<PAGE> 1
As filed with the Securities and Exchange Commission on November 13, 1998
Registration No.
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
----------------------
<TABLE>
<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:
<TABLE>
<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III JAMES I. LUNDY
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD LLP KENNEDY, BARIS & LUNDY LLP
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. SUITE 300
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 4719 HAMPDEN LANE
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 BETHESDA, MD 20814
(205) 250-5000 (202) 508-3303 (301) 654-6040
</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 848,031 $10.30941793 $8,742,706 $2,430.47
========================================================================================================================
</TABLE>
*Calculated in accordance with Rule 457(f), based on the total stockholders'
equity of the company being acquired.
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
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PROXY STATEMENT PROSPECTUS
BULLSBORO BANCSHARES, INC. REGIONS FINANCIAL CORPORATION
SHARES
OF COMMON STOCK
</TABLE>
-------------------------
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
-------------------------
This Proxy Statement-Prospectus is being provided to you as stockholders of
Bullsboro BancShares, Inc. The Boards of Directors of Bullsboro BancShares and
Regions Financial Corporation have agreed to the merger of Bullsboro BancShares
and Regions. The Merger is subject to the approval of Bullsboro BancShares'
stockholders. The Board of Directors of Bullsboro BancShares has scheduled a
special meeting on for you to vote on the merger. You may vote by
proxy or in person.
If the merger is completed, Bullsboro BancShares stockholders will receive 3.65
shares of Regions common stock for each share of Bullsboro BancShares common
stock that they own. Regions common stock is traded on the Nasdaq National
Market under the symbol "RGBK."
Bullsboro BancShares is the bank holding company for THE BANK of Newnan, Newnan,
Georgia. Bullsboro BancShares has assets of approximately $107.7 million,
deposits of approximately $91.3 million, and stockholders' equity of
approximately $10.9 million. Regions will be the surviving corporation in the
merger. Regions is a regional bank holding company headquartered in Birmingham,
Alabama. Regions has banking operations in Alabama, Arkansas, Florida, Georgia,
Louisiana, South Carolina, Tennessee, and Texas. Regions has assets of
approximately $35.1 billion, deposits of approximately $27.2 billion, and
stockholders' equity of approximately $3.0 billion.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the stockholder
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you sign, date, and mail your proxy card without indicating how
you want to vote, your proxy will be counted as a vote in favor of the merger.
If you do not return your card, the effect will be a vote against the merger.
The date, time, and place of the special meeting of stockholders is as follows:
, 1998 p.m.
Main Office
Bullsboro BancShares, Inc.
40 Bullsboro Drive
Newnan, Georgia, 30264
THE BOARD OF DIRECTORS OF BULLSBORO BANCSHARES NEGOTIATED THIS TRANSACTION ON
YOUR BEHALF. YOUR BOARD STRONGLY SUPPORTS THIS MERGER OF BULLSBORO BANCSHARES
WITH REGIONS AND ENTHUSIASTICALLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
MERGER
This Proxy Statement-Prospectus provides you with detailed information about the
proposed merger. We encourage you to read this entire document carefully. You
also can get information about Regions from documents filed with the Securities
and Exchange Commission.
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
COMMISSION HAS APPROVED OR DISAPPROVED OF THE REGIONS COMMON STOCK TO BE ISSUED
UPON COMPLETION OF THE MERGER OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS
IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Proxy Statement-Prospectus dated , 1998, first mailed to
stockholders on , 1998.
<PAGE> 3
We have not authorized anyone to give any information or make any representation
about the merger or our companies that differs from, or adds to, the information
in this Proxy Statement-Prospectus or in Regions' documents that are publicly
filed with the Securities and Exchange Commission. Therefore, if anyone does
give you different or additional information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or sell,
or to ask for offers to exchange or buy, the securities offered by this Proxy
Statement-Prospectus or to ask for proxies, or if you are a person to whom it is
unlawful to direct such activities, then the offer presented by this Proxy
Statement-Prospectus does not extend to you.
This Proxy Statement-Prospectus speaks only as of its date except where it
indicates that another date applies.
Information in this Proxy Statement-Prospectus about Regions Financial
Corporation has been supplied by Regions, and information about Bullsboro
BancShares, Inc. has been supplied by Bullsboro BancShares.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Each company makes forward-looking statements in this Proxy
Statement-Prospectus, and in Regions' public documents to which we refer, that
are subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our operations or the
performance of the combined company after the merger. Also, when we use any of
the words "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. Many possible events or factors could affect
the future financial results and performance of each of our companies and the
combined company after the merger. This could cause results or performance to
differ materially from those expressed in our forward-looking statements. You
should consider these risks when you vote on the merger. These possible events
or factors include the following:
1. Regions' revenues after the merger and other recent acquisitions may be
lower than expected, Regions' restructuring charges in recent acquisitions
may be higher than expected, or Regions' operating costs after the merger
and other recent acquisitions may be greater than expected;
2. Competition among depository and other financial institutions may
increase significantly;
3. We may have more trouble obtaining regulatory approvals for the merger
than expected;
4. Regions may have more trouble integrating acquired businesses or
retaining key personnel than expected;
5. Regions' costs savings from the merger and other recent acquisitions may
be less than expected, or Regions may be unable to obtain those cost
savings as soon as expected;
6. Changes in the interest rate environment may reduce operating margins;
7. General economic or business conditions may be worse than we expect;
<PAGE> 4
8. Legislative or regulatory changes may adversely affect our businesses;
9. Technological changes and systems integration may be harder to make or
more expensive than expected; and
10. Adverse changes may occur in the securities markets.
<PAGE> 5
BULLSBORO BANCSHARES, INC.
40 BULLSBORO DRIVE, NEWNAN, GEORGIA, 30264
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT ON , 1998
-------------------------
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Bullsboro BancShares, Inc. ("Bullsboro") will be held at
Bullsboro's main office, located at 40 Bullsboro Drive, Newnan, Georgia, 30264
on , 1998, at :00 p.m., local time, for the following
purposes:
1. Merger. To consider and vote on the Agreement and Plan of Merger, dated as
of July 16, 1998 (the "Agreement"), by and between Bullsboro and Regions
Financial Corporation ("Regions") pursuant to which (i) Bullsboro will merge
with and into Regions with Regions as the surviving corporation (the "Merger")
and (ii) each share of Bullsboro common stock (excluding certain shares held by
Bullsboro, Regions, or their respective subsidiaries and excluding all shares
held by stockholders who perfect their dissenters' rights) will be converted
into 3.65 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 of the Special Meeting.
Stockholders of Bullsboro have a right to dissent from the Merger and to obtain
payment of the fair value of their shares in cash by complying with the
provisions of applicable law, which are attached to the accompanying Proxy
Statement-Prospectus as Appendix C.
The Board of Directors of Bullsboro unanimously recommends that holders of
Bullsboro 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
Bullsboro 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
Jennie P. Stefanchick
Corporate Secretary
, 1998
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
The Companies.......................................... 1
The Merger............................................. 1
Comparative Per Share Market Price Information......... 2
Reasons for the Merger................................. 2
The Special Meeting.................................... 3
Recommendations to Stockholders........................ 3
Record Date; Voting Power.............................. 3
Vote Required.......................................... 3
Conditions to Completion of the Merger................. 3
Termination of the Merger Agreement.................... 4
Federal Income Tax Consequences........................ 4
Accounting Treatment................................... 5
Interests of Persons in the Merger That Are Different
from Yours............................................ 5
Dissenters' Appraisal Rights........................... 5
Regulatory Approvals................................... 5
Comparative Per Share Data............................. 5
Selected Financial Data................................ 7
THE SPECIAL MEETING......................................... 12
General................................................ 12
Record Date; Vote Required............................. 12
THE MERGER.................................................. 14
General................................................ 14
Possible Adjustment of Exchange Ratio.................. 14
Treatment of Bullsboro Options......................... 17
Background of the Merger............................... 17
Bullsboro's Reasons for the Merger..................... 18
Regions' Reasons for the Merger........................ 19
Opinion of Bullsboro's Financial Advisor............... 20
Effective Time of the Merger........................... 25
Distribution of Regions Stock Certificates and
Payment For Fractional Shares........................ 25
Conditions to Consummation of the Merger............... 26
Regulatory Approvals................................... 27
Waiver, Amendment, and Termination of the Agreement....
Conduct of Business Pending the Merger................. 28
Management Following the Merger........................ 29
Interests of Certain Persons in the Merger............. 30
Dissenting Stockholders................................ 31
Federal Income Tax Consequences of the Merger.......... 34
Accounting Treatment................................... 35
Expenses and Fees...................................... 35
Resales of Regions Common Stock........................ 35
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS.............. 36
Antitakeover Provisions Generally...................... 37
Authorized Capital Stock............................... 37
Amendment of Certificate or Articles of Incorporation
and Bylaws............................................ 38
Classified Board of Directors and Absence of Cumulative
Voting................................................ 39
Removal of Directors................................... 39
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Limitations on Director Liability...................... 40
Indemnification........................................ 40
Special Meetings of Stockholders....................... 41
Actions by Stockholders Without a Meeting.............. 41
Stockholder Nominations................................ 42
Mergers, Consolidations, and Sales of Assets
Generally............................................. 42
Business Combinations with Certain Persons............. 43
Dissenters' Rights..................................... 44
Stockholders' Rights to Examine Books and Records...... 44
Dividends.............................................. 44
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 46
BULLSBORO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 48
INFORMATION ABOUT BULLSBORO................................. 60
Business and Properties................................ 60
Competition............................................ 60
Legal Proceedings...................................... 60
Management............................................. 61
Transactions with Management........................... 62
Voting Securities and Principal Stockholders of
Bullsboro............................................. 62
INFORMATION ABOUT REGIONS................................... 63
General................................................ 63
Recent Developments.................................... 63
SUPERVISION AND REGULATION.................................. 66
General................................................ 66
Payment of Dividends................................... 67
Capital Adequacy....................................... 68
Prompt Corrective Action............................... 69
FDIC Insurance Assessments............................. 70
DESCRIPTION OF REGIONS COMMON STOCK......................... 70
STOCKHOLDER PROPOSALS....................................... 71
EXPERTS..................................................... 71
OPINIONS.................................................... 71
WHERE YOU CAN FIND MORE INFORMATION......................... 72
INDEX TO BULLSBORO FINANCIAL STATEMENTS..................... F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Opinion of Mercer Capital Management, Inc..... B-1
APPENDIX C -- Copy of Chapter 2, Article 13 of the Georgia
Business Corporation Act, pertaining to dissenters'
rights.................................................... C-1
</TABLE>
<PAGE> 8
SUMMARY
This summary presents 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 of
legal terms of the merger. See "Where You Can Find More Information" (page 72).
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 60 AND 64)
REGIONS FINANCIAL CORPORATION
417 North 20th Street
Birmingham, Alabama 35203
(205) 326-7100
Regions is incorporated in Delaware and is a regional bank holding company.
Regions provides banking and other financial services. Regions has banking
operations in Alabama, Arkansas, Florida, Georgia, Louisiana, South Carolina,
Tennessee, and Texas. As of September 30, 1998, Regions' total assets were
approximately $35.1 billion, deposits were approximately $27.2 billion and
stockholders' equity was approximately $3.0 billion.
The section of this Proxy Statement-Prospectus under the caption "Where You Find
More Information" refers you to places where you can find more information about
Regions.
BULLSBORO BANCSHARES, INC.
40 Bullsboro Drive
Newnan, Georgia, 30264
(770) 253-8080
Bullsboro BancShares is incorporated in Georgia and is a bank holding company.
Bullsboro BancShares owns THE BANK of Newnan, a commercial bank, which serves
customers primarily in Coweta County, Georgia. As of September 30, 1998,
Bullsboro BancShares' total assets were approximately $107.7 million, deposits
were approximately $91.3 million, and stockholders' equity was approximately
$10.9 million.
THE MERGER (PAGE 13)
If the merger is approved by stockholders and is completed, Bullsboro BancShares
will merge with Regions Financial Corporation. Regions will be the surviving
corporation in the merger. When the merger is completed, you will receive 3.65
shares of Regions stock for each share of Bullsboro BancShares stock that you
own. You will receive only whole shares of Regions common stock. You will
receive a cash payment for any fraction of a share to which you may become
entitled.
If you elect to dissent from the merger under Georgia law and follow the
required procedures, you will receive a cash payment for your shares of
Bullsboro BancShares common stock instead of receiving Regions common stock.
More information about your rights to dissent from the Merger, and the
procedures you must follow should you choose to do so, is included under the
heading "The Merger -- Dissenting Stockholders" at page .
1
<PAGE> 9
The merger agreement protects you as stockholders against a sharp decline 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 $32.75 and also underperforms a group of bank
holding company stocks by more than 15% between the date of the agreement 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 Bullsboro BancShares 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 merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE )
Shares of Regions are quoted on the Nasdaq National Market. Shares of Bullsboro
BancShares are not quoted on any established market. On July 16, 1998, the last
full trading day prior to the public announcement of the merger, Regions stock
closed at $42.00 per share. As of that date the last known price of Bullsboro
BancShares stock was $60.00 per share. On , 1998, Regions stock closed
at $ per share and the last known price of Bullsboro BancShares stock
was $ per share.
Based on the exchange ratio in the merger, which is 3.65, the market value of
the consideration that Bullsboro BancShares stockholders will receive in the
merger for each share of Bullsboro BancShares common stock would be $153.30
based on Regions' July 16, 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 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 merger, your Board of Directors
considered the financial condition and prospects of Bullsboro BancShares and
Regions, information about Regions, the financial terms of the merger, the
likelihood that bank regulators will approve the merger, the federal income tax
consequences of the merger, the advice of your Board's legal and financial
advisors, and other factors. Your Board of Directors decided the merger is
advisable and is in your best interests as stockholders.
To review the background of and reasons for the merger in greater detail, please
see the discussion under the headings "The Merger -- Background of the Merger"
and "The Merger -- Bullsboro's Reasons for the Merger" at pages 17 and 18.
OPINION OF FINANCIAL ADVISOR (PAGE )
In deciding to approve the merger, your Board considered the opinion of its
financial advisor, Mercer Capital, that as of the date of the opinion the
exchange ratio was fair from a financial point of view to you as Bullsboro
BancShares 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 Bullsboro BancShares special meeting will be held at Bullsboro BancShares'
main office, 40 Bullsboro Drive, Newnan, Georgia, 30264, at p.m. on
, 1998. Bullsboro BancShares stockholders will be asked to approve the
merger agreement at the special meeting.
RECOMMENDATIONS TO STOCKHOLDERS (PAGE )
Your Board of Directors believes that the merger is fair to you and in your best
interests. The Board unanimously recommends that you vote "FOR" the proposal to
approve the merger agreement.
