Commercial") contacted Sloan Rainwater, chairman of Arkansas Banking Company
and a major stockholder, to discuss the possibility of acquiring Arkansas
Banking Company. First Commercial was, at the time, in the process both of
expanding its banking network throughout Arkansas and merging with Regions.
On July 10, 1998, First Commercial delivered to Mr. Rainwater letters from
First Commercial and Regions indicating Regions' preliminary interest in
acquiring Arkansas Banking Company and outlining the essential terms of the
proposed transaction. The letters proposed a merger of Arkansas Banking Company
into Regions in a tax-free exchange of stock, at an exchange ratio of 2.8
shares of Regions common stock for each share Arkansas Banking Company common
stock.
After receiving the First Commercial and Regions letters, Mr. Rainwater
contacted another bank holding company that had previously expressed an
interest in acquiring Arkansas Banking Company. That contact resulted in
Arkansas Banking Company's receiving, on July 20, 1998, a letter from the bank
holding company offering to acquire Arkansas Banking Company. That offer was
subsequently increased in the course of further discussions between Arkansas
Banking Company and the bank holding company.
On July 29, 1998, management of Arkansas Banking Company met with Stephens
Inc., Arkansas Banking Company's financial advisor, to discuss the competing
acquisition proposals. Based on an evaluation of the prospective acquirors'
stock prices, price-earnings multiples and other financial performance data,
and the prospects for further consolidation in the banking industry, management
of Arkansas Banking Company decided to pursue, and seek improvements in, the
Regions proposal. Representatives of Stephens Inc. met later that day with
representatives of First Commercial to discuss the terms of the Regions
proposal. On July 31, 1998, Regions submitted a revised proposal that increased
the exchange ratio to 2.85 and made other changes sought by Arkansas Banking
Company. The proposal was non-binding, and
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<PAGE> 27
provided for due diligence reviews by the parties and the negotiation of a
definitive merger agreement. On August 4, 1998, Arkansas Banking Company
accepted the Regions proposal.
On September 25, 1998, following completion of the due diligence reviews and
the negotiation of other terms of the proposed merger, Regions and Arkansas
Banking Company entered into the merger agreement.
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<PAGE> 28
ARKANSAS BANKING COMPANY'S REASONS FOR THE MERGER.
In approving the proposed merger, the directors of Arkansas Banking Company
considered a number of factors. Without assigning any relative or specific
weights to the factors, the Arkansas Banking Company Board of Directors
considered the following material factors:
- - the information presented to the directors by the management of Arkansas
Banking Company concerning the business, operations, earnings, asset
quality, and financial condition of Arkansas Banking Company and Regions;
- - the financial terms of the proposed merger, including the relationship of
the merger price to the book value and earnings per share of Arkansas
Banking Company common stock and the partial protection against a decline
in the market value of Regions common stock;
- - the nonfinancial terms of the proposed merger, including the treatment of
the merger as a tax-free exchange of Arkansas Banking Company common stock
for Regions common stock for federal income tax purposes;
- - the likelihood of the proposed merger being approved by applicable
regulatory authorities without undue conditions or delay;
- - the preliminary opinion orally rendered by Arkansas Banking Company's
financial advisor to the effect that, from a financial point of view, the
exchange ratio of Arkansas Banking Company common stock for Regions common
stock set forth in the merger agreement is fair to Arkansas Banking Company
and its stockholders;
- - stockholders of Arkansas Banking Company will receive shares of Regions
common stock, which is publicly traded on the Nasdaq National Market;
there is no current public market for Arkansas Banking Company 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 Arkansas Banking
Company, as a result of both employment in a larger enterprise and
Regions' benefit plans and policies;
- - the recent history of mergers and consolidations in the banking industry
and the prospects for a continuation of that trend; and
- - growth of Arkansas Banking Company without affiliation with a larger
holding company would likely be limited because of market conditions
resulting from consolidations in the banking industry and Arkansas Banking
Company's eventual need for increasing capital resources to support that
growth. Without such a combination, the Arkansas Banking Company 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 Arkansas Banking Company Board of Directors
believed would be necessary to maintain Arkansas Banking Company as a
viable independent entity.
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<PAGE> 29
The terms of the proposed merger were the result of arms-length negotiations
between representatives of Arkansas Banking Company and representatives of
Regions. Based upon the consideration of the foregoing factors, the Board of
Directors of Arkansas Banking Company unanimously approved the proposed merger
as being in the best interests of Arkansas Banking Company and its
stockholders. Each member of the Board of Directors of Arkansas Banking Company
has agreed to vote those shares of Arkansas Banking Company common stock over
which such member has voting authority (other than in a fiduciary capacity) in
favor of the proposed merger.
ARKANSAS BANKING COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
ARKANSAS BANKING COMPANY STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
REGIONS' REASONS FOR THE MERGER.
In approving the merger agreement and the proposed merger, the Regions Board
considered a number of factors concerning the benefits of the proposed merger,
including the following:
- - Information Concerning Arkansas Banking Company: The Regions Board
considered information concerning the business, operations, earnings,
asset quality, and financial condition of Arkansas Banking Company, and
aspects of the Arkansas Banking Company franchise, including the market
position of Arkansas Banking Company in each of the markets in which it
operates and the compatibility of the community bank orientation of the
operations of Arkansas Banking Company to that of Regions. The Regions
Board concluded that Arkansas Banking Company is a sound financial
institution which has a strong management team and is well positioned in
its market areas, and therefore presents an attractive opportunity for
Regions to add to its franchise in the Arkansas market.
- - Financial Terms of the Merger: The Regions Board considered various
financial aspects of the proposed merger as reported by Regions'
management including (1) the anticipated effect of the proposed 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 proposed merger on Regions' book value per share (with the
merger anticipated not to dilute significantly Regions' book value per
share), and (3) a comparison of Arkansas Banking Company to selected peer
banks and a comparison of pricing aspects of the proposed merger to
pricing characteristics of other merger transactions involving financial
institutions.
- - Nonfinancial Terms of the Merger. The Regions Board considered various
nonfinancial aspects of the proposed merger, including the treatment of
the proposed merger as a tax-free exchange of Arkansas Banking Company
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 proposed merger and the merger 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 proposed merger and the other
transactions contemplated by the merger agreement, and considering, among other
things, the matters discussed above, the Regions Board determined that the
proposed merger is in the best interests of Regions and its stockholders and
unanimously approved the merger agreement.
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<PAGE> 30
OPINION OF ARKANSAS BANKING COMPANY'S FINANCIAL ADVISOR
Stephens Inc. has acted as financial advisor to Arkansas Banking Company in
connection with the proposed merger. As part of its engagement, Stephens agreed,
if requested by Arkansas Banking Company, to render an opinion with respect to
the fairness to Arkansas Banking Company and its stockholders from a financial
point of view of the exchange ratio of Arkansas Banking Company common stock for
Regions common stock set forth in the merger agreement (the "Exchange Ratio").
Stephens is a nationally recognized investment banking firm and, as part of its
investment activities, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Arkansas Banking Company selected Stephens as its financial
advisor on the basis of its experience and expertise in merger transactions, and
its reputation in the banking and investment communities.
In connection with its engagement, a written opinion dated December ___, 1998
was delivered by Stephens to Arkansas Banking Company to the effect that, based
upon and subject to certain assumptions and matters considered, and limitations
set out therein, the Exchange Ratio is fair from a financial point of view to
Arkansas Banking Company and its stockholders.
THE FULL TEXT OF STEPHENS' WRITTEN OPINION TO ARKANSAS BANKING COMPANY DATED
DECEMBER ___, 1998, WHICH SETS FORTH THE ASSUMPTIONS, MATTERS CONSIDERED AND
LIMITATIONS OF THE OPINION IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED
HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN
CONNECTION WITH THIS PROXY STATEMENT-PROSPECTUS. THE FOLLOWING SUMMARY OF
STEPHENS' OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION. THE OPINION, WHICH IS ADDRESSED TO THE BOARD OF DIRECTORS OF
ARKANSAS BANKING COMPANY, IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL
POINT OF VIEW OF THE EXCHANGE RATIO AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE
PROPOSED MERGER OR ANY RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
SPECIAL MEETING.
In connection with its opinion, Stephens among other things: (1) reviewed
certain publicly available financial and other data with respect to Regions and
Arkansas Banking Company, including the consolidated financial statements of
Regions and Arkansas Banking Company for recent years and interim periods to
September 1998, and certain other relevant financial and operating data relating
to Regions and Arkansas Banking Company made available to Stephens from
published sources and from the internal records of Arkansas Banking Company; (2)
reviewed the Agreement and Plan of Merger; (3) reviewed a draft of this Proxy
Statement-Prospectus; (4) reviewed certain historical market prices and trading
volumes of Regions common stock as reported by The NASDAQ Stock Market; (5)
compared Regions and Arkansas Banking Company from a financial point of view
with certain other companies which Stephens deemed to be relevant; (6)
considered the financial terms, to the extent publicly available, of selected
business combinations in the banking industry; (7) discussed with
representatives of the management of Regions and Arkansas Banking Company,
respectively, certain information of a business and financial nature regarding
Regions and Arkansas Banking Company; (8) made inquiries regarding and discussed
the merger, the merger agreement and other matters related thereto with Regions'
and Arkansas Banking Company's counsel; and (9) performed such other analyses
and examinations as Stephens deemed appropriate.
Stephens relied on the accuracy and completeness of the information and
financial data provided to it by Regions and Arkansas Banking Company, and
Stephens' opinion is based upon such information.
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Stephens inquired into the reliability of such information and financial data
only to the limited extent necessary to provide a reasonable basis for its
opinion, recognizing that Stephens rendered only an informed opinion and not an
appraisal or certification of value. With respect to the financial projections
prepared by management of Arkansas Banking Company, Stephens assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Arkansas Banking Company as to the
expected future financial performance of Arkansas Banking Company. Stephens did
not express any opinion as to the prices at which the Regions common stock will
trade in the period following the announcement or completion of the proposed
merger.
Stephens also assumed that there were no material changes in Arkansas Banking
Company or Regions' assets, financial condition, results of operations, business
or prospects since the respective dates of their last financial statements
reviewed by Stephens and that any off-balance sheet activities of Arkansas
Banking Company and Regions, including derivatives and other similar financial
instruments, if any, would not materially and adversely affect the future
financial condition or results of operations of Arkansas Banking Company or
Regions. Stephens further assumed that in the course of obtaining the necessary
regulatory and third party consents for the merger, no restrictions would be
imposed that would have a material adverse effect on the contemplated benefits
of the merger or the transactions contemplated thereby. Stephens further assumed
that the merger will be consummated in accordance with the terms and provisions
of the Agreement and Plan of Merger, without any amendments to, and without any
waiver by Arkansas Banking Company of, any of the material conditions to its
obligations thereunder. Stephens noted that it is not an expert in the
evaluation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and assumed that such allowances for
each of Arkansas Banking Company and Regions, are in the aggregate, adequate to
cover such possible losses. In addition, Stephens did not assume responsibility
for reviewing any individual credit files or making independent evaluation,
appraisal or physical inspection of the assets or individual properties of
Arkansas Banking Company or Regions, nor was Stephens furnished with any such
evaluations or appraisals. Finally, Stephens assumed that the merger will
qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as
amended.
In arriving at its opinion, Stephens performed a variety of financial analyses,
the material portions of which are summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed
by Stephens. In addition, Stephens believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all such factors and analyses,
could create a misleading view of the process underlying its analyses. Stephens
did not draw any specific conclusions from or with regard to any one method of
analysis. However, Stephens did not identify any one method of analysis which
failed to support its opinion. The matters considered by Stephens in arriving
at its opinion are based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond Arkansas Banking
Company's and Regions' control. Any estimates incorporated in the analyses
performed by Stephens are not necessarily indicative of actual past or future
results or values, which may be significantly more or less favorable than such
estimates. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold in
the future, and such estimates are inherently subject to uncertainty. Arriving
at a fairness opinion is a complex process not necessarily susceptible to
partial or summary description. No public company or transaction involving
public companies utilized as a comparison is identical to Regions or Arkansas
Banking Company . Accordingly, an analysis of publicly traded comparable
companies and comparable business combinations is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies involved
and other factors that could affect the public trading value of the comparable
companies or company utilized in Stephens' analysis.
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<PAGE> 32
Set forth below is a summary of the material analyses performed by Stephens in
connection with its opinion delivered to Arkansas Banking Company on December
___, 1998.
Offer Valuation. Stephens reviewed the terms of the proposed merger, including
the exchange ratio and the aggregate transaction value, and also reviewed the
implied value of the consideration offered based upon the closing share price
of Regions' common stock of $38.625 on December 9, 1998, which indicated that
the implied value of the consideration offered in the Regions proposal was
$70.3 million. Stephens calculated the purchase price to last 12 months
earnings for the 12 months ended September 30, 1998, book value and tangible
book value, which resulted in multiples of 17.8x, 2.7x, and 3.0x, respectively.
Pro Forma Merger Analysis. Stephens reviewed the pro forma impact of the merger
of Arkansas Banking Company's earnings per share and book value per share from
1995 through September 30, 1998 on a historical basis, and for the year ended
December 31, 1998 on an estimated basis. Earnings estimates for Regions were
based on the median of analysts' estimates as published by the Institutional
Brokers Estimate System ("I/B/E/S"). I/B/E/S is a data service that monitors
and publishes a compilation of earnings estimates produced and provided by
selected research analysts. Stephens did not assume any cost savings (or
revenue enhancements) by Regions resulting from the merger. This analysis
showed that the merger was accretive (dilutive) to Arkansas Banking Company's
historical earnings per share for 1995, 1996, 1997 and the nine months ended
September 30, 1998, by 153%, 53%, 9%, and (2)%, respectively, and 1% accretive
to estimated earnings per share for 1998. The analysis also showed that the
merger was accretive (dilutive) to Arkansas Banking Company's book value per
share at December 31, 1995, 1996 and 1997 and September 30, 1998, by 23%, 13%,
6% and (10)%, respectively.
Analysis of Selected Comparable Bank Merger Transactions. Stephens reviewed the
consideration paid in 24 transactions announced between January 1, 1997 and
December 7, 1998, with transaction values between $50 million and $150 million
and involving acquired banks located in Arkansas or its contiguous states (the
"Comparable Transactions"). For each company merged or to be merged in such
transactions, Stephens compiled data comparing, among other things, the
transaction price at announcement to the latest twelve months' earnings per
share, the transaction price to book value and the transaction price to tangible
book value.
The characteristics of the Comparable Transactions announced since 1997 are as
follows: (i) a mean and median ratio of transaction price to latest twelve
months' earnings per share of 19.9x and 20.6x, respectively; (ii) a mean and
median ratio of transaction price to book value of 2.65x and 2.59x,
respectively; and (iii) a mean and median ratio of transaction price to tangible
book value of 2.80x and 2.70x, respectively. In comparison, based upon a price
per share of $38.44 for Regions (using the last reported price on August 6,
1998, the date the transaction was announced) and an implied offer value of
$69.9 million, the consideration to be paid to the holders of Arkansas Banking
Company common stock represented a ratio of transaction price to latest twelve
months' earnings per share (through June 30, 1998) of 18.3x, a ratio of
transaction price to book value of 2.79x and a ratio of transaction price to
tangible book value of 3.16x.
No other company or transaction used in the above analysis as a comparison is
identical to Regions, Arkansas Banking Company or the proposed merger.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics of the companies and other factors
that could affect the acquisition or public trading multiples of the companies
to which Regions, Arkansas Banking Company and the proposed merger are being
compared.
Potential Merger Valuation Range. Stephens prepared an analysis that provided
an estimate of the potential value that selected potential merger partners
including Regions might offer to acquire Arkansas
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Banking Company. The analysis showed that, based on closing stock market prices
on December 9, 1998 and management's assumption of potential cost savings of
0% to 20% of Arkansas Banking Company's non-interest expense, the selected
potential merger partners might offer between $58.4 million and $83.8 million
in a merger transaction. The potential merger partners selected for the
analysis included five publicly-traded bank holding companies that in recent
years have acquired community banks in Arkansas. The analysis was predicated on
the assumption that each potential merger partner would be willing to issue
that number of shares that would cause no dilution to analysts' consensus
estimates of their expected 1998 earnings per share and was based on
management's estimate of Arkansas Banking Company's estimated 1998 earnings.
Comparison of Selected Companies. Stephens reviewed and compared certain public
market multiples relating to Regions to the publicly available corresponding
data for a group of selected banks which Stephens deemed to be relevant. The
group of banks selected (the "Regions Selected Comparable Banks") consisted of
AmSouth Bancorporation, BB&T Corporation, Colonial BancGroup, Inc., Compass
Bancshares, Inc., First American Corporation, First Tennessee National
Corporation, Mercantile Bancorporation, Inc., SouthTrust Corporation, and Union
Planters Corporation.
Based on review of such information for Regions Selected Comparable Banks,
Stephens determined (in each case based on company data as of or for the twelve
months ended September 30, 1998, and closing stock prices as of December 9,
1998): (i) that, with respect to the ratio of price to earnings per share for
the latest twelve-month period ended September 30, 1998, Regions Selected
Comparable Banks had a median of 20.3x compared to 18.6 x for Regions; (ii)
that, with respect to the multiple of stock price to estimated earnings per
share for 1998, Regions Selected Comparable Banks (based on projected earnings
per share for 1998 as reported by IBES) had a median of 16.5x compared to 16.8x
for Regions; (iii) that, with respect to the multiple of stock price to
estimated earnings per share for 1999, Regions Selected Comparable Banks (based
on earnings per share for 1999 as reported by IBES) had a median of 14.3x
compared to 14.9x for Regions; (iv) that, with respect to the multiple of stock
price to book value, Regions Selected Comparable Banks had a median of 2.43x
compared to 2.89x for Regions; and (v) that, with respect to the multiple of
stock price to tangible book value, Regions Selected Comparable Banks had a
median of 3.28x compared to 3.39x for Regions.
In rendering its opinion, Stephens considered certain other factors and
performed other comparative analyses, including, among other things, analyses
of: (i) the historical financial results of Regions and Arkansas Banking
Company; (ii) the historical trading prices and volume of the stock of Regions,
and (iii) the market share of Regions.
The foregoing is a summary of the material analyses performed by Stephens in
connection with its opinion delivered to Arkansas Banking Company on December
___, 1998. The summary set forth above does not purport to be a complete
description of the analyses performed by Stephens. The preparation of a
fairness opinion is not necessarily susceptible to partial analysis or summary
description. Stephens believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its analyses
and of the factors considered, without considering all analyses and factors,
would create an incomplete view of the process underlying the analyses. In
addition, Stephens may have given various analyses more or less weight than
other analyses, and may have deemed various assumptions more or less probable
that other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Stephens' view of
the actual values of Arkansas Banking Company, Regions or the combined company.
The fact that any specific analysis has been referred to in the summary above
is not meant to indicate that such analysis was given greater weight that any
other analysis.
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In performing its analyses, Stephens made numerous assumptions with respect to
industry performance, regulatory, general business and economic conditions and
other matters many of which are beyond the control of Arkansas Banking Company
and Regions. The analyses performed by Stephens are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than those suggested by such analyses. Such analyses were
prepared solely as part of Stephens' analysis of the fairness of the
consideration to be received from a financial point of view in connection with
the delivery of Stephens' opinion. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the
prices at which any securities may trade at the present time or at any time in
the future.
Pursuant to the terms of Stephens' engagement as financial advisor (including
rendering its opinion as to the fairness of the proposed transaction), Arkansas
Banking Company has agreed to pay Stephens a fee equal to 0.50% of the
transaction value, of which $50,000 is payable upon issuance of the Fairness
Opinion, and the balance of which is contingent, and payable on completion of
the merger.
Arkansas Banking Company has also agreed to indemnify Stephens, its affiliates
and their respective partners, directors, officers, agents, consultants,
employees and controlling persons against certain liabilities, including
liabilities under federal securities law.
EFFECTIVE TIME OF THE MERGER
After all conditions to the proposed merger are satisfied or waived, the merger
will become effective when Regions files certain certificates with the
Secretaries of State of Delaware and Arkansas. The effective time of the merger
will occur when such certificates are filed and declared effective. Unless
otherwise agreed upon by Regions and Arkansas Banking Company, and subject to
the satisfaction or waiver of the conditions to the obligations of the parties
to effect the proposed merger, the parties will use their reasonable efforts to
cause the effective time of the proposed merger to occur not later than the
last business day of the month which the last of the following events occurs:
(i) the effective date (including the expiration of any applicable waiting
period) of the last federal or state regulatory approval required for the
proposed merger and (ii) the date on which the merger agreement is approved by
the requisite vote of Arkansas Banking Company 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 proposed
merger can or will be satisfied. Regions and Arkansas Banking Company
anticipate that all conditions to consummation of the proposed merger will be
satisfied so that the proposed merger can be consummated during the first
quarter of 1999. However, delays in the consummation of the proposed merger
could occur.
The Board of Directors of either Regions or Arkansas Banking Company generally
may terminate the merger agreement if the proposed merger is not consummated by
June 30, 1999, unless the failure to consummate by that date is the result of a
breach of the merger agreement by the party seeking termination. See
"--Conditions to Consummation of the Merger" and "--Waiver, Amendment, and
Termination of the Merger Agreement."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the effective time of the proposed merger, Regions will cause an
exchange agent selected by Regions to mail to the former stockholders of
Arkansas Banking Company a form letter of transmittal, together with
instructions for the exchange of such stockholders' certificates representing
shares of Arkansas Banking Company common stock for certificates representing
shares of Regions common stock.
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ARKANSAS BANKING COMPANY 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 Arkansas Banking Company
common stock, together with a properly completed letter of transmittal, there
will be issued and mailed to each holder of Arkansas Banking Company 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 of the proposed merger, to
the extent permitted by law, Arkansas Banking Company 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 Arkansas Banking Company common stock has been converted (unless
such stockholders have exercised their dissenters' rights), regardless of
whether such stockholders have surrendered their Arkansas Banking Company
common stock certificates. No dividend or other distribution payable after the
effective time of the proposed merger with respect to Regions common stock,
however, will be paid to the holder of any unsurrendered Arkansas Banking
Company 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 proposed merger, an Arkansas Banking Company
stockholder will be unable to transfer shares of Arkansas Banking Company
common stock. If certificates representing shares of Arkansas Banking Company
common stock are presented for transfer after the effective time of the
proposed merger, 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 proposed 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
Arkansas Bank Commissioner 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 merger agreement as to render inadvisable the consummation of the
proposed merger;
- - the approval of the merger agreement by the stockholders of Arkansas
Banking Company;
- - the absence of any action by any court or governmental authority of
competent jurisdiction restricting, prohibiting, or making illegal the
consummation of the proposed merger and the other transactions
contemplated by the merger agreement;
- - the receipt of a satisfactory opinion of counsel that the proposed merger
qualifies for federal income tax treatment as a reorganization under
Section 368(a) of the Internal Revenue Code, with the effects described
under "-- Federal Income Tax Consequences of the Merger," including, among
others, that the exchange of Arkansas Banking Company common stock for
Regions common stock will not give rise to recognition of gain or loss to
Arkansas Banking Company stockholders, except to the extent of any cash
received;
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- - 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 proposed merger; and
- - the receipt by Arkansas Banking Company of an opinion of Arkansas Banking
Company's financial advisor that the consideration to be received in the
proposed merger by the stockholders of Arkansas Banking Company is fair to
such stockholders from a financial point of view (which has been received
and is included as Appendix B).
Consummation of the proposed merger also is subject to the satisfaction or
waiver of various other conditions specified in the merger agreement which are
customary in transactions of this nature, including, among others: (i) the
delivery by Regions and Arkansas Banking Company 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 merger agreement and (ii) as of the effective time
of the proposed 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 proposed 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 approvals to fail to satisfy the conditions set forth in the merger
agreement. Applications for the approvals described below have been submitted
to the appropriate regulatory agencies.
Regions and Arkansas Banking Company are not aware of any material governmental
approvals or actions that are required for consummation of the proposed 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 proposed merger requires the prior approval of the Federal Reserve Board,
pursuant to Section 3 of the Bank Holding Company Act 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 proposed 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 proposed 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.
The proposed merger also is subject to the approval of the Arkansas Bank
Commissioner. In the evaluation, the Arkansas Bank Commissioner will take into
account considerations similar to those applied by the Federal Reserve Board.
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WAIVER, AMENDMENT, AND TERMINATION OF THE MERGER AGREEMENT
Prior to the effective time of the proposed merger, and to the extent permitted
by law, any provision of the merger agreement generally may be (i) waived by
the party benefitted by the provision or (ii) amended by a written agreement
between Regions and Arkansas Banking Company approved by their respective
Boards of Directors; provided, however, that after approval by the Arkansas
Banking Company stockholders, no amendment that pursuant to the Arkansas
Business Corporation Act requires further approval of the Arkansas Banking
Company stockholders, including decreasing the consideration to be received by
Arkansas Banking Company stockholders, may be made without the further approval
of such stockholders.
The merger agreement may be terminated, and the proposed merger abandoned, at
any time prior to the effective time of the proposed merger, either before or
after approval by Arkansas Banking Company 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 Arkansas Banking Company
stockholders shall not have approved the merger agreement;
- - by mutual consent of the Boards of Directors of Regions and Arkansas
Banking Company;
- - 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 merger agreement), in the event of any
inaccuracy in any representation or warranty by the other party which
meets certain standards specified in the merger 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 merger agreement), in the event of a breach by the other party of any
covenant or agreement included in the merger 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 proposed merger shall not
have been consummated by June 30, 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 merger agreement.
The Arkansas Banking Company Board has the right to terminate the proposed
merger in certain situations in which the price of Regions common stock
declines significantly and such decline is significantly greater than the
overall decline of a selected group of bank holding companies' stocks during
the same time period. Termination in such a situation can be avoided if Regions
elects (at its sole discretion) to adjust the exchange ratio according to a
formula set forth in the merger agreement. See "--Possible Adjustment of
Exchange Ratio."
If the merger 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 merger agreement giving
rise to such termination.
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CONDUCT OF BUSINESS PENDING THE MERGER
Each of Arkansas Banking Company 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 proposed merger or to perform its covenants and agreements under the
merger agreement and to consummate the proposed 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 merger agreement includes certain other
restrictions applicable to the conduct of the business of Arkansas Banking
Company prior to consummation of the proposed merger, as described below.
Arkansas Banking Company. Arkansas Banking Company has agreed not to take
certain actions relating to the operation of its business pending consummation
of the proposed merger without the prior written consent of Regions, which
Regions has agreed shall not be unreasonably withheld. The actions Arkansas
Banking Company has agreed not to take are in the general categories of:
- - amending its Articles, 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 merger agreement, which is attached as Appendix A. See Article 7 of the
merger agreement.
In addition, Arkansas Banking Company has agreed not to solicit, directly or
indirectly, any acquisition proposal from any other person or entity. Arkansas
Banking Company also has agreed not to negotiate with
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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, Arkansas Banking Company has agreed to use 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 proposed 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 merger agreement generally provides that Regions will indemnify and hold
harmless each person entitled to indemnification from Arkansas Banking Company
or any of its subsidiaries to the full extent permitted by Arkansas law and by
Arkansas Banking Company's Articles or Bylaws as in effect on September 25,
1998, and that such rights will continue in full force and effect for six years
from the effective time of the proposed merger with respect to matters
occurring at or prior to the effective time.
The merger agreement also provides that, after the effective time of the
proposed merger, Regions will provide generally to officers and employees of
Arkansas Banking Company 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 Arkansas Banking
Company or its subsidiaries prior to the effective time of the proposed merger
will be treated as service with Regions or its subsidiaries. The merger
agreement further provides that Regions will cause Arkansas Banking Company to
honor all employment, severance, consulting, and other compensation contracts
previously disclosed to Regions between Arkansas Banking Company 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 of
the proposed merger under Arkansas Banking Company's benefit plans.
As described above under " --Treatment of Arkansas Banking Company Options,"
the merger agreement also provides that all rights with respect to Arkansas
Banking Company common stock pursuant to stock options or stock appreciation
rights granted by Arkansas Banking Company under its stock option and other
stock-based compensation plans which are outstanding at the effective time of
the proposed 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 its terms.
As of the record date, directors and executive officers of Arkansas Banking
Company owned _____ shares of Regions common stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Subchapter 13 of the Arkansas Business
Corporation Act, if the proposed merger is consummated, any holder of Arkansas
Banking Company common stock who (i) gives to Arkansas Banking Company, prior
to the vote at the Special Meeting with respect to the approval of the
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merger agreement, written notice of such holder's intent to demand payment for
such holder's shares, and (ii) does not vote in favor thereof, shall be
entitled to receive, upon compliance with the statutory requirements summarized
below, the fair value of such holder's shares as of the effective time of the
proposed merger, excluding any appreciation or depreciation in anticipation of
the proposed merger.
A stockholder of record may assert dissenters' rights as to fewer than all the
shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies Arkansas Banking Company in writing of the name and
address of each person on whose behalf such holder asserts dissenters' rights.
The rights of such a partial dissenter are determined as if the shares as to
which such holder dissents and such holder's other shares were registered in
the names of different stockholders. A beneficial stockholder may assert
dissenters' rights as to shares held on his behalf only if he dissents with
respect to all shares of which he is the beneficial stockholder or over which
he has power to direct the vote. A beneficial stockholder asserting dissenters'
rights to shares held on such holder's behalf must submit to Arkansas Banking
Company such record holder's consent to the dissent not later than the time at
which the beneficial stockholder exercises dissenters' rights.
The written notice requirement referred to above will not be satisfied under
the Arkansas statutory provisions by merely voting against approval of the
merger agreement by proxy or in person at the Special Meeting. In addition to
not voting in favor of the merger 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 proposed
merger is effected.
Any written notice of intent to demand payment pursuant to Subchapter 13 of the
Arkansas Business Corporation Act should be addressed as follows: Arkansas
Banking Company, 515 West Washington, Jonesboro, Arkansas 72403, Attention:
Corporate Secretary.
If the proposed merger is authorized at the Special Meeting, Arkansas Banking
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all holders of Arkansas Banking Company common stock who satisfied the
foregoing requirements. The Dissenters' Notice must be sent within ten days
after the effective time of the proposed merger and must (i) state where the
demand for payment must be sent and where certificates for shares of Arkansas
Banking Company common stock must be deposited, (ii) inform holders of
uncertificated shares to what extent transfer of these shares will be
restricted after the demand for payment is received, (iii) supply a form for
demanding payment that includes the date of the first announcement to news
media or to stockholders of the terms of the proposed merger and requires that
the person asserting dissenters' rights certify whether or not such person, or
if a nominee asserting dissenters' rights on behalf of a beneficial
stockholder, the beneficial stockholder acquired beneficial ownership of the
shares before that date, (iv) set a date by which Arkansas Banking Company 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 (v) be accompanied
by a copy of Subchapter 13 of the Arkansas Business Corporation Act.
A stockholder of record who receives the Dissenters' Notice must demand
payment, certify whether such holder (or the beneficial stockholder on whose
behalf such holder is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the Dissenters' Notice,
and deposit such holder's certificates in accordance with the Dissenters'
Notice. Such stockholder will retain all other rights of a stockholder until
those rights are canceled or modified by the consummation of the proposed
merger. A stockholder who does not demand payment and deposit such holder's
share certificates where required, each by the date set in the Dissenters'
Notice, is not entitled to payment for such holder's shares under Subchapter
13.
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Except as described below, as soon as the proposed merger is consummated, or
upon receipt of a payment demand, Regions as the surviving corporation
resulting from the proposed merger must pay to each dissenting stockholder who
complied with the payment demand and deposit requirements described above, the
amount the surviving corporation estimates to be the fair value of such
holder's shares, plus accrued interest from the effective time of the proposed
merger. Such payment must be accompanied by (i) certain recent Arkansas Banking
Company financial statements, (ii) the surviving corporation's estimate of the
fair value of the shares and an explanation how the fair value was calculated,
(iii) an explanation of how the interest was calculated, (iv) a statement of
the dissenter's right to demand additional payment under Section 4-27-1328 of
the Arkansas Business Corporation Act, and (v) a copy of Subchapter 13 of the
Arkansas Business Corporation Act.
The surviving corporation may elect to withhold such payment from a dissenter
as to any shares of which such dissenter (or the beneficial owner on whose
behalf such dissenter is asserting dissenters' rights) was not the beneficial
owner on the date set forth in the Dissenters' Notice as the date of the first
announcement to news media or to stockholders of the terms of the proposed
merger, unless the beneficial ownership of the shares devolved upon him by
operation of law from a person who was the beneficial owner on the date of the
first announcement. To the extent the surviving corporation elects so to
withhold payment, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to accept it
in full satisfaction of such dissenter's demand. The surviving corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the fair value and interest were calculated, and
a statement of the dissenter's right to demand additional payment under Section
4-27-1328.
Section 4-27-1328 of the Arkansas 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 of such holder's shares and the
interest due, and may demand payment of such holder's estimate (less any
payment already received), if (i) such holder believes that the amount offered
by the surviving corporation is less than the fair value of such holder's
shares or that the interest due has been calculated incorrectly, (ii) the
surviving corporation fails to make payment under Section 4-27-1325 or to offer
payment under Section 4-27-1327 within sixty days after the date set for
demanding payment; or (iii) the corporation has failed to effect the proposed
merger and does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty days after the date
set for demanding payment. A dissenting stockholder waives such holder's right
to demand payment under Section 4-27-1328 unless such holder notifies the
surviving corporation of such holder's demand in writing within 30 days after
the surviving corporation makes or offers payment for such holder's shares.
If a demand for payment under Section 4-27-1328 remains unsettled, the
surviving corporation must commence a proceeding in the Circuit Court of
Craighead County, Arkansas, within 60 days after receiving the demand for
additional payment and must petition the court to determine the fair value of
the shares and accrued interest. If the surviving corporation does not commence
the proceeding within those 60 days, it is required to pay each dissenting
stockholder whose demand remains unsettled the amount demanded. The surviving
corporation is required to make all dissenting stockholders whose demands
remain unsettled, parties to the proceeding and to serve a copy of the petition
upon all such parties. The court may appoint appraisers to receive evidence and
to recommend a decision on fair value. Each dissenter made a party to the
proceeding is entitled to judgment for the amount, if any, by which the court
finds the fair value of such dissenter's shares, plus interest, exceeds the
amount paid by the surviving corporation.
The court in an appraisal proceeding commenced under the foregoing provision
must determine the costs of the proceeding, excluding fees and expenses of
attorneys and experts for the respective parties, and must
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assess those costs against the surviving corporation, except that the court may
assess the costs against all or some of the dissenting stockholders to the
extent the court finds they acted arbitrarily, vexatiously, or not in good
faith in demanding payment under Section 4-27-1328. 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
Subchapter 13 of the Arkansas 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 Subchapter 13 of the Arkansas Business Corporation Act.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the surviving corporation,
the court may award to such counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefitted.
In a proceeding commenced by dissenters to enforce the liability under Section
4-27-1328 of a corporation that has failed to commence an appraisal proceeding
within the sixty-day period, the court shall assess the costs of the proceeding
and the fees and expenses of dissenters' counsel against the surviving
corporation and in favor of the dissenters.
The foregoing is a summary of the material rights of a dissenting stockholder
of Arkansas Banking Company, but is qualified in its entirety by reference to
Subchapter 13 of the Arkansas Business Corporation Act, included in Appendix C
to this Proxy Statement-Prospectus. It is not intended to grant or enlarge any
right of dissent or payment to any stockholder and should not be so read.
Stockholders' rights of dissent and payment are limited to those provided by
law. Any Arkansas Banking Company stockholder who intends to exercise the right
to dissent from consummation of the proposed merger 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 Arkansas Banking Company
stockholders, except as indicated above or otherwise required by law.
Any dissenting Arkansas Banking Company 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 PROPOSED MERGER TO HOLDERS OF ARKANSAS BANKING COMPANY COMMON STOCK.
THIS DISCUSSION MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS ARKANSAS BANKING
COMPANY STOCKHOLDERS, IF ANY, WHO HOLD ARKANSAS BANKING COMPANY COMMON STOCK
OTHER THAN AS A CAPITAL ASSET, WHO RECEIVED ARKANSAS BANKING COMPANY COMMON
STOCK UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION,
WHO HOLD ARKANSAS BANKING COMPANY 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 proposed merger. Instead,
consummation of the proposed merger is conditioned upon receipt by Regions and
Arkansas Banking Company of an opinion from Alston & Bird LLP, special counsel
to Regions, concerning the material
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federal income tax consequences of the proposed merger. Based upon the
assumption that the proposed merger is consummated in accordance with the
merger agreement and upon factual statements and factual representations made
by Regions and Arkansas Banking Company, it is such firm's opinion that:
- - The proposed merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
- - No gain or loss will be recognized by holders of Arkansas Banking Company
common stock upon the exchange in the proposed merger of all of their
Arkansas Banking Company 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
Arkansas Banking Company stockholders who exchange all of their Arkansas
Banking Company common stock for Regions common stock in the proposed
merger will be the same as the aggregate tax basis of the Arkansas Banking
Company 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 Arkansas
Banking Company stockholders who exchange all of their Arkansas Banking
Company common stock for Regions common stock in the proposed merger will
include the holding period of the Arkansas Banking Company common stock
surrendered in exchange therefor, provided that such Arkansas Banking
Company common stock is held as a capital asset at the effective time of
the proposed merger.
- - The payment of cash to Arkansas Banking Company 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 Arkansas Banking Company stockholder in
exchange for Arkansas Banking Company common stock pursuant to the
exercise of dissenters' rights, such cash will be treated as having been
received in redemption of such holder's Arkansas Banking Company 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 PROPOSED MERGER. ARKANSAS BANKING COMPANY 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 proposed merger will be accounted for as a
"purchase," as that term is used pursuant to generally accepted accounting
principles, for accounting and financial reporting purposes. Under the purchase
method of accounting, the assets and liabilities of Arkansas Banking Company as
of the effective time of the proposed merger will be recorded at their
estimated respective fair values and added to those of Regions. Financial
statements of Regions issued after the effective time will reflect such values
and will not be restated retroactively to reflect the historical financial
position or results of operations of Arkansas Banking Company.
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EXPENSES AND FEES
The merger agreement provides, in general, that each of the parties will bear
and pay its own expenses in connection with the transactions contemplated by
the merger 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 one half of the printing costs in
connection with this Proxy Statement-Prospectus.
RESALES OF REGIONS COMMON STOCK
The Regions common stock to be issued to Arkansas Banking Company stockholders
in the merger has been registered with the Securities and Exchange
Commission 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, Arkansas Banking Company (such persons are referred
to hereinafter as "affiliates" and generally include executive officers,
directors, and 10% stockholders) at the time of the Special Meeting. Affiliates
may not sell shares of Regions common stock acquired in connection with the
merger, except pursuant to an effective registration statement under the
Securities Act or in compliance with SEC Rule 145 or in accordance with a legal
opinion satisfactory to Regions that such sale or transfer is otherwise exempt
from the Securities Act registration requirements.
Rule 145 promulgated under the Securities Act of 1933 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 proposed merger, affiliates of Arkansas
Banking Company 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' being current in its periodic reporting obligations with the
Securities and Exchange Commission. After the one-year period and within two
years following the effective time of the merger, affiliates of Arkansas
Banking Company who are not affiliates of Regions may resell Regions common
stock issued in the merger, subject only to Regions' being current in its
periodic reporting requirements. After two years, such affiliates of Arkansas
Banking Company 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 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 Proxy Statement-Prospectus
does not cover any resales of Regions common stock received by persons who may
be deemed to be affiliates of Arkansas Banking Company or Regions.
Each person who Arkansas Banking Company reasonably believes will be an
affiliate of Arkansas Banking Company has delivered to Regions a written
agreement providing that such person generally will not sell, pledge, transfer,
or otherwise dispose of any Regions common stock to be received by such person
upon consummation of the merger, except in compliance with the Securities Act
and the rules and regulations of the SEC promulgated thereunder.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the proposed merger, holders of Arkansas Banking Company common
stock will be exchanging their shares of a Arkansas corporation governed by the
Arkansas Business Corporation Act and Arkansas Banking Company's Articles, as
amended (the "Articles"), and Arkansas Banking Company's Bylaws (the "Bylaws"),
for shares of Regions, a Delaware corporation governed by the Delaware General
Corporation Law and Regions' Certificate of Incorporation (the "Certificate")
and Bylaws. Certain significant differences exist between the rights of
Arkansas Banking Company 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 Arkansas Business Corporation Act and the Delaware General
Corporation Law as well as to Regions' Certificate and Bylaws and Arkansas
Banking Company'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 otherwise would prevail. In addition, the protective
provisions may decrease the market price of Regions common stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The protective provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the protective provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believes such replacement is in the best
interests of Regions. As a result, the protective provisions may tend to
perpetuate the incumbent Board of Directors and management.
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AUTHORIZED CAPITAL STOCK
Regions. Regions' Certificate authorizes the issuance of up to 500,000,000
shares of Regions common stock, of which 221,252,589 shares were issued and
219,296,875 shares were outstanding as of November 30, 1998, 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.
Regions' certificate of incorporation does not provide preemptive rights to
Regions stockholders.
The authority to issue additional shares of Regions capital stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions common stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock
dividends, employee benefit and compensation plans, acquisitions, and public or
private sales for cash as a means of raising capital. Such shares could be used
to dilute the stock ownership of persons seeking to obtain control of Regions.
In addition, the sale of a substantial number of shares of Regions common stock
to persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
common stock (or the right to receive Regions common stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions. Regions has committed not
to issue shares of preferred stock for any anti-takeover purpose, including any
purpose to make a change in control of Regions more costly or difficult.
Arkansas Banking Company. Arkansas Banking Company's authorized capital stock
consists of 10,000,000 shares of Arkansas Banking Company common stock, which
is the only class of capital stock authorized and of which [586,980] shares
were issued and outstanding as of the record date.
Pursuant to the Arkansas Business Corporation Act, Arkansas Banking Company's
Board of Directors may authorize the issuance of additional shares of Arkansas
Banking Company common stock without further action by Arkansas Banking
Company's stockholders. Arkansas Banking Company's Articles do not provide the
stockholders of Arkansas Banking Company with preemptive rights to purchase or
subscribe to any unissued authorized shares of Arkansas Banking Company 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 certificate specifies a
greater voting requirement. Regions' certificate of incorporation states that
its provisions regarding authorized capital stock, election, classification,
and removal of directors, the approval required for certain business
combinations, meetings of stockholders, and amendment of the Certificate and
Bylaws may be amended or repealed only by the affirmative vote of the holders
of at least 75% of the outstanding shares of Regions common stock.
Regions' certificate of incorporation 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.
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Arkansas Banking Company. The Arkansas Business Corporation Act generally
provides that an Arkansas corporation's articles of incorporation may be
amended if the number of votes cast in favor of the amendment exceeds the
number of votes cast against the amendment, provided a quorum is present at the
meeting; however, if the amendment creates dissenters' rights for a voting
group, the amendment must be approved by a majority of the votes entitled to be
cast by such voting group. The Arkansas Banking Company Articles do not alter
the voting requirement of the Arkansas Business Corporation Act.
Arkansas Banking Company's Bylaws provide that the Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. Regions' certificate of incorporation provides that Regions' Board of
Directors is divided into three classes, with each class to be as nearly equal
in number as possible. The directors in each class serve three-year terms of
office.
The effect of Regions' having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year;
consequently, two annual meetings are effectively required for Regions'
stockholders to change a majority of the members of the Board.
Pursuant to the Certificate, each stockholder generally is entitled to one vote
for each share of Regions stock held and is not entitled to cumulative voting
rights in the election of directors. With cumulative voting, a stockholder has
the right to cast a number of votes equal to the total number of such holder's
shares multiplied by the number of directors to be elected. The stockholder has
the right to cast all of such holder's votes in favor of one candidate or to
distribute such holder's votes in any manner among any number of candidates.
Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of Regions common
stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining Regions common stock effectively may not be able
to elect any person to the Board of Directors. The absence of cumulative
voting, therefore, could make it more difficult for a stockholder who acquires
less than a majority of the shares of Regions common stock to obtain
representation on Regions' Board of Directors.
Arkansas Banking Company. Arkansas Banking Company's Articles generally does
not provide for a classified board of directors. Holders of Arkansas Banking
Company common stock are not afforded cumulative voting rights.
REMOVAL OF DIRECTORS
Regions. Under the Certificate, any director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of the holders
of at least 75% of Regions' voting stock.
Arkansas Banking Company. Under the Arkansas Business Corporation Act, the
stockholders of a corporation may remove a director with or without cause if
the number of votes cast to remove the director exceed the number of votes cast
not to remove the director. Such action may only be taken at a meeting called
for the purpose of removing the director, and the meeting notice must state
that one of the purposes of the meeting is to remove the director.
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LIMITATIONS ON DIRECTOR LIABILITY
Regions. Regions' certificate of incorporation provides that a director of
Regions will have no personal liability to Regions or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) the
payment of certain unlawful dividends and the making of certain unlawful stock
purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or other
equitable relief as a remedy for a breach of duty by a director, it does limit
the remedies available to a stockholder who has a valid claim that a director
acted in violation of such director's duties, if the action is among those as
to which liability is limited. This provision may reduce the likelihood of
stockholder derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefitted
Regions and its stockholders. The SEC has taken the position that similar
provisions added to other corporations' certificates of incorporation would not
protect those corporations' directors from liability for violations of the
federal securities laws.
Arkansas Banking Company. The Arkansas Business Corporation Act permits a
corporation's articles of incorporation to relieve the directors from liability
for money damages for good faith conduct. The Arkansas Banking Company Articles
provide that Arkansas Banking Company directors shall not be liable for money
damages for breach of a fiduciary duty to the fullest extent allowed by the
Arkansas Business Corporation Act.
INDEMNIFICATION
Regions. Regions' certificate of incorporation 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, 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.
Arkansas Banking Company. The Arkansas Business Corporation Act provides for
indemnification of its directors, officers, employees, and agents in
substantially the same manner and with substantially the same effect as in the
case of Regions.
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SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders may be called at any time, but only by the chief executive
officer, the secretary, or the Board of Directors of Regions. Regions
stockholders do not have the right to call a special meeting or to require that
Regions' Board of Directors call such a meeting. This provision, combined with
other provisions of the Certificate and the restriction on the removal of
directors, would prevent a substantial stockholder from compelling stockholder
consideration of any proposal (such as a proposal for a business combination)
over the opposition of Regions' Board of Directors by calling a special meeting
of stockholders at which such stockholder could replace the entire Board with
nominees who were in favor of such proposal.
Arkansas Banking Company. Arkansas Banking Company's Bylaws provide that
special meetings of stockholders shall be called by Arkansas Banking Company
upon request by the holders of 60% or more of all the shares of Arkansas
Banking Company which are outstanding and entitled to vote at the meeting. The
Bylaws also provide that special meetings of the stockholders may be called at
any time by the Arkansas Banking Company Board or the Chairman.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. Regions' certificate of incorporation 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.
Arkansas Banking Company. Under the Arkansas Banking Company Articles, any
action requiring stockholder approval may be approved by the unanimous written
consent of stockholders.
STOCKHOLDER NOMINATIONS
Regions. Regions' Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Board of Directors must be made
by delivering written notice of such nomination (the "Nomination Notice") to
the Secretary of Regions not less than 14 days nor more than 50 days before any
meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days notice of the meeting is given to
stockholders, the Nomination Notice must be delivered to the Secretary of
Regions not later than the seventh day following the day on which notice of the
meeting was mailed to stockholders. The Nomination Notice must set forth
certain background information about the persons to be nominated, including
information concerning (i) the name, age, business, and, if known, residential
address of each nominee, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of Regions capital stock
beneficially owned by each such nominee. The Board of Directors is not required
to nominate in the annual proxy statement any person so proposed; however,
compliance with this procedure would permit a stockholder to nominate the
individual at the stockholders' meeting, and any stockholder may vote such
holder's shares in person or by proxy for any individual such holder desires.
Arkansas Banking Company. Arkansas Banking Company's Articles and Bylaws do not
provide for special nominating procedures for election of directors.
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MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. Regions' certificate of incorporation 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 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.
Arkansas Banking Company. The Arkansas Business Corporation Act generally
requires approval of a majority of the outstanding shares of a corporation's
voting stock to approve a merger, consolidation, share exchange, sale of all or
substantially all of the corporation's assets, or similar corporate
transaction.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware General Corporation Law ("Section 203")
places certain restrictions on "business combinations" (as defined in Section
203 to include, generally, mergers, sales and leases of assets, issuances of
securities, and similar transactions) by Delaware corporations with an
"interested stockholder" (as defined in Section 203 to include, generally, the
beneficial owner of 15% or more of the corporation's outstanding voting stock).
Section 203 generally applies to Delaware corporations, such as Regions, that
have a class of voting stock listed on a national securities exchange,
authorized for quotation on an interdealer quotation system of a registered
national securities association, or held of record by more than 2,000
stockholders, unless the corporation expressly elects in its certificate of
incorporation or bylaws not to be governed by Section 203.
Regions has not specifically elected to avoid the application of Section 203.
As a result, Section 203 generally would prohibit a business combination by
Regions or a subsidiary with an interested stockholder within three years after
the person or entity becomes an interested stockholder, unless (i) prior to the
time when the person or entity becomes an interested stockholder, Regions'
Board of Directors approved either the business combination or the transaction
pursuant to which such person or entity became an interested stockholder, (ii)
upon consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder held at least 85% of the
outstanding Regions voting stock (excluding shares held by persons who are both
officers and directors and shares held by certain employee benefit plans), or
(iii) once the person or entity becomes an interested stockholder, the business
combination is approved by Regions' Board of Directors and by the holders of at
least two-thirds of the outstanding Regions voting stock, excluding shares
owned by the interested stockholder.