RECORD DATE; VOTING POWER (PAGE )
You can vote at the Bullsboro BancShares Special Meeting if you owned Bullsboro
BancShares common stock as of the close of business on , 1998, the
record date. On that date, shares of Bullsboro BancShares common
stock were outstanding and are allowed to vote at the special meeting. You will
be able to cast one vote for each share of Bullsboro BancShares common stock you
owned on , 1998.
Regions stockholders will not vote on the Merger.
VOTE REQUIRED (PAGE )
In order for the special meeting to be held, a quorum must be present. A quorum
is established when a majority of the shares of Bullsboro BancShares common
stock are represented at the special meeting either in person or by proxy. To
approve the Merger, Bullsboro BancShares stockholders who hold a majority of the
outstanding shares of common stock on the record date must vote for the merger.
If you do not vote, this will have the same effect as a vote against the merger.
All together, the directors and officers of Bullsboro BancShares can cast about
% of the votes entitled to be cast at the Bullsboro BancShares special
meeting. The members of your Board of Directors have agreed to vote all of their
shares in favor of the merger.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE )
The completion of the merger depends on a number of conditions being met,
including the following:
- Bullsboro BancShares stockholders' approving the merger;
- Receipt of all required regulatory approvals and the expiration of any
regulatory waiting periods;
- The absence of any governmental or court order blocking completion of the
merger, or of any proceedings by a government body trying to block it;
- Receipt of an opinion of counsel that the U.S. federal income tax
treatment of you the stockholders and of Bullsboro BancShares in the
merger will generally be tax-free as we have described it to you in this
Proxy Statement-Prospectus; and
3
<PAGE> 11
- Filing with the National Association of Securities Dealers, Inc. of
Regions' notification for listing of additional shares on the Nasdaq
National Market for the shares of Regions common stock to be issued in
the Merger
Completion of the merger is subject to additional conditions not described
above. In cases where the law permits, a party to the Merger Agreement could
elect to waive a condition that has not been satisfied and complete the merger
although it is entitled not to. We cannot be certain whether or when any of the
conditions we've listed will be satisfied (or waived, where permissible), or
that the merger will be completed.
TERMINATION OF THE MERGER AGREEMENT (PAGE )
We can agree at any time to terminate the merger agreement without completing
the merger, even if you the stockholders have already voted to approve it.
In addition, either of us can terminate the merger agreement in the following
circumstances:
- After a final decision by a governmental authority to prohibit the
merger, or after the rejection of an application for a governmental
approval required to complete the merger;
- If the merger is not completed by January 31, 1999;
- If the Bullsboro BancShares stockholders do not approve the merger; or
- If the other party violates, in a material way, any of its
representations, warranties or obligations under the merger agreement and
the party seeking termination is not in violation of the merger
agreement.
In addition, Bullsboro BancShares 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 merger, if the average price during the
period is less than $32.75 and has underperformed a group of bank holding
company stocks by 15% or more during the period following the date we entered
the merger agreement. However, Bullsboro BancShares will not be able to
terminate the merger agreement if Regions elects to make a compensating
adjustment to the exchange ratio that would provide Bullsboro BancShares
stockholders more shares of Regions common stock in exchange for shares of
Bullsboro BancShares common stock.
FEDERAL INCOME TAX CONSEQUENCES (PAGE )
We expect that you will not recognize any gain or loss for U.S. federal income
tax purposes in the merger when you exchange all of your shares of Bullsboro
BancShares common stock for shares of Regions common stock in the merger, except
in connection with any cash you receive instead of fractional shares and in
certain special circumstances. We have conditioned the merger on our receipt of
legal opinions that this will be the case, but these opinions will not bind the
Internal Revenue Service, which could take a different view.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN BULLSBORO BANCSHARES STOCKHOLDERS,
INCLUDING THE TYPES OF BULLSBORO BANCSHARES STOCKHOLDERS DISCUSSED ON PAGE 34,
AND WILL NOT APPLY TO ANY BULLSBORO BANCSHARES STOCKHOLDER WHO DISSENTS FROM THE
MERGER UNDER
4
<PAGE> 12
GEORGIA LAW. DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE
COMPLICATED. THE TAX CONSEQUENCES WILL DEPEND ON YOUR SPECIFIC SITUATION AND
MANY VARIABLES NOT WITHIN OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
FOR A FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
ACCOUNTING TREATMENT (PAGE )
We expect the merger to qualify as a pooling of interests, which means that, for
accounting and financial reporting purposes, we will treat our companies as if
they had always been one company.
INTERESTS OF PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE )
Some of the officers of Bullsboro BancShares have benefit and compensation plans
that provide them with interests in the merger that are different from, or in
addition to, their interests as stockholders of Bullsboro BancShares. In
particular, they hold outstanding options under Bullsboro's existing stock
option plan, which will be converted into stock options to acquire Regions stock
after the merger. Also, members of Bullsboro BancShares' Board and its officers
are entitled to indemnification under the merger agreement.
The board of directors of Bullsboro BancShares was aware of these interests and
considered them in approving and recommending the merger.
DISSENTERS' APPRAISAL RIGHTS (PAGE )
Georgia law permits you to dissent from the merger and to have the fair value of
your stock appraised by a court and paid to you in cash. To do this, you must
follow certain procedures, which include filing certain notices and refraining
from voting your shares in favor of the merger. If you dissent from the merger,
your shares of Bullsboro BancShares common stock will not be exchanged for
shares of Regions common stock in the merger, and your only right will be to
receive the appraised value of your shares in cash.
REGULATORY APPROVALS (PAGE )
We cannot complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System.
In addition, the merger is subject to the approval of or notice to the
Department of Banking and Finance of the state of Georgia. We have filed (or
shortly will file) all of the required notices with these state regulatory
authorities.
We do not know of any reason why we should not obtain the remaining regulatory
approvals in a timely manner, but we cannot be certain when we will obtain them
or that we will obtain them.
COMPARATIVE PER SHARE DATA
The following table shows information about our companies' income per share,
dividends per share and book value per share, and similar information reflecting
the merger of our two companies (which is referred to as "pro forma"
information). In presenting the
5
<PAGE> 13
comparative pro forma information for certain time periods, we assumed that our
companies had been merged throughout those periods.
In presenting the comparative pro forma information, we also assumed that we
will treat our companies as if they had always been combined for accounting and
financial reporting purposes (a method referred to as the "pooling of interests"
method of accounting).
The information listed as "equivalent pro forma" was obtained by multiplying the
pro forma amounts by the exchange ratio of 3.65. It is intended to reflect the
fact that Bullsboro BancShares stockholders will be receiving 3.65 shares of
Regions common stock for each share of Bullsboro BancShares common stock
exchanged in the merger.
The pro forma information, while helpful in illustrating the financial
attributes of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. Also, the information for the
nine-month period ended September 30, 1998 does not 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 "Information About Regions -- Recent
Developments," "Where You Can Find More Information," and "Index to Bullsboro
Financial Statements."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED EXCEPT
REGIONS AND
BULLSBORO HISTORICAL)
<S> <C> <C> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM PER
COMMON SHARE
Regions historical........................ $ 1.34 $ 1.38 $ 1.82 $ 1.64 $ 1.45
Regions historical diluted................ 1.32 1.36 1.79 1.61 1.43
Bullsboro historical...................... 6.21 7.06 8.17 6.39 5.44
Bullsboro historical diluted.............. 5.79 6.41 7.42 5.90 5.09
Regions and Bullsboro pro forma
combined(1)............................. 1.34 1.82 1.64 1.45
Regions and Bullsboro pro forma combined
diluted(1).............................. 1.32 1.79 1.61 1.43
Bullsboro pro forma Merger
equivalent(2)........................... 4.89 6.64 5.99 5.29
Bullsboro pro forma Merger equivalent
diluted(2).............................. 4.82 6.53 5.88 5.22
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical........................ .69 .60 .80 .70 .66
Bullsboro historical...................... -- -- -- -- --
Bullsboro pro forma Merger
equivalent(3)........................... 2.52 2.19 2.92 2.56 2.41
</TABLE>
6
<PAGE> 14
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED EXCEPT
REGIONS AND
BULLSBORO HISTORICAL)
<S> <C> <C> <C> <C> <C>
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical........................ 13.38 12.46 12.75 11.82 10.74
Bullsboro historical...................... 51.58
-----
Regions and Bullsboro pro forma
combined(1)............................. 13.38
Bullsboro pro forma Merger
equivalent(2)........................... 48.84
</TABLE>
- -------------------------
(1) Represents the combined results of Regions and Bullsboro as if the Merger
were consummated on January 1, 1995 (or September 30, 1998, in the case of
Book Value Per Share Data), and were accounted for as a pooling of
interests.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of 3.65 shares of Regions common stock for each share of Bullsboro 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 $32.75. 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 3.65 shares of Regions common stock for each share of
Bullsboro 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
"Information About Regions -- Recent Developments," on page and "Where You
Can Find More Information" on page . The financial information as of or for the
interim periods ended September 30, 1998 and 1997 has not been audited and in
7
<PAGE> 15
the respective opinions of management reflects all adjustments (consisting only
of normal recurring adjustments) necessary to a fair presentation of such data.
SELECTED HISTORICAL FINANCIAL DATA OF REGIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total interest
income............. $ 1,932,506 $ 1,684,430 $ 2,276,584 $ 1,954,283 $ 1,750,427 $ 1,385,512 $ 1,102,493
Total interest
expense............ 948,247 808,368 1,097,376 942,459 861,242 598,160 446,199
Net interest income.. 984,259 876,062 1,179,208 1,011,824 889,185 787,352 656,294
Provision for loan
losses............. 41,482 58,966 89,663 46,026 37,493 22,058 38,017
Net interest income
after loan loss
provision.......... 942,777 817,096 1,089,545 965,798 851,692 765,294 618,277
Total noninterest
income excluding
security gains
(losses)........... 340,835 283,374 381,400 341,792 280,834 251,837 242,326
Security gains
(losses)........... 3,127 454 498 3,311 (697) 681 3,312
Total noninterest
expense............ 839,939 663,039 901,776 837,034 720,825 653,506 584,044
Income tax expense... 152,095 147,693 187,563 156,008 134,529 115,853 88,225
Income before
extraordinary
item............... 294,705 290,192 382,104 317,859 276,475 248,453 191,646
Extraordinary item... -- 15,425 15,425 -- -- -- --
Net income........... 294,705 305,617 397,529 317,859 276,475 248,453 191,646
PER SHARE DATA:
Income, before
extraordinary
item............... $ 1.34 $ 1.38 $ 1.82 $ 1.64 $ 1.45 $ 1.36 $ 1.14
Net income........... 1.34 1.46 1.89 1.64 1.45 1.36 1.14
Income, before
extraordinary
item -- diluted.... 1.32 1.36 1.79 1.61 1.43 1.34 1.12
Net income --
diluted............ 1.32 1.43 1.86 1.61 1.43 1.34 1.12
Cash dividends....... .69 .60 .80 .70 .66 .60 .52
Book value........... 13.38 12.46 12.75 11.82 10.74 9.58 8.89
OTHER INFORMATION:
Average number of
shares
outstanding........ 220,220 209,721 209,781 194,241 190,896 182,903 168,758
Average number of
shares
outstanding, --
diluted............ 223,935 213,940 213,750 197,751 193,579 185,110 171,363
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
</TABLE>
8
<PAGE> 16
<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>
Total deposits....... 27,184,895 24,699,371 25,011,021 22,019,412 19,982,422 18,048,906 16,242,208
Long-term debt....... 424,176 456,347 445,529 570,545 762,521 766,774 683,171
Stockholders'
equity............. 2,957,653 2,614,863 2,679,821 2,274,563 2,047,398 1,785,026 1,581,143
PERFORMANCE RATIOS:
Return on average
assets(1).......... 1.17%(a) 1.40%(b) 1.35%(c) 1.25%(d) 1.19% 1.23% 1.19%
Return on average
stockholders'
equity(1).......... 13.79(a) 16.02(b) 15.38(c) 14.71(d) 14.30 14.88 14.02
Net interest
margin(1).......... 4.28 4.42 4.41 4.36 4.27 4.33 4.57
Efficiency(2)........ 62.54(a) 56.32 57.78 61.84(d) 61.61 62.89 63.84
Dividend payout...... 51.49 41.10 42.33 42.68 45.52 44.12 45.61
ASSET QUALITY RATIOS:
Net charge-offs to
average loans, net
of unearned
income(1).......... .22 .23 .27 .18 .15 .18 .24
Problem assets to net
loans and other
real estate(3)..... .67 .76 .78 .63 .69 .91 1.44
Nonperforming assets
to net loans and
other real
estate(4).......... .84 .90 .91 .83 .81 .98 1.59
Allowance for loan
losses to loans,
net of unearned
income............. 1.36 1.39 1.39 1.38 1.43 1.41 1.62
Allowance for loan
losses to
nonperforming
assets(4).......... 163.04 153.64 151.89 166.41 177.53 144.04 101.66
LIQUIDITY AND CAPITAL
RATIOS:
Average stockholders'
equity to average
assets............. 8.51 8.74 8.75 8.50 8.36 8.23 8.49
Average loans to
average deposits... 86.91 84.54 84.94 82.42 82.23 75.90 72.36
Tier 1 risk-based
capital(5)......... 10.64 10.35 10.48 10.81 11.14 10.69 11.13
Total risk-based
capital(5)......... 11.84 11.54 12.93 13.59 14.61 14.29 13.48
Tier 1 leverage(5)... 7.84 5.57 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.
9
<PAGE> 17
(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) charged for SAIF
assessment and merger expenses are as follows: Return on average
assets -- 1.40%, Return on average stockholders' equity -- 16.45%, and
Efficiency -- 56.16%.