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Arkansas Banking Company. The Arkansas Business Corporation Act requires
approval of a majority of the voting power of a corporation's stock for these
types of combinations.
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.
Arkansas Banking Company. A summary of the pertinent provisions of the Arkansas
Business Corporation Act pertaining to dissenters' rights is set forth under
the caption "The Merger--Dissenting Stockholders," and such provisions are
included as Appendix C.
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.
Arkansas Banking Company. Pursuant to the Arkansas 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, a list of directors and officers, and
all stockholder communications for the preceding three years, including
financial statements. Upon demonstration of a proper purpose, a stockholder may
be entitled to inspect other corporate records.
DIVIDENDS
Regions. The Delaware 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 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 "Supervision and Regulation--Payment of Dividends."
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Arkansas Banking Company. Pursuant to the Arkansas Business Corporation Act, a
board of directors may from time to time make distributions to its
stockholders, subject to restrictions in its Articles, 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 permits 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. As with Regions, substantially all of the funds available for the
payment of dividends by Arkansas Banking Company are also derived from its
subsidiary depository institutions, and there are various statutory limitations
on the ability of such subsidiaries to pay dividends to Arkansas Banking
Company.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions common stock is quoted on the Nasdaq National Market under the symbol
"RGBK." Arkansas Banking Company common stock is not traded in any established
market. The following table sets forth, for the indicated periods, the high and
low closing sale prices for Regions common stock as reported on the Nasdaq
National Market and the cash dividends declared per share of Regions common
stock and Arkansas Banking Company 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. For the indicated period, management of Arkansas Banking
Company is aware only of isolated transfers of Arkansas Banking Company stock
that have taken place between Arkansas Banking Company and directors or
existing stockholders at prices based on the book value of shares of Arkansas
Banking Company stock.
<TABLE>
<CAPTION>
REGIONS ARKANSAS BANKING COMPANY
PRICE RANGE CASH DIVIDENDS CASH DIVIDENDS
----------- DECLARED DECLARED
HIGH LOW PER SHARE PER SHARE
---- --- --------- ---------
<S> <C> <C> <C> <C>
1996
First Quarter ......... $ 24.00 $ 20.38 $ .175 $ --
Second Quarter ........ 24.19 21.13 .175 --
Third Quarter ......... 24.32 21.82 .175 --
Fourth Quarter ........ 26.88 24.38 .175 --
1997
First Quarter ......... 30.94 25.69 .20 --
Second Quarter ........ 33.25 27.38 .20 --
Third Quarter ......... 39.13 32.06 .20 --
Fourth Quarter ........ 44.75 36.56 .20 --
1998
First Quarter ......... 43.50 37.94 .23 --
Second Quarter ........ 45.25 38.66 .23 --
Third Quarter ......... 42.69 33.81 .23 --
Fourth Quarter (through
_______, 1998) .... 30.25 .23 .6555
</TABLE>
On _______, 1998, the last reported sale price of Regions common stock as
reported on the Nasdaq National Market was $ _______. On August 5, 1998, the
last business day prior to public announcement of the proposed merger, the last
reported sale price of Regions common stock as reported on the Nasdaq National
Market was $37.88. The last known sale of Arkansas Banking Company stock took
place on ____________ at a price of $____________ per share.
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 proposed 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
46
<PAGE> 54
institutions are subject to certain legal restrictions on the amount of
dividends they are permitted to pay. See "Supervision and Regulation--Payment
of Dividends."
The Arkansas Banking Company stockholders are entitled to receive dividends
when and if declared by the Board of Directors out of legally available funds.
Arkansas Banking Company did not pay dividends before entering into the merger
agreement. The merger agreement permits Arkansas Banking Company to pay
dividends equivalent (taking the exchange ratio into account) to any paid by
Regions after September 25, 1998. Consequently, in November, 1998, Arkansas
Banking Company paid its stockholders a dividend of $.6555 per share, which was
equal to Regions' October 1, 1998 dividend of $.23 per share multiplied by the
exchange ratio of 2.85. Until the merger is completed or the merger agreement
terminated, Arkansas Banking Company intends to continue to pay cash dividends
equivalent to any paid by Regions. However, the payment of future dividends
will depend upon factors such as business conditions, operating results,
capital and reserve requirements, and the Board of Directors may discontinue
dividend payments at any time.
Arkansas Banking Company 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. Arkansas Banking
Company's 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."
47
<PAGE> 55
ARKANSAS BANKING COMPANY MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the financial
condition and results of operations of Arkansas Banking Company (ABC) for the
three years ended December 31, 1997, and as of September 30, 1998 and 1997 and
for the nine month periods then ended. Management's discussion should be read in
conjunction with the financial statements and accompanying notes presented
elsewhere in this Proxy Statement.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996 AND YEAR ENDED DECEMBER 31, 1996
COMPARED TO YEAR ENDED DECEMBER 31, 1995
OVERVIEW
Net earnings for 1997 totaled $3,425,021 compared to $2,265,931 for 1996 and
$1,264,944 for 1995. The increase in net earnings of $1,159,090 from 1996 to
1997 was caused primarily by an increase in all categories of interest earning
assets and service charges on deposits, partially offset by an increase of
interest bearing liabilities, salaries and employee benefits expense of $492,722
and occupancy expense of $104,938. Net interest income increased by $1,694,512.
Return on average assets was 1.13% and return on average equity was 16.45% for
1997, compared to 0.94% and 12.53%, respectively, for 1996 and 0.60% and 7.37%,
respectively, for 1995.
Average assets in 1997 increased by $62,051,252, or 25.70%, from 1996. This
increase was due in part to an increase in average customer deposits of
$52,146,796 or 28.14%. The increase in average deposits was caused by increases
in average time deposits of $41,171,023, in average non-interest bearing demand
deposits of $3,994,378, and average demand deposits of $4,344,538. The increase
in average deposits helped to fund the increase in average loans of $46,467,485
as well as the changes in other asset accounts.
The net interest margin, the percentage of net interest income (including
discount accretion and premium amortization) to average earning assets,
decreased in 1997, from 4.28% to 3.99%. The net interest margin of 3.99% in 1997
is favorable to ABC but is reflective of the continued decline in interest rates
as the spread between rates on deposits and yields on investments and loans
continues to decline at ABC as well as within the entire banking industry.
Average earning assets comprised 91.10% , 90.57% and 90.08% of total average
assets in 1997, 1996 and 1995, respectively.
RESULTS OF OPERATIONS
Net Interest Income. ABC's primary source of revenue is net interest income.
Net interest income is the difference between interest earned on interest
earning assets and interest paid on interest bearing sources of funds. The level
of net interest income is determined primarily by the volume of interest earning
assets and the various rates spreads between the interest earning assets and
their funding sources.
48
<PAGE> 56
Net interest income for 1997 was $11,045,624, compared to $9,351,112 for 1996
and $6,508,546 for 1995. The increases of $1,694,512 from 1996 to 1997 and
$2,842,566 from 1995 to 1996 were caused by the increases in average net
interest-earning assets. The decrease in the net interest margin was due to the
net interest income not increasing proportionately with the increase in average
earning assets. Average non-interest bearing deposits as a percent of total
deposits remained relatively stable from 1995 to 1997.
Loans continued to be the largest component of earnings assets as well as the
highest yielding asset of ABC. Average loans for 1997 were $194,212,522 or
70.24% of average earning assets. Average investment securities totaled
$69,685,194 and comprised 25.20% of average earning assets. Federal funds sold
constitute the remainder of ABC's earning assets.
49
<PAGE> 57
The following table presents the average balance sheets, net interest income,
yields earned and rates paid for each category of assets for the periods
indicated by setting forth, information regarding (i) the total dollar amount of
interest income of ABC from interest-earning assets and the resultant average
yields; (ii) the total dollar amount of interest expense on interest-bearing
liabilities and the resultant average rate; (iii) net interest income; (iv)
interest rate spread; and (v) net interest margin. Information is based on
average daily balances during the indicated periods.
AVERAGE BALANCES, NET INTEREST INCOME YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------- ---------------------------------- ------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST
----------- ---------- ------- ----------- ---------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold........ $12,575,851 $ 660,696 5.25% $12,069,360 $ 633,604 5.25% $ 7,417,318 $ 419,097
Loans..................... 194,212,522 18,117,601 9.33 147,745,037 14,028,808 9.50 99,774,670 9,211,742
Investment securities held
to maturity............. -- -- 0.00 -- -- 0.00 -- --
Investment securities
available for sale...... 69,685,194 4,142,494 5.94 58,844,626 3,433,498 5.83 83,622,934 4,586,728
Other earning assets....... 16,821 403 2.40 -- -- 0.00 6,268 79
----------- ---------- ----------- ---------- ----------- ----------
Total interest-earning
assets.................... 276,490,388 22,921,194 8.29 218,659,023 18,095,910 8.28 190,821,190 14,217,646
Non-interest-earning
assets.................... 26,999,098 22,779,211 21,021,873
----------- ----------- -----------
Total assets........ 303,489,486 241,438,234 211,843,063
=========== =========== ===========
INTEREST-BEARING
LIABILITIES:
Deposits.................. 237,488,256 11,340,445 4.78% 185,341,460 8,366,919 4.51% 164,920,370 7,418,241
Other interest-bearing
liabilities............. 7,227,442 535,125 7.40 4,991,147 377,879 7.57 3,421,149 290,859
----------- ---------- ---------- ----------- ----------
Total interest-bearing
liabilities............... 244,715,698 11,875,570 4.85 190,332,607 8,744,798 4.59 168,341,519 7,709,100
---------- ---------- ----------- ----------
Non-interest-bearing
liabilities:
Deposits.................. 34,082,858 30,088,480 24,473,687
Other non-interest-bearing
liabilities............. 3,872,351 2,931,490 1,876,071
----------- ----------- -----------
Total liabilities.......... 282,670,907 223,352,577 194,691,277
Equity..................... 20,818,579 18,085,657 17,151,786
----------- ----------- -----------
Total liabilities
and shareholders'
equity............. 303,489,486 241,438,234 211,843,063
=========== =========== ===========
Net interest-earning
assets.................... 31,774,690 28,326,416 22,479,671
=========== =========== ===========
Net interest
income/interest rate
spread.................... 11,045,624 3.44 9,351,112 3.68 6,508,546
========== ========== ==========
Net interest margin........ 3.99 4.28
Ratio of average interest-
earning assets to average
interest-bearing
liabilities............... 112.98 114.88
<CAPTION>
1995
-------
AVERAGE
YIELD/
COST
-------
<S> <C>
INTEREST-EARNING ASSETS:
Federal funds sold........ 5.65%
Loans..................... 9.23
Investment securities held
to maturity............. 0.00
Investment securities
available for sale...... 5.49
Other earning assets....... 1.26
Total interest-earning
assets.................... 7.45
Non-interest-earning
assets....................
Total assets........
INTEREST-BEARING
LIABILITIES:
Deposits.................. 4.50%
Other interest-bearing
liabilities............. 8.50
Total interest-bearing
liabilities............... 4.58
Non-interest-bearing
liabilities:
Deposits..................
Other non-interest-bearing
liabilities.............
Total liabilities..........
Equity.....................
Total liabilities
and shareholders'
equity.............
Net interest-earning
assets....................
Net interest
income/interest rate
spread.................... 2.87
Net interest margin........ 3.41
Ratio of average interest-
earning assets to average
interest-bearing
liabilities............... 113.35
</TABLE>
- -------------------------
(1) Nonaccrual loans and the interest income which was recorded on these loans
(both prior and subsequent to the time the loans were placed on nonaccrual
status, if any) are included in the yield calculation for loans in all
periods reported.
50
<PAGE> 58
Rate/Volume Analysis. The following table provides the components of changes in
net interest income in the format of a rate/volume analysis and analyzes the
dollar amount of changes in interest income and interest expense for major
components of interest-earning assets and interest-bearing liabilities. The
table distinguishes between (i) changes attributable to rate (changes in rate
multiplied by the prior period's volume), (ii) changes attributable to volume
(changes in volume multiplied by the prior period's rate), (iii) mixed change
(changes in rate multiplied by changes in volume), and (iv) total increase
(decrease) (sum of the previous columns).
ARKANSAS BANKING COMPANY
RATE/VOLUME VARIANCE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1997/1996 1996/1995
------------------------------------------------- -------------------------------------------------
CHANGE ATTRIBUTABLE TO CHANGE ATTRIBUTABLE TO
------------------------------------------------- -------------------------------------------------
TOTAL TOTAL
RATE/ INCREASE/ RATE/ INCREASE/
VOLUME RATE VOLUME DECREASE VOLUME RATE VOLUME DECREASE
---------- --------- ----------- ---------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING
ASSETS:
Federal funds
sold.............. $ (187,414) $ 612 $ 213,894 $ 27,092 $ 309,351 $(39,655) $ (55,190) $ 214,507
Loans............... 4,367,413 (291,629) 13,008 4,088,793 4,237,539 321,737 257,790 4,817,066
Investment
securities held to
maturity.......... -- -- -- -- -- -- -- --
Investment
securities
available for
sale.............. (74,571) 110,221 673,346 708,996 226,114 279,640 (1,616,156) (1,110,401)
Other earning
assets.............. -- -- 403 403 (79) (79) (42,750) (42,908)
---------- --------- ----------- ---------- ---------- -------- ----------- -----------
Total net
change in
income on
interest-
earning
assets...... 4,105,428 (180,795) 900,651 4,825,284 4,772,925 561,644 (1,456,305) 3,878,264
---------- --------- ----------- ---------- ---------- -------- ----------- -----------
INTEREST-BEARING
LIABILITIES:
Deposits............ 91,714 93,382 2,789,055 2,974,151 2,108,309 26,446 (1,186,702) 948,053
Other interest-
bearing
liabilities....... 2,303 (15) 154,333 156,621 33,539 9,663 44,443 87,645
---------- --------- ----------- ---------- ---------- -------- ----------- -----------
Total net
change in
expense on
interest-
bearing
liabilities... 94,017 93,366 2,943,389 3,130,772 2,141,848 36,109 (1,142,258) 1,035,698
---------- --------- ----------- ---------- ---------- -------- ----------- -----------
Net change in net
interest income..... $4,011,411 $(274,161) $(2,042,738) $1,694,512 $2,631,078 $525,535 $ (314,047) $ 2,842,566
========== ========= =========== ========== ========== ======== =========== ===========
</TABLE>
51
<PAGE> 59
Interest Rate Sensitivity. The interest rate sensitivity gap is the difference
between the amount of interest bearing assets and interest bearing liabilities
maturing in any given time frame. A primary objective of asset/liability
management is to maximize net interest margin while not subjecting ABC to
significant interest rate risk in periods of rising or falling interest rates.
At December 31, 1997, ABC's one year repricing gap, defined as repricing assets
minus repricing liabilities as a percentage of total assets was a negative
7.68%, i.e. more of ABC's liabilities than assets reprice within a one year time
frame. Management regularly reviews interest rate exposure to analyze the impact
of changes in market interest rates on net interest income.
The following table sets forth ABC's interest rate sensitivity at various time
intervals as of December 31, 1997.
ARKANSAS BANKING COMPANY
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
MORE THAN
WITHIN THREE TO ONE YEAR OVER
THREE TWELVE TO TWO
MONTHS MONTHS TWO YEARS YEARS TOTAL
------- -------- ----------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold............... $11,805 $ -- $ -- $ -- $ 11,805
Loans............................ 37,585 64,409 40,564 68,790 211,348
Investment securities held to
maturity...................... -- -- -- -- --
Investment securities available
for sale...................... 17,779 1,309 10,770 37,738 67,596
Other earning assets............... --
------- -------- -------- -------- --------
Total interest-earning
assets................. 67,169 65,718 51,334 106,528 290,749
------- -------- -------- -------- --------
INTEREST-BEARING LIABILITIES:
Deposits......................... 70,429 86,522 65,549 28,772 251,272
Other interest-bearing
liabilities................... -- 558 -- -- 558
------- -------- -------- -------- --------
Total interest-bearing
liabilities............ 70,429 87,080 65,549 28,772 251,830
------- -------- -------- -------- --------
Excess (deficiency) of
interest-earning assets over
interest-bearing liabilities..... (3,260) (21,362) (14,215) 77,756
------- -------- -------- --------
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities..... (3,260) (24,622) (38,837) 38,919
------- -------- -------- --------
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities as a
percent of total assets.......... (1.02)% (7.68)% (12.11)% 12.14%
</TABLE>
Provision for Loan Losses. The provision for loan losses charged to operating
expense is the result of a continuing review and assessment of the loan
portfolio, taking into consideration the history of chargeoffs in the loan
portfolio by category, the current economic conditions in the lending area, the
payment history, the ability to repay and
52
<PAGE> 60
strength of collateral of specific borrowers, and other relevant factors. The
1997 provision is $582,534, compared to $665,012 in 1996 and $532,313 in 1995.
Actual chargeoffs, net of recoveries, were $198,014 in 1997, $283,442 in 1996
and $225,474 in 1995. The provision exceeded net chargeoffs in all years
presented, resulting in an increase in the allowance for loan losses.
Non-Interest Income. Non-interest income in 1997 totaled $2,747,613 compared to
$2,286,166 in 1996 and $1,838,301 in 1995. The increases from 1995 and 1996 were
caused by increases in service charges.
Non-Interest Expenses. Non-interest expenses were $7,998,710 in 1997, compared
to $7,434,804 in 1996 and $5,871,930 in 1995. Salaries and related benefits
increased $492,722 from 1996 to 1997 and $594,429 from 1995 to 1996, while
occupancy expense increased $104,938 from 1996 to 1997 and $115,941 from 1995 to
1996.
Income Taxes. ABC's effective tax rate was 34.29% in 1997, 35.94% in 1996 and
34.88% in 1995. The effective rate is higher than the highest federal statutory
rate primarily because of additional state income tax.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. In 1997, average investment securities increased
$10,840,568 from 1996. The increase was funded by a larger increase in deposits.
At December 31, 1997, ABC had securities classified as available for sale. There
were no securities classified as held to maturity. Available for sale securities
were comprised mainly of U.S. government agencies, with a market value of
$67,596,342. These securities had gross unrealized gains of $128,308 and gross
unrealized losses of $325,709. The investment securities portfolio is used as a
source of liquidity and a means of managing interest rates and interest rate
sensitivity. In addition, the portfolio serves as a source of collateral on
certain deposits.
Securities Portfolio. The carrying amount of securities at the dates indicated
is set forth in the table below:
CARRYING AMOUNT OF SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY............... $ -- 0.00% $ -- 0.00% $ -- 0.00%
------- ------ ------- ------ ------- ------
AVAILABLE FOR SALE
US Government agencies &
treasuries................. 63,322 93.68 64,499 93.66 57,603 89.13
Mortgage-backed securities... 304 0.45 1,088 1.58 1,610 2.49
State, county and
municipals................. 3,135 4.64 3,276 4.76 5,417 8.38
Other obligations............ 835 1.23 -- 0.00 -- 0.00
------- ------ ------- ------ ------- ------
Total................. $67,596 100.00% $68,863 100.00% $64,630 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
53
<PAGE> 61
Investment Securities Maturity Distribution. The amortized cost of securities
available for sale 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.
MATURITY DISTRIBUTION AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
OVER
ONE YEAR ONE TO FIVE TO TEN
OR LESS FIVE YEARS TEN YEARS YEARS TOTAL
-------- ---------- --------- ----- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
US Government agencies &
treasuries
Amount...................... $12,020 $50,615 $1,000 $ -- $63,635
------- ------- ------ ----- -------
Yield....................... 5.19% 6.07% 5.00% 0.00%
Mortgage-backed securities
Amount...................... -- 25 17 242 284
------- ------- ------ ----- -------
Yield....................... 0.00% 8.50% 9.31% 5.68%
State, county and municipals
Amount...................... 96 1,630 1,397 -- 3,123
------- ------- ------ ----- -------
Yield....................... 5.96% 4.70% 4.97% 0.00%
Other obligations
Amount...................... 250 502 -- -- 752
------- ------- ------ ----- -------
Yield....................... 8.84% 6.37% 0.00% 0.00%
Total............... $12,366 $52,772 $2,414 $ 242 $67,794
======= ======= ====== ===== =======
</TABLE>
Loans. Net loans outstanding at December 31, 1997 totaled $211,572,087 compared
to $164,824,490 in 1996, an increase of $46,747,597 or 28.36%. Total average
loans in 1997 were $194,212,522, an increase of $46,467,485 from the average for
1996.
54
<PAGE> 62
The following table sets forth the composition of ABC's loan portfolio by type
of loan at the dates indicated:
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
% OF % OF % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
-------- ------ -------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TYPES OF LOANS:
Commercial and
industrial........ $ 28,055 13.26% $ 16,686 10.12% $ 22,021 18.65%
Real estate --
construction...... 10,749 5.08 6,345 3.85 5,683 4.81
Real
estate -- mortgage.. 118,666 56.09 103,721 62.93 59,375 50.27
Consumer and other... 59,565 28.15 42,180 25.59 34,127 28.90
-------- ------ -------- ------ -------- ------
Total
loans..... 217,035 102.58 168,932 102.49 121,206 102.63
LESS
Unearned interest.... (3,155) (1.49) (2,184) (1.33) (1,792) (1.52)
Allowance for loan
losses............ (2,308) (1.09) (1,924) (1.17) (1,309) (1.11)
-------- ------ -------- ------ -------- ------
Total loans,
net....... $211,572 100.00% $164,824 100.00% $118,105 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
Real estate mortgage loans is the largest category of loans, comprising 56.09%
and 62.93% of net loans at December 31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, fixed rate loans totaled $203,506,133 and
$157,781,636, respectively, and variable rate loans totaled $8,065,867 and
$7,042,364, respectively.
Non-Performing Assets. Nonaccrual loans, foreclosed assets and troubled debt
restructurings are included in non-performing assets. Non-performing assets
decreased $46,000 during 1997 to $775,000 at December 31, 1997.
Nonaccrual loans are loans on which the accrual of interest income has been
discontinued and previously accrued interest has been reversed because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
55
<PAGE> 63
The following table sets forth information with respect to non-performing assets
identified by ABC, including nonaccrual loans, other real estate owned and
troubled debt restructurings at the dates indicated:
NONPERFORMING ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996 1995
------- ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans................................. $ 574 $ 432 $ 800
Accruing loans past due 90 days or more.......... 156 324 73
Other real estate owned.......................... 45 65 92
------- ------- -------
Total nonperforming assets............. $ 775 $ 821 $ 965
======= ======= =======
Nonperforming assets to net loans................ 0.37% 0.50% 0.82%
Allowance for loan losses to total loans at end
of period...................................... 1.08 1.15 1.10
Allowance for loan losses to nonperforming
assets......................................... 297.81 234.35 135.65
</TABLE>
Allowance for Loan Losses. Inherent in ABC's lending activities is the risk
that loan losses will be experienced and that the risk of loss will vary with
the type of loan being made and the creditworthiness of the borrower over the
term of the loan. To reflect the currently perceived risk of loss associated
with ABC's loan portfolio, provisions are made to the allowance for loan losses.
The allowance is created by direct charges against income and is available for
loan losses. The amount of the allowance for loan losses and the provisions for
loan losses are evaluated quarterly, based on management's estimate of risk in
the overall loan portfolio and the estimated exposure on individual loans. In
evaluating the adequacy of the allowance and the amount of the provision,
consideration is given to such factors as: management's evaluation of specific
loans; the level and composition of classified loans; historical loss
experience; results of examinations by regulatory agencies and an internal asset
review process; expectations of future national and local economic conditions
and their impact on particular industries and the individual borrowers; the
market value of collateral and strength of available guaranties; concentrations
of credit; and other judgmental factors. ABC maintains an allowance for loan
losses which it believes is adequate to absorb reasonably foreseeable losses in
the loan portfolio.
The allowance for loan losses increased $384,520 from December 31, 1996 to 1997,
to $2,308,207 and was 1.08% of total loans. The 1996 balance in the allowance
for loan losses was $1,923,687 or 1.15% of total loans.
56
<PAGE> 64
The following table summarizes the loan loss experience for each of the periods
indicated:
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year....................... $ 1,924 $ 1,309 $ 1,002
Provisions charged to expense...................... 583 665 532
Changes incident to mergers and absorptions, net... -- 233 --
Chargeoffs:
Real estate...................................... 6 152 197
Commercial....................................... 14 58 10
Consumer and other............................... 214 182 158
------- ------- -------
Total chargeoffs......................... 234 392 365
------- ------- -------
Recoveries:
Real estate...................................... 6 29 59
Commercial....................................... -- 7 1
Consumer and other............................... 29 73 80
------- ------- -------
Total recoveries......................... 35 109 140
------- ------- -------
Net loan chargeoffs................................ 199 283 225
------- ------- -------
Balance at end of period........................... $ 2,308 $ 1,924 $ 1,309
======= ======= =======
Allowance for loan losses to total loans at end of
period........................................... 1.08% 1.15% 1.10%
Allowance for loan losses to total nonperforming
assets........................................... 297.81 234.35 135.65
Net chargeoffs to average loans.................... 0.10 0.19 0.23
Recoveries as a percentage of chargeoffs........... 14.96 27.44 38.36
</TABLE>
Deposits. Total deposits at December 31, 1997 were $289,076,765, an increase of
$41,621,414 from the December 31, 1996 total of $247,455,351. Average deposits
increased $52,146,796 from 1996. As noted earlier, an increase occurred in the
average balance of time deposits, non-interest bearing demand deposits and
interest bearing demand deposits.
Time deposits of $100,000 or more were $39,311,545 at December 31, 1997, which
comprised 13.60% of total deposits. These deposits consist primarily of deposits
from local customers with which ABC has other banking relationships. ABC had no
brokered deposits at December 31, 1997.
Deposit Average Balances and Rates. The following table indicates the average
daily amount of deposits and rates paid on such deposits for the periods
indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1997 1996 1995
------------------ ---------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- ------------ ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand................. $ 34,083 0.00% $ 30,088 0.00% $ 24,474 0.00%
Interest bearing
demand................. 31,945 2.69 27,600 2.59 25,851 2.57
Savings.................. 41,315 3.09 34,684 2.62 33,301 2.94
Time deposits............ 164,229 5.61 123,058 5.48 105,768 5.46
</TABLE>
57
<PAGE> 65
Maturities of Time Deposits of $100,000 or More. The maturities of time
deposits of $100,000 or more are summarized in the table below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Three months or less........................................ $14,050 $16,245
Over three months through twelve months..................... 22,478 14,764
Over one year through two years............................. 8,491 2,751
Over two years.............................................. 535 1,314
------- -------
Total............................................. $45,554 $35,074
======= =======
</TABLE>
Liquidity. Liquidity involves ABC's ability to raise funds to support asset
growth or to reduce assets, meet deposit withdrawals and other borrowing needs,
maintain reserve requirements and otherwise operate on an ongoing basis.
As shown in the accompanying 1997 statement of cash flows, cash and cash
equivalents increased by $2,391,702 from December 31, 1996 to December 31, 1997.
Cash and cash equivalents were generated primarily by sales and maturities of
investment securities of $28,420,000, and increases in customers' deposits of
$41,621,413. Cash and cash equivalents were used for purchases of investment
securities of $27,106,195, increases in loans outstanding of $47,330,130, and
purchases of premises and equipment of $1,102,923. Overall, operating activities
provided net cash of $4,369,934.
Capital Resources. ABC maintains adequate capital for regulatory purposes and
has sufficient capital to absorb the risks inherent in the business. Risk-based
capital requirements have been established that weight different assets
according to the level of risk associated with those types of assets. The table
below summarizes ABC's capital levels at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
----- -----
<S> <C> <C>
Tier 1 Capital to Average Assets............................ 6.69% 6.64%
Tier 1 Capital to Risk Weighted Assets...................... 9.30 9.31
Total Capital to Risk Weighted Assets....................... 10.62 11.08
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1997
The following discussion provides certain information concerning the financial
condition and results of operations of ABC as of September 30, 1998 and for the
nine month period then ended. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) which are necessary for a fair
presentation of results of operations for such nine month period have been made.
Management's discussion should be read in conjunction with the financial
statements and accompanying notes presented elsewhere in this Proxy Statement.
58
<PAGE> 66
OVERVIEW
Net earnings for the nine months ended September 30, 1998 totaled $2,965,622
compared to $2,436,077 for the same period in 1997.
Return on average assets (annualized) was 1.08% and return on average equity
(annualized) was 7.52% for the nine months ended September 30, 1998 compared to
1.01% and 7.12%, respectively, for the comparable period in 1997.
RESULTS OF OPERATIONS
Net Interest Income. ABC's primary source of revenue is net interest income.
Net interest income is the difference between interest earned on interest
earning assets and interest paid on interest bearing sources of funds. The level
of net interest income is determined primarily by the volume of interest earning
assets and the various rate spreads between the interest earning asset and their
funding sources.
Net interest income for the nine months period ended September 30, 1998 totaled
$9,142,710, an increase of $962,718 or 11.77% from the $8,179,992 total for the
comparable period in 1997. The increase in net interest income was attributable
to an increase in total interest income of $2,476,381, which was partially
offset by an increase in total interest expense of $1,513,664.
Average interest earning assets for the nine months ended September 30, 1998
were $309,836,718 and represented 84.44% of average total assets. An increase in
average loans outstanding of $32,321,556 and federal funds sold of $3,329,975,
together with decreases in average investment securities of $2,289,404 and other
interest-bearing assets of $15,797, resulted in an increase in average interest
earning assets of $33,346,330 from December 31, 1997.
As of September 30, 1998, non-interest bearing demand deposits averaged
$38,451,440 or 12.66% of deposits compared to $33,118,978 or 12.46% of deposits
as of September 30, 1997. The large percentage of non-interest bearing deposits
has a positive impact on ABC's net interest margin.
Net interest margin, the ratio of annualized net interest income to average
earning assets, for the nine months ended September 30, 1998 decreased to 3.93%,
a decrease of 6 basis points from December 31, 1997. The decrease in net
interest margin in 1998 is a result of the higher percentage of interest-bearing
deposits.
Net interest spread, the difference between the annualized yield on earning
assets and the annualized rate paid on interest bearing liabilities, was 3.35%
for the nine months ended September 30, 1998, a decrease from December 31, 1997
of 9 basis points.
Interest Rate Sensitivity. The interest rate sensitivity gap is the difference
between the amount of interest bearing assets and interest bearing liabilities
maturing in any given time frame. A primary objective of asset/liability
management is to maximize net interest margin while not subjecting ABC to
significant interest rate risk in period of rising or falling interest rates. At
September 30, 1998 ABC's one year repricing gap, defined as repricing assets
minus repricing liabilities, as a percentage of total assets was a negative
9.60%, i.e. more of ABC's liabilities than assets reprice within a one year time
frame. Management regularly reviews interest rate exposure to analyze the impact
of changes in market interest rates on net interest income.
59
<PAGE> 67
Provision for Possible Loan Losses. The provision for possible loan losses
charged to operating expense is the result of a continuing review and assessment
of the loan portfolio, taking into consideration the impact of economic
conditions on the borrower's ability to repay, past collection experience, the
risk characteristics of the loan portfolio and such other factors which deserve
current recognition. For the nine months ending September 30, 1998, the
provision for possible loan losses charged as expense totaled $423,970 compared
to $411,034 for the same nine month period in 1997.
Non-Interest Income. Non-interest income for the nine month period ended
September 30, 1998 totaled $2,105,974 compared to $1,756,552 for the same period
in 1997. The increase resulted from an increase in service charges of $37,468
and decreases in other income items of $311,954.
Non-Interest Expense. For the nine month period ended September 30, 1998, total
non-interest expenses increased $577,797 or 10.28% from the same period in 1997.
Salaries and employee benefits increased $209,855, other operating expenses
increased by $325,670 and occupancy increased by $42,272.
Income Taxes. ABC's effective tax rate was 35.88% for the nine month period
ended September 30, 1998 compared to 37.59% for the same period in 1997. The
effective tax rate is higher than the highest federal statutory rate primarily
because of additional state income tax.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. Average investment securities for the nine months ended
September 30, 1998 were $67,395,790 or 21.75% of average earning assets. Total
investment securities at September 30, 1998 were $67,687,895 including gross
unrealized gains of $426,852 and gross unrealized losses of $76,419. The
investment securities portfolio is used to make investments of various
maturities in order to improve the overall earning asset yield. It also serves
as a source of liquidity and as collateral to secure certain types of deposits.
Investment securities are classified as available for sale or held to maturity.
The composition of the portfolio, effectively managed, limits ABC's exposure to
changes in interest rates and economic conditions as they occur.
Loans and Non-Performing Assets. The loan portfolio is the largest component of
ABC's earning assets. For the nine months ended September 30, 1998, average
loans outstanding were $226,534,078 compared to $188,234,711 for the same period
in 1997.
Total non-performing assets at September 30, 1998 were 0.31% of total loans,
which is comparable to non-performing assets at December 31, 1997.
Nonaccrual loans are loans on which the accrual of interest income has been
discontinued and previously accrued interest has been reversed, because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
Allowance for Loan Losses. At September 30, 1998 the allowance for possible
loan losses was $2,456,228 compared to $2,244,231 at September 30, 1997. The
allowance as a percent of loans outstanding was 0.99% and 1.03% as of September
30, 1998 and 1997,
60
<PAGE> 68
respectively. For the nine month period ending September 30, 1998, charge-offs
exceeded recoveries by $275,949.
Deposits. Total deposits at September 30, 1998 were $311,160,491 which is
$32,696,439 or 11.74% higher than at September 30, 1997.
Time deposits of $100,000 or more were $53,578,147 at September 30, 1998. These
deposits consist primarily of deposits from local customers with which ABC has
other banking relationships. ABC had no brokered deposits at September 30, 1998.
Liquidity. Liquidity is the ability of ABC to fund the needs of its borrowers,
depositors and creditors. ABC's management maintains a strategy that provides
adequate liquidity and manages interest rate risk. ABC's liquidity sources,
including cash flows from sales, maturities and paydowns of loans and investment
securities, federal funds purchased, securities sold under agreements to
repurchase and a base of core deposits, are considered adequate to meet
liquidity needs for normal operations.
Capital Resources. ABC is required to comply with the risk-based capital
guidelines adopted by the FDIC. Those guidelines apply weighing factors which
vary according to the level of risk associated with each asset category. As of
September 30, 1998, ABC exceeds all minimum capital ratios, with the following
ratios:
<TABLE>
<S> <C>
Tier 1 risk-based capital................................ 6.58%
Total risk-based capital................................. 8.13
Tier 1 leverage.......................................... 6.61
</TABLE>
61
<PAGE> 69
INFORMATION ABOUT ARKANSAS BANKING COMPANY
Arkansas Banking Company is a bank holding company organized under the laws of
the state of Arkansas on June 13, 1991. It operates principally through its four
subsidiary banks, which provide a range of consumer and commercial banking
services through 19 offices in Lawrence, Craighead, Greene, Independence,
Jackson, Clay and Mississippi counties in northeastern Arkansas. At September
30, 1998, Arkansas Banking Company had total consolidated assets of
approximately $350.3 million, total consolidated deposits of approximately
$311.2 million, and total consolidated stockholders' equity of approximately
$26.0 million. Arkansas Banking Company's principal executive office is located
at 515 West Washington, Jonesboro, Arkansas 72403 and its telephone number at
such address is (870) 932-2131.
BUSINESS AND PROPERTIES
Banking Services. Arkansas Banking Company provides banking services through
four subsidiary banks: The Arkansas Bank, Jonesboro; The Arkansas Bank, Walnut
Ridge; The Planters Bank, Osceola; and The Arkansas Bank, N.A., Batesville. The
first three of these subsidiary banks are Arkansas state-chartered banks, the
fourth is a federally chartered national banking association.
The subsidiary banks offer most of the usual banking services, including
checking accounts, savings accounts, certificates of deposit, money market
accounts, money orders, travelers' checks, safe deposit boxes, night depository,
installment loans, commercial loans, mortgage loans and mortgage collections.
The subsidiary banks operate a total of 11 automatic teller machines within
their service areas.
The commercial loan departments of the subsidiary banks serve a variety of
professionals, farmers and local businesses and offer a full range of business
credit services, including lines of credit, term loans, revolving loans,
agricultural loans, equipment financing and mortgage loans. Consumer loan
services offered by the subsidiary banks include automobile loans, home
improvement loans, home equity lines of credit and other personal loans.
Other Services. Business Support, Ltd., a company formed and owned by Arkansas
Banking Company's subsidiary banks, provides data processing and other services
to the banks.
Employees. As of September 30, 1998, Arkansas Banking Company and its
subsidiaries employed 148 persons. Management of Arkansas Banking Corporation
believes that its employee relations have been and continue to be good. No
employees are represented by any union or similar group, and neither Arkansas
Banking Company nor any of its subsidiaries has experienced any strike or labor
dispute.
Properties. Arkansas Banking Company's main office is located in a two-story
building at 515 West Washington, Jonesboro, Arkansas, which also serves as the
main banking facility for The Arkansas Bank, Jonesboro. The main and branch
offices of Arkansas Banking Company and its subsidiary banks are described
below:
62
<PAGE> 70
<TABLE>
<CAPTION>
SIZE OWN/
LOCATION (SQUARE FEET) USE LEASE
-------- ------------- --- -----
<S> <C> <C> <C>
The Arkansas Bank 14,565 Bank; Main Own
515 W. Washington Office of ABC
Jonesboro, AR 72401
The Arkansas Bank 4,396 Operations Own
519 W. Washington
Jonesboro, AR 72401
The Arkansas Bank 2,500 Branch Own
1306 S. Caraway Rd.
Jonesboro, AR 72401
The Arkansas Bank 5,000 Branch Own
4902 E. Nettleton Ave.
Jonesboro, AR 72401
The Arkansas Bank 750 Branch Lease
2908 S. Caraway Rd.
Jonesboro, AR 72401
The Arkansas Bank 448 Branch Own
3313 E. Johnson
Jonesboro, AR 72401
The Arkansas Bank 448 Branch Own
3100 Southwest Drive
Jonesboro, AR 72401
The Arkansas Bank 6,000 Branch Own
1512 West Court Street
Paragould, AR 72450
The Arkansas Bank 5,454 Branch Own
264 North Third Street
Piggott, AR 72454
The Arkansas Bank 14,000 Bank Own
1141 E. Main
Batesville, AR 72503
The Arkansas Bank 1,250 Branch Own
2880 Harrison Street
Batesville, AR 72501
</TABLE>
63
<PAGE> 71
<TABLE>
<CAPTION>
SIZE OWN/
LOCATION (SQUARE FEET) USE LEASE
-------- ------------- --- -----
<S> <C> <C> <C>
The Arkansas Bank 2,500 Branch Lease
2153 Malcolm Village Park
Newport, AR 72112
The Arkansas Bank 7,500 Bank Own
212 W. Walnut Street
Walnut Ridge, AR 72476
The Arkansas Bank 1,000 Branch Own
Hwy 63
Portia, AR 72457
The Arkansas Bank 1,500 Branch Own
Hwy 25
Lynn, AR 72440
The Arkansas Bank 1,500 Branch Own
103 W. 3rd
Imboden, AR 72434
The Arkansas Bank 1,000 Branch Own
Hwy 115
Smithville, AR 72466
The Planters Bank 13,500 Bank Own
1300 W. Keiser
Osceola, AR 72470
The Planters Bank 400 Branch Lease
101 E. Hale
Osceola, AR 72470
</TABLE>
Consulting Agreement with Regions. Arkansas Banking Company and Regions have
entered into a consulting agreement pursuant to which Arkansas Banking Company
is providing consulting services to Regions in connection with Regions' banking
operations in Jonesboro, Arkansas. For such services Regions has agreed to pay
Arkansas Banking Company a consulting fee of $2,500 for each day Regions'
banking offices in Jonesboro are open for business and to reimburse Arkansas
Banking Company for its out of pocket expenses. The consulting agreement will
terminate at the effective time of the merger or upon termination of the merger
agreement. The consulting agreement has a maximum term of nine months and may be
terminated at any time by mutual agreement of the parties.
The consulting agreement does not vest Arkansas Banking Company with any
decision-making authority over Region' banking operations and does not grant
Regions any right or power to influence Arkansas Banking Company's management,
policies, business, or affairs.
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<PAGE> 72
COMPETITION
Arkansas Banking Company 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, credit unions, other financial
institutions, and financial intermediaries that operate in Arkansas Banking
Company'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. Arkansas Banking Company's bank subsidiaries also compete 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 Arkansas Banking Company. At
September 30, 1998, there were approximately 21 commercial banks, five savings
banks, and two credit unions competing in Arkansas Banking Company's
seven-county market area.
LEGAL PROCEEDINGS
Arkansas Banking Company and its subsidiary banks 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 Arkansas Banking Company. Unless otherwise indicated, each person
has sole voting and investment powers over the indicated shares. Information
relating to beneficial ownership of Arkansas Banking Company common stock 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 Arkansas Banking Company 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.
65
<PAGE> 73
<TABLE>
<CAPTION>
DIRECTOR NUMBER OF SHARES
OR BENEFICIALLY
PRESENT OCCUPATION AND POSITION AND EXECUTIVE OWNED AT THE
PRINCIPAL OCCUPATION FOR OFFICES HELD WITH OFFICER RECORD DATE AND
NAME LAST FIVE YEARS ABC AND BANKS SINCE PERCENT OF CLASS
---- --------------- ------------- ----- ----------------
<S> <C> <C> <C> <C>
Sloan Rainwater(1,2) Banking/Farming Director and 1995 368,159
Chairman, ABC (62.72%)
William I. Rainwater(1,3) Hotel Management/ Director, ABC 1995 366,724
Farming (62.48%)
Stephen E. Cox(1,4) Banking/Farming Director and Vice 1995 3,333*
Chairman, ABC;
Chairman, ABC
subsidiary banks
Virginia R. Cox(1,4) Interior Decorator Director, ABC 1995 3,333*
William I. Rainwater, Jr.(1) Hotel Management/ Director, ABC 1995 1,398*
Farming
G.L. Lieblong(5) Banking Director, President 1995 13,656
and CEO, ABC; Vice (2.28%)
Chairman, ABC
subsidiary banks
Gary Childers(5) Banking Director and Chief 1995 6,040
Financial Officer, (1.02%)
ABC; CEO, Arkansas
Bank-Jonesboro
Bob Dixon(5) Banking, Retired, Director, ABC; 1997 1,000*
Agribusiness President, Arkansas
Consultant, Bank-Walnut Ridge
President and CEO
of SF Services
Larry Worsham(5) Banking Director, ABC; 1997 6,040
President, Arkansas (1.02%)
Bank-Jonesboro
All directors and officers 567,311
as a group (9 persons) (93.31%)
</TABLE>
- --------------------------
* Less than one percent.
(1) Sloan Rainwater and William I. Rainwater are brothers. William I.
Rainwater is the father of William I. Rainwater, Jr. and Virginia R. Cox,
who is married to Stephen E. Cox.
66
<PAGE> 74
(2) Sloan Rainwater owns 2,166 shares in his own name. Mr. Rainwater is a
co-trustee of WIR Trust I and therefore is deemed beneficially to own
364,722 shares held either in the trust's name or in the name of companies
that are jointly owned by the trust. Mr. Rainwater also serves as an
officer of the companies owned by the trust. In addition, Mr. Rainwater is
deemed beneficially to own 1,271 shares as trustee of the T.E. Dill
Estate. Mr. Rainwater disclaims beneficial ownership of all shares he is
deemed beneficially to own in his capacity as trustee or co-trustee of a
trust or as a corporate officer.
(3) William I. Rainwater owns 583 shares in his own name. In addition, Mr.
Rainwater is a co-trustee of RSR II Trust I and therefore is deemed
beneficially to own 366,141 shares held either in the trust's name or in
the name of companies that are wholly or jointly owned by the trust. Mr.
Rainwater also serves as an officer of the companies owned by the trust.
Mr. Rainwater disclaims beneficial ownership of all shares he is deemed
beneficially to own in his capacity as co-trustee of a trust or as a
corporate officer.
(4) Of these shares, 1,935 are owned in the name of Stephen E. Cox and 1,398
are owned in the name of Virginia R. Cox. Stephen E. Cox and Virginia R.
Cox are husband and wife.
(5) Shares owned beneficially by this individual include vested stock options,
exercisable within the next 60 days, for shares of Arkansas Banking
Company stock, as follows: G.L. Lieblong, 12,000 shares; Gary Childers,
4,000 shares; Bob Dixon, 1,000 shares; Larry Worsham, 4,000 shares.
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, Arkansas Banking Company's subsidiary banks
have 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(ies) in which they have a 10% or more ownership interest as of September
30, 1998, were approximately $937,163.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning the beneficial
owners of more than 5.0% of Arkansas Banking Company common stock, as of the
record date.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
------------------- ------------------ --------
<S> <C> <C>
Sloan Rainwater(2) 368,159 62.72%
P.O. Box 1617
Jonesboro, AR 72403
William I. Rainwater(3) 366,724 62.48%
2806 S. Culberhouse
Jonesboro, AR 72401
</TABLE>
67
<PAGE> 75
<TABLE>
<S> <C> <C>
RSR II Trust I(4) 366,141 62.38%
P.O. Box 1617
Jonesboro, AR 72403
WIR Trust I(5) 364,722 62.14%
P.O. Box 1617
Jonesboro, AR 72403
Valley Corp.(6) 92,840 15.82%
P.O. Box 1617
Jonesboro, AR 72403
Stillwater Inn Corp.(6) 54,727 9.32%
P.O. Box 1617
Jonesboro, AR 72403
Conway Inn Corp.(6) 51,472 8.77%
P.O. Box 1617
Jonesboro, AR 72403
</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
Securities Exchange Act of 1934. 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. 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 Arkansas Banking
Company 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.
(2) Sloan Rainwater owns 2,166 shares in his own name. Mr. Rainwater is a
co-trustee of WIR Trust I and therefore is deemed beneficially to own
364,722 shares held either in the trust's name or in the name of companies
that are jointly owned by the trust. Mr. Rainwater also serves as an
officer of the companies owned by the trust. In addition, Mr. Rainwater is
deemed beneficially to own 1,271 shares as trustee of the T.E. Dill
Estate. Mr. Rainwater disclaims beneficial ownership of all shares he is
deemed beneficially to own in his capacity as trustee or co-trustee of a
trust or as a corporate officer.
(3) William I. Rainwater owns 583 shares in his own name. In addition, Mr.
Rainwater is a co-trustee of RSR II Trust I and therefore is deemed
beneficially to own 366,141 shares held either in the trust's name or in
the name of companies that are wholly or jointly owned by the trust. Mr.
Rainwater also serves as an officer of the companies owned by the trust.
Mr. Rainwater disclaims beneficial ownership of all shares he is deemed
beneficially to own in his capacity as co-trustee of a trust or as a
corporate officer.
68
<PAGE> 76
(4) Consists of 166,085 shares held directly by the trust, 199,039 shares
owned in the aggregate by Conway Inn Corp., Stillwater Inn Corp. and
Valley Corp., which companies are jointly owned by the trust and WIR Trust
I, and 1,017 shares owned by Henry Land Company, which is wholly owned by
the trust. Beneficiaries of the trust are Virginia R. Cox and William I.
Rainwater, Jr.
(5) Consists of 165,683 shares held directly by the trust and 199,039 shares
owned in the aggregate by Conway Inn Corp., Stillwater Inn Corp. and
Valley Corp., which companies are jointly owned by the trust and RSR II
Trust I. Beneficiaries of the trust are Virginia R. Cox and William I.
Rainwater, Jr.
(6) Owned jointly by RSR II Trust I and WIR Trust I.
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<PAGE> 77
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."
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 proposed merger (the
"Other Pending Acquisitions"). Certain aspects of the completed and other
pending acquisitions are presented in the following table:
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<PAGE> 78
<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 $ 134 $ 34 Regions Pooling
Greenville, South Carolina Common of
Stock Interests
PALFED, Inc., located in Aiken, 665 145 Regions Pooling
South Carolina Common of
Stock Interests
First United Bancorporation, located in Anderson, South 292 80 Regions Pooling
Carolina Common of
Stock Interests
St. Mary Holding Corporation, located in Franklin, 113 31 Regions Pooling
Louisiana Common of
Stock Interests
Key Florida Bancorp, Inc., located in Bradenton, Florida 212 39 Regions Pooling
Common of
Stock Interests
First State Corporation, located in Albany, Georgia 540 161 Regions Pooling
Common of
Stock Interests
First Commercial Corporation, located in Little Rock, 7,382 2,597 Regions Pooling
Arkansas Common of
Stock Interests
Village Bankshares, inc. located in Tampa, Florida 211 46 Regions Pooling
Common of
Stock Interests
Jacobs Bank, located in Scottsboro, Alabama 186 47 Regions Pooling
Common of
Stock Interests
Etowah Bank, located in Canton, Georgia 409 99 Regions Pooling
Common of
Stock Interests
First Community Banking Services, Inc., located in Peachtree 125 30 Regions Pooling
City, Georgia Common of
Stock Interests
Other Pending Acquisitions:
VB&T Bancshares Corporation, located in Valdosta, Georgia 75 18 Regions Pooling
Common of
Stock Interests
</TABLE>
71
<PAGE> 79
<TABLE>
<CAPTION>
CONSIDERATION
----------------------
APPROXIMATE
-------------------------
ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
------------- -------- ---- ---------
(In millions)
<S> <C> <C> <C> <C>
Other Pending Acquisitions -- Continued:
Meigs County Bancshares, Inc. located in Decatur, Tennessee $ 103 $ 19 Regions Pooling
Common of
Stock Interests
Bullsboro BancShares, Inc., located in Newnan, Georgia 108 36 Regions Pooling
Common of
Stock Interests
St. James Bancorporation, Inc., located in Lutcher, Louisiana 152 43 Regions Purchase
Common
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 proposed 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 combinations
consummated in the first quarter of 1998 which were 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."