SELECTED HISTORICAL FINANCIAL DATA OF BULLSBORO
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income.................. $ 7,630 $ 7,160 $ 9,745 $ 7,524 $ 6,327 $ 4,849 $ 3,964
Total interest expense................. 3,209 2,787 3,807 3,215 2,659 2,052 1,878
Net interest income.................... 4,421 4,373 5,938 4,309 3,668 2,797 2,086
Provision for loan losses.............. 208 210 716 289 205 138 188
Net interest income after loan loss
provision............................ 4,213 4,163 5,222 4,020 3,463 2,659 1,898
Total noninterest income excluding
security gains (losses).............. 794 828 1,055 956 979 740 722
Security gains (losses)................ -- -- -- 29 -- -- --
Total noninterest expense.............. 3,049 2,851 3,869 3,080 2,798 2,407 2,069
Income tax expense..................... 702 785 840 700 600 344 193
Net income............................. 1,256 1,355 1,568 1,225 1,044 648 358
PER SHARE DATA:
Net income............................. $ 6.21 $ 7.06 $ 8.17 $ 6.39 $ 5.44 $ 3.38 $ 1.87
Net income -- diluted.................. 5.79 6.41 7.42 5.90 5.09 3.27 1.87
Cash dividends......................... -- -- -- -- -- -- --
Book value............................. 51.58 46.16 45.57 38.48 33.50 27.55 25.26
OTHER INFORMATION:
Average number of shares outstanding... 202 192 192 192 192 192 192
Average number of shares outstanding,
-- diluted........................... 217 211 211 208 205 198 192
</TABLE>
10
<PAGE> 18
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION DATA (PERIOD
END):
Total assets........................... $107,721 $99,841 $97,766 $85,286 $69,396 $53,565 $52,059
Securities............................. 15,139 12,893 13,534 13,642 13,157 11,808 8,905
Loans, net of unearned income.......... 68,799 68,678 70,914 61,766 48,645 40,667 36,056
Total deposits......................... 91,314 89,477 87,870 77,272 62,668 52,507 47,473
Long-term debt......................... 4,000 -- -- -- -- -- --
Stockholders' equity................... 10,887 8,523 8,743 7,105 5,953 4,712 4,157
PERFORMANCE RATIOS:
Return on average assets(1)............ 1.61% 1.99% 1.70% 1.58% 1.70% 1.23% 0.73%
Return on average stockholders'
equity(1)............................ 17.26 23.58 19.72 19.34 19.58 14.61 8.87
Net interest margin(1)................. 6.23 7.39 7.14 6.43 6.31 4.93 4.00
Efficiency(2).......................... 60.87 57.11 61.64 61.54 62.99 70.81 78.97
Dividend payout........................ -- --
ASSET QUALITY RATIOS:
Net charge-offs to average loans, net
of unearned income(1)................ 1.09% 0.07% 0.10% 0.21% 0.18% 1.62% 1.57%
Problem assets to net loans and other
real estate(3)....................... 1.30 0.41 1.28 0.44 0.29 0.36 1.13
Nonperforming assets to net loans and
other real estate(4)................. 1.33 1.59 1.68 0.70 0.66 1.06 1.94
Allowance for loan losses to loans, net
of unearned income................... 1.52 1.60 2.23 1.52 1.59 1.62 1.57
Allowance for loan losses to
nonperforming assets(4).............. 114.23 102.04 133.14 216.17 244.48 155.42 81.70
Liquidity and Capital Ratios:
Average stockholders' equity to average
assets............................... 9.19% 8.44% 8.64% 8.16% 8.67% 8.40% 9.64%
Average loans to average deposits...... 77.19 80.46 83.45 76.85 77.53 76.74 74.15
Tier 1 risk-based capital(5)........... 14.04 12.08 11.91 11.50 12.00 11.98 13.84
Total risk-based capital(5)............ 15.29 13.34 13.16 12.76 13.25 13.23 15.19
Tier 1 leverage(5)..................... 9.68 8.96 8.96 9.25 8.53 8.45 7.98
</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 minimum leverage ratio of Tier 1 capital to total assets is
3% to 5%.
11
<PAGE> 19
THE SPECIAL MEETING
GENERAL
We are sending this Proxy Statement-Prospectus to the stockholders of Bullsboro
BancShares, Inc. ("Bullsboro") in connection with the solicitation by the
Bullsboro Board of Directors of proxies for use at a special meeting of
stockholders (the "Special Meeting"), at which Bullsboro stockholders will be
asked to vote upon a proposal to approve the Agreement and Plan of Merger dated
as of July 16, 1998 (the "Agreement"), between Bullsboro and Regions Financial
Corporation.
The Special Meeting will be held at :00 p.m., local time, on , 1998,
at the main offices of Bullsboro, located at 40 Bullsboro Drive, Newnan,
Georgia, 30264.
Bullsboro stockholders are requested promptly to sign, date, and return the
accompanying proxy card to Bullsboro in the enclosed postage-paid, addressed
envelope. A stockholder's failure to return a properly executed proxy card or
vote at the Special Meeting will have the same effect as a vote against the
Agreement.
Any Bullsboro 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
Bullsboro a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by Bullsboro 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 Bullsboro BancShares, Inc.,
40 Bullsboro Drive, Newnan, Georgia, 30264, Attention:, Corporate Secretary. A
proxy will not be revoked by death or incapacity of the stockholder after the
proxy is given unless, before the vote, notice of death or incapacity is filed
with the Secretary. The shares of Bullsboro common stock represented by properly
executed proxies received at or prior to the Special Meeting and not
subsequently revoked will be voted as directed in such proxies. IF INSTRUCTIONS
ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL
OF THE AGREEMENT AND IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER
MATTERS THAT PROPERLY MAY COME BEFORE THE SPECIAL MEETING. IF NECESSARY, AND
UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR
OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF
PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE THE AGREEMENT. As of the
date of this Proxy Statement-Prospectus, Bullsboro is unaware of any other
matter to be presented at the Special Meeting.
Bullsboro may solicit proxies by mail, and also possibly by telephone or
telegram or in person by the directors, officers, and employees of Bullsboro.
The directors, officers, and employees who will receive no additional
compensation for the 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.
Bullsboro stockholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
Bullsboro's Board of Directors has established the close of business on
, 1998, as the record date for determining the Bullsboro stockholders
entitled to notice of and to vote at the Special Meeting. Only Bullsboro
stockholders of record as of the record date will be
12
<PAGE> 20
entitled to vote at the Special Meeting. As of the record date, there were
approximately holders of shares of the $1.00 par
value common stock of Bullsboro outstanding and entitled to vote at the Special
Meeting. Each share is entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares of
Bullsboro 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 Bullsboro common stock that
are present, or represented by proxy, at the Special Meeting will be counted for
quorum purposes regardless of whether the holder of the shares or proxy fails to
vote on the Agreement for any reason, including broker nonvotes. Generally, a
broker who holds shares of Bullsboro common stock in "street" name on behalf of
a beneficial owner lacks authority to vote these shares in the absence of
specific voting instructions from the beneficial owner.
Once a quorum is established, approval of the Agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of Bullsboro common
stock entitled to vote at the Special Meeting. A failure to vote, in person or
by proxy, for any reason, including failure to return a properly executed proxy,
an abstention, or a broker nonvote, has the same effect as a vote against the
Agreement.
The directors and executive officers of Bullsboro and their affiliates
beneficially owned, as of the record date, shares (or
approximately % of the outstanding shares) of Bullsboro common stock. The
directors and executive officers of Regions and their affiliates beneficially
owned, as of the record date, no shares of Bullsboro common stock. As of that
date, no subsidiary of either Bullsboro or Regions held any shares of Bullsboro
common stock in a fiduciary capacity for others.
13
<PAGE> 21
THE MERGER
The following material describes certain aspects of merger of Bullsboro with and
into Region. This description does not purport to be complete and is qualified
in its entirety by reference to the Appendices, including the Agreement, which
is attached as Appendix A to this Proxy Statement-Prospectus and is incorporated
here by reference. All stockholders are urged to read the Appendices in their
entirety.
GENERAL
The Agreement provides generally for the acquisition of Bullsboro by Regions
pursuant to the Merger of Bullsboro with and into Regions. Regions will be the
surviving corporation resulting from the Merger.
On the date and at the time that the Merger becomes effective, each share of
Bullsboro common stock (excluding shares held by Bullsboro, Regions, or their
respective subsidiaries, in each case other than shares held in a fiduciary
capacity or as a result of debts previously contracted, and excluding all shares
held by stockholders who perfect their dissenters' rights) issued and
outstanding at the effective time of the Merger will be converted into 3.65
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 Merger will remain outstanding and unchanged
as a result of the Merger.
No fractional shares of Regions common stock will be issued in connection with
the Merger. Instead of issuing fractional shares, Regions will make a cash
payment equal to the fractional part of a share which a Bullsboro stockholder
would otherwise receive multiplied by the closing price of Regions common stock
on the Nasdaq National Market on the last trading day prior to the effective
time of the Merger.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The exchange ratio of 3.65 shares of Regions common stock for each share of
Bullsboro common stock (the "Exchange Ratio") could be adjusted under certain
provisions of the Agreement. UNDER NO CIRCUMSTANCES WOULD THE EXCHANGE RATIO BE
LESS THAN 3.65 SHARES OF REGIONS COMMON STOCK FOR EACH SHARE OF BULLSBORO COMMON
STOCK. An adjustment could occur only if the Bullsboro Board elects to terminate
the Agreement under the provisions of the Agreement described below, and if
Regions then elects to avoid termination of the 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 for the 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.
The "Determination Date" is the date the Merger is approved by the stockholders
of Bullsboro.
14
<PAGE> 22
The "Regions Ratio" is the number obtained by dividing the Average Closing Price
by $40.94.
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
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 July 23, 1998, less 15%.
If both:
(i) the Average Closing Price is less than $32.75; and
(ii) the Regions Ratio is less than the Index Ratio,
then Bullsboro may elect to terminate the Agreement unless Regions increases the
Exchange Ratio such that the number of shares of Regions common stock issued in
exchange for each share of Bullsboro common stock has a value (based on the
Average Closing Price) equal to the lesser of (i) $119.54 or (ii) the value
(based on the Average Closing Price) of the number of a shares of Regions common
stock that would have been exchanged for each share of Bullsboro 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 Merger is
approved by the Bullsboro stockholders, the Bullsboro Board may elect not to
terminate the Agreement and to consummate the Merger without resoliciting the
Bullsboro stockholders even if Bullsboro's Stock Price Termination Right is
triggered. These conditions reflect the parties' agreement that Bullsboro's
stockholders will assume the risk of declines in the value of Regions common
stock to $32.75. Any adjustment of the Exchange Ratio reflecting a decline in
the price of Regions common stock to below $32.75 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 making its determination of whether to terminate the Agreement, the Bullsboro
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' financial performance, and the future prospects for
Regions common stock following the Merger), and the advice of its financial
advisors and legal counsel. If the Bullsboro Board elects to terminate the
Agreement, Regions would then determine whether to proceed with the Merger at
the higher Exchange Ratio. In making this determination, the principal factors
Regions will consider include the projected effect of the Merger on Regions' pro
forma earnings per share and whether Regions' assessment of Bullsboro'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, Bullsboro 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.
15
<PAGE> 23
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 3.65, the Starting Price of Regions Common stock is $40.94, and the
Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is $32.75 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 Bullsboro
stockholders could have fallen from a pro forma $149.42 per share, as of the
Starting Date, to as little as a pro forma $119.54 per share, as of the
Determination Date.
(2) The second scenario occurs if the Average Closing Price is less than $32.75,
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,
Bullsboro will have no right to terminate the Merger, and there would be no
adjustment to the Exchange Ratio, even though the value of the consideration to
be received by Bullsboro stockholders would have fallen from a pro forma $149.42
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 $119.54 per share.
(3) The third scenario occurs if the Average Closing Price declines below $32.75
and the Regions Ratio is below the Index Ratio. Under this scenario, the
adjustment in the Exchange Ratio is designed to ensure that the Bullsboro
stockholders receive shares of Regions common stock having a value (based upon
the Average Closing Price) that corresponds to at least $119.54 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 $30.00, and the ending Index
Price, as of the Determination Date, were $90, the Regions Ratio (.7328) would
be below the Index Ratio (.75, or .90 minus .15), and Bullsboro could terminate
the Agreement unless Regions elected within five days to increase the Exchange
Ratio to equal 3.7355, which represents the lesser of (a) 3.9846 [the result of
dividing $119.54 (the product of $32.75 and the 3.65 Exchange Ratio) by the
Average Closing Price ($30.00), rounded to the nearest ten-thousandth] and (b)
3.7355 [the result of dividing the Index Ratio (.75) times 3.65 by the Regions
Ratio (.7328), rounded to the nearest ten-thousandth]. Based upon the assumed
$30.00 Average Closing Price, the new Exchange Ratio would represent a value to
the Bullsboro stockholders of $112.07 per Bullsboro share.
If the Average Closing Price were $30.00, and the ending Index Price, as of the
Determination Date, were $100, the Regions Ratio (.7328) would be below the
Index Ratio (.85, or 1.00 minus .15), and Bullsboro could terminate the
Agreement unless Regions elected within five days to increase the Exchange Ratio
to equal 3.9846, which represents the lesser of (a) 3.9846 [the result of
dividing $119.54 (the product of $32.75 and the 3.65 Exchange Ratio) by the
Average Closing Price ($30.00), rounded to the nearest ten-thousandth] and (b)
4.2336 [the result of dividing the Index Ratio (.85) times 3.65 by the Regions
Ratio (.7328), rounded to the nearest ten-thousandth]. Based upon the assumed
$30.00 Average Closing Price, the new Exchange Ratio would represent a value to
the Bullsboro stockholders of $119.54 per Bullsboro share.
The actual market value of a share of Regions common stock at the Effective Date
and at the time certificates for those shares are delivered following surrender
and exchange of
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certificates for shares of Bullsboro common stock may be more or less than the
Average Closing Price. Bullsboro stockholders are urged to obtain current market
quotations for Regions common stock. See "Comparative Market Prices and
Dividends."
TREATMENT OF BULLSBORO OPTIONS
The Agreement provides that all rights with respect to Bullsboro common stock
pursuant to stock options or stock appreciation rights granted by Bullsboro
under its stock option plans which are outstanding at the effective time of the
Merger, whether or not then exercisable, will be converted into and will become
rights with respect to Regions common stock, and Regions will assume each of
such options in accordance with the terms of the plan under which it was issued
and the agreement by which it is evidenced. After the effective time, those
options will become options to purchase Regions common stock, with the exercise
price and number of shares of Regions common stock purchasable thereunder
adjusted to reflect the exchange ratio of 3.65 shares of Regions common stock
for each share of Bullsboro common stock. 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 Bullsboro held in the aggregate
exercisable options to purchase 18,351 shares of Bullsboro common stock, as of
the date of this Proxy Statement-Prospectus. The current Bullsboro stock option
plan provides that outstanding options are exercisable before the merger for
cash, but that options not exercised would terminate at the closing of the
Merger. A vote to approve the Merger also will approve an amendment to the
Bullsboro stock option plan to provide for the conversion of outstanding
options, as described above.
BACKGROUND OF THE MERGER
Bullsboro's management has discussed possible affiliations with other financial
institutions from time to time in the past. Except for the discussions described
below, these discussions did not lead to negotiations or agreements regarding
significant terms of a potential affiliation, and were abandoned.
In early October 1997, a representative of Regions expressed interest in a
possible merger with Bullsboro at a meeting with a Bullsboro director. The
meeting was arranged by a significant stockholder of Bullsboro, who also
attended the meeting. Bullsboro's President met with the representative of
Regions on October 16, 1997, to discuss a possible merger. At its meeting of
October 20, 1997, the Bullsboro Board of Directors authorized Bullsboro's
President to provide information requested by Regions, subject to the execution
of a confidentiality agreement, and to discuss an affiliation with Regions in
consultation with the Expansion Committee of the Board of Directors. The
Expansion Committee consisted of Directors Arnall, Church and Murphey. In the
following months, a number of discussions were held between Bullsboro
management, its financial consultant, USBA, Inc. or its special legal counsel,
Kennedy, Baris & Lundy, L.L.P., and Regions representatives. Several of these
discussions also included the principal officers and stockholders of Southern
Asset Management, Inc., an asset-based lending company that operates under
contract with THE BANK of Newnan.