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<PAGE> 80
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 Arkansas Banking Company.
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 Arkansas Banking Company are both bank holding companies registered
with the Federal Reserve Board under the Bank Holding Company Act. As such,
Regions and Arkansas Banking Company 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 (the
"Interstate Banking Act") 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 Arkansas Banking Company are located has
"opted out."
The Bank Holding Company Act generally prohibits Regions and Arkansas Banking
Company 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 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,
73
<PAGE> 81
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 Arkansas Banking
Company is a member of the Federal Deposit Insurance Corporation (the "FDIC"),
and as such, its deposits are insured by the FDIC to the extent provided by law.
Each such subsidiary is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
The regulatory agencies having supervisory jurisdiction over the respective
subsidiary institutions of Regions and Arkansas Banking Company (the FDIC and
the applicable state authority in the case of state-chartered nonmember banks)
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 Arkansas Banking Company are legal entities separate and distinct
from their banking, thrift, and other subsidiaries. The principal sources of
cash flow of both Regions and Arkansas Banking Company, 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 Arkansas Banking Company, as well as by Regions and
Arkansas Banking Company 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 Arkansas
Banking Company, without obtaining governmental approvals, could declare
aggregate dividends to Regions and Arkansas Banking Company of approximately
$252 million and $845,000 respectively.
The payment of dividends by Regions and Arkansas Banking Company 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.
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<PAGE> 82
CAPITAL ADEQUACY
Regions, Arkansas Banking Company, 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 Arkansas
Banking Company 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%, and Arkansas
Banking Company's consolidated Total Capital Ratio was 8.13% and its Tier 1
Capital Ratio was 6.58%.
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. At September 30, 1998 Regions' Leverage Ratio
was 7.84% and Arkansas Banking Company's Leverage Ratio was 6.61%.
Each of Regions' and Arkansas Banking Company'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, Arkansas Banking Company, nor any of
their subsidiary depository institutions has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift institution to
a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and to certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The Federal Reserve Board, the Comptroller of the Currency, and the FDIC also
have adopted 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
75
<PAGE> 83
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 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 Arkansas Banking Company had the requisite capital levels to qualify as well
capitalized.
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<PAGE> 84
FDIC INSURANCE ASSESSMENTS
The FDIC currently uses 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 Federal Deposit Insurance Act, 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 221,252,589 shares were issued and 219,296,875 shares were outstanding at
November 30, 1998, 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 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
proposed 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
Ernst & Young LLP, independent auditors, have audited Regions' consolidated
financial statements (and schedules) and supplemental consolidated financial
statements (and schedules)
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<PAGE> 85
included in Regions' Annual Report on Form 10-K for the year ended December 31,
1997 and in its Current Report on Form 8-K dated as of November 6, 1998, as set
forth in their reports, which are incorporated in this Proxy Statement-
Prospectus by reference. Regions' financial statements are incorporated by
reference in reliance on their reports, given on their authority as experts in
accounting and auditing.
The consolidated financial statements of Arkansas Banking Company, included in
this Registration Statement, have been audited by Jones & Company, Ltd.,
independent auditors, for the periods indicated in their report thereon which is
included herein. The financial statements audited by Jones & Company, Ltd. 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 proposed
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 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
Arkansas Banking Company stockholders in the proposed 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.
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<PAGE> 86
<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 proposed 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 Arkansas Banking
Company has supplied all such information relating to Arkansas Banking Company.
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.
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 proposed merger creates any implication to the
contrary.
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<PAGE> 87
INDEX TO ARKANSAS BANKING COMPANY FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Statements of Financial Condition as of
December 31, 1997 and 1996................................ F-3
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996, and 1995......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1996, and 1995............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Statements of Financial Condition as of
September 30, 1998 and 1997 (Unaudited)................... F-18
Consolidated Statements of Income for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)................... F-19
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 1998 and 1997
(Unaudited)............................................... F-20
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 (Unaudited)............. F-21
Consolidated Statements of Comprehensive Income for the Nine
Months Ended September 30, 1998 and 1997 (Unaudited)...... F-22
Notes to Unaudited Consolidated Interim Financial
Statements................................................ F-23
</TABLE>
F-1
<PAGE> 88
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Arkansas Banking Company
We have audited the accompanying consolidated statements of financial condition
of Arkansas Banking Company and Subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the three years ended December 31, 1997. These
financial statements are the responsibility of the management of Arkansas
Banking Company and Subsidiaries. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Arkansas Banking
Company as of December 31, 1997 and 1996, and the consolidated results of their
operations and their cash flows for the three years ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ JONES & COMPANY, LTD.
February 13, 1998
F-2
<PAGE> 89
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash and due from banks............................. $ 12,709,885 $ 10,318,183
Federal funds sold.................................. 11,805,000 15,375,000
Investment securities............................... 67,596,342 68,863,031
Loans, net.......................................... 211,572,087 164,824,490
Premises and equipment, net......................... 8,418,383 8,026,160
Accrued interest receivable......................... 4,007,277 3,065,202
Intangible assets................................... 3,000,662 3,351,488
Other assets........................................ 1,507,966 1,051,245
------------ ------------
Total Assets.............................. $320,617,602 $274,874,799
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing.............................. $ 37,805,097 $ 35,773,385
Interest bearing.................................. 251,271,668 211,681,966
------------ ------------
289,076,765 247,455,351
Long term debt...................................... 5,310,000 5,570,000
Accrued interest payable............................ 1,582,950 1,284,887
Other liabilities................................... 1,601,156 1,210,476
------------ ------------
Total liabilities......................... 297,570,871 255,520,714
------------ ------------
Stockholders' equity
Common stock, $.01 par value:..................... 5,897 5,838
Authorized 10,000,000 shares
Issued 589,745 shares (1997) and 583,769 shares
(1996)
Additional paid in capital........................ 16,299,178 16,118,896
Retained earnings................................. 6,955,897 3,530,876
Treasury stock -- 2,765 shares (1997) and 1,665
shares (1996).................................. (78,746) (47,462)
------------ ------------
23,182,226 19,608,148
Net unrealized loss on securities
available for sale, net of deferred tax
assets of $69,800 (1997) and $130,881
(1996)................................. (135,495) (254,063)
------------ ------------
23,046,731 19,354,085
------------ ------------
Total Liabilities and Stockholders'
Equity................................. $320,617,602 $274,874,799
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 90
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................ $18,117,601 $14,028,808 $ 9,211,742
Federal funds sold........................ 660,696 633,604 419,097
INVESTMENT SECURITIES
Taxable................................... 3,998,084 3,321,829 4,407,698
Tax-exempt................................ 144,410 111,669 136,201
Other..................................... 403 -- 42,908
----------- ----------- -----------
22,921,194 18,095,910 14,217,646
INTEREST EXPENSE
Deposits.................................. 11,340,445 8,366,294 7,418,241
Other borrowings.......................... 535,125 378,504 290,859
----------- ----------- -----------
11,875,570 8,744,798 7,709,100
----------- ----------- -----------
Net interest income............. 11,045,624 9,351,112 6,508,546
Provision for loan losses................. 582,534 665,012 532,313
----------- ----------- -----------
Net interest income after
provisions for loan losses... 10,463,090 8,686,100 5,976,233
OTHER INCOME
Service charges on deposit accounts....... 2,169,145 1,880,375 1,245,358
Other service charges and fees............ 118,009 91,638 74,876
Other..................................... 460,459 314,153 518,067
----------- ----------- -----------
2,747,613 2,286,166 1,838,301
OTHER EXPENSES
Salaries and benefits..................... 4,173,760 3,681,038 3,086,609
Occupancy expense......................... 644,158 539,220 423,279
Furniture and equipment expense........... 626,349 568,503 503,847
Supplies and printing..................... 274,369 256,261 206,570
Postage and courier....................... 244,637 220,398 185,983
Service fees.............................. 244,937 774,439 383,808
Data processing expense................... 48,215 35,883 41,704
Marketing expense......................... 485,420 241,617 178,562
Amortization.............................. 350,827 299,719 261,453
Other..................................... 906,039 817,726 600,115
----------- ----------- -----------
7,998,710 7,434,804 5,871,930
----------- ----------- -----------
Income before income taxes...... 5,211,993 3,537,462 1,942,604
INCOME TAX EXPENSE........................ 1,786,972 1,271,531 677,660
----------- ----------- -----------
Net income...................... $ 3,425,021 $ 2,265,931 $ 1,264,944
=========== =========== ===========
Earnings per share........................ $ 5.86 $ 3.89 $ 2.17
=========== =========== ===========
Earnings per share -- diluted............. $ 5.86 $ 3.89 $ 2.17
=========== =========== ===========
Weighted average shares outstanding....... 584,588 582,290 583,449
=========== =========== ===========
Weighted average shares
outstanding -- diluted.................. 584,588 582,290 583,449
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 91
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NET
UNREALIZED
LOSS ON
ADDITIONAL SECURITIES
COMMON PAID IN RETAINED AVAILABLE TREASURY
STOCK CAPITAL EARNINGS FOR SALE STOCK TOTAL
------ ----------- ---------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of 583,449 shares of
Common Stock............... $5,834 $16,109,972 $ -- $(1,427,222) $ -- $14,688,584
Net income for the year ended
December 31, 1995.......... 1,264,945 1,264,945
Change in unrealized
depreciation on
available-for-sale
securities................. 1,198,258 1,198,258
------ ----------- ---------- ----------- -------- -----------
BALANCES
December 31, 1995.......... 5,834 16,109,972 1,264,945 (228,964) -- 17,151,787
Issuance of 320 shares of
Common Stock............. 4 8,924 -- -- 8,928
Purchase of 1,665 shares of
treasury stock........... (47,462) (47,462)
Net income for the year
ended December 31,
1996..................... 2,265,931 2,265,931
Change in unrealized
depreciation on
available-for-sale
securities............... (25,099) (25,099)
------ ----------- ---------- ----------- -------- -----------
BALANCES
December 31, 1996.......... 5,838 16,118,896 3,530,876 (254,063) (47,462) 19,354,085
Issuance of 5,976 shares of
Common Stock............. 59 180,282 180,341
Purchase of 1,100 shares of
treasury stock........... (31,284) (31,284)
Net income for the year
ended December 31,
1997..................... 3,425,021 3,425,021
Change in unrealized
depreciation on
available-for-sale
securities............... 118,568 118,568
------ ----------- ---------- ----------- -------- -----------
BALANCES
December 31, 1997.......... $5,897 $16,299,178 $6,955,897 $ (135,495) $(78,746) $23,046,731
====== =========== ========== =========== ======== ===========
Tangible book value per
common share:
December 31, 1997........ $33.99
December 31, 1996........ $27.41
December 31, 1995........ $24.88
</TABLE>
See accompanying notes.
F-5
<PAGE> 92
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................. $ 3,425,021 $ 2,265,931 $ 1,264,945
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 986,916 857,587 713,638
Amortization of investment securities
premiums and accretion of discounts,
net................................... 71,454 30,723 17,708
Provision for loan losses................ 582,534 665,012 532,313
Changes in assets and liabilities:
Accrued interest receivable........... (942,075) (245,008) (552,247)
Other assets.......................... (615,494) (420,310) 181,435
Accrued interest payable.............. 298,063 443,830 188,035
Other liabilities..................... 563,515 652,328 52,464
------------ ------------ ------------
Net cash provided by operating
activities..................... 4,369,934 4,250,093 2,398,291
INVESTING ACTIVITIES
Net (increase) decrease in federal funds
sold..................................... 3,570,000 (5,475,000) 1,200,000
Proceeds from sales and maturities of
investment securities.................... 28,420,000 32,573,000 45,116,382
Purchase of investment securities.......... (27,106,195) (36,773,928) (15,171,505)
Net increase in loans...................... (47,330,130) (47,384,760) (34,455,968)
Purchases of premises and equipment........ (1,102,923) (2,098,696) (1,348,733)
(Increase) or decrease in intangible
assets................................... -- (1,014,649) (7,630)
Other...................................... 60,546 -- --
------------ ------------ ------------
Net cash used in investing
activities..................... (43,488,702) (60,174,033) (4,667,454)
FINANCING ACTIVITIES
Net increase in deposits................... 41,621,413 54,697,920 $ 3,437,358
Stock issued............................... 180,341 8,928 --
Purchase of treasury stock................. (31,284) (47,462) --
Loan proceeds.............................. -- 3,000,000 --
Payments on long term debt................. (260,000) (130,000) (2,946,637)
------------ ------------ ------------
Net cash provided by financing
activities..................... 41,510,470 57,529,386 490,721
Net increase (decrease) in cash............ 2,391,702 1,605,446 (1,778,442)
Balance -- January 1....................... 10,318,183 8,712,737 10,491,179
------------ ------------ ------------
Balance -- December 31..................... $ 12,709,885 $ 10,318,183 $ 8,712,737
============ ============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest................................. $ 11,875,570 $ 8,446,735 $ 7,521,065
Income taxes............................. 1,789,811 1,254,026 419,000
NON-CASH TRANSACTIONS
Transfers from loans to other real
estate................................ 53,184 99,830 282,258
Unrealized gains or (losses) in
securities available for sale (net of
tax effect)........................... (130,285) (25,099) 1,198,258
</TABLE>
See accompanying notes.
F-6
<PAGE> 93
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
A. ORGANIZATION
Arkansas Banking Company (the Company) was organized on December 22, 1994 as a
bank holding company. The company has the following wholly-owned subsidiaries as
of December 31, 1997: The Arkansas Bank (Jonesboro), The Arkansas Bank (Walnut
Ridge), Planters Bank (Osceola), The Arkansas Bank (Batesville), and Business
Support, Ltd. (BSL). The acquisition of Jonesboro, Walnut Ridge and Osceola was
completed in early 1995 as an exchange of common stock. The Company exchanged
240,638 shares, 198,787 shares and 144,024 shares of its common stock to the
stockholders of Jonesboro, Walnut Ridge and Osceola, respectively for all of the
outstanding common stock of the bank subsidiaries. Business Support, Ltd. was
formed June 30, 1994 by the bank subsidiaries as a service corporation to
provide data processing services to the banks. The Company acquired Batesville
in a cash transaction effective August 9, 1996.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company's
wholly-owned subsidiaries described above. All intercompany transactions and
balances have been eliminated.
C. NATURE OF OPERATIONS
The four bank subsidiaries are full service banks. All except Batesville are
state-chartered banks and subject to the regulation of the Arkansas State Bank
Department and the Federal Deposit Insurance Corporation (FDIC). Batesville is
federally-chartered, and is subject to the regulation of the Office of the
Comptroller of the Currency and the FDIC.
D. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent 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.
E. CASH AND CASH EQUIVALENTS
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents are defined as those amounts included in the balance sheet caption
"Cash and due from banks."
F. INVESTMENT SECURITIES
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 115 Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115).
F-7
<PAGE> 94
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 115 requires the classification of a bank's investment securities portfolio
into three categories: Held to maturity, available for sale and trading. The
bank subsidiaries have classified all investment securities as available for
sale. The available for sale portfolio is stated at market value with unrealized
gains and losses reported as a separate element of stockholders' equity, net of
income tax effect.
Gains and losses on sales of securities are recognized when realized on a
specific identification basis. Premiums and discounts are amortized and accreted
into income using the level yield method.
G. LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Loans are stated at the principle amount outstanding, reduced by unearned
discount and an allowance for loan losses. Unearned discount on installment
loans is recognized as income over the life of the loans using the interest
method. Interest on other loans is calculated by using the simple interest
method on daily balances of the principal amounts outstanding. The allowance for
loan losses is established through a provision for loan losses charged to
operations. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance for loan losses is maintained at a level that management believes will
be adequate to absorb losses inherent in the existing loan portfolio, based on
evaluations of collectibility and prior loss experience. These evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, loan concentrations, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that collection of
interest is doubtful.
H. OTHER REAL ESTATE
Other real estate, acquired through partial or total satisfaction of loans, is
carried at the lower of cost or fair market value. At the date of acquisition,
losses are charged to the allowance for loan losses, and subsequent write downs
are charged to operations in the period they are incurred.
I. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation. The
provision for depreciation is computed by the straight-line and declining
balance methods over the useful lives of the related assets.
Expenditures for maintenance and repairs are charged to operations, and the
expenditures for major replacements and betterments are added to the property
and equipment accounts. The cost and accumulated depreciation of property and
equipment retired or sold are eliminated from the property accounts at the time
of the retirement or sale and the resulting gain or loss is reflected in current
operations.
F-8
<PAGE> 95
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. INTANGIBLE ASSETS
Intangible assets consist primarily of purchased core deposit premiums and
goodwill, and are being amortized on a straight-line basis over 15 years.
K. INCOME TAXES
The provision for income taxes is based on taxes payable or refundable for the
current year (after exclusion of non-taxable income such as interest on state
and municipal securities) and deferred taxes on temporary differences between
the amount of taxable and pretax financial income and between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which the
deferred tax asset and liabilities are expected to be realized or settled as
prescribed in Statement of Financial Accounting Standards No. 109 Accounting for
Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets
and liabilities are adjusted through the current provision for income taxes.
L. EARNINGS PER SHARE
Earnings per share of common stock is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the year.
NOTE 2. ACQUISITIONS
On August 9, 1996 the Company acquired all of the outstanding common stock of
Mercantile Bank of Batesville, N.A. (MBB). As of the acquisition date, MBB had
approximately $39.3 million in assets, $13.5 million in loans, and $36.1 million
in deposits. This transaction was accounted for as a purchase, and accordingly,
the results of operations were consolidated with those of the Company from the
date of acquisition. The assets and liabilities of MBB were adjusted to fair
value at the purchase date, resulting in an excess cost over fair value of
$787,982, which is being amortized over 15 years. MBB was renamed The Arkansas
Bank (Batesville) after the acquisition was complete.
F-9
<PAGE> 96
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment securities at
December 31, 1997 and 1996 are as follows:
December 31, 1997:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations......... $ 4,001,279 $ 13,101 $ -0- $ 4,014,380
U.S. Agency Obligations........... 59,535,687 83,607 311,406 59,307,888
Mortgage Backed Securities........ 304,346 1,466 1,719 304,093
State and Municipal Obligations... 3,122,991 24,496 12,584 3,134,903
Other Obligations................. 829,440 5,637 -0- 835,077
----------- -------- -------- -----------
$67,793,743 $128,307 $325,709 $67,596,341
=========== ======== ======== ===========
</TABLE>
December 31, 1996:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations......... $ 5,409,119 $ 8,216 $ 1,907 $ 5,415,428
U.S. Agency Obligations........... 59,484,207 106,231 507,593 59,083,845
Mortgage Backed Securities........ 1,086,667 7,296 5,641 1,088,322
State and Municipal Obligations... 3,266,982 39,603 31,149 3,275,436
----------- -------- -------- -----------
$69,247,975 $161,346 $546,290 $68,863,031
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1997 and 1996, by contractual maturities, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less............................... $12,492,656 $12,480,446
Due after one through five years...................... 52,902,614 52,775,248
Due after five through ten years...................... 2,190,000 2,130,002
Due after ten years................................... 208,473 210,645
----------- -----------
$67,793,743 $67,596,341
=========== ===========
</TABLE>
F-10
<PAGE> 97
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less............................... $32,183,943 $32,070,006
Due after one through five years...................... 33,245,936 33,040,937
Due after five through ten years...................... 1,292,381 1,293,959
Due after ten years................................... 2,525,715 2,458,129
----------- -----------
$69,247,975 $68,863,031
=========== ===========
</TABLE>
Proceeds from the sale of debt securities, gross realized gains, gross realized
losses, and the related income taxes on net realized gains were as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Proceeds from sales................................... $28,420,000 $32,573,000
Gross realized gains.................................. 128,307 155,462
Gross realized losses................................. 325,709 546,290
Applicable income tax on net realized gains........... (67,117) (132,882)
</TABLE>
At December 31, 1997 and 1996, investment securities with carrying values of
approximately $40,836,000 and $36,449,000 were pledged as collateral to secure
public deposits and for other purposes.
NOTE 4. LOANS
The components of loans in the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Commercial loans.................................... $ 27,779,233 $ 16,879,956
Installment loans................................... 27,640,043 22,239,332
Real estate loans:
Residential....................................... 63,326,296 54,438,715
Developmental..................................... 10,749,035 6,344,683
Farm land......................................... 20,652,277 16,309,952
Other............................................. 32,774,780 31,168,614
Other agricultural loans............................ 26,623,511 17,028,413
Other loans......................................... 4,335,118 2,338,512
------------ ------------
213,880,293 166,748,177
Less allowance for losses........................... 2,308,207 1,923,687
------------ ------------
$211,572,086 $164,824,490
============ ============
</TABLE>
F-11
<PAGE> 98
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balances at beginning of year........................... $1,923,687 $1,308,255
Provision or loan losses................................ 582,534 665,012
Recoveries.............................................. 34,612 109,047
Loans charged off....................................... (232,626) (392,489)
Increase due to acquisition............................. -0- 233,862
---------- ----------
Balances at end of year............................... $2,308,207 $1,923,687
========== ==========
</TABLE>
NOTE 6. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Buildings, land and improvements...................... $ 8,775,712 $ 8,203,395
Equipment and furniture............................... 4,168,188 3,864,068
----------- -----------
12,943,900 12,067,463
Less accumulated depreciation......................... 4,525,517 4,041,303
----------- -----------
$ 8,418,383 $ 8,026,160
=========== ===========
</TABLE>
Depreciation expense included in 1997, 1996 and 1995 operations amounted to
$636,090 and $557,868 and $452,185, respectively.
NOTE 7. DEPOSITS
The following summarizes information on deposits at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Non-interest bearing accounts....................... $ 37,805,097 $ 35,773,384
NOW and money market accounts....................... 62,192,778 51,905,300
Savings accounts.................................... 14,600,320 15,020,518
Time deposits, $100,000 and over.................... 39,311,545 32,876,195
Other time deposits................................. 135,167,025 111,879,954
------------ ------------
$289,076,765 $247,455,351
============ ============
</TABLE>
NOTE 8. LONG-TERM DEBT
In conjunction with the formation of the bank holding company, certain
shareholder debt collateralized by stock of bank subsidiaries was assumed by the
Company. On January 3, 1995, the company entered into an agreement with a
financial institution to borrow $5,648,530 to retire the debt owed by the
shareholders. By agreement, this note was
F-12
<PAGE> 99
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reduced to $2,700,000 by December 31, 1995. A second note was originated in
August 1996 to finance the Batesville acquisition. This note, with a face amount
of $3,000,000, is due in varying installments through December 31, 1999. Future
principal payment requirements for both notes are as follows:
<TABLE>
<CAPTION>
NOTE #1 NOTE #2 TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
December 31, 1998.............................. $160,000 $ 149,000 $ 309,000
December 31, 1999.............................. 180,000 2,731,000 2,911,000
December 31, 2000.............................. 200,000 -0- 200,000
December 31, 2001.............................. 230,000 -0- 230,000
December 31, 2002.............................. 260,000 -0- 260,000
December 31, 2003.............................. 290,000 -0- 290,000
December 31, 2004.............................. 330,000 -0- 330,000
December 31, 2005.............................. 370,000 -0- 370,000
December 31, 2006.............................. 410,000 -0- 410,000
</TABLE>
These notes provide for interest to be paid quarterly at variable rates (7.5% at
December 31, 1997), and are collateralized by stock of the bank subsidiaries.
The loan agreement with the financial institution lender requires the Company
and the bank subsidiaries to maintain certain specified financial ratios and to
certify compliance with such ratios on a quarterly basis.
NOTE 9. INCOME TAXES
The provisions for income taxes for the year ended December 31, 1997, 1996 and
1995 include the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Currently payable.............................. $2,023,297 $1,295,728 $632,641
Deferred....................................... (236,325) (37,218) 45,019
---------- ---------- --------
$1,786,972 $1,258,510 $667,660
========== ========== ========
</TABLE>
A reconciliation of income tax expense at the statutory rate to income tax
expense at the Company's effective rate is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Computed at the statutory rate (34%)........... $1,772,078 $1,202,737 $660,485
Tax exempt interest income..................... (54,430) (33,452) (46,308)
State income taxes, net........................ 101,231 57,866 -0-
Other.......................................... (31,907) 31,359 63,483
---------- ---------- --------
Actual provision for income taxes.............. $1,786,972 $1,258,510 $677,660
========== ========== ========
</TABLE>
F-13
<PAGE> 100
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of each type of significant item that gave rise to deferred
taxes are:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Depreciation................................... $ 16,085 $ (40,047) $(71,096)
Sales of premises and equipment................ (1,930) (349) -0-
Provisions for loan losses..................... (154,070) 106,912 118,051
Discount accretion on securities............... 9,231 6,082 -0-
Sales and maturities of securities............. (54,219) (26,731) 46,257
Write-downs of other real estate............... (1,020) 3,929 11,219
Amortization of intangibles.................... (41,915) 24,943 9,921
Sales of other real estate..................... (8,487) (37,521) (9,614)
Operating losses............................... -0- -0- (59,719)
---------- ---------- --------
$ (236,325) $ 37,218 $ 45,019
========== ========== ========
</TABLE>
Arkansas Banking Company has not established a valuation allowance for deferred
tax assets because the Company believes that they will likely be realized.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
The bank subsidiaries are parties to financial instruments with
off-balance-sheet risk in the normal course of business to meet the financing
needs of their customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheet. The bank subsidiaries exposure to
credit loss in the event of nonperformance by other parties to the financial
instrument for commitments to extend credit and standby letters of credit is
represented by the contractual terms of those instruments. The bank subsidiaries
use the same credit policies in making commitments and condition obligations as
it does for on-balance-sheet instruments. At December 31, 1997 and 1996, the
total amounts of financial instruments with off-balance-sheet risk are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Commitments to extend credit.......................... $34,299,157 $17,193,078
Standby letters of credit............................. 213,600 162,600
</TABLE>
Commitments to extend credit are agreements to lend a customer as long as there
are no violations of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The bank subsidiaries evaluate each
customer's credit-worthiness on a case by case basis. The amount of collateral
obtained, if deemed necessary by the bank subsidiaries upon extension of credit,
is based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.