In late 1997 and early 1998, several other financial institutions expressed
interest in a possible merger transaction with Bullsboro. Bullsboro's President
had preliminary discussions with these institutions. One of them, a Georgia
institution with assets of less than
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<PAGE> 25
$500 million, expressed continued, strong interest in a possible merger. At its
meeting of April 21, 1998, the Bullsboro Board of Directors considered possible
terms for an affiliation with Regions or with this other institution. In
comparing a possible affiliation with Regions and this other institution, the
Board considered Region's greater asset size, the greater trading volume and
liquidity of Region's common stock, the potential dilution that such a merger
might produce in the per share value of the other institution, the greater
potential dividend payments to Bullsboro holders from the possible merger with
Regions, the comparative value of the shares that might be exchanged, based upon
assumed exchange ratios, and the expected effects of a merger with each
institution on Bullsboro employees and directors. The Board also considered the
potentially favorable effects of a "double dip," that is, a sale of the other
institution at a premium following a merger with Bullsboro. The Board determined
to pursue discussions with Regions, and not to pursue discussions with the other
institution. Regions provided a draft definitive agreement to Bullsboro's
special legal counsel on May 1, 1998. Discussions between the parties and
Regions due diligence review of Bullsboro continued through mid-May 1998. On May
18, 1998, however, Regions informed Bullsboro that it was ending discussions
regarding a possible merger. In late May, Representatives of Regions and USBA
met in Birmingham at USBA's request to explore a possible resumption of
discussions. Discussions were resumed in early June 1998, and included
discussion of terms of the proposed merger and revisions to the proposed merger
agreement.
The Bullsboro Board of Directors met on July 16, 1998 to consider the terms of
the possible merger with Regions and the related merger agreement. The meeting
was attended by a representative of USBA and by special legal counsel. Special
legal counsel had provided materials for consideration by the Board, including
the latest draft of a proposed merger agreement and related documents, and an
outline of the merger agreement. Mercer Capital had provided the Board with a
financial analysis of the potential merger, and an opinion as to the fairness of
the exchange ratio to the Bullsboro stockholders from a financial point of view.
After deliberation and consultation with the Bullsboro financial advisor and
special legal counsel, the Board of Directors approved the Merger and the Merger
Agreement, subject to amendment and correction as deemed necessary or
appropriate by the President.
BULLSBORO'S REASONS FOR THE MERGER
In approving the Merger, the directors of Bullsboro considered a number of
factors. Without assigning any relative or specific weights to the factors, the
Bullsboro Board of Directors considered the following material factors:
- the information presented to the directors by the management of Bullsboro
concerning the business, operations, earnings, asset quality, and
financial condition of Bullsboro, including compliance with regulatory
capital requirements on an historical and prospective basis;
- the financial terms of the Merger, including the relationship of the
merger price to the book value and earnings per share of Bullsboro common
stock, the partial protection against a decline in the market value of
Regions common stock, and the potential increase in cash dividends for
Bullsboro stockholders;
- the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of Bullsboro common stock for Regions
common stock for federal and state income tax purposes;
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<PAGE> 26
- the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
- the opinion rendered by Bullsboro's financial advisor to the effect that,
from a financial point of view, the exchange of Bullsboro common stock
for Regions common stock on the terms and conditions set forth in the
Agreement is fair to the holders of Bullsboro common stock;
- stockholders of Bullsboro will receive shares of Regions common stock,
which is publicly traded on NASDAQ; there is no current public market for
Bullsboro 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 Bullsboro, as a
result of both employment in a larger enterprise and Regions' benefit
plans and policies; and
- growth of Bullsboro without affiliation with a larger holding company
would likely be limited because of Bullsboro's need for increasing
capital resources to support that growth. Without such a combination, the
Bullsboro 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 Bullsboro Board of
Directors believed would be necessary to maintain Bullsboro as a viable
independent entity.
The terms of the Merger were the result of arms-length negotiations between
representatives of Bullsboro and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of Bullsboro
unanimously approved the Merger as being in the best interests of Bullsboro and
its stockholders. Each member of the Board of Directors of Bullsboro has agreed
to vote those shares of Bullsboro common stock over which such member has voting
authority (other than in a fiduciary capacity) in favor of the Merger.
Bullsboro's Board of Directors unanimously recommends that Bullsboro
stockholders vote for approval of the Agreement.
REGIONS' REASONS FOR THE MERGER
In approving the Agreement and the Merger, the Regions Board considered a number
of factors concerning the benefits of the Merger, including the following:
- Information Concerning Bullsboro: The Regions Board considered
information concerning the business, operations, earnings, asset quality,
and financial condition of Bullsboro, and aspects of the Bullsboro
franchise, including the market position of Bullsboro in each of the
markets in which it operates and the compatibility of the community bank
orientation of the operations of Bullsboro to that of Regions. The
Regions Board concluded that Bullsboro is a sound, well managed financial
institution which is well positioned in its market areas and which
presents an attractive opportunity for Regions to add to its franchise in
the Georgia market.
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- Financial Terms of the Merger: The Regions Board considered various
financial aspects of the Merger as reported by Regions' management
including (1) the anticipated effect of the Merger on Regions' per share
earnings (with the Merger anticipated to have no significant effect on
Regions' earnings per share), (2) the anticipated effect of the Merger on
Regions' book value per share (with the Merger anticipated not to dilute
significantly Regions' book value per share), (3) a comparison of
Bullsboro to selected peer banks and a comparison of pricing aspects of
the Merger to pricing characteristics of other merger transactions
involving financial institutions, and (4) the anticipated accounting
treatment of the Merger as a pooling of interests.
- Nonfinancial Terms of the Merger: The Regions Board considered various
nonfinancial aspects of the Merger, including the treatment of the Merger
as a tax-free exchange of Bullsboro common stock for Regions common stock
for federal income tax purposes and the likelihood of the Merger being
approved by applicable regulatory authorities without undue conditions or
delay.
The foregoing discussion of the information and factors considered by the
Regions Board is not intended to be exhaustive but includes all material factors
considered by the Regions Board. In reaching its determination to approve the
Merger and the Agreement, the Regions Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. After deliberating with respect to
the Merger and the other transactions contemplated by the Agreement, and
considering, among other things, the matters discussed above, the Regions Board
determined that the Merger is in the best interests of Regions and its
stockholders and unanimously approved the Agreement.
OPINION OF BULLSBORO'S FINANCIAL ADVISOR
Mercer Capital is regularly engaged to assist financial institutions in mergers
and acquisitions and value the debt and equity securities of such institutions.
The Board of Directors retained Mercer Capital on the basis of its reputation
and its experience in negotiating mergers among financial institutions and in
evaluating such transactions. No limitations were imposed by Bullsboro's Board
with respect to the investigations made or the procedures followed by Mercer
Capital in rendering its fairness opinion. Mercer Capital was paid a fee of
$20,000 for rendering its opinion. Mercer Capital did not participate in the
negotiations, which led to the Agreement.
Mercer Capital prepared a valuation analysis to evaluate the fairness from a
financial point of view of the proposed "Exchange Ratio" of 3.65 shares of
Regions common stock for each share of Bullsboro common stock. The valuation
analysis and preliminary fairness opinion were delivered to Bullsboro on July
15, 1998. Mercer Capital subsequently rendered an updated fairness opinion,
dated , 1998, to the effect that the Exchange Ratio is fair
to the Bullsboro stockholders from a financial point of view. The fairness
opinion, which is included in Appendix B of this proxy/prospectus, should be
read in its entirety by Bullsboro stockholders.
As part of its investigation, Mercer Capital reviewed: (1) the Agreement and
Plan of Merger; (2) Bullsboro's annual reports for fiscal years 1995, 1996, and
1997; (3) THE BANK of Newnan's Call Reports for fiscal years 1995, 1996, and
1997 and the quarters ended March 31, 1998 and June 30, 1998; (4) Region's
annual reports for the fiscal years ended December 31, 1995, 1996 and 1997; (6)
Region's 10-K for fiscal years 1995, 1996,
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<PAGE> 28
and 1997 and Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998;
(7) Region's proxy statements for fiscal years 1996, 1997, and 1998; (8)
Bullsboro's 1998 budget prepared by Bullsboro management; (9) public market
pricing data of publicly traded banks which Mercer Capital deemed comparable to
Regions; and, (10) transaction data involving other banks which have been
acquired.
As part of its engagement, representatives of Mercer Capital visited with
Bullsboro management in Newnan, Georgia and Regions management in Birmingham,
Alabama. Factors considered in rendering the opinion included: (1) terms of the
Agreement and Plan of Merger; (2) the arms' length process by which the
Agreement was negotiated; (3) Mercer Capital's valuation analysis; (4) an
analysis of the estimated pro-forma changes in book value per share, earnings
per share, and dividends per share from the perspective of the Bullsboro
stockholders; (5) a review of Region's historical financial performance,
historical stock pricing, the liquidity of its shares and pricing in relation to
other publicly traded bank holding companies; (6) a review of Bullsboro's
historical financial performance and projected financial performance; and, (7)
tax consequences of the merger for Bullsboro stockholders.
In connection with rendering its opinion, Mercer Capital performed a variety of
financial analyses, which are summarized below. Mercer Capital believes that its
analyses must be considered as a whole and that selection of portions of such
analyses and the factors considered therein, without considering all factors and
analyses, could create an incomplete view of the analyses and the process
underlying Mercer Capital's opinion. Also, Mercer Capital relied upon management
forecasts in rendering its opinion. Mercer Capital did not represent or warrant
that the actual performance would reflect that which was projected.
Mercer Capital did not compile or audit Bullsboro's or Region's financial
statements, nor did Mercer Capital independently verify the information
reviewed. Mercer Capital relied upon such information as being complete and
accurate in all material respects. Mercer Capital did not make an independent
valuation of the loan portfolio, adequacy of the loan loss reserve or other
assets or liabilities of either institution.
Mercer Capital's opinion does not constitute a recommendation to any stockholder
as to how the stockholder should vote on the proposed merger; nor did Mercer
Capital express any opinion as to the prices at which any security of Bullsboro
or Regions might trade in the future.
The following is a summary of Mercer Capital's valuation analysis and the
analysis of the proposed merger with Regions.
Transaction Summary. Mercer Capital noted that the Exchange Ratio of 3.65
Regions shares for each Bullsboro share was determined through arms length
negotiations with Regions. Based upon the value of Regions common stock
immediately prior to the date the Agreement was signed, Mercer Capital
calculated that the then implied value of the transaction to Bullsboro
stockholders was $151 per share, or approximately $35 million based upon
Bullsboro's 231,302 fully diluted common shares. The implied price/earnings was
21.4x Bullsboro's diluted earnings per share for the twelve-month period ended
March 31, 1998 and 340% of Bullsboro's diluted book value per share as of the
same date. Mercer Capital cautioned, however, that the ultimate value of the
Regions shares received by Bullsboro stockholders would be contingent upon the
value of Region's shares on the Effective Date given the fixed Exchange Ratio.
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Pro Forma Analysis of Per Share Data. Mercer Capital analyzed the changes in
pro forma dividends per share, earnings per share and book value per share from
the perspective of Bullsboro's stockholders. Mercer Capital did not represent or
warrant that the actual pro forma data reflected in the proxy/prospectus mailed
to Bullsboro stockholders would reflect that which was developed in its
analysis. Mercer Capital calculated that book value per share would rise from
$44.58 per diluted share at March 31, 1998 to $51.94 per exchange adjusted
share; earnings per share would rise from $7.40 per diluted share for the twelve
month period ended March 31, 1998 to $8.10 per exchange adjusted share; and,
dividends per share would rise from $2.31 per share to $3.36 per exchange
adjusted share.
Comparable Transaction Analysis. Mercer Capital reviewed the prices paid for
various banks that have been acquired based upon certain available public
information as compiled by SNL Securities. Mercer Capital noted that most
banking transactions are measured in terms of the price/book ("P/B"),
price/tangible book ("P/TB"), price/earnings ("P/E"), price/assets ("P/A") and
tangible book premium/core deposit ("TBP/CD") ratios.
The bank acquisition data was divided into the following six groups: (1)
aggregate national acquisition data; (2) banks based in the Southeast; (3) banks
based in Georgia; (4) banks which have been acquired by Regions; and, (5) banks
with assets of $75 million to $125 million which produced an ROE in excess of
15%.
For each group, average and median P/E, P/B, P/TB, P/A and TBP/CD ratios were
calculated for calendar years 1993-1997 and for the partial 1998 year. The 1997
and 1998 median P/E ratios and average P/B, P/TB, P/A and TBP/CD ratios were
then multiplied times Bullsboro's respective net income for the latest twelve
months ended March 31, 1998 and March 31, 1998 book value, tangible book value,
assets and core deposits to develop an overall indicated range for Bullsboro.
The range of indicated multiples and values as applied to Bullsboro's March 31,
1998 financial data were as follows: (a) P/E 16.0x-22.8x, $26.2-$37.4 million;
(b) P/B 235%-332%, $24.2-$34.2 million; (c) P/TB 237%-342%, $24.4-$35.3 million;
(d) P/A 21.3%-29.6%, $23.0-$32.0 million; and, (e) TBP/CD 15.8%-29.6%,
$23.0-$34.0 million.
Mercer Capital noted that the pricing for community banks had risen
substantially during 1997 and the first half of 1998. The increase in
acquisition P/E multiples was attributable to an expansion in P/E multiples at
which publicly traded banks were valued in the public markets. Thus, an acquiror
could pay a higher price without issuing additional shares and thereby avoid
issuing additional shares and incurring the additional earnings per share and
ownership dilution. With regard to the P/B multiples, the increase in pricing
was attributable to the expansion in P/E ratios and, for many banks, an
improvement in their ROE. Mercer Capital further noted that if public market P/E
multiples contracted for an extended period of time, then acquisition multiples
would also likely contract.
Dilution Analysis. A dilution analysis was conducted whereby hypothetical
non-dilutive prices for Bullsboro were generated under the assumption that
various potential buyers would structure an offer so that Bullsboro's pro-forma
earnings per share would equal that of the assumed buyer based solely on the
shares issued to Bullsboro.
The valuation analysis was based upon hypothetical non-dilutive mergers with
Regions, First Citizens, Flag Financial, SouthTrust, AmSouth, Colonial,
SunTrust, and Premier. The analysis calculated a range of values for each
assumed buyer based upon Bullsboro's trailing twelve month earnings as of March
31, 1998, plus after-tax cost savings that a
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<PAGE> 30
buyer might realize, less revenues lost from some core deposit run off of 0% to
10%. Expense savings were assumed to range from 0% to 35% of Bullsboro's
non-interest operating expenses.
Based upon the public market prices and P/E ratios for the hypothetical public
market acquirors as of mid-July, the analysis indicated a lower range of $28.2
million to $43.8 million assuming no expense savings and no core deposit
run-off. The analysis indicated an upper range of $39.1 million to $60.7 million
assuming that the buyer credited Bullsboro with a 35% reduction in operating
expenses and a loss of 10% of its core deposits. Mercer Capital noted that the
upper indicated values were "high" because of the premium public market P/Es for
Premier and SunTrust. Excluding the two high P/E hypothetical acquirors, the
indicated lower range was $28.2 million to $34.5 million assuming no expense
savings and no loss of core deposits, while the upper indicated range was $39.1
million to $47.9 million assuming that the buyer credited Bullsboro with a 35%
expense reduction and a loss of 10% of core deposits.
At the time the analysis was prepared, the banks in the analysis were trading at
a range of 17x to 28x estimated 1998 earnings. Regions was trading in the
vicinity of $41-42 per share and 18x estimated 1998 earnings, which resulted in
an indicated range of $28.2 million to $39.1 million. The implied value of the
transaction of about $35 million at the time the Agreement was negotiated fell
towards the upper end of the range, and indicated that Regions was crediting
Bullsboro with expense savings on the order of 20% to 25%.
Mercer Capital noted that the analysis was predicated upon the hypothetical
buyer's earnings per share and public market stock price. Changes in market
conditions which result in higher or lower prices for the possible acquirors
result in a corresponding higher or lower indicated price.
Discounted Cash Flow Analysis. A discounted cash flow ("DCF") analysis was
prepared to develop an estimate of value Bullsboro stockholders might realize
assuming a merger was delayed five years. Indications of value derived using the
DCF method reflect interim cash flows (dividends) and a terminal cash flow (the
value of Bullsboro at the end of the projection period), both discounted to the
present at an appropriate required rate of return.
Mercer Capital prepared projections which were reviewed by Bullsboro management
for overall reasonableness. Mercer Capital did not warrant or represent that the
projections could be or would be realized. Rather, the projections were prepared
to derive a range of present values given a set of assumptions. Those
assumptions included annual balance sheet growth of 12%, an ROA of 1.80%-1.85%,
and distribution of about 25% of earnings each year in order to avoid an
excessive accumulation of excess capital.
The terminal value was based upon the product of projected earnings for 2002 of
$3.0 million and a range of P/E ratios of 18x to 24x. The terminal values and
interim dividends were discounted to present values at a rate of 15%. The
overall indicated range of present values given the noted assumptions was $28.6
million to $37.5 million. A broader range of value of $26.8 million to $42.3
million was also calculated based upon a range of P/E ratios of 18x to 24x and a
range of earnings for the year 2002 of $2.8 million to $3.4 million.
Review of Regions. Using public and other available information, Mercer Capital
compared the historical financial performance and current market pricing of
Regions with the following: (1) publicly traded bank holding companies based in
the Southeast (defined as Alabama, Arkansas, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina,
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South Carolina, Tennessee, and Virginia); (2) publicly traded bank holding
companies with $10 billion to $35 billion of assets; and, (3) aggregate data for
all publicly traded bank holding companies. None of the companies considered in
the comparison analysis is identical to Regions.
Based upon pricing data as of early July 1998, Mercer Capital calculated that
Regions was trading at 18.7x times reported twelve month earnings for the period
ended March 31, 1998 and 18.0x and 15.7x, times estimated 1998 and 1999 earnings
based upon First Call's median analysts' estimates of Region's operating
earnings of $2.30 per share for 1998 and $2.65 per share for 1999. By way of
comparison, the comparable groups were trading at the following multiples: (a)
Southeastern Group -- 21.0x trailing twelve month earnings, 19.0x estimated 1998
earnings, and 17.1x estimated 1999 earnings; (b) $10-$35 Billion Group -- 21.0x
trailing twelve month earnings, 19.0x estimated 1998 earnings, and 17.1x
estimated 1999 earnings; and, (c) National Group -- 20.8x trailing twelve month
earnings, 18.2x estimated 1998 earnings, and 16.4x estimated 1999 earnings.
In terms of book value, Region's P/B ratio was 292% as compared to median P/B
multiples of 253% for the Southeastern Group, 311% for the $10-$35 Billion
Group, and 247% for the National Group. Region's dividend yield was 2.22%
compared to median yields of 1.59% for the Southeastern Group, 22.03% for the
$10-$35 Billion Group, and 1.68% for the National Group.
Region's reported ROE and ROA for the twelve month period ended March 31, 1998
were, respectively, 16.40% and 1.40% as compared to 12.90% and 1.23% for the
Southeast, 16.51% and 1.35% for the $10-$35 Billion Group, and 13.39% and 1.22%
for the National Group. Mercer Capital noted that, in its opinion, Regions at
times has tended to trade at a discount to its peers because of its active
acquisition program.
Other Factors. Other factors considered by Mercer Capital in rendering its
opinion included the possibility that Bullsboro stockholders may benefit from an
acquisition of Regions given the ongoing industry consolidation. Mercer Capital
made no representation or warranty, however, that such an event would occur, or
if it did occur, that it would occur on favorable terms.
Mercer Capital also noted that although the Bullsboro transaction was not
shopped, another institution had expressed continued strong interest. Though the
indicated value of the exchange suggested by that institution was nominally
higher than the value attributed to Regions proposal, the terms of the Regions'
transaction were deemed to be more favorable to Bullsboro stockholders given the
liquidity of Regions stock, Regions superior profitability, and Regions large,
attractive franchise.
Bullsboro has agreed to indemnify Mercer Capital against certain liabilities,
including certain liabilities under federal securities laws, in its engagement
agreement with Mercer Capital.
USBA provided financial advice to Bullsboro and assisted it in the discussions
with Regions under an agreement that calls for a payment of a success fee equal
to 75/100 of a percent, or 75 basis points, of the total consideration paid to
stockholders based upon the average trading price of Regions' Common stock for
the fifteen days before closing. USBA is entitled to this fee only if the Merger
is completed. If the average Regions' share price and the outstanding shares of
Bullsboro at closing were equal to the price and outstanding shares at the
record date, USBA would receive a success fee of approximately [$
thousand].
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EFFECTIVE TIME OF THE MERGER
After all conditions to the Merger are satisfied or waived, the Merger will
become effective when Regions files certain certificates with the Secretaries of
State of Delaware and Georgia. The effective time of the Merger will occur on
the date and at the time that such certificates are filed and declared
effective. Unless otherwise agreed upon by Regions and Bullsboro, and subject to
the conditions to the obligations of the parties to effect the Merger, the
parties will use their reasonable efforts to cause the effective time of the
Merger to occur on the last business day of the month in which the last of the
following occurs: (i) the effective date (including the expiration of any
applicable waiting period) of the last federal or state regulatory approval
required for the Merger and (ii) the date on which the Agreement is approved by
the requisite vote of Bullsboro stockholders; or such later date within 30 days
thereof as may be specified by Regions.
No assurance can be provided that the necessary stockholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Regions and Bullsboro anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the fourth quarter of 1998. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or Bullsboro generally may terminate
the Agreement if the Merger is not consummated by January 31, 1999, unless the
failure to consummate by that date is the result of a breach of the Agreement by
the party seeking termination. Regions and Bullsboro each agreed to use
reasonable efforts to take the actions necessary for the merger to be closed as
soon as reasonably possible after the date of the Agreement. See "-- Conditions
to Consummation of the Merger" and "-- Waiver, Amendment, and Termination of the
Agreement."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the effective time of the Merger, Regions will cause an exchange
agent selected by Regions to mail to the former stockholders of Bullsboro a form
letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of Bullsboro common stock for
certificates representing shares of Regions common stock.
BULLSBORO 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 Bullsboro common stock, together with a properly
completed letter of transmittal, there will be issued and mailed to each holder
of Bullsboro 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
Merger, to the extent permitted by law, Bullsboro 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
Bullsboro common stock has been converted, regardless of whether such
stockholders have surrendered their Bullsboro common stock certificates. No
dividend or other distribution payable after the effective time of the Merger
with respect to Regions common stock, however, will be paid to the holder of any
unsurrendered Bullsboro certificate until the holder duly surrenders such
certificate. Upon such surrender, all undelivered dividends and
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other distributions and, if applicable, a check for the amount to be paid in
lieu of any fractional share interest will be delivered to such stockholder, in
each case without interest.
After the effective time of the Merger, a Bullsboro stockholder will be unable
to transfer shares of Meigs County Bancshares common stock. If certificates
representing shares of Bullsboro common stock are presented for transfer after
the effective time, they will be canceled and exchanged for the shares of
Regions common stock and a check for the amount due in lieu of fractional
shares, if any, deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including, but
not limited to:
- approval by the holders of a majority of the outstanding shares of
Bullsboro common stock;
- approval from the Board of Governors of the Federal Reserve System and
the Department of Banking and Finance of the state of Georgia and the
expiration of all waiting periods required in connection with these
approvals, without any conditions or restrictions (excluding requirements
relating to the raising of additional capital or the disposition of
assets or deposits) that would, in the reasonable judgment of Regions'
Board of Directors, so materially adversely impact the economic benefits
of the transactions contemplated by the Agreement as to render
inadvisable the consummation of the Merger;
- the absence of any action by any court or governmental authority of
competent jurisdiction restricting, prohibiting, or making illegal the
consummation of the Merger and the other transactions contemplated by the
Agreement;
- the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under
Section 368(a) of the Code, with the effects described under "-- Federal
Income Tax Consequences of the Merger," including, among others, that the
exchange of Bullsboro common stock for Regions common stock will not give
rise to recognition of gain or loss to Bullsboro stockholders, except to
the extent of any cash received;
- filing with the NASD of notification for listing of additional shares on
the Nasdaq National Market for the shares of Regions common stock to be
issued in the Merger;
- the receipt by Bullsboro of an opinion of Bullsboro's financial advisor
that the consideration to be received in the Merger by the stockholders
of Bullsboro is fair to such stockholders from a financial point of view;
and
- the receipt by both parties of a letter from Regions' independent
auditors to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement which are customary in
transactions of this nature, including, among others: (i) the delivery by
Regions and Bullsboro of opinions of their respective counsel and certificates
executed by their respective duly authorized officers as to the satisfaction of
certain conditions and obligations set forth in the Agreement, (ii) the receipt
of consents that are required under material agreements with third parties, and
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(iii) as of the effective time of the Merger, the accuracy of certain
representations and warranties and the compliance in all material respects with
the agreements and covenants of each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained or as to the timing of such approvals. It is also possible that any
such approval may be based on a materially adverse condition or requirement that
would cause the parties to abandon the Merger. Applications for the approvals
described below have been submitted to the appropriate regulatory agencies.
Regions and Bullsboro are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve Board, pursuant to
Section 3 of the Bank Holding Company Act. 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. This law prohibits the Federal Reserve Board from
approving the Merger (i) if it would result in a monopoly or be in furtherance
of any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the United States or (ii) if its effect in
any section of the country may be to substantially lessen competition or to tend
to create a monopoly, or if it would be a restraint of trade in any other
manner, unless the Federal Reserve Board finds that any anticompetitive effects
are outweighed clearly by the public interest and the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. Under the Bank Holding Company Act, the Merger may not be consummated
until the 30th day following the date of Federal Reserve Board approval, which
may be shortened by the Federal Reserve Board to the 15th day, during which time
the United States Department of Justice may challenge the transaction on
antitrust grounds. The commencement of any antitrust action would delay the
effectiveness of the Federal Reserve Board's approval, unless a court
specifically orders otherwise.
The Merger also is subject to the approval of the Georgia Department of Banking
and Finance. In the evaluation, the Georgia Department will take into account
considerations similar to those applied by the Federal Reserve Board.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the effective time of the Merger, and to the extent permitted by law,
any provision of the Agreement generally may be (i) waived by the party
benefited by the provision or (ii) amended by a written agreement between
Regions and Bullsboro approved by their respective Boards of Directors;
provided, however, that after approval by the Bullsboro stockholders, no
amendment that pursuant to the Georgia Business Corporation Act requires further
approval of the Bullsboro stockholders, including decreasing the consideration
to be received by Bullsboro stockholders, may be made without the further
approval of such stockholders.
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The Agreement may be terminated, and the Merger abandoned, at any time prior to
the effective time of the Merger, either before or after approval by Bullsboro
stockholders, under certain circumstances, including:
- by the Board of Directors of either party upon final denial of any
required consent of any regulatory authority, if such denial is
nonappealable or was not appealed within the time limit for appeal;
- by the Board of Directors of either party, if the holders of the required
number of shares of Bullsboro common stock shall not have approved the
Agreement;
- by mutual consent of the Boards of Directors of Regions and Bullsboro;
- by the Board of Directors of either party (provided the terminating party
is not in material breach of any representation, warranty, covenant, or
agreement included in the Agreement), in the event of any inaccuracy in
any representation or warranty by the other party which meets certain
standards specified in the Agreement and cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party;
- by the Board of Directors of either party (provided the terminating party
is not in material breach of any representation, or warranty included in
the Agreement), in the event of a breach by the other party of any
covenant or agreement included in the Agreement that cannot be cured
within 30 days after giving notice to the breaching party; and
- by the Board of Directors of either party if the Merger shall not have
been consummated by January 31, 1999, but only if the failure to
consummate the Merger by such date has not been caused by the terminating
party's breach of the Agreement.
The Bullsboro Board has the right to terminate the 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 Agreement. See
"-- Possible Adjustment of Exchange Ratio."
If the Agreement is terminated, the parties will have no further obligations,
except with respect to certain provisions, including those providing for payment
of expenses and restricting disclosure of confidential information. Further,
termination generally will not relieve the parties from the consequences of any
uncured willful breach of the Agreement giving rise to such termination.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Bullsboro and Regions generally has agreed to operate its business only
in the usual, regular, and ordinary course, and to preserve intact its business
organizations and assets and maintain its rights and franchises. Each has also
agreed to take no action which would materially adversely affect the ability of
either party to obtain any consents required for the Merger or to perform its
covenants and agreements under the Agreement and to consummate the Merger. The
foregoing shall not prevent Regions or any subsidiary of Regions from
discontinuing or disposing of any of its assets or business. Nor is Regions
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prevented from acquiring or agreeing to acquire any other entity or any assets
thereof, if such action is, in the judgment of Regions, desirable in the conduct
of the business of Regions and its subsidiaries. In addition, the Agreement
includes certain other restrictions applicable to the conduct of the business of
Bullsboro prior to consummation of the Merger, as described below.
Bullsboro. Bullsboro has agreed not to take certain actions relating to the
operation of its business pending consummation of the Merger without the prior
written consent of Regions, which Regions has agreed shall not be unreasonably
withheld. The actions Bullsboro has agreed not to take are in the general
categories of:
- amending Articles of Incorporation, Bylaws, or other governing
instruments;
- incurring indebtedness;
- acquiring any of its outstanding shares or making distributions in
respect to its outstanding shares;
- issuing additional securities;
- reclassifying capital stock or selling or encumbering assets;
- acquiring or investing in other entities;
- increasing employees' salaries and benefits or accelerating the vesting
of any stock-based compensation or employee benefits;
- entering into or amending employment contracts;
- adopting employee benefit plans or amending existing plans;
- changing accounting methods or practices;
- commencing or settling litigation; or
- entering into or terminating material contracts.