F-14
<PAGE> 101
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Standby letters of
credit are conditional commitments issued by the bank to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support private borrowing arrangements.
NOTE 11. RELATED PARTY TRANSACTIONS
Directors, officers and principal stockholders of the Company were customers of,
and had other transactions with the bank subsidiaries in the ordinary course of
business. Loan transactions with directors, officers and principal stockholders
were made on substantially the same terms as those prevailing, at the time made,
for comparable loans to other persons and did not involve more than normal risk
of collectibility or present other unfavorable features. The outstanding
balances of borrowings by employees, directors, and stockholders with 5% or
greater stock ownership and their affiliates at December 31, 1997 was
$4,290,904.
NOTE 12. CONCENTRATION OF CREDIT RISK
Practically all of the bank subsidiaries' loans, commitments, and commercial and
standby letters of credit have been granted to customers in the bank
subsidiaries' market areas. All such customers are depositors of the bank
subsidiaries. Investment in state and municipal securities also include
governmental entities within those market areas. The concentrations of credit by
type of loan are set forth in Note 3.
At December 31, 1997 the bank subsidiaries' cash included four commercial bank
deposit accounts aggregating $7,620,488 in excess of the Federal Deposit
Insurance Corporation limit of $100,000 per institution.
NOTE 13. EMPLOYEE BENEFIT PLAN
The Company adopted a contributory 401(k) savings plan covering substantially
all employees on November 11, 1995. The plan allows eligible employees to
contribute up to a fixed percentage of their compensation, with the Company
matching a portion of each employee's contribution. The Company's contribution
for the year ended December 31, 1997, 1996 and 1995 was $61,324, $56,085 and
$10,722, respectively.
NOTE 14. REGULATORY MATTERS
In accordance with Arkansas state banking laws, certain restrictions exist
regarding the ability of the bank subsidiaries to transfer funds to the Company
in the form of cash dividends, loans or advances. Under such restrictions, the
bank subsidiaries may not, without prior approval of the bank regulatory
agencies, declare and pay dividends of more than 75% of net income.
The Company and the bank subsidiaries are also required to maintain sufficient
capital to meet minimum capital ratios, as defined by the regulatory agencies.
At December 31, 1997 and 1996, the capital ratios of the Company and its
subsidiaries exceeded the minimum required amounts.
F-15
<PAGE> 102
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. ARKANSAS BANKING COMPANY (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Balance sheets at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash in bank subsidiary............................. $ 773,972 $ 553,181
Receivable from bank subsidiaries................... 689,866 72,510
Prepaid expenses.................................... 40,552 17,089
Furniture and equipment, net........................ 43,150 56,093
Intangible assets, net.............................. 3,052 4,577
Other investments................................... 50,000 50,000
Investment in subsidiaries.......................... 27,048,414 24,319,630
----------- -----------
$28,649,006 $25,073,080
=========== ===========
LIABILITIES
Long term debt...................................... $ 5,310,000 $ 5,570,000
Other liabilities................................... 292,276 148,994
----------- -----------
Total Liabilities........................... 5,602,276 5,718,994
Stockholders' Equity.................................. 23,046,730 19,354,085
----------- -----------
$28,649,006 $25,073,080
=========== ===========
</TABLE>
Statements of income for the year ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Fee income from bank subsidiaries............ $ 525,687 $ 478,998 $ 401,770
---------- ---------- ----------
EXPENSES
Salaries and benefits...................... 729,033 742,038 512,673
Interest expense........................... 409,843 284,745 247,834
Other...................................... 105,734 128,937 46,730
---------- ---------- ----------
1,244,610 1,155,720 807,237
---------- ---------- ----------
Loss before income taxes and equity in
undistributed net income of subsidiaries... (718,923) (676,722) (405,467)
Income taxes (benefit)....................... (278,460) (300,910) (137,855)
---------- ---------- ----------
(440,463) (375,812) (267,612)
Equity in undistributed income of
subsidiaries............................... 3,865,485 2,641,743 1,532,556
---------- ---------- ----------
Net income................................. $3,425,022 $2,265,931 $1,264,944
========== ========== ==========
</TABLE>
F-16
<PAGE> 103
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement of cash flows for the year ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 3,425,022 $ 2,265,931 $ 1,264,944
Adjustments to reconcile to net cash
provided by operating activities:
Equity in undistributed income....... (3,865,485) (2,641,743) (1,532,566)
Increase in accrued expenses......... 217,290 -0- -0-
Other, net........................... 15,855 (44,370) 93,533
----------- ----------- -----------
Net cash used by operating activities... (207,318) (420,182) (174,089)
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of bank subsidiary............. -0- (4,482,339) -0-
Purchases of premises and equipment..... (1,385) (33,937) (37,927)
Purchase of other investments........... -0- (50,000) -0-
Increase in receivables from
subsidiaries......................... (565,778) -0- -0-
Dividends from subsidiaries............. 1,255,272 1,961,541 3,866,751
----------- ----------- -----------
Net cash provided (used) by investing
activities........................... 688,109 (2,604,735) 3,828,824
----------- ----------- -----------
FINANCING ACTIVITIES
Loans proceeds.......................... -0- 3,000,000 -0-
Payments on long term debt.............. (260,000) (130,000) (2,946,637)
----------- ----------- -----------
Net cash provided (used) by financing
activities........................... (260,000) 2,870,000 (2,946,637)
----------- ----------- -----------
Increase or (Decrease) in cash............ 220,791 (154,917) 708,098
Cash at beginning of year................. 553,181 708,098 -0-
----------- ----------- -----------
Cash at end of year....................... $ 773,972 $ 553,181 $ 708,098
=========== =========== ===========
</TABLE>
The parent company paid $409,843, $284,745 and $247,834 in interest during 1997,
1996 and 1995, respectively.
F-17
<PAGE> 104
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks............................. $ 11,239,925 $ 11,588,100
Federal funds sold.................................. 7,664,080 6,629,080
Investment securities............................... 67,687,895 65,532,373
Loans, net.......................................... 245,945,214 214,808,989
Premises and equipment, net......................... 8,211,343 8,210,978
Accrued interest receivable......................... 5,063,309 4,253,138
Intangible assets................................... 2,738,000 3,089,174
Other assets........................................ 1,711,605 1,281,721
------------ ------------
Total Assets.............................. $350,261,371 $315,393,553
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing.............................. $ 34,069,489 $ 32,590,858
Interest bearing.................................. 277,091,002 245,873,194
------------ ------------
311,160,491 278,464,052
Long term debt...................................... 9,061,000 10,215,000
Accrued interest payable............................ 1,749,045 1,604,901
Other liabilities................................... 2,294,595 3,043,311
------------ ------------
Total liabilities......................... 324,265,131 293,327,264
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value:..................... 5,897 5,897
Authorized 10,000,000 shares
Issued 589,745 shares (1998 and 1997)
Additional paid in capital........................ 16,299,178 16,299,178
Retained earnings................................. 9,536,754 5,966,954
Treasury stock -- 2,765 shares (1998 and 1997).... (78,746) (78,746)
------------ ------------
25,763,083 22,193,283
Net unrealized loss on securities
available for sale, net of deferred tax
assets (liabilities) of ($119,700)
(1998) and $57,528 (1997).............. 233,157 (126,994)
------------ ------------
25,996,240 22,066,289
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................. $350,261,371 $315,393,553
============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-18
<PAGE> 105
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans.......................... $15,672,246 $13,165,331
Federal funds sold.................................. 653,684 479,002
Investment securities:
Taxable.......................................... 2,818,378 3,059,441
Tax-exempt....................................... 142,357 106,182
Other............................................... 40 367
----------- -----------
19,286,705 16,810,323
INTEREST EXPENSE:
Deposits............................................ 9,786,222 8,238,482
Other borrowings.................................... 357,773 391,849
----------- -----------
10,143,995 8,630,331
----------- -----------
Net interest income................................... 9,142,710 8,179,992
Provision for loan losses............................. 423,970 411,034
----------- -----------
Net interest income after provisions for loan
losses.............................................. 8,718,740 7,768,958
OTHER INCOME:
Service charges on deposit accounts................. 1,610,114 1,572,646
Other service charges and fees...................... 123,994 93,109
Other............................................... 371,866 90,797
----------- -----------
2,105,974 1,756,552
OTHER EXPENSES:
Salaries and benefits............................... 3,314,739 3,104,884
Occupancy expense................................... 512,598 470,326
Furniture and equipment expense..................... 492,323 466,267
Supplies and printing............................... 159,940 215,764
Postage and courier................................. 195,433 182,431
Service fees........................................ 193,957 17,301
Data processing expense............................. 35,107 (91,766)
Marketing expense................................... 323,963 346,292
Amortization........................................ 262,662 262,314
Other............................................... 708,944 648,056
----------- -----------
6,199,666 5,621,869
----------- -----------
Income before income taxes............................ 4,625,048 3,903,641
Income tax expense.................................... 1,659,426 1,467,564
----------- -----------
NET INCOME.................................. $ 2,965,622 $ 2,436,077
=========== ===========
Earnings per share.................................... $ 5.04 $ 4.18
=========== ===========
Earnings per share -- diluted......................... $ 5.04 $ 4.18
=========== ===========
Weighted average shares outstanding................... 588,100 583,405
=========== ===========
Weighted average shares outstanding -- diluted........ 588,100 583,405
=========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-19
<PAGE> 106
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
LOSS ON
ADDITIONAL SECURITIES
COMMON PAID IN RETAINED AVAILABLE TREASURY
STOCK CAPITAL EARNINGS FOR SALE STOCK TOTAL
------ ----------- ---------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES
January 1, 1997......... $5,838 $16,118,896 $3,530,877 $(254,063) $(47,462) $19,354,086
Issuance of 5,976 shares
of Common Stock....... 59 180,282 180,341
Purchase of 1,100 shares
of treasury stock..... (31,284) (31,284)
Net income for the
period ended September
30, 1997.............. 2,436,077 2,436,077
Change in unrealized
depreciation on
available-for-sale
securities............ 127,070 127,070
------ ----------- ---------- --------- -------- -----------
BALANCES
September 30, 1997...... $5,897 $16,299,178 $5,966,954 $(126,993) $(78,746) $22,066,290
====== =========== ========== ========= ======== ===========
BALANCES
January 1, 1998......... $5,897 $16,299,178 $6,955,896 $(135,495) $(78,746) $23,046,730
Net income for the
period ended September
30, 1998.............. 2,965,622 2,965,622
Cash dividends paid..... (384,764) (384,764)
Change in unrealized
depreciation on
available-for-sale
securities............ 368,652 368,652
------ ----------- ---------- --------- -------- -----------
BALANCES
September 30, 1998...... $5,897 $16,299,178 $9,536,754 $ 233,157 $(78,746) $25,996,240
====== =========== ========== ========= ======== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-20
<PAGE> 107
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $ 2,965,622 $ 2,436,077
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 754,013 737,740
Amortization of investment securities premiums
and accretion of discounts, net.............. 256 63,973
Provision for loan losses...................... 423,970 411,034
(Gains) or losses on sales of assets........... (78,750) (133,759)
(Gains) or losses on sales of investment
securities................................... (19,456) (1,938)
Changes in assets and liabilities:
Accrued interest receivable.................. (1,056,032) (1,187,936)
Other assets................................. (141,732) (230,477)
Accrued interest payable..................... 166,095 320,014
Other liabilities............................ 631,531 1,832,835
------------ ------------
Net cash provided by operating
activities............................. 3,645,517 4,247,563
------------ ------------
INVESTING ACTIVITIES:
Net (increase) decrease in federal funds sold..... 4,140,920 8,745,920
Proceeds from sales and maturities of investment
securities..................................... 36,026,194 21,900,000
Purchase of investment securities................. (35,580,895) (18,384,306)
Net increase in loans............................. (34,797,097) (50,395,533)
Purchases of premises and equipment............... (205,561) (526,485)
(Increase) or decrease in intangible assets....... -- --
Other............................................. -- --
------------ ------------
Net cash used in investing activities..... (30,416,439) (38,660,404)
FINANCING ACTIVITIES:
Net increase in deposits.......................... 22,083,726 31,008,701
Stock issued...................................... -- 180,341
Purchase of treasury stock........................ -- (31,284)
Dividends paid.................................... (384,764) --
Loan proceeds..................................... 3,751,000 4,645,000
Payments on long term debt........................ (149,000) (120,000)
------------ ------------
Net cash provided by financing
activities............................. 25,300,962 35,682,758
Net increase (decrease) in cash..................... (1,469,960) 1,269,917
Balance -- January 1................................ 12,709,885 10,318,183
------------ ------------
Balance -- September 30............................. $ 11,239,925 $ 11,588,100
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest....................................... $ 9,977,900 $ 8,310,317
Income taxes................................... 1,460,425 1,704,754
NON-CASH TRANSACTIONS:
Transfers from loans to other real estate...... 412,579 17,760
Unrealized gains or (losses) in securities
available for sale (net of tax effect)....... 368,652 127,071
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-21
<PAGE> 108
ARKANSAS BANKING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income.............................................. $2,965,622 $2,436,077
---------- ----------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period........................................... 380,527 128,320
Less: reclassification adjustment for (gains)
losses included in net income.................... 11,875 1,250
---------- ----------
Other comprehensive income............................ 368,652 127,070
---------- ----------
Comprehensive Income.................................... $3,334,274 $2,563,147
========== ==========
</TABLE>
F-22
<PAGE> 109
ARKANSAS BANKING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial statements included the accounts of Arkansas Banking Company.
The financial information furnished herein reflects all adjustments which are,
in the opinion of management, necessary to present a fair statement of the
results of operations and financial position for the period covered herein. All
such adjustments are of a normal recurring nature.
NOTE 2. AGREEMENT TO MERGE WITH REGIONS
An Agreement and Plan of Merger between Arkansas Banking Company and Regions
Financial Corporation was signed on September 25, 1998. The Agreement provides
for a merger of the companies in a stock for stock exchange accounted for as a
purchase. On the effective date of the merger each share of Arkansas Banking
Company stock will be exchanged for 2.85 shares of Regions stock, subject to
possible adjustment. The merger is contingent upon regulatory and shareholder
approval.
F-23
<PAGE> 110
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
ARKANSAS BANKING COMPANY
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF SEPTEMBER 25, 1998
A-1
<PAGE> 111
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties...............................................................
Preamble..............................................................
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER.........................
1.1 Merger......................................................
1.2 Time and Place of Closing...................................
1.3 Effective Time..............................................
1.4 Execution of Support Agreements.............................
ARTICLE 2 -- TERMS OF MERGER..........................................
2.1 Certificate of Incorporation................................
2.2 Bylaws......................................................
2.3 Directors and Officers......................................
ARTICLE 3 -- MANNER OF CONVERTING SHARES..............................
3.1 Conversion of Shares........................................
3.2 Anti-Dilution Provisions....................................
3.3 Shares Held by ABC or Regions...............................
3.4 Fractional Shares...........................................
3.5 Conversion of Stock Rights..................................
3.6 Conversion of Stock Rights..................................
ARTICLE 4 -- EXCHANGE OF SHARES.......................................
4.1 Exchange Procedures.........................................
4.2 Rights of Former ABC Stockholders...........................
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF ABC....................
5.1 Organization, Standing, and Power...........................
5.2 Authority; No Breach By Agreement...........................
5.3 Capital Stock...............................................
5.4 ABC Subsidiaries............................................
5.5 Financial Statements........................................
5.6 Absence of Undisclosed Liabilities..........................
5.7 Absence of Certain Changes or Events........................
5.8 Tax Matters.................................................
5.9 Assets......................................................
5.10 Environmental Matters.......................................
5.11 Compliance with Laws........................................
5.12 Labor Relations.............................................
5.13 Employee Benefit Plans......................................
5.14 Material Contracts..........................................
5.15 Legal Proceedings...........................................
5.16 Reports.....................................................
5.17 Statements True and Correct.................................
5.18 Accounting, Tax, and Regulatory Matters.....................
5.19 State Takeover Laws.........................................
5.20 Charter Provisions..........................................
5.21 Support Agreements..........................................
5.22 Derivatives.................................................
</TABLE>
A-2
<PAGE> 112
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.23 Year 2000...................................................
5.24 Year 2000...................................................
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS................
6.1 Organization, Standing, and Power...........................
6.2 Authority; No Breach By Agreement...........................
6.3 Capital Stock...............................................
6.4 Regions Subsidiaries........................................
6.5 SEC Filings; Financial Statements...........................
6.6 Absence of Undisclosed Liabilities..........................
6.7 Absence of Certain Changes or Events........................
6.8 Compliance with Laws........................................
6.9 Legal Proceedings...........................................
6.10 Reports.....................................................
6.11 Statements True and Correct.................................
6.12 Accounting, Tax, and Regulatory Matters.....................
6.13 Derivatives.................................................
6.14 Year 2000...................................................
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.................
7.1 Affirmative Covenants of Both Parties.......................
7.2 Negative Covenants of ABC...................................
7.3 Adverse Changes in Condition................................
7.4 Reports.....................................................
ARTICLE 8 -- ADDITIONAL AGREEMENTS....................................
8.1 Proxy Statement; Stockholder Approval.......................
8.2 Placement of Shares; Registration...........................
8.3 Exchange Listing............................................
8.4 Applications................................................
8.5 Filings with State Offices..................................
8.6 Agreement as to Efforts to Consummate.......................
8.7 Investigation and Confidentiality...........................
8.8 Press Releases..............................................
8.9 Certain Actions.............................................
8.10 Accounting and Tax Treatment................................
8.11 State Takeover Laws.........................................
8.12 Charter Provisions..........................................
8.13 Stockholder Agreement.......................................
8.14 Agreement of Affiliates.....................................
8.15 Employee Benefits and Contracts.............................
8.16 Indemnification.............................................
8.17 Certain Conditions..........................................
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........
9.1 Conditions to Obligations of Each Party.....................
9.2 Conditions to Obligations of Regions........................
9.3 Conditions to Obligations of ABC............................
</TABLE>
A-3
<PAGE> 113
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 10 -- TERMINATION.............................................
10.1 Termination.................................................
10.2 Effect of Termination.......................................
10.3 Non-Survival of Representations and Covenants...............
ARTICLE 11 -- MISCELLANEOUS...........................................
11.1 Definitions.................................................
11.2 Expenses....................................................
11.3 Brokers and Finders.........................................
11.4 Entire Agreement............................................
11.5 Amendments..................................................
11.6 Waivers.....................................................
11.7 Assignment..................................................
11.8 Notices.....................................................
11.9 Governing Law...............................................
11.10 Counterparts................................................
11.11 Captions....................................................
11.12 Interpretations.............................................
11.13 Enforcement of Agreement....................................
11.14 Severability................................................
Signatures............................................................
</TABLE>
A-4
<PAGE> 114
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1. -- Form of Support Agreement (sec. 1.4).
2. -- Form of Affiliate Agreement (sec.sec. 8.13, 9.2(d)).
3. -- Form of Claims Letter (sec. 9.2(e)).
4. -- Form of opinion of ABC Counsel (sec. 9.2(f)).
5. -- Form of opinion of Regions Counsel (sec. 9.3(e)).
</TABLE>
[EXHIBITS OMITTED]
A-5
<PAGE> 115
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as
of September 25, 1998, by and between ARKANSAS BANKING COMPANY ("ABC"), a
corporation organized and existing under the Laws of the State of Arkansas, with
its principal office located in Jonesboro, Arkansas; 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 ABC 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 ABC by Regions pursuant to the merger (the "Merger") of ABC with
and into Regions. At the effective time of the Merger, the outstanding shares of
the capital stock of ABC shall be converted into shares of the common stock of
Regions (except as provided herein). As a result, stockholders of ABC shall
become stockholders of Regions, and each of the subsidiaries of ABC 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 ABC, 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 ABC'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, ABC shall be merged with and into Regions in accordance with the
provisions of Sections 4-27-1107 of the ABCA and with the effect provided in
Section 4-12-1106 of the ABCA and in accordance with Section 252 of the DGCL and
with the effect provided in Section 259 of the DGCL (the "Merger"). Regions
shall be the Surviving Corporation resulting from the Merger and shall continue
to be governed by the Laws of the State of Delaware. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective Boards of Directors of ABC and Regions.
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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 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 Arkansas
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Arkansas 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 in writing by the duly authorized officers
of each Party, the Parties shall use their reasonable efforts to cause the
Effective Time to occur on the 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 ABC 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 ABC 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 ABC, 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 ABC Common Stock (excluding shares held by any ABC
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 2.85 shares of
Regions Common Stock (subject to adjustment pursuant to Section 10.1(g) of
this Agreement, the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event ABC changes the number of shares of
ABC 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, subdivision, reclassification, combination or
exchange of shares 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 ABC or Regions. Each of the shares of ABC Common Stock held
by any ABC 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 Fractional Shares. Notwithstanding any other provision of this Agreement,
each holder of shares of ABC 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.
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3.5 Conversion of Stock Rights.
(a) At the Effective Time, each award, option, or other right to purchase
or acquire shares of ABC Common Stock pursuant to stock options, stock
appreciation rights, or stock awards ("ABC Rights") granted by ABC under
the ABC Stock Plans, which are outstanding at the Effective Time, whether
or not exercisable, shall be converted into and become rights with respect
to Regions Common Stock, and Regions shall assume each ABC Right, in
accordance with the terms of the ABC Stock Plan and stock option agreement
by which it is evidenced, except that from and after the Effective Time,
(i) Regions and its Compensation Committee shall be substituted for ABC and
the Committee of ABC's Board of Directors (including, if applicable, the
entire Board of Directors of ABC) administering such ABC Stock Plan, (ii)
each ABC 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 ABC
Right shall be equal to the number of shares of ABC Common Stock subject to
such ABC 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 ABC Right shall be
adjusted by dividing the per share exercise (or threshold) price under each
such ABC 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 ABC Rights and any fraction of a share of
Regions Common Stock that otherwise would be subject to a converted ABC
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
average of the high and low sales prices 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 exercise of such Right. In addition,
notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence of this Section 3.5, each ABC 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 3.5.
(b) All restrictions or limitations on transfer with respect to ABC Common
Stock awarded under the ABC Stock Plans or any other plan, program, or
arrangement of any ABC Company, to the extent that such restrictions or
limitations shall not have lapsed prior to the Effective Time, 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.
3.6 Conversion of Stock Rights. Any holder of shares of ABC Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Subchapter 13 of the ABCA shall be entitled to receive the value
of such shares in cash as determined pursuant to such provision of Law;
provided, that no such payment shall be made to any dissenting stockholder
unless and until such dissenting
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stockholder has complied with the applicable provisions of the ABCA and
surrendered to ABC 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 ABC 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 ABC Common Stock is entitled under this Article 3 (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of ABC Common Stock held by such holder.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Regions and ABC
shall cause the exchange agent selected by Regions (the "Exchange Agent") to
mail to the former stockholders of ABC appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of ABC Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of ABC Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement or as to which dissenters'
rights have been perfected as provided in Section 3.6 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 3.4 of this
Agreement, each holder of shares of ABC 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 ABC Common Stock is entitled as a result of the Merger
until such holder surrenders such holder's certificate or certificates
representing the shares of ABC Common Stock for exchange as provided in this
Section 4.1. The certificate or certificates of ABC 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 ABC 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 ABC Stockholders. At the Effective Time, the stock
transfer books of ABC shall be closed as to holders of ABC Common Stock
immediately prior to the Effective Time and no transfer of ABC 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 ABC Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement or as to which
dissenters' rights have been perfected as provided in Section 3.6 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 3.4 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
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which have been declared or made by ABC in respect of such shares of ABC 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 ABC 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 ABC Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing ABC 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 ABC
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 ABC 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 ABC
ABC hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. ABC is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Arkansas,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease, and operate its Material Assets. ABC 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 ABC.