The specific agreements not to take certain actions of such character, including
the exceptions and contractually permitted actions, are set forth in the
Agreement, which is attached as Appendix A. See Article 7 of the Agreement.
In addition, Bullsboro has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. Bullsboro also has agreed
not to negotiate with respect to any such proposal, provide nonpublic
information to any party making such a proposal, or enter into any agreement
with respect to any such proposal, except in compliance with the fiduciary
obligations of its Board of Directors. In addition, Bullsboro 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 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
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Form 10-K for the year ended December 31, 1997, incorporated herein by
reference. See "Where You Can Find More Information."
Each Bullsboro director in office when the Merger Agreement was signed entered
into an agreement not to compete with Regions after the Merger. This agreement
provides that the director will not become a director, officer, or major
stockholder of any financial institution that has an office in Coweta County,
Georgia, for a period of two years after the closing of the Merger without
Regions' prior written consent. A major stockholder for this purpose is a holder
of more than 5% of any class of voting securities or of the total equity
interest of a company. This agreement not to compete only applies to directors,
other than Bullsboro's President, who are not offered employment as a director
or advisory or honorary director of Regions or any of its subsidiaries at the
effective time of the Merger, and ends after the two year period or earlier
termination by Regions of a director's service. The agreement with Mr. Murphey,
Bullsboro's President, ends if Regions or one of its subsidiaries terminates his
employment without just cause.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will indemnify and hold harmless
each person entitled to indemnification from Bullsboro or any of its
subsidiaries to the full extent permitted by Georgia law and by Bullsboro's
Articles of Incorporation or Bylaws as in effect on the date of the Agreement,
and that such rights will continue in full force and effect for six years from
the effective time of the Merger with respect to matters occurring at or prior
to the effective time.
The Agreement also provides that, after the effective time of the Merger,
Regions will provide generally to officers and employees of Bullsboro 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 Bullsboro or its subsidiaries prior to the effective time of
the Merger will be treated as service with Regions or its subsidiaries. The
Agreement further provides that Regions will cause Bullsboro to honor all
employment, severance, consulting, and other compensation contracts previously
disclosed to Regions between Bullsboro 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 Merger under Bullsboro's
benefit plans.
As described above under "-- Treatment of Bullsboro Options," the Agreement also
provides that all rights with respect to Bullsboro common stock pursuant to
stock options or stock appreciation rights granted by Bullsboro under its stock
option and other stock-based compensation plans which are outstanding at the
effective time of the Merger, whether or not then exercisable, will be converted
into and will become rights with respect to Regions common stock, and Regions
will assume each of such options in accordance with its terms.
Mr. Murphey entered into a new employment agreement with Bullsboro and THE BANK
of Newnan when the Merger Agreement was signed. Regions concurred with the terms
of the employment agreement and has agreed to honor it. The term of the
employment agreement is the three years beginning at the effective time of the
Merger. The new
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employment agreement will replace an earlier agreement at the effective time.
The earlier employment agreement, which continues in effect until the effective
time, would allow Mr. Murphey to voluntarily terminate his employment after the
Merger, and to receive a payment equal to three times his salary. The new
employment agreement eliminates this payment. The new employment agreement
entitles Mr. Murphey to enter into a change of control agreement with Regions
that would provide a lump sum cash payment of two times the sum of his base
salary and bonus (based on the average of the preceding three years), payable if
Mr. Murphey terminated his employment with good reason, or if his employment
were terminated other than for cause, death, or disability, within the two years
following a change of control of Regions.
The new employment agreement calls for Mr. Murphey to continue as the President
and Chief Executive Officer of THE BANK of Newnan with responsibility for the
general management and control of the business and affairs of the Bank in Coweta
County. The new employment agreement entitles Mr. Murphey to a base salary of at
least $150,000 per year, and participation in bonus, stock option and employee
benefit plans and programs offered to officers with similar responsibilities at
other Regions subsidiaries. At the Effective Date, Mr. Murphey also will be
granted stock options to purchase Regions common stock at its market value at
the date of grant with a total exercise price of $300,000. These options will
vest in equal installments over three years.
As of the record date, directors and executive officers of Bullsboro owned no
shares of Regions common stock.
DISSENTING STOCKHOLDERS
Pursuant to the provisions of Chapter 2, Article 13 of the Georgia Business
Corporation Act, if the Merger is consummated, any holder of record of Bullsboro
common stock who (i) gives to Bullsboro, prior to the vote at the Annual Meeting
with respect to the approval of the Agreement, written notice of such holder's
intent to demand payment for such holder's shares, and (ii) does not vote in
favor thereof, shall be entitled to receive, upon compliance with the statutory
requirements summarized below, the fair value of such holder's shares as of the
effective time of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger. A copy of the pertinent provisions of Chapter 2,
Article 13 of the Georgia Business Corporation Act is reproduced as Appendix C
to this Proxy Statement-Prospectus.
A stockholder of record may assert dissenters' rights as to fewer than all the
shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies Bullsboro in writing of the name and address of each person
on whose behalf such holder asserts dissenters' rights. The rights of such a
partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different stockholders.
The written objection requirement referred to above will not be satisfied under
the Georgia statutory provisions by merely voting against approval of the
Agreement by proxy or in person at the Annual Meeting. Any holder of Bullsboro
common stock who returns a signed proxy but fails to provide instructions as to
the manner in which such shares are to be voted will be deemed to have voted in
favor of the transaction and will not be entitled to assert dissenters' rights
of appraisal. In addition to not voting in favor of the Agreement, a stockholder
wishing to preserve the right to dissent and seek appraisal must give a
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separate written notice of such holder's intent to demand payment for such
holder's shares if the Merger is effected, as hereinabove provided.
Any written objection to the Agreement satisfying the requirements discussed
above should be addressed as follows: Bullsboro BancShares, Inc. 40 Bullsboro
Drive, Newnan, Georgia, 30264, Attention: Corporate Secretary.
If the Merger is authorized at the Annual Meeting, Bullsboro must deliver a
written dissenters' notice (the "Dissenters' Notice") to all holders of
Bullsboro common stock who satisfied the foregoing requirements. The Dissenters'
Notice must be sent within ten days after the effective time of the Merger and
must (i) state where the demand for payment must be sent and where and when
certificates for shares of Bullsboro common stock must be deposited, (ii) inform
holders of uncertificated shares to what extent transfer of these shares will be
restricted after the demand for payment is received, (iii) set a date by which
Bullsboro must receive the demand for payment (which date may not be fewer than
30 nor more than 60 days after the Dissenters' Notice is delivered), and (iv) be
accompanied by a copy of Article 13 of the Georgia Business Corporation Act.
A stockholder of record who receives the Dissenters' Notice must demand payment
and deposit such holder's certificates in accordance with the Dissenters'
Notice. Such stockholder will retain all other rights of a stockholder until
those rights are canceled or modified by the consummation of the Merger. A
record stockholder who does not demand payment or deposit such holder's shares
certificates where required, each by the date set in the Dissenters' Notice, is
not entitled to payment for such holder's shares under Article 13.
Except as described below, the surviving corporation resulting from the Merger
must, within ten days of the later of the effective time of the Merger or
receipt of a payment demand, offer to pay to each dissenting stockholder who
complied with the payment demand and deposit requirements described above the
amount the surviving corporation estimates to be the fair value of such holder's
shares, plus accrued interest from the effective time. Such offer of payment
must be accompanied by (i) certain recent Bullsboro financial statements, (ii)
the surviving corporation's estimate of the fair value of the shares, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Section 14-2-1327 of the Georgia
Business Corporation Act, and (v) a copy of the Article 13 of the Georgia
Business Corporation Act. If the stockholder accepts the surviving corporation's
offer by written notice to the surviving corporation within 30 days after the
surviving corporation's offer, payment must be made within 60 days after the
later of the making of the offer or the effective time of the Merger.
If the Merger is not effected within 60 days after the date set forth demanding
payment and depositing share certificates, Bullsboro must return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares. If, after such return and release, the Merger is effected, the surviving
corporation must send a new Dissenter's Notice and repeat the payment demand
procedure described above.
Section 14-2-1327 of the Georgia Business Corporation Act provides that a
dissenting stockholder may notify the surviving corporation in writing of such
holder's own estimate of the fair value or such holder's shares and the interest
due, and may demand payment of such holder's estimate, if (i) such holder
believes that the amount offered by the surviving corporation is less than the
fair value of such holder's shares or that the interest due has been calculated
incorrectly, or (ii) Bullsboro, having failed to effect the Merger, does not
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return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment. A dissenting stockholder waives such holder's right to demand payment
under Section 14-2-1327 unless such holder notifies the surviving corporation of
such holder's demand in writing within 30 days after the surviving corporation
makes or offers payment for such holder's shares. If the surviving corporation
does not offer payment within ten days of the later of the effective time of the
Merger or receipt of a payment demand, then (i) the stockholder may demand the
financial statements and other information required to accompany the surviving
corporation's payment offer, and the surviving corporation must provide such
information within ten days after receipt of the written demand, and (ii) the
stockholder may notify the surviving corporation of such holder's own estimate
of the fair value of such holder's shares and the amount of interest due, and
may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, the surviving
corporation must commence a nonjury equity valuation proceeding in the Superior
Court of Coweta County, Georgia, within 60 days after receiving the payment
demand and must petition the court to determine the fair value of the shares and
accrued interest. If the surviving corporation does not commence the proceeding
within those 60 days, it is required to pay each dissenting stockholder whose
demand remains unsettled, the amount demanded. The surviving corporation is
required to make all dissenting stockholders whose demands remain unsettled
parties to the proceeding and to serve a copy of the petition upon each
dissenting stockholder. The court may appoint appraisers to receive evidence and
to recommend a decision on fair value. Each dissenting stockholder made a party
to the proceeding is entitled to judgment for the fair value of such holder's
shares plus interest to the date of judgment.
The court in an appraisal proceeding commenced under the foregoing provision
must determine the costs of the proceeding, excluding fees and expenses of
attorneys and experts for the respective parties, and must assess those costs
against the surviving corporation, except that the court may assess the costs
against all or some of the dissenting stockholders to the extent the court finds
they acted arbitrarily, vexatiously, or not in good faith in demanding payment
under Section 14-2-1327. The court also may assess the fees and expenses of
attorneys and experts for the respective parties against the surviving
corporation if the court finds the surviving corporation did not substantially
comply with the requirements of specified provisions of Article 13 of the
Georgia Business Corporation Act, or against either the surviving corporation or
a dissenting stockholder if the court finds that such party acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by Article
13 of the Georgia Business Corporation Act.
If the court finds that the services of attorneys for any dissenting stockholder
were of substantial benefit to other dissenting stockholders similarly situated,
and that the fees for those services should not be assessed against the
surviving corporation, the court may award those attorneys reasonable fees out
of the amounts awarded the dissenting stockholders who were benefitted. No
action by any dissenting stockholder to enforce dissenters' rights may be
brought more than three years after the effective time of the Merger, regardless
of whether notice of the Merger and of the right to dissent was given by
Bullsboro or the surviving corporation in compliance with the Dissenters' Notice
and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting stockholder of
Bullsboro, but is qualified in its entirety by reference to Article 13 of the
Georgia Business Corporation Act, included in Appendix C to this
Prospectus/Proxy Statement. Any
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Bullsboro stockholder who intends to dissent from approval of the Agreement
should carefully review the text of such provisions and should also consult with
such holder's attorney. No further notice of the events giving rise to
dissenters' rights or any steps associated therewith will be furnished to
Bullsboro stockholders, except as indicated above or otherwise required by law.
Any dissenting Bullsboro stockholder who perfects such holder's right to be paid
the value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes. See "-- Federal
Income Tax Consequences of the Merger."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER TO HOLDERS OF BULLSBORO COMMON STOCK. THIS DISCUSSION MAY NOT APPLY
TO SPECIAL SITUATIONS, SUCH AS BULLSBORO STOCKHOLDERS, IF ANY, WHO HOLD
BULLSBORO COMMON STOCK OTHER THAN AS A CAPITAL ASSET, WHO RECEIVED BULLSBORO
COMMON STOCK UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, WHO HOLD BULLSBORO COMMON STOCK AS PART OF A "STRADDLE" OR
"CONVERSION TRANSACTION," OR WHO ARE INSURANCE COMPANIES, SECURITIES DEALERS,
FINANCIAL INSTITUTIONS OR FOREIGN PERSONS, AND DOES NOT DISCUSS ANY ASPECTS OF
STATE, LOCAL, OR FOREIGN TAXATION. THIS DISCUSSION IS BASED UPON LAWS,
REGULATIONS, RULINGS AND DECISIONS NOW IN EFFECT AND ON PROPOSED REGULATIONS,
ALL OF WHICH ARE SUBJECT TO CHANGE (POSSIBLY WITH RETROACTIVE EFFECT) BY
LEGISLATION, ADMINISTRATIVE ACTION, OR JUDICIAL DECISION. NO RULING HAS BEEN OR
WILL BE REQUESTED FROM THE INTERNAL REVENUE SERVICE ON ANY MATTER RELATING TO
THE TAX CONSEQUENCES OF THE MERGER.
Consummation of the Merger is conditioned upon receipt by Regions and Bullsboro
of an opinion from Alston & Bird LLP, special counsel to Regions, concerning the
material federal income tax consequences of the Merger. Based upon the
assumption that the Merger is consummated in accordance with the Agreement and
upon factual statements and factual representations made by Regions and
Bullsboro, it is such firm's opinion that:
- The Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and Bullsboro and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
- No gain or loss will be recognized by holders of Bullsboro common stock
upon the exchange in the Merger of all of their Bullsboro 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
Bullsboro stockholders in the Merger will, in each instance, be the same
as the aggregate tax basis of the Bullsboro 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 Bullsboro
stockholders in the Merger will, in each instance, include the holding
period of the Bullsboro common stock surrendered in exchange therefor,
provided that such Bullsboro common stock is held as a capital asset at
the effective time of the Merger.
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- The payment of cash to Bullsboro stockholders in lieu of fractional share
interests of Regions common stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the
exchange and then were redeemed by Regions. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the stock redeemed, as provided in Section 302(a) of the
Code.