5.2 Authority; No Breach By Agreement.
(a) ABC has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby, subject to the approval of this
Agreement by the required vote of the outstanding shares of ABC Common
Stock. 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 ABC, subject to the approval of this
Agreement by the holders of a majority of the outstanding shares of ABC
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 ABC. Subject to such requisite stockholder approval and receipt of the
requisite Consents
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referred to in Section 9.1(b) of this Agreement, this Agreement represents
a legal, valid, and binding obligation of ABC, enforceable against ABC 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) Except as disclosed in Section 5.2(b) of the ABC Disclosure Memorandum,
neither the execution and delivery of this Agreement by ABC, nor the
consummation by ABC of the transactions contemplated hereby, nor compliance
by ABC with any of the provisions hereof or thereof, will (i) conflict with
or result in a breach of any provision of ABC'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 ABC Company under, any Contract or Permit of any ABC 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 ABC, 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 ABC Company or any of their respective Material Assets where such
violation would have, individually or in the aggregate, a Material Adverse
Effect on ABC.
(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 ABC,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by ABC of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of ABC consists, as of the date of this
Agreement, of 10,000,000 shares of ABC Common Stock, of which 586,980
shares are issued and outstanding as of the date of this Agreement and not
more than 651,980 shares will be issued and outstanding at the Effective
Time. All of the issued and outstanding shares of ABC Common Stock are duly
and validly issued and outstanding and are fully paid and nonassessable
under the ABCA. None of the outstanding shares of ABC Common Stock has been
issued in violation of any preemptive rights of the current or past
stockholders of ABC. ABC has reserved 65,000 shares of ABC Common Stock for
issuance under the ABC Stock Plans, pursuant to which options to purchase
not more than 65,000 shares of ABC Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the ABC Disclosure Memorandum, there are no shares of capital
stock or other equity securities of ABC outstanding and no outstanding
Rights relating to the capital stock of ABC.
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5.4 ABC Subsidiaries. ABC has disclosed in Section 5.4 of the ABC Disclosure
Memorandum all of the ABC Subsidiaries as of the date of this Agreement. ABC or
one of its Subsidiaries owns all of the issued and outstanding shares of capital
stock of each ABC Subsidiary. No equity securities of any ABC Subsidiary are or
may become required to be issued (other than to another ABC Company) by reason
of any Rights, and there are no Contracts by which any ABC Subsidiary is bound
to issue (other than to another ABC Company) additional shares of its capital
stock or Rights or by which any ABC Company is or may be bound to transfer any
shares of the capital stock of any ABC Subsidiary (other than to another ABC
Company). There are no Contracts relating to the rights of any ABC Company to
vote or to dispose of any shares of the capital stock of any ABC Subsidiary. All
of the shares of capital stock of each ABC Subsidiary held by an ABC 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 ABC Company
free and clear of any Lien. Each ABC 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 ABC 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 ABC. Each ABC 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. ABC has disclosed in Section 5.5 of the ABC
Disclosure Memorandum, and has delivered to Regions copies of, all ABC Financial
Statements prepared for periods ended prior to the date hereof and will deliver
to Regions copies of all ABC Financial Statements prepared subsequent to the
date hereof. The ABC 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 ABC 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 ABC Companies as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity, and
cash flows of the ABC Companies for the periods indicated, in accordance with
GAAP (except as disclosed in Section 5.5 of the ABC Disclosure Memorandum and
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 the absence of notes thereto and 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 ABC Company has any Liabilities that
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ABC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of ABC as of July 31, 1998, included in the
ABC Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business
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subsequent to July 31, 1998. No ABC Company has incurred or paid any Liability
since July 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 ABC.
5.7 Absence of Certain Changes or Events. Since July 31, 1998, except as
disclosed in the ABC Financial Statements delivered prior to the date of the
Agreement or as otherwise disclosed in the ABC Disclosure Memorandum, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
ABC, and (ii) the ABC 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 ABC
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 ABC, 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 ABC, except to the extent reserved against in the ABC
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 ABC 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) To the Knowledge of ABC, adequate provision for any Taxes due or to
become due for any of the ABC Companies for the period or periods through
and including the date of the respective ABC Financial Statements has been
made and is reflected on such ABC Financial Statements.
(d) Each of the ABC 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 ABC.
(e) None of the ABC Companies has made any payments, is obligated to make
any payments, or is a party to any contract, agreement, or other
arrangement that could
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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 ABC Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the ABC Companies that occurred during or after any
Taxable Period in which the ABC Companies incurred a net operating loss
that carries over to any Taxable Period ending after December 31, 1997.
(h) No ABC 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 ABC Company has or has had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Assets. Except as disclosed or reserved against in the ABC Financial
Statements made available prior to the date of this Agreement, the ABC Companies
have good and marketable title, free and clear of all Liens, to all of their
respective Assets that are Material to the business of the ABC Companies. All
Material tangible properties used in the businesses of the ABC Companies are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with ABC's past practices. All Assets
which are Material to ABC's business on a consolidated basis, held under leases
or subleases by any of the ABC 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 ABC Companies currently maintain the insurance policies set forth in Section
5.9 of the ABC Disclosure Memorandum. Except as reflected in the provisions of
said policies, none of the ABC 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 ABC
Companies include all Material Assets required to operate the business of the
ABC Companies as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of ABC, each ABC 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 ABC.
(b) To the Knowledge of ABC, there is no Litigation pending or, to the
Knowledge of ABC, threatened before any court, governmental agency, or
authority, or other forum in which any ABC Company or any of its
Participation Facilities has been or, with respect to threatened
Litigation, may reasonably be expected to be named as a
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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 ABC 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 ABC.
(c) There is no Litigation pending, or to the Knowledge of ABC, threatened
before any court, governmental agency, or board, or other forum in which
any of its Loan Properties (or ABC 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 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 ABC.
(d) To the Knowledge of ABC, 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 ABC.
(e) To the Knowledge of ABC, during the period of (i) any ABC Company's
ownership or operation of any of their respective current properties, (ii)
any ABC Company's participation in the management of any Participation
Facility, or (iii) any ABC 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 ABC. Prior to the period of (i) any ABC
Company's ownership or operation of any of their respective current
properties, (ii) any ABC Company's participation in the management of any
Participation Facility, or (iii) any ABC Company's holding of a security
interest in a Loan Property, to the Knowledge of ABC, 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 ABC.
5.11 Compliance with Laws. ABC is duly registered as a bank holding company
under the BHC Act. Each ABC 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
ABC, 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 ABC. Except as disclosed in Section 5.11
of the ABC Disclosure Memorandum, none of the ABC 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 ABC; and
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(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 ABC 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 ABC, (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 ABC, or (iii) requiring any ABC 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.
5.12 Labor Relations. No ABC Company is the subject of any Litigation asserting
that it or any other ABC 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 ABC Company to bargain with any labor
organization as to wages or conditions of employment, nor is any ABC 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 ABC Company, pending or
threatened, or to the Knowledge of ABC, is there any activity involving any ABC
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) ABC has disclosed to Regions in writing prior to the execution of the
Agreement and in Section 5.13 of the ABC 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 ABC Benefits
Plans. For purposes of this Agreement, "ABC 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 ABC 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 ABC 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 an "ABC ERISA Plan." Any ABC 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
an "ABC Pension Plan." Neither ABC nor any ABC 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 ABC Company that was intended to qualify under Section 401(a) of the
Internal
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Revenue Code and with respect to which any ABC Company has any Liability,
is disclosed as such in Section 5.13 of the ABC Disclosure Memorandum.
(b) ABC 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 ABC Benefit
Plans (including insurance contracts), and all amendments thereto, (ii)
with respect to any such ABC Benefit Plans or amendments, all determination
letters, rulings, opinion letters, 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, 1995, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any ABC Benefit Plan with respect to the most recent
plan year, and (iv) the most recent summary plan descriptions and any
modifications thereto.
(c) All ABC 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 ABC. Each ABC 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 ABC 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 ABC ERISA Plan has been determined to be
exempt from Tax under Section 501(a) of the Internal Revenue Code and ABC
is not aware of any circumstance which will or could reasonably result in
revocation of such exemption. With respect to each ABC Benefit Plan to the
Knowledge of ABC, 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 ABC. There is no pending or, to the Knowledge of ABC,
threatened Litigation relating to any ABC ERISA Plan.
(d) No ABC Company has engaged in a transaction with respect to any ABC
Benefit Plan that, assuming the Taxable Period of such transaction expired
as of the date of this Agreement, would subject any ABC Company to a tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on ABC. Neither
ABC nor any administrator or fiduciary of any ABC 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 ABC 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 ABC. No oral or written representation or communication with respect to
any aspect of the ABC Benefit Plans has been made to employees of any ABC
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 ABC.
(e) No ABC 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
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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 ABC Pension Plan, (ii) no change in the actuarial assumptions with
respect to any ABC Pension Plan, and (iii) no increase in benefits under
any ABC 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 ABC. Neither any ABC Pension
Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any ABC Company,
or the single-employer plan of any entity which is considered one employer
with ABC under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code or Section 302 of ERISA (whether or not waived) (an "ABC 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 an ABC Pension Plan or any single-employer
plan of an ABC ERISA Affiliate have or will be timely made and there is no
lien nor is there expected to be any lien under Internal Revenue Code
Section 412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code
Section 4971. No ABC Company has provided, or is required to provide,
security to an ABC Pension Plan or to any single-employer plan of an ABC
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 ABC, except to the extent any failure would not have a
Material Adverse Effect on ABC.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any ABC Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any ABC 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 ABC).
(g) No ABC Company has any obligations for retiree health and retiree life
benefits under any of the ABC 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 ABC Company from any ABC Company under
any ABC Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any ABC 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 ABC
Disclosure Memorandum, none of the ABC 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 $75,000, (ii) any Contract relating to the borrowing
of money by any ABC Company or the guarantee by any ABC Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal
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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 ABC with the SEC as
of the date of this Agreement if ABC 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 "ABC Contracts"). To the Knowledge of ABC, with respect to each
ABC Contract: (i) the Contract is in full force and effect; (ii) no ABC Company
is in Default thereunder, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ABC; (iii)
no ABC 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
ABC, 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
ABC, or has repudiated or waived any Material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of any ABC Company for
money borrowed is prepayable at any time by such ABC Company without penalty or
premium.
5.15 Legal Proceedings.
(a) Except to the extent specifically reserved against in the ABC Financial
Statements dated prior to the date of this Agreement, there is no
Litigation instituted or pending, or, to the Knowledge of ABC, threatened
against any ABC 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 ABC, nor are
there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any ABC Company, that are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ABC.
(b) Section 5.15(b) of the ABC Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any ABC
Company is a party and which names an ABC Company as a defendant or
cross-defendant.
5.16 Reports. Since January 1, 1995, or the date of organization if later, each
ABC 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 ABC. 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 ABC Company or any Affiliate thereof regarding ABC 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 ABC Company or any Affiliate
thereof for inclusion in the Proxy Statement to be mailed to ABC's stockholders
in connection with the Stockholders' Meeting will, when first mailed to the
stockholders of ABC, 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
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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 ABC Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all Material respects with the provisions of
applicable Law.
5.18 Accounting, Tax, and Regulatory Matters. To the Knowledge of ABC, no ABC
Company or any Affiliate thereof has taken or agreed to take any action, and ABC
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 ABC 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 Arkansas (collectively,
"Takeover Laws").
5.20 Charter Provisions. Each ABC 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 ABC 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 ABC Company that may
be directly or indirectly acquired or controlled by it.
5.21 Support Agreements. Each of the directors of ABC has executed and
delivered to Regions a Support Agreement in substantially the same 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 ABC's own account, or for the account of one or more
the ABC 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. Section 5.23 of the ABC Disclosure Memorandum includes a
complete and accurate copy of any ABC's plan, including an estimate of the
anticipated associated costs, for implementing modifications to ABC's 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, ABC shall endeavor to continue its efforts to
implement such plan.
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5.24 Status of Stockholders.
(a) Each holder of ABC Common Stock is either: (i) an Accredited Investor,
as such term is defined in Rule 501 of Regulation D promulgated under the
1933 Act ("Rule 501"), or (ii) if not an Accredited Investor, a person who
alone or with his or her "purchaser representative" as such term is defined
in Rule 501 has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of
making an investment in Regions Common Stock pursuant to this Agreement;
and
(b) The number of holders of ABC Common Stock who are the type of person
described in paragraph (a)(ii) above does not exceed 35.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to ABC as follows:
6.1 Organization, Standing, and Power. Regions is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Delaware,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease, and operate its Material Assets. Regions is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 Authority; No Breach By Agreement.
(a) Regions has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part
of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its
terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Regions' Certificate of
Incorporation or Bylaws, (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
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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 500,000,000 shares of Regions Common Stock, of which
214,100,931 shares were issued and outstanding and 363,279 shares were held as
treasury shares as of June 30, 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 ABC Common Stock upon consummation of the
Merger, when issued in accordance with the terms of this Agreement, will be,
duly and validly issued and outstanding and fully paid and nonassessable under
the DGCL. None of the outstanding shares of Regions Common Stock has been, and
none of the shares of Regions Common Stock to be issued in exchange for shares
of ABC 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
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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 ABC all forms, reports, and
documents required to be filed by Regions with the SEC since January 1,
1995 (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.
(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 June 30, 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 June 30, 1998. No Regions Company has incurred or paid any
Liability since June 30, 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 June 30, 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).
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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 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 January 1, 1995, 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
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ABC's stockholders in connection with the Stockholders' Meeting, will, when
first mailed to the stockholders of ABC, 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 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 ABC 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
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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 ABC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, ABC
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of Regions, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any ABC Company; or
(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money (other than
indebtedness of an ABC Company to another ABC Company) in excess of an
aggregate of $100,000 (for the ABC Companies on a consolidated basis),
except in the ordinary course of the business consistent with past
practices (which shall include, for ABC Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of 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 ABC
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
ABC 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 ABC Company, or declare or pay any dividend or
make any other distribution in respect of ABC's capital stock; provided
that ABC may (to the extent legally and contractually able to do so), but
shall not be obligated to, declare and pay cash dividends on the shares of
ABC Common Stock at rates equivalent on a per share basis (taking the
Exchange Ratio into account) to any cash dividends paid by Regions on the
shares of Regions Common Stock between the date of this Agreement and the
Effective Time with record and payment dates occurring as nearly as
possible simultaneously with the record and payment dates applicable to the
cash dividends paid by 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 ABC Common Stock
do not receive both a dividend in respect of their ABC Common Stock and a
dividend in respect of Regions Common Stock or fail to receive any
dividend; 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 ABC Common
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Stock or any other capital stock of any ABC 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 ABC
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of ABC Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any ABC Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another ABC 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 ABC
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
(g) grant any increase in compensation or benefits to the employees or
officers of any ABC Company, except as required by Law or in the case of
persons holding positions of vice president or below consistent with past
practices; 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 ABC Company; grant any increase in fees or other increases in
compensation or other benefits to directors of any ABC 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 ABC Company and
any Person (unless such amendment is required by Law) that the ABC 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 ABC Company or make any
Material change in or to any existing employee benefit plans of any ABC
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 ABC Company for Material money damages or restrictions upon the
operations of any ABC 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.
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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 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 Proxy Statement; Stockholder Approval. ABC shall call a Stockholders'
Meeting, to be held as soon as reasonably practicable, for the purpose of voting
upon approval of this Agreement and such other related matters as it deems
appropriate. In connection with the Stockholder's Meeting, (i) ABC and Regions
shall prepare a Proxy Statement and mail such Proxy Statement to ABC's
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 ABC shall recommend (subject to
compliance with its fiduciary duties as advised by counsel) to its stockholders
the approval of the matters submitted for approval, and (iv) the Board of
Directors and officers of ABC shall (subject to compliance with their fiduciary
duties as advised by counsel) use their reasonable efforts to obtain such
stockholders' approval. In connection with the provisions of Section 8.2 of this
Agreement, if deemed necessary by counsel to Regions, Regions shall prepare an
offering memorandum, which shall include such information relating to Regions
and ABC, as is deemed appropriate by such counsel and ABC shall use its best
efforts to cause its stockholders to execute a letter of representations
allowing Regions to confirm that such stockholders are "Accredited Investors" as
defined in Regulation D promulgated under the 1933 Act.
8.2 Placement of Shares; Registration.
(a) As soon as practicable after the Effective Time, Regions shall prepare
and file a Form D with the SEC in connection with the issuance of shares of
Regions Common Stock in connection with the Merger. The Parties hereby
covenant and agree that
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each will take all actions necessary to ensure that the issuance of the
shares of Regions Common Stock in connection with the Merger qualifies for
an exemption from registration under Section 4(2) of the 1933 Act pursuant
to Rule 506 promulgated thereunder.
(b) As soon as practicable after the Effective Time, Regions shall prepare
and file a Registration Statement (the "Registration Statement") with the
SEC to register the shares of Regions Common Stock to be issued to the
holders of ABC Common Stock pursuant to the Merger for resale by the
holders of ABC Common Stock. Regions 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. ABC shall furnish all
information concerning it and the holders of its capital stock as Regions
may reasonably request in connection with such action. Regions shall use
its best efforts to maintain the effectiveness of the Registration
Statement until the earlier of (i) the date on which the shares of Regions
Common Stock to be issued to the holders of ABC Common Stock pursuant to
the Merger may be sold without restriction under the 1933 Act or (ii) the
fifth anniversary of the Effective Time subject to such periods of time
when Regions must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment is filed and
declared effective or an appropriate report is filed by Regions with the
SEC. The provisions of this Section 8.2(b) are intended to be for the
benefit of and shall be enforceable, following the Merger, by the former
stockholders of ABC; provided, however, that no enforcement action may be
brought by such stockholders unless joined by stockholders who, in the
aggregate, owned not less than 20% of the shares of ABC Common Stock
outstanding prior to the Merger.
(c) Notwithstanding the other provisions of this Section 8.2, if Regions
determines, in its sole discretion, that the shares of Regions Common Stock
to be issued in the Merger is not exempt from registration pursuant to Rule
506 under Regulation D, then Regions shall file a registration statement
registering the shares of Regions Common Stock for issuance to the ABC
stockholders in connection with the Merger and use its best efforts to have
such registration statement declared effective prior to the Effective Time.
ABC shall furnish all information concerning it and the holders of its
capital stock as Regions may reasonably request in connection with such
action.
8.3 Exchange Listing. Regions shall use its reasonable efforts to list on the
Nasdaq NMS, subject to official notice of issuance, the shares of Regions Common
Stock to be issued to the holders of ABC Common Stock pursuant to the Merger,
and Regions shall give all notices and make all filings with the Nasdaq NMS
required in connection with the transactions contemplated herein.
8.4 Applications. Regions shall promptly prepare and file, and ABC 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.
8.5 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
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Secretary of State of the State of Delaware and the Arkansas Articles of Merger
with the Secretary of State of the State of Arkansas in connection with the
Closing.
8.6 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.
8.7 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.
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8.8 Press Releases. Prior to the Effective Time, Regions and ABC shall consult
with each other as to the form and substance of any press release or other
public disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 8.8 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.
8.9 Certain Actions. Except with respect to this Agreement and the transactions
contemplated hereby, no ABC Company nor any Affiliate thereof nor any
Representatives thereof retained by any ABC 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, ABC 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 ABC'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 ABC's Board of Directors under
applicable Law; provided, that ABC 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
ABC or access to ABC's books, records, or properties in connection therewith,
the other Person shall have entered into a confidentiality agreement in a form
reasonably acceptable to the Parties. Nothing contained in this Section 8.9
shall prohibit the Board of Directors of ABC from complying with Rule 14e-2,
promulgated under the 1934 Act. ABC 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.
8.10 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.
8.11 State Takeover Laws. Each ABC 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.
8.12 Charter Provisions. Each ABC 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 ABC 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 ABC Company
that may be directly or indirectly acquired or controlled by it.
8.13 Stockholder Agreements. ABC has disclosed in Section 8.13 of the ABC
Disclosure Memorandum the name and address of each person who is a holder of ABC
Common Stock. ABC shall use its reasonable efforts to cause each holder of
shares of ABC Common Stock to deliver to Regions not later than prior to the
Stockholders' Meeting a
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written agreement providing representations, warranties and agreements
consistent with Rule 506 under the 1933 Act.
8.14 Agreement of Affiliates. ABC has disclosed in Section 8.14 of the ABC
Disclosure Memorandum each Person whom it reasonably believes may be deemed an
"affiliate" of ABC for purposes of Rule 145 under the 1933 Act. ABC 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, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of ABC 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 ABC 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
ABC in exchange for shares of ABC Common Stock shall not be transferable until
such time as financial results covering at least 30 days of combined operations
of Regions and ABC 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 8.14 (and Regions shall be entitled to place restrictive legends upon
certificates for shares of Regions Common Stock issued to affiliates of ABC
pursuant to this Agreement to enforce the provisions of this Section 8.14).
8.15 Employee Benefits and Contracts. Following the Effective Time, Regions
shall provide generally to officers and employees of the ABC 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 8.15), 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 ABC shall be treated as
service under Regions' qualified defined benefit plans, (ii) service under any
qualified defined contribution plans of ABC shall be treated as service under
Regions' qualified defined contribution plans, and (iii) service under any other
employee benefit plans of ABC shall be treated as service under any similar
employee benefit plans maintained by Regions. Regions also shall cause ABC and
its Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 8.15 of the ABC Disclosure
Memorandum to Regions between any ABC 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
ABC Benefit Plans.
8.16 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
ABC 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
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transactions contemplated by this Agreement) to the full extent permitted
by Arkansas Law, in each case as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
Litigation; provided, however, that all rights to indemnification in
respect of any claim asserted or made against an Indemnified Party within
such six- (6) year period shall continue until the final disposition of
such claim. Without limiting the foregoing, in any case in which approval
by ABC is required to effectuate any indemnification, Regions shall cause
ABC 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 ABC
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 (employing counsel reasonably
satisfactory to the Indemnified Parties), except that if Regions or ABC
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 ABC and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and
Regions or ABC 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, unless counsel for any Indemnified Party
advises in writing that there are Material substantive issues which raise
conflicts of interest between the Indemnified Parties, (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 8.16.
(d) The provisions of this Section 8.16 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
8.17. Certain Conditions. Regions and ABC shall consult with respect to their
loan, litigation, and real estate valuation policies and practices (including
loan classifications and levels of reserves) and ABC 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 ABC 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
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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 ABC as a consequence of any
modifications or charges undertaken solely on account of this Section 8.17.
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 ABC 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) 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
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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 ABC Common Stock who exchange all of their ABC
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 ABC Common Stock who exchange all of their ABC
Common Stock solely for Regions Common Stock in the Merger will be the same
as the tax basis of the ABC 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 ABC Common Stock solely for Regions Common Stock in the Merger
will be the same as the holding period of the ABC Common Stock surrendered
in exchange therefor, provided that such ABC 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 ABC
and Regions reasonably satisfactory in form and substance to such counsel.
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 ABC 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 ABC 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 ABC 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 ABC 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 ABC; 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 ABC or to a matter being "known" by ABC shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of ABC 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. ABC 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
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adopted by ABC'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 ABC the affiliates agreement referred to in Section 8.14 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 ABC
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 ABC, in substantially the form of
Exhibit 4.
(h) Registration Statement. If Regions elects to register the shares of
Regions Common Stock to be issued in the Merger prior to issuance, such
registration statement shall be effective under the 1933 Act, no stop
orders suspending the effectiveness of such registration statement shall
have been issued, no action, lawsuit, proceeding, or investigation by the
SEC to suspend the effectiveness thereof shall have been initiated and be
continuing.
9.3 Conditions to Obligations of ABC. The obligations of ABC 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 ABC 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 ABC (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 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 ABC and its counsel shall request.
(d) Fairness Opinion. ABC shall have received a letter from Stephens Inc.
dated not more than five (5) days prior to the date of the Proxy Statement
to the effect that in the opinion of such firm, the Exchange Ratio is fair
to the stockholders of ABC from a financial point of view.
(e) Legal Opinion. ABC 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 ABC 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 ABC; 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 ABC 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 ABC 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 ABC 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
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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 ABC fail to vote their approval of the matters submitted
for the approval by such stockholders at the Stockholders' Meeting where
the transactions were presented to such stockholders for approval and voted
upon; or
(e) By the Board of Directors of either Party in the event that the Merger
shall not have been consummated by June 30, 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
(d) 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 ABC 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; or
(g) By the Board of Directors of ABC, if it determines by a vote of a
majority of the members of its entire Board, at any time during the ten-day
period commencing two days after the Determination Date, if both of the
following conditions are satisfied:
(1) the Average Closing Price shall be less than the product of (i) 0.80
and (ii) the Starting Price; and
(2) (i) the quotient obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the "Regions
Ratio") shall be less than (ii) the quotient obtained by dividing the
Index Price on the Determination Date by the Index Price on the Starting
Date and subtracting 0.15 from the quotient in this clause (2)(ii) (such
number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If ABC refuses to
consummate the Merger pursuant to this Section 10.1(g), it shall give
prompt written notice thereof to Regions; provided, that such notice of
election to terminate may be withdrawn at any time within the
aforementioned ten-day period. During the five-day period commencing
with its receipt of such notice, Regions shall have the option to elect
to increase the Exchange Ratio to equal the lesser of (i) the quotient
(rounded to the nearest one-ten-thousandth) obtained by dividing (1) the
product of 0.80, the Starting Price, and the Exchange Ratio (as then in
effect) by (2) the Average Closing Price, and (ii) the quotient (rounded
to the nearest one-ten-thousandth) obtained by dividing (1) the product
of the Index Ratio and the Exchange Ratio (as then in effect) by (2) the
Regions Ratio. If Regions makes an election contemplated by the
preceding sentence, within such five-day period, it shall give prompt
written notice to ABC of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section
10.1(g) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so
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modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of Regions Common Stock as reported on the Nasdaq NMS (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Regions) for the ten consecutive full
trading days in which such shares are traded on the Nasdaq NMS ending at
the close of trading on the Determination Date.
"Determination Date" shall mean the later of the date on which (i) the
Consent of the Board of Governors of the Federal Reserve System (without
regard to any requisite waiting period thereof) to the Merger shall be
received, and (ii) the ABC stockholders approve the Merger at the
Stockholders' Meeting.
"Index Group" shall mean the 17 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such
company to be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquiror's
market capitalization. In the event that any such company or companies
are removed from the Index Group, the weights (which shall be determined
based upon the number of outstanding shares of common stock) shall be
redistributed proportionately for purposes of determining the Index
Price. The 17 bank holding companies and the weights attributed to them
are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
- ---------------------- ---------
<S> <C>
AmSouth Bancorporation...................... 4.67%
BB&T Corporation............................ 5.56
Compass Bancshares, Inc..................... 2.73
Fifth Third Bancorp......................... 10.41
First American Corporation.................. 4.15
First Security Corporation.................. 7.31
First Tennessee National Corporation........ 4.97
First Virginia Banks, Inc................... 2.02
Hibernia Corporation........................ 6.07
Huntington Bancshares, Inc.................. 8.23
Mercantile Bancorporation, Inc.............. 5.91
SouthTrust Corporation...................... 6.40
Star Banc Corporation....................... 3.73
Summit Bancorp.............................. 6.76
SunTrust Banks, Inc......................... 8.12
Union Planters Corporation.................. 4.94
Wachovia Corporation........................ 8.03
------
Total............................. 100.00%
======
</TABLE>
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"Index Price" on a given date shall mean the weighted average (weighted
in accordance with the factors listed above) of the last sales prices of
the companies composing the Index Group.
"Starting Date" shall mean the date of this Agreement.
"Starting Price" shall mean the last sale price per share 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) on the Starting Date.
If any company belonging to the Index Group or Regions declares or effects
a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction between the date of
this Agreement and the Determination Date, the prices for the common stock
of such company or Regions shall be appropriately adjusted for the purposes
of applying this Section 10.1(g).
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 8.7(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 8.2, 8.14 and 8.16 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:
"ABCA" shall mean the Arkansas Business Corporation Act of 1987, as
amended.
"ABC COMMON STOCK" shall mean the $.01 par value common stock of ABC.
"ABC COMPANIES" shall mean, collectively, ABC and all ABC Subsidiaries.
"ABC DISCLOSURE MEMORANDUM" shall mean the written information entitled
"ABC Disclosure Memorandum" delivered to Regions prior to execution of this
Agreement, 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.
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"ABC FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of ABC and as of
July 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 six months ended
July 31, 1998, and for each of the three years ended as of December 31,
1997, 1996, and 1995 included in the ABC Disclosure Memorandum, and (ii)
the consolidated statements of condition of ABC (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 July 31,
1998.
"ABC STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of ABC.
"ABC SUBSIDIARIES" shall mean the Subsidiaries of ABC, which shall include
the ABC Subsidiaries described in Section 5.4 of this Agreement and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of ABC in the future and owned by ABC at the Effective Time.
"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.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ARKANSAS ARTICLES OF MERGER" shall mean the articles of merger to be
executed by the parties and filed with the Secretary of State of the State
of Arkansas relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"ASSETS" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CONFIDENTIALITY AGREEMENTS" shall mean those certain Confidentiality
Agreements, entered into prior to the date of this Agreement, between ABC
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.
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"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach
or violation of or default under any Contract, Order, or Permit, or (iii)
any occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke, change
the current terms of, or renegotiate, or to accelerate, increase, or impose
any Liability under, any Contract, Order, or Permit, 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 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.
"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).
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"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, 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
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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, or (e) any change in the management personnel of either party.
"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.
"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 ABC or Regions, and "PARTIES" shall mean both ABC
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 ABC 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 ABC 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.
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"REGIONS FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of Regions as
of June 30, 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 six months ended
June 30, 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 June 30, 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.
"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 ABC
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.
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"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.
"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.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
ABC Benefit Plans..................... Section 5.13(a)
ABC Contracts......................... Section 5.14
ABC ERISA Affiliate................... Section 5.13(e)
ABC ERISA Plan........................ Section 5.13(a)
ABC Rights............................ Section 3.5(a)
ABC Pension Plan...................... Section 5.13(a)
Average Closing Price................. Section 10.1(g)
Closing............................... Section 1.2
Determination Date.................... Section 10.1(g)
Effective Time........................ Section 1.3
Exchange Agent........................ Section 4.1
Exchange Ratio........................ Section 3.1(b)
Indemnified Party..................... Section 8.16(a)
Index Group........................... Section 10.1(g)
Index Price........................... Section 10.1(g)
Index Ratio........................... Section 10.1(g)
Merger................................ Section 1.1
Regions Ratio......................... Section 10.1(g)
Regions SEC Reports................... Section 6.5(a)
Registration Statement................ Section 8.2(b)
Rule 501.............................. Section 5.24(a)
Starting Date......................... Section 10.1(g)
Starting Price........................ Section 10.1(g)
Support Agreement..................... Preamble
</TABLE>
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<TABLE>
<S> <C>
Takeover Laws......................... Section 5.19
Tax Opinion........................... Section 9.1(e)
</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 Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party
of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 Brokers and Finders. Except for Stephens Inc. as to ABC, 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 ABC or Regions, each of ABC
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 8.2(b), 8.14 and 8.16 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 ABC Common
Stock will be exchanged for Regions Common Stock shall not be amended (except in
accordance with Section 10.1(g) of this Agreement) after the Stockholders'
Meeting without the requisite approval of the holders of the issued and
outstanding shares of ABC Common Stock entitled to vote thereon.
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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 ABC, to waive or extend the
time for the compliance or fulfillment by ABC 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, ABC, 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 ABC 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 ABC.
(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>
ABC: ARKANSAS BANKING COMPANY
515 West Washington
Post Office Box 1617
Jonesboro, Arkansas 72403-1617
Telecopy Number: (870) 931-2183
Attention: Sloan Rainwater
Chairman
</TABLE>
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<TABLE>
<S> <C>
Copy to Counsel: WRIGHT, LINDSEY & JENNINGS LLP
Suite 2200
200 West Capitol Avenue
Little Rock, Arkansas 72201
Telecopy Number: (501) 376-9442
Attention: C. Douglas Buford, Jr.
Regions: REGIONS FINANCIAL CORPORATION
417 North Twentieth Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive
Financial Officer
Copy to Counsel: REGIONS FINANCIAL CORPORATION
417 North Twentieth 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
Arkansas 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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<PAGE> 160
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>
ARKANSAS BANKING COMPANY
ATTEST:
By: /s/ STEPHEN E. COX By: /s/ SLOAN RAINWATER
------------------------------------------- -------------------------------------------
Stephen E. Cox Sloan Rainwater
Vice Chairman Chairman
[CORPORATE SEAL]
REGIONS FINANCIAL CORPORATION
ATTEST:
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ CARL E. JONES, JR.
------------------------------------------- -------------------------------------------
Samuel E. Upchurch, Jr. Carl E. Jones, Jr.
Corporate Secretary President and Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
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<PAGE> 161
APPENDIX B
, 199 .
Members of the Board of Directors
Arkansas Banking Company
151 W. Washington
Jonesboro, AR 72403
Members of the Board:
We have acted as your financial advisor in connection with the merger of
Arkansas Banking Company (the "Company") with and into Regions Financial
Corporation ("Regions"), pursuant to which each outstanding share of the
Company's common stock, par value $0.01 per share (the "Company Shares"), will
be converted into the right to receive 2.85 shares (the "Exchange Ratio") of
common stock of Regions and each outstanding award, option, or other right to
purchase shares of the Company will be converted into and become comparable
rights with respect to Regions, adjusted to reflect the Exchange Ratio
(collectively referred to as the "Transaction").
You requested our opinion as to whether the Exchange Ratio is fair from a
financial point of view to the Company and its shareholders.
In connection with rendering our opinion, we have;
(i) analyzed certain publicly available financial statements and reports
regarding the Company and Regions;
(ii) analyzed certain internal financial statements and other financial
and operating data (including financial projections) concerning the Company
prepared by the management of the Company;
(iii) analyzed, on a pro forma basis, the financial effect of the
Transaction;
(iv) reviewed the reported prices and trading activity for Regions common
stock;
(v) compared the financial performance of the Company and Regions and the
prices and trading activity of Regions common stock with that of certain other
comparable publicly-traded companies and their securities;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(vii) reviewed the Agreement and Plan of Merger between the Company and
Regions and related documents, including the roxy Statement-Prospectus; and
(viii) discussed with managements of the Company and Regions the operations
of and future business prospects for the Company and Regions.
We have relied on the accuracy and completeness of the information and financial
data provided to us by the Company and Regions, and our opinion is based upon
such information. We have inquired into the reliability of such information and
financial data only to the limited extent necessary to provide a reasonable
basis for our opinion. With respect to the financial projections prepared by
management of the Company, we have assumed that they have been reasonably
prepared on bases reflecting the best currently
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<PAGE> 162
available estimates and judgements of the management of the Company as to the
future financial performance of the Company.
As part of our investment banking business, we regularly issue fairness opinions
and are continually engaged in the valuation of companies and their securities
in connection with business reorganizations, private placements, negotiated
underwritings, mergers and acquisitions and valuations for estate, corporate and
other purposes. We are familiar with the Company and Regions, and issue periodic
research reports regarding Regions, its business activities and prospects. In
the ordinary course of business, Stephens Inc. and its affiliates at any time
may hold long or short positions, and may trade or otherwise effect transactions
as principal or for the accounts of customers, in debt or equity securities or
options on securities of the Company and Regions. We are acting as financial
advisor to the Company in connection with the Transaction and will receive a fee
from the Company for our services, a significant portion of which is contingent
upon the consummation of the Transaction. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of our engagement.
We have assumed that the Transaction will qualify as a tax-free reorganization
under the Internal Revenue Code of 1986, as amended. We have also assumed that
there were no material changes in the Company's or Regions' assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements reviewed by Stephens, and that any
off-balance sheet activities of the Company and Regions, including derivatives
and other similar financial instruments, if any, would not materially and
adversely affect the future financial condition or results of operations of the
Company or Regions. We have further assumed that the Transaction will be
consummated in accordance with the terms and provisions of the Agreement and
Plan of Merger, without any amendments to, and without any waiver by the Company
of, any of the material conditions to its obligations thereunder. Stephens is
not an expert in the evaluation of loan portfolios for purposes of assessing the
adequacy of the allowances for losses with respect thereto and assumed that such
allowances, for each of the Company and Regions, are in the aggregate adequate
to cover such possible losses. In addition, we did not review any individual
credit files or make any independent evaluation, appraisal or physical
inspection of the assets or individual properties of the Company or Regions, nor
were we furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon market, economic and other conditions as
they exist and can be evaluated on, and on the information made available to us
as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction.
This opinion is for the use and benefit of the Board of Directors of the
Company, and neither this opinion nor any other advice or materials provided by
Stephens Inc. in connections with its engagement hereunder may be used for any
other purpose or be reproduced, disseminated, quoted or referred to at any time,
in any matter, or for any purpose, nor may any references to Stephens Inc. be
made by or on behalf of the Company without our prior written consent; provided,
however, that a copy of this opinion may be included in the Proxy
Statement-Prospectus to be delivered to the Company's shareholders. Our opinion
does not address the merits of the underlying decision by the Company to engage
in the Transaction and does not constitute a recommendation to any shareholder
of the Company as to how such shareholder should vote on the proposed
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<PAGE> 163
Transaction. We are not expressing any opinion herein as to the prices at which
Regions Shares will trade following consummation of the Transaction.
Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion on the date
hereof that the Exchange Ratio is fair from a financial point of view to the
Company and its shareholders.
Very Truly Yours,
STEPHENS INC.
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<PAGE> 164
APPENDIX C
Sections 14-27-1301 Through 14-27-1331
of the
Arkansas Business Corporation ACT
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
4-27-1301 DEFINITIONS.
In this subchapter:
1. "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer;
2. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under sec. 4-27-1302 and who exercises that right when and
in the manner required by sec.sec. 4-27-1320 - 4-27-1328;
3. "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable;
4. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances;
5. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation;
6. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder;
and
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
4-27-1302 RIGHT OF DISSENT.
A. A shareholder is entitled to dissent from and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by sec. 4-27-1103
or the articles of incorporation and the shareholder is entitled to vote
on the merger; or
(ii) If the corporation is a subsidiary that is merged with its parent
under sec. 4-27-1104;
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;
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<PAGE> 165
3. Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one (1) year after the date of the sale;
4. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash
under sec. 4-27-604; or
5. Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares under
this subchapter may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
4-27-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A. A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held on
his behalf only if:
1. He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
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<PAGE> 166
4-27-1304 - 4-27-1319 [RESERVED.]
Procedure for Exercise of Dissenters' Rights
4-27-1320 NOTICE OF DISSENTERS' RIGHTS.
A. If proposed corporate action creating dissenters' rights under sec. 4-27-1302
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
chapter and be accompanied by a copy of this chapter.
B. If corporate action creating dissenters' rights under sec. 4-27-1302 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 sec. 4-27-1322.
4-27-1321 NOTICE OF INTENT TO DEMAND PAYMENT.
A. If proposed corporate action creating dissenters' rights under sec. 4-27-1302
is submitted to a vote at a shareholders' meeting, a 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 shareholder who does not satisfy the requirements of subsection A. of this
section is not entitled to payment for his shares under this subchapter.
4-27-1322 DISSENTERS' NOTICE.
A. If proposed corporate action creating dissenters' rights under sec. 4-27-1302
is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
sec. 4-27-1321.
B. The dissenters' notice must be sent not later than then (10) 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. Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares
before that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30) nor more than sixty (60) days
after the date the notice required by subsection A. of this section is
delivered; and
5. Be accompanied by a copy of this subchapter.
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4-27-1323 DUTY TO DEMAND PAYMENT.
A. A shareholder sent a dissenters' notice described in sec. 4-27-1322 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
the sec. 4-27-1322B.3. and deposit his certificates in accordance with the terms
of the notice.
B. The shareholder who demands payment and deposits his share certificates under
subsection A. of this 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 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 subchapter.
4-27-1324 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 sec. 4-27-1326.
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.
4-27-1325 PAYMENT.
A. Except as provided in sec. 4-27-1327, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with sec. 4-27-1323 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
B. The payment must be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (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
sec. 4-27-1328; and
5. A copy of this subchapter.
4-27-1326 FAILURE TO TAKE ACTION.
A. If the corporation does not take the proposed action within sixty (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.
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>B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under sec. 4-27-1322 and repeat the payment demand procedure.
4-27-1327 AFTER-ACQUIRED SHARES.
A. A corporation may elect to withhold payment required by sec. 4-27-1325 from a
dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
B. To the extent the corporation elects to withhold payment under subsection A.
of this section, after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under sec. 4-27-1328.
4-27-1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
A. A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate (less any payment under sec. 4-27-1325), or reject the corporation's
offer under sec. 4-27-1327 and demand payment of the fair value of his shares
and interest due, if:
1. The dissenter believes that the amount paid under sec. 4-27-1325 or
offered under sec. 4-27-1327 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
2. The corporation fails to make payment under sec. 4-27-1325 within sixty
(60) days after the date set for demanding payment; or
3. 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 sixty (60) days after the date set
for demanding payment.
B. A dissenter waives his right to demand payment under this section unless he
notifies the corporation of his demand in writing under subsection A. of this
section within thirty (30) days after the corporation made or offered payment
for his shares.
4-27-1329 [RESERVED.]
Judicial Appraisal of Shares
4-27-1330 COURT ACTION.
A. If a demand for payment under sec. 4-27-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (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 sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
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<PAGE> 169
B. The corporation shall commence the proceeding in the circuit court of the
county where the corporation's principal office (or, if none in this state, its
registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the 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
sate) whose demands remain unsettled parties to the proceeding as in an action
against their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law.
D. The jurisdiction of the court in which the proceeding is commenced under
subsection B. of this section is plenary and exclusive. The court may appoint
one (1) 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. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is entitled to judgment:
1. For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or
2. For the fair value, plus accrued interest, of his after-acquired shares
for which the corporation elected to withhold payment under sec. 4-27-1327.
4-27-1331 COURT COSTS AND COUNSEL FEES.
A. The court in an appraisal proceeding commenced under sec. 4-27-1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under sec. 4-27-1328.
B. The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of sec.sec. 4-27-1320 - 4-27-1328; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
C. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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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
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of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the
stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such
expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
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"(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
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<PAGE> 173
director or officer whose actions in his capacity result in liability, or to
the Registrant, in the event it has indemnified the director or officer. Major
exclusions from coverage include libel, slander, personal profit based on
inside information, illegal payments, dishonesty, accounting of securities
profits in violation of Section 16(b) of the Securities Exchange Act of 1934
and acts within the scope of the Pension Reform Act of 1974.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------
<S> <C>
2.1 -- Agreement and Plan of Merger, dated as of September 25, 1998,
by and between Arkansas Banking Company 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. -- Form of opinion re: legality.
8. -- Form of opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Jones & Company, Ltd.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- to be included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP-- to be included in Exhibit 8.
23.5 -- Consent of Stephens Inc. -- to be filed by amendment.
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
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<PAGE> 174
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 175
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 17th day of December, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
BY: /s/ Richard D. Horsley
--------------------------------
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 December 17, 1998
- --------------------------- Officer and Director
Carl E. Jones, Jr. (principal executive officer)
/s/ Richard D. Horsley Vice Chairman of the Board and December 17, 1998
- --------------------------- Executive Financial Officer
Richard D. Horsley and Director
(principal financial officer)
/s/ Robert P. Houston Executive Vice President and December 17, 1998
- --------------------------- Comptroller
Robert P. Houston (principal accounting officer)
</TABLE>
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<PAGE> 176
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ----------------------------- -----------------
<S> <C> <C>
/s/ Sheila S. Blair
- --------------------------- Director December 17, 1998
Sheila S. Blair
/s/ James B. Boone, Jr.
- --------------------------- Director December 17, 1998
James B. Boone, Jr.
/s/ Albert P. Brewer
- --------------------------- Director December 17, 1998
Albert P. Brewer
/s/ James S.M. French
- --------------------------- Director December 17, 1998
James S.M. French
/s/ Barnett Grace
- --------------------------- Director December 17, 1998
Barnett Grace
/s/ Frank D. Hickingbotham
- --------------------------- Director December 17, 1998
Frank D. Hickingbotham
/s/ Olin B. King
- --------------------------- Director December 17, 1998
Olin B. King
- --------------------------- Chairman of the Board
J. Stanley Mackin and Director
/s/ Michael W. Murphy
- --------------------------- Director December 17, 1998
Michael W. Murphy
/s/ Henry E. Simpson
- --------------------------- Director December 17, 1998
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- --------------------------- Director December 17, 1998
Lee J. Styslinger, Jr.
- --------------------------- Director
Robert J. Williams
</TABLE>
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<PAGE> 177
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------------------ ------------
<S> <C>
2.1 -- Agreement and Plan of Merger, dated as of September 25, 1998, by and between Arkansas
Banking Company 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. -- Form of opinion re: legality.
8. -- Form of opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Jones & Company, Ltd.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- to be included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- to be included in Exhibit 8.
23.5 -- Consent of Stephens Inc. -- to be filed by amendment.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature
page of the registration statement.
99. -- Form of proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
December 17, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Acquisition of Arkansas Banking Company
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of Arkansas Banking
Company ("ABC") 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 ABC upon consummation of the Merger.
The maximum number of shares of Regions to be issued in the Merger is estimated
to be 1,858,143.
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,
<PAGE> 1
EXHIBIT 8
FORM OF TAX OPINION
December __, 1998
Regions Financial Corporation
417 N. 20th Street
Birmingham, AL 35203
Arkansas Banking Company
515 West Washington
Jonesboro, Arkansas 72403
Re: Agreement and Plan of Merger By and Between Arkansas Banking
Company and Regions Financial Corporation
Ladies and Gentlemen:
We have served as counsel to Regions Financial Corporation ("Regions") in
connection with the proposed reorganization of Regions and Arkansas Banking
Company ("Arkansas Banking") pursuant to the Agreement and Plan of Merger dated
as of September 25, 1998, (the "Agreement") which provides for the merger of
Arkansas Banking with and into Regions (the "Merger"). 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"). In our capacity as
counsel to Regions, our opinion has been requested with respect to certain of
the federal income tax consequences of the Merger.
In rendering the opinions expressed herein, we have examined such documents
as we deemed appropriate, including:
(1) The Agreement; and
(2) The Registration Statement on Form S-4 filed by Regions with the
Securities and Exchange Commission under the Securities Act of 1933, on December
18, 1998, as amended, including the Proxy Statement/Prospectus constituting part
thereof (together the "Registration Statement").
<PAGE> 2
Regions Financial Corporation
Arkansas Banking Company
December __, 1998
Page 2
In rendering the opinions expressed herein, we have assumed with the
consent of Arkansas Banking and Regions 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 Arkansas Banking and Regions 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 Arkansas Banking to us dated December __, 1998,
and December __, 1998, respectively, (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, and subject to the assumptions and qualifications
set forth in the Registration Statement under the heading "Description of the
Transaction--Federal Income Tax Consequences of the Merger," 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.
2. No gain or loss will be recognized by holders of Arkansas Banking Common
Stock upon the exchange in the Merger of all of their Arkansas Banking 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).
3. The aggregate tax basis of the Regions Common Stock received by holders
of Arkansas Banking Common Stock who exchange all of their Arkansas Banking
Common Stock solely for Regions Common Stock in the Merger will be the same as
the tax basis of the Arkansas Banking 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 Arkansas Banking Common Stock solely for Regions Common
Stock in the Merger will include the holding period of the Arkansas Banking
Common Stock surrendered in exchange therefor, provided that such Arkansas
Banking Common Stock is held as a capital asset at the Effective Time.
5. The payment of cash to holders of Arkansas Banking Common Stock in lieu
of fractional share interests of Regions Common Stock will be treated for
federal
<PAGE> 3
Regions Financial Corporation
Arkansas Banking Company
December __, 1998
Page 3
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 Arkansas Banking Common
Stock in exchange for Arkansas Banking Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such holder's Arkansas Banking Common stock, subject to the
provisions and limitations of Section 302 of the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, and the factual statements and factual representations
set out in the Certificates, which we have assumed are true on the date hereof
and will be true on the date on which the Merger is consummated. 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.
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
PCC:mlt
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 1,858,143 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
December 17, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Regions Financial
Corporation on Form S-4 of our report relating to Arkansas Banking Company dated
February 13, 1998, and to the reference to us under the heading "EXPERTS" in the
proxy statement-prospectus that constitutes part of this Registration Statement.
/s/ Jones & Company, Ltd.
-------------------------
Jones & Company, Ltd.
Jonesboro, Arkansas
December 17, 1998
<PAGE> 1
EXHIBIT 99
ARKANSAS BANKING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Sloan Rainwater and Stephen F.
Cox, and each or either of them, with full power of substitution, as Proxies to
represent and to vote, as designated below, all the shares of common stock of
Arkansas Banking Company held of record by the undersigned on _______, 1998, at
the Special Meeting of Stockholders (the "Special Meeting") to be held on
_______, 199__, or any adjournments thereof.
1. Proposal to approve the Agreement and Plan of Merger by and between
Arkansas Banking Company and Regions Financial Corporation ("Regions"), dated
as of September 25, 1998 (the "Agreement"), pursuant to which Arkansas Banking
Company will merge with and into Regions, with Arkansas Banking Company's
operating subsidiaries to become wholly-owned subsidiaries of Regions, and each
share of Arkansas Banking Company's common stock (except for certain shares
held by Arkansas Banking Company, Regions, or their respective subsidiaries)
will be converted into 2.85 shares of Regions common stock, subject to possible
adjustment, 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 Special
Meeting or any adjournments 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 adjournments thereof. If no direction is made, this
proxy will be voted in favor of Proposal 1.
This Proxy revokes all prior proxies with respect to the Special Meeting
and may be revoked prior to its exercise.
Please date and sign exactly as name appears on your stock certificate.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated: _______________________, 199__.
(Print Name of Stockholder)
(Signature of Stockholder)
(Print Name of Stockholder)
(Signature of Stockholder)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