- Where solely cash is received by a Bullsboro stockholder in exchange for
Bullsboro common stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of such
holder's Bullsboro common stock, subject to the provisions and
limitations of Section 302 of the Code.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES OF THE MERGER. BULLSBORO STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX REPORTING REQUIREMENTS AND TAX CONSEQUENCES
UNDER STATE, LOCAL, AND FOREIGN LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests as that term is used pursuant to generally accepted accounting
principles, for accounting and financial reporting purposes. Under the
pooling-of-interests method of accounting, assets, liabilities, and equity of
the acquired company are carried forward to the combined entity at their stated
amounts.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Bullsboro common
stock must be exchanged for Regions common stock with substantially similar
terms. There are certain other criteria that must be satisfied in order for the
Merger to qualify as a pooling of interests, some of which criteria cannot be
satisfied until after the effective time of the Merger. See
"Summary -- Comparative Per Share Data" and "-- Resales of Regions common
stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and pay
its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that Regions
will bear and pay the filing fees and printing costs in connection with this
Proxy Statement-Prospectus.
RESALES OF REGIONS COMMON STOCK
The Regions common stock to be issued to Bullsboro stockholders in the Merger
has been registered under the Securities Act, but that registration does not
cover resales of those shares by persons who control, are controlled by, or are
under common control with, Bullsboro (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
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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 Merger, affiliates of Bullsboro 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 Bullsboro 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 Bullsboro who are not affiliates of Regions may resell their
shares without restriction. Persons who are affiliates of Regions after the
effective time of the Merger may publicly resell the Regions common stock
received by them in the Merger subject to similar limitations and subject to
certain filing requirements specified in SEC Rule 144. Affiliates will receive
additional information regarding the effect of Rule 145 on their ability to
resell Regions common stock received in the Merger. Affiliates also would be
permitted to resell Regions common stock received in the Merger pursuant to an
effective registration statement under the Securities Act or an available
exemption from the Securities Act registration requirements. This Proxy
Statement-Prospectus does not cover any resales of Regions common stock received
by persons who may be deemed to be affiliates of Bullsboro or Regions.
Each person who Bullsboro reasonably believes will be an affiliate of Bullsboro
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.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of Bullsboro common stock will be exchanging
their shares of a Georgia corporation governed by the Georgia Business
Corporation Act and Bullsboro's Articles of Incorporation, as amended (the
"Articles"), and Bylaws, for shares of Regions, a Delaware corporation governed
by the Delaware General Corporation Law and Regions' Certificate of
Incorporation (the "Certificate") and Bylaws. Significant differences exist
between the rights of Bullsboro stockholders and those of Regions stockholders.
The material differences are summarized below. In particular, Regions'
Certificate and Bylaws contain several provisions that under certain
circumstances may have an antitakeover effect in that they could impede or
prevent an acquisition of Regions unless the potential acquirer has obtained the
approval of Regions' Board of Directors. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the rights of stockholders and their respective entities, and it is
qualified in its entirety by reference to the Georgia Business Corporation Act
and the Delaware General Corporation Law as well as to Regions' Certificate and
Bylaws and Bullsboro's Articles and Bylaws.
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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 beneficial
to Regions' stockholders, the Protective Provisions also may tend to discourage
some takeover bids. As a result, Regions' stockholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. On the other hand, defeating undesirable
acquisition offers can be a very expensive and time-consuming process. To the
extent that the Protective Provisions discourage undesirable proposals, Regions
may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
common stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions common stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believes such replacement is in the best
interests of Regions. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate of Incorporation authorizes the issuance of up to
500,000,000 shares of Regions common stock, of which 221,111,474 shares were
issued as of September 30, 1998, none of which were held as treasury shares, and
5,000,000 shares of preferred stock, none of which are outstanding. Regions'
Board of Directors may authorize the issuance of additional shares of Regions
common stock or preferred stock without further action by Regions' stockholders,
unless such action is required in a particular case by applicable laws or
regulations or by any stock exchange upon which Regions' capital stock may be
listed. The Certificate does not provide preemptive rights to Regions
stockholders.
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The authority to issue additional shares of Regions capital stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions common stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Regions. In
addition, the sale of a substantial number of shares of Regions common stock to
persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
common stock (or the right to receive Regions common stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions. Regions has committed not to
issue shares of preferred stock for any antitakeover purpose, including any
purpose to make a change in control of Regions more costly or difficult.
Bullsboro. Bullsboro's authorized capital stock consists of 1,500,000 shares of
Bullsboro common stock, of which shares were issued and
outstanding as of the record date.
Pursuant to the Georgia Business Corporation Act, Bullsboro's Board of Directors
may authorize the issuance of additional shares of Bullsboro common stock
without further action by Bullsboro's stockholders. The Articles do not provide
the stockholders of Bullsboro with preemptive rights to purchase or subscribe to
any unissued authorized shares of Bullsboro 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. The 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.
The 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.
Bullsboro. The Georgia Business Corporation Act generally provides that a
Georgia corporation's articles of incorporation may be amended by the
affirmative vote of a majority of the shares entitled to vote thereon, unless
the articles of incorporation provide for a higher or lower voting requirement.
The Articles provide that the provisions of the Articles relating to the size of
the Board of Directors, the removal of directors, the limitation of director
liability and the vote required for certain business combination transactions,
may be amended or rescinded only by the vote of the holders of at least two-
thirds (2/3) of the issued and outstanding shares unless two-thirds (2/3) of
the directors then in office approve the proposed change.
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Bullsboro's Articles provide that the Bylaws may be altered, amended, repealed
or rescinded or new Bylaws adopted by a majority vote of the directors or by the
vote of a majority of the voting power of all outstanding shares, except that
any amendment of the bylaws changing the number of directors requires the
affirmative vote of two-thirds (2/3) of the issued and outstanding shares
entitled to vote in an election of directors.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The 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.
Bullsboro. The Articles provide for a Board of Directors consisting of a single
class of between 5 and 25 directors, the exact number as determined in
accordance with the Articles and Bylaws, all of which are elected annually.
Stockholders are not entitled to cumulate votes in the election of directors.
REMOVAL OF DIRECTORS
Regions. Under the Certificate of Incorporation, any director or the entire
Board of Directors may be removed only for cause and only by the affirmative
vote of the holders of at least 75% of Regions' voting stock.
Bullsboro. The Articles provide that any director or the entire Board of
Directors may be removed, at any stockholders' meeting with respect to which
notice of such purpose has been given: (i) without cause, by the vote of the
holders of at least two-thirds (2/3) of the issued and outstanding shares
entitled to vote in an election of directors; or (ii) with cause, by the vote of
at least a majority of the issued and outstanding shares entitled to vote in an
election of directors. For purposes of removal of a director, cause exists if
(a) the director has been convicted of a felony; (b) any bank regulatory
authority having jurisdiction over the Corporation requests or demands in
writing the removal; or (c) at least two-thirds (2/3)
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of the directors of Bullsboro then in office, excluding the director to be
removed, determines that the director's conduct has been inimical to the best
interests of Bullsboro.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The 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.
Bullsboro. The Articles provide that the directors shall not be liable to
Bullsboro or its stockholders for money damages for any breach of duty as a
director except for liability for (i) any appropriation, in violation of the
director's duties, of any business opportunity of the corporation; (ii) acts or
omissions that involve intentional misconduct or a knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor provision or
redesignation thereof) of the Georgia Business Corporation Act; and (iv) any
transaction from which the director received an improper personal
benefit.
INDEMNIFICATION
Regions. The 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
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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.
Bullsboro. Under Bullsboro's bylaws, Bullsboro may indemnify persons who are
parties to any action, suit or proceeding, civil or criminal, by reason of the
fact that such person was or is a director, trustee, officer, employee, or agent
of Bullsboro or served at Bullsboro's request in those capacities in another
entity. Except as noted below, such persons may be indemnified against
reasonable expenses. Directors also are entitled to have Bullsboro advance any
such expenses prior to final disposition of the proceeding, upon an undertaking
to repay Bullsboro if it is ultimately determined that they are not entitled to
indemnification. Directors will not be indemnified against expenses, judgments,
fines and amounts paid in settlement attributable to circumstances as to which,
under applicable provisions of the Georgia Business Corporation Act as in effect
from time to time, such indemnification may not be authorized by action of the
Board, the stockholders, or otherwise. The Georgia Business Corporation Act
currently provides that a director may not be indemnified for liability
resulting from (i) any appropriation, in violation of his duties, of any
business opportunity of Bullsboro, (ii) acts or omissions involving intentional
misconduct or a knowing violation of law, (iii) the types of liability set forth
in Section 14-2-832 of the Georgia Business Corporation Act, or (iv) any
transaction from which the director receives an improper personal benefit.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. Regions' Certificate and Bylaws provide that special meetings of
stockholders may be called at any time, but only by the chief executive officer,
the secretary, or the Board of Directors of Regions. Regions stockholders do not
have the right to call a special meeting or to require that Regions' Board of
Directors call such a meeting. This provision, combined with other provisions of
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.
Bullsboro. Under the Articles, a special meeting of stockholders may be called
at any time by the President, the Board of Directors, the Chairman of the Board,
or the holders of at least twenty-five percent of all outstanding shares of
Bullsboro entitled to vote in the election of directors.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The 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.
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Bullsboro. The Articles provide that stockholders may take any action required
to be taken at a meeting of stockholders, or any action which may be taken at
such a meeting, without a meeting, if written consents, setting forth the action
to be taken, are signed by stockholders who would be entitled to cast at a
meeting at least the number of votes that would be necessary to take such action
at a meeting at which all shares entitled to vote were present and voted.
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.
Bullsboro. Neither Bullsboro's Articles nor Bylaws contains any provisions
governing or restricting the means by which stockholders may nominate
individuals to be directors of Bullsboro.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The 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
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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.
Bullsboro. The Georgia Business Corporation Act generally provides that, unless
a corporation's articles otherwise provide, such transactions require the
approval by the corporation's board of directors and by a majority of the
corporation's outstanding shares. Bullsboro Bullsboro's Articles provide that
the vote of the holders of at least two-thirds (2/3) of the issued and
outstanding shares of Bullsboro are required to approve: (i) any merger or share
exchange of Bullsboro with or into any other corporation; and (ii) any sale,
lease, exchange or other disposition of all or substantially all of the assets
of Bullsboro to any other corporation, person or other entity, except that the
increased vote requirement does not apply to: (a) any merger or similar
transaction with any corporation if two-thirds (2/3) or more of the directors
then holding office approve such transaction prior to its consummation; or (b)
any merger or share exchange of Bullsboro with or into, or any sale or lease,
exchange or other disposition of any assets of the Bullsboro (or of any
subsidiary thereof) to, any corporation of which a majority of the outstanding
shares of all classes of stock entitled to vote in an election of directors is
owned of record or beneficially by Bullsboro and its subsidiaries.
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.
Bullsboro. The provisions of the Georgia Business Corporation Act comparable to
Section 203 of the Delaware General Corporation Law, and which provide for
special
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approval requirements for business combinations with interested stockholders are
not applicable to Bullsboro. Such provisions are applicable to a corporation
only if the corporation's bylaws expressly provide that they will be.
Bullsboro's Bylaws do not provide for the applicability of such provisions.
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.
Bullsboro. The rights of dissenting stockholders under Georgia law are
generally similar to those afforded under the Delaware General Corporation Law.
A summary of the pertinent provisions of the Georgia Business Corporation Act
pertaining to dissenters' rights is set forth under the caption "The
Merger -- Dissenting Stockholders," and such provisions are included as Appendix
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.
Bullsboro. Pursuant to the Georgia Business Corporation Act, upon written
notice of a demand to inspect corporate records, a stockholder is entitled to
inspect specified corporate records, including articles of incorporation and
bylaws, minutes of stockholder meetings and certain resolutions adopted at
director meetings, stockholder list, and all stockholder communications for the
preceding three years, including financial statements. Upon demonstration of a
proper purpose, a stockholder may be entitled to inspect other corporate
records.
DIVIDENDS
Regions. The Delaware General Corporation Law provides that, subject to any
restrictions in the corporation's certificate of incorporation, dividends may be
declared from
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the corporation's surplus, or, if there is no surplus, from its net profits for
the fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary depository institutions. There are various statutory limitations on
the ability of Regions' subsidiary depository institutions to pay dividends to
Regions. See "Certain Regulatory Considerations -- Payment of Dividends."
Bullsboro. Pursuant to the Georgia Business Corporation Act, a board of
directors may from time to time make distributions to its stockholders, subject
to restrictions in its articles of incorporation, provided that no distribution
may be made if, after giving it effect, (i) the corporation would not be able to
pay its debts as they become due in the usual course of business, or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
45
<PAGE> 53
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions common stock is quoted on the Nasdaq National Market under the symbol
"RGBK." Bullsboro common stock is not traded in any established market. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for Regions common stock as reported on the Nasdaq National Market,
the high and low prices for Bullsboro common stock and the cash dividends
declared per share of Regions common stock for the indicated periods. The prices
indicated for Bullsboro are based on actual transactions in Bullsboro common
stock of which Bullsboro management is aware; however, for the indicated period
there has been only a small number of transactions and all such transactions
have involved limited numbers of shares in Bullsboro common stock in the
indicated periods, and no assurance can be given that the indicated prices
represent the actual market value of the Bullsboro common stock. The amounts
indicated for Regions have been adjusted to reflect a 2-for-1 stock split
effected by Regions on June 13, 1997.
<TABLE>
<CAPTION>
REGIONS BULLSBORO
--------------------------- ---------------
CASH
PRICE RANGE DIVIDENDS PRICE RANGE
--------------- DECLARED ---------------
HIGH LOW PER SHARE HIGH LOW
------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C>
1996
First Quarter.......................... $24.00 $20.38 $.175 $35.00 $35.00
Second Quarter......................... 24.19 21.13 .175 37.00 35.00
Third Quarter.......................... 24.32 21.82 .175 37.00 40.00
Fourth Quarter......................... 26.88 24.38 .175 40.00 40.00
1997
First Quarter.......................... 30.94 25.69 .20 43.29 43.29
Second Quarter......................... 33.25 27.38 .20 43.29 43.29
Third Quarter.......................... 39.13 32.06 .20 60.00 43.29
Fourth Quarter......................... 44.75 36.56 .20 60.00 60.00
1998
First Quarter.......................... 43.50 37.94 .23 60.00 60.00
Second Quarter......................... 45.25 38.66 .23 60.00 60.00
Third Quarter.......................... 42.69 33.81 .23 62.00 62.00
Fourth Quarter (through ,
1998)................................
</TABLE>
On , 1998, the last reported sale price of Regions common stock as
reported on the Nasdaq National Market, and the price of Bullsboro common stock
in the last known transaction, which occurred in , were $
and $ , respectively. On July 16, 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, and the last known price of Bullsboro common stock, were $42.00 and
$60.00, respectively.
The holders of Regions common stock are entitled to receive dividends when and
if declared by the Board of Directors out of funds legally available therefor.
Regions has paid regular quarterly cash dividends since 1971. Although Regions
currently intends to continue to pay quarterly cash dividends on the Regions
common stock, there can be no assurance that Regions' dividend policy will
remain unchanged after completion of the Merger. The declaration and payment of
dividends thereafter will depend upon business
46
<PAGE> 54
conditions, operating results, capital and reserve requirements, and the Board
of Directors' consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and its
revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions. Regions' subsidiary depository institutions
are subject to certain legal restrictions on the amount of dividends they are
permitted to pay. See "Supervision and Regulation -- Payment of Dividends."
Bullsboro's dividend policy has been to maintain capital to provide financial
strength to its subsidiary. Earnings have been retained consistent with the
organization's capital needs, asset quality and overall financial condition with
a minimum required capitalization of 8% on a consolidated basis. Dividends are
limited to consolidated net income over the past year and are funded from cash
balances and upstream dividends from the bank subsidiary. Borrowings are not
undertaken to fund dividend payments to stockholders. In 1996 and 1997,
Bullsboro paid 4% stock dividends, and made cash payment for fractional shares
in connection with those stock dividends. No dividends have been declared in
1997.
47
<PAGE> 55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS: BULLSBORO BANCSHARES, INC.
The following is Management's discussion and analysis of Bullsboro's
consolidated financial condition and results of operations for the indicated
dates and periods. You should read this discussion in conjunction with
Bullsboro's consolidated financial statements and notes included elsewhere in
this Proxy Statement-Prospectus. Dollar amounts, other than per share figures,
have been rounded to the nearest thousand unless otherwise indicated.
GENERAL
Bullsboro is a bank holding company organized under the laws of the State of
Georgia. Bullsboro owns all of the stock of THE BANK of Newnan, a
state-chartered commercial bank founded in 1987. At September 30, 1998, the
Company had approximately $ 107.7 million in total assets, $91.3 million in
total deposits, and $10.9 million in shareholders' equity. The deposits of the
Bank are insured by the Federal Deposit Insurance Corporation.
The Bank provides a broad range of consumer and commercial banking services
through its main office and a branch in Coweta County, Georgia. These services
include demand, savings and time deposits, individual retirement accounts, safe
deposit boxes, ATM cards, and real estate, installment and commercial loans,
including receivables factoring. The Bank substantially expanded and renovated
its main office in 1997. The Company offers a check imaging system, implemented
in 1998 as the first of its kind in Coweta County, and a twenty-four hour
telephone banking, which handles hundreds of calls a day.
The Company focuses on consumers and small businesses in the Coweta County
market. At September 30, 1998, commercial loans totaled $ 27.0 million, or 39%
of the $68.8 million total loan portfolio. Commercial loans included $6.0
million in factored receivables originated through the Bank's asset based
lending program. This asset based lending program is a joint effort of the Bank
and Southern Asset Management, Inc., an independent asset based lending
management company that provides services to the Bank under contract. Deposits
at September 30, 1998, totaled $91.3 million, of which $36.7 million, or 28%,
were demand, savings, and money market accounts.
SUMMARY OF EARNINGS
Nine months ended September 30, 1998 and 1997. Net income for the first nine
months of 1998 was $1,256,000, a decrease of $99,000, or 7%, from the 1,355,000,
earned in the first nine months of 1997. Basic and diluted earnings per common
share were $6.21 and $5.79 for the first nine months of 1998 compared to $7.06
and $6.41 for the first nine months of 1997. Return on equity, the annualized
percentage of net income to average stockholders' equity, was 17.26% for the
first nine months of 1998 compared to 23.58% for the same period in 1997. Return
on assets, the annualized percentage of net income to total average assets, was
1.61% for the first nine months of 1998 and 1.99% for the first nine months of
1997.
Years ended December 31, 1997 and 1996. Net income for 1997 was $1,568,000, an
increase of $343,000, or 28% over the $1,225,000 earned in 1996. Basic and
diluted earnings per common share were $8.17 and $ 7.42 for 1997 compared to
$6.39 and $5.90 for 1996. Return on equity was 19.72% for 1997 compared to
19.34% for 1996. Return on assets was 1.70% and 1.58% for 1997 and 1996.
48
<PAGE> 56
INTEREST INCOME AND EXPENSE
Nine months ended September 30, 1998 and 1997. Net interest income was
$4,421,000 for the first nine months of 1998, an increase of $48,000, or 1%,
from the first nine months of 1997. Net interest margin was 6.23% and 7.39% for
the first nine months of 1998 and 1997. The slight increase in net interest
income was primarily the result of a $15.7 million (20%) increase in average
earning assets offset by a $11.0 million (15%) increase in interest bearing
liabilities used to fund the growth in earning assets and a 1.35% decrease in
the yield on average earning assets.
49
<PAGE> 57
Years ended December 31, 1997 and 1996. Net interest income was $5,938,000 for
1997, an increase of $1,629,000, or 38%, over 1996. The net interest margin was
7.14% and 6.43% for 1997 and 1996. The increase in net interest income was
primarily the result of an increase in average earning assets (up $16.2 million
or 24%) and a 48 basis point increase in the rate on average interest earning
assets, offset by an $11.6 million (19%) increase in interest bearing
liabilities.
BULLSBORO BANCSHARES, INC.
AVERAGE BALANCES AND YIELDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------------------------------------------------------ ----------------------------
1998 1997 1997
----------------------------- ---------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------- ------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment
Securities(1)........... $ 14,736 $ 642 5.81% $10,109 $ 625 8.24% $ 9,537 $ 831 8.71%
Loans(1)(2).............. 69,653 6,570 12.57 65,842 6,422 13.00 69,358 8,730 12.59
Other interest-earning
assets.................. 10,189 418 5.47 2,897 113 5.20 4,254 184 4.33
-------- ------ ------- ------ ------- ------
Total interest-earning
assets.................. 94,578 7,630 10.75 78,848 7,160 12.10 83,149 9,745 11.72
Non interest-earning
assets.................. 9,743 12,131 8,922
-------- ------- -------
Total Assets............. $104,321 $90,979 $92,071
======== ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Savings and interest
checking................ $ 13,463 250 2.48 $11,697 207 2.36 $11,689 276 2.36
Money market accounts.... 11,504 328 3.80 7,088 176 3.31 8,175 284 3.47
Time deposits............ 54,904 2,480 6.02 53,479 2,402 5.99 53,782 3,245 6.03
-------- ------ ------- ------ ------- ------
Total interest-bearing
deposits.............. 79,871 3,058 5.10 72,264 2,785 5.14 73,646 3,805 5.17
Other interest-bearing
liabilities............. 3,414 151 5.90 23 2 11.59 19 2 10.53
-------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities........... 83,285 3,209 5.14 72,287 2,787 5.14 73,665 3,807 5.17
------ ------ ------
Noninterest bearing
liabilities:
Demand deposits......... 10,368 9,569 9,464
Other noninterest-bearing
liabilities............. 1,080 1,439 991
-------- ------- -------
Total Liabilities....... 84,365
Stockholders' equity..... 9,588 7,684 7,951
-------- ------- -------
Total Liabilities and
Stockholders Equity..... $104,321 $90,979 $92,071
======== ======= =======
Net Interest Income...... $4,421 $4,373 $5,938
====== ====== ======
Net Interest Spread...... 5.62% 6.97% 6.55%
===== ===== =====
Net Interest Margin...... 6.23% 7.39% 7.14%
===== ===== =====
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1996
----------------------------
AVERAGE AVERAGE
BALANCE INTEREST RATE
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Investment
Securities(1)........... $11,176 $ 870 7.78%
Loans(1)(2).............. 53,697 6,544 12.19
Other interest-earning
assets.................. 2,081 111 5.33
------- ------
Total interest-earning
assets.................. 66,954 7,525 11.24
Non interest-earning
assets.................. 10,660
-------
Total Assets............. $77,614
=======
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Savings and interest
checking................ $10,784 259 2.40
Money market accounts.... 6,454 190 2.94
Time deposits............ 44,827 2,765 6.17
------- ------
Total interest-bearing
deposits.............. 62,065 3,214 5.18
Other interest-bearing
liabilities............. 10 1 10.00
------- ------
Total interest-bearing
liabilities........... 62,075 3,215 5.18
------
Noninterest bearing
liabilities:
Demand deposits......... 7,807
Other noninterest-bearing
liabilities............. 1,397
-------
Total Liabilities.......
Stockholders' equity..... 6,335
-------
Total Liabilities and
Stockholders Equity..... $77,614
=======
Net Interest Income...... $4,310
======
Net Interest Spread...... 6.06%
=====
Net Interest Margin...... 6.43%
=====
</TABLE>
- -------------------------
(1) Interest revenues are not adjusted to reflect the effect of tax-exempt loans
and securities.
(2) Non accrual loans are included in average loans. Interest on loans includes
fees of $1,839 thousand and $1,677 thousand for the nine months ended
September 30, 1998
50
<PAGE> 58
and 1997, and $2,415 thousand and $1,103 thousand for the years ended
December 31, 1997 and 1996.
CHANGES IN INTEREST INCOME AND EXPENSE/RATE AND VOLUME VARIANCES
The following table shows the changes in interest income and expense
attributable to changes in average volume and rates from the corresponding
period in the preceding year. The changes in interest due to the combined change
of rates and volumes have been allocated in proportion to the absolute dollar
amounts of the changes due to rate and volume.
RATE AND VOLUME VARIANCES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED YEAR ENDED
INCREASE (DECREASE) DECEMBER 31, 1997 DECEMBER 31, 1996
DUE TO CHANGES INCREASE (DECREASE) INCREASE (DECREASE)
IN:(1) DUE TO CHANGES IN:(1) DUE TO CHANGES IN:(1)
---------------------- ---------------------- ----------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ----- ----- ------ ---- ------ ------ ---- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment Securities(1)............... $ 235 $(218) $ 17 $(136) $ 97 $ (39) $ (80) $149 $ 69
Loans(1)............................... 364 (216) 148 1,965 221 2,186 1,065 6 1,071
Other interest-earning assets.......... 299 6 305 97 (24) 73 63 (5) 58
Total interest-earning assets...... 898 (428) 470 1,926 294 2,220 1,048 150 1,198
INTEREST-BEARING LIABILITIES:
Savings and interest checking.......... 32 11 43 21 (4) 17 4 10 14
Money market accounts................ 123 29 152 56 38 94 (2) (6) (8)
Time deposits.......................... 64 14 78 541 (61) 480 560 (5) 555
Total interest-bearing deposits...... 219 54 273 618 (27) 591 562 (1) 561
Other interest-bearing liabilities..... 150 (1) 149 1 0 1 (4) 2 (2)
Total interest-bearing liabilities... 369 53 422 619 (27) 592 558 1 559
Change in Net Interest Income.......... 529 (481) 48 1,307 321 1,628 490 149 639
</TABLE>
- -------------------------
(1) Interest revenues are not adjusted to reflect the effect of tax-exempt loans
and securities.
PROVISION FOR LOAN LOSSES
Provisions for loan losses and recoveries of loans previously charged off
increase the allowance for loan losses, while charge offs decrease the
allowance. On a periodic basis, management determines the amount of the
provision for possible loan losses necessary to maintain the allowance for loan
losses at a level that management deems adequate. In order to determine the
appropriate level of the allowance for loan losses, management considers factors
including the balance of the allowance; the size, composition and quality of the
loan portfolio; levels and trends in identified problem assets; use of
appraisals to estimate the value of collateral; and prevailing and anticipated
economic conditions. See the discussion of "Credit Risk."
Nine months ended September 30, 1998 and 1997. The provision for loan losses
was $208,000 for the first nine months of 1998, compared to $210,000 for the
first nine months of 1997, a 1% decrease.
Years ended December 31, 1997 and 1996. The provision for loan losses was
$716,000 for 1997, compared to $289,000 in 1996, an increase of $427,000, or
148%. Most of this
51
<PAGE> 59
increase was the result of the deterioration of a large commercial credit during
1997 and a revision in management's method of assessing reserve adequacy on
factored receivables.
OTHER INCOME AND EXPENSE
Nine months ended September 30, 1998 and 1997. Other income of $794,000 in the
first nine months of 1998 was approximately $34,000, or 4% less than the
$828,000 recorded in the first nine months of 1997. This decrease resulted from
declines of $46,000 (26%) in other noninterest income caused mainly by a
reduction in SBA loan originations, and $51,000 (44%) in gains on sales of
loans, which were partially offset by a $62,000 (12%), increase in service
charges and fees.
Other expense for the first nine months of 1998 of $3,049,000 increased
$198,000, or 7%, from the $2,851,000 recorded in the first nine months of 1997.
The increase was primarily the result of costs related to the proposed Merger,
the Year 2000 issue, the new check imaging system, and the renovated main
office. Compared to the first nine months of 1997, 1998 occupancy expense of
$482,000 was up $90,000 (23%), and general and administrative expense of
$1,207,000 was up $220,000 (22%). The increases in those expense categories were
offset by a $112,000 decrease in salaries and benefits, which resulted from
lower staffing, made possible, in part, by the operation of the check imaging
system.
Years ended December 31, 1997 and 1996. Other income of $1,055,000 increased
$71,000, or 7% in 1997 over 1996, as a net result of a $74,000 (11%) increase in
service charges on deposit accounts, an $84,000 (117%) increase in gains on the
sale of loans, a $58,000 (25%) decrease in other service charges and fees, and a
$29,000 decrease in net realized gains on sales of available for sale
securities.
Other expense for 1997 of $3,869,000, increased $790,000 (26%) over 1996. Each
category of other expense increased: salaries and benefits increased $394,000
(25%); equipment and occupancy expenses increased $112,000 (30%); and other
operating expenses increased $283,000 (25%).
INCOME TAXES
Nine months ended September 30, 1998 and 1997. Income tax expense of $702,000
for the first nine months of 1998 was down $83,000 from the same period in 1997,
mainly as a result of the lower 1998 pre-tax income.
Years ended December 31, 1997 and 1996. Income tax expense of $840,000 for 1997
increased $140,000, or 20%, over 1996 as a result of higher pre-tax income.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Loans. Total loans, net of unearned income but before deduction of the
allowance for loan losses, were $68,799,000 at September 30, 1998. At December
31, 1997, loans totaled $70,914,000, up $9,148,000, or 15%, from year-end 1996.
Total loans declined $2,116,000, or 3%, in the first nine months of 1998, mainly
due to a lower volume in SBA loans and factored receivables. The loan portfolio
does not contain any concentration of loans to borrowers engaged in the same or
similar activities. Bullsboro's loans are, however, made primarily to borrowers
within Coweta County and nearby areas in the State of Georgia.
52
<PAGE> 60
Economic conditions within those areas may affect loan demand and the ability of
Bullsboro's borrowers to pay in accordance with the terms of their loans.
The following table shows the composition of Bullsboro's loan portfolio, net of
unearned interest, at each of the dates indicated:
LOANS OUTSTANDING BY TYPE
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------------- ------------------- -------------------
% OF % OF % OF
BALANCE PORTFOLIO BALANCE PORTFOLIO BALANCE PORTFOLIO
------- --------- ------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real Estate -- Mortgage.... $19,716 29% $29,843 42% $27,101 44%
Real
Estate -- Construction... 8,984 13 9,244 13 10,089 16
Commercial................. 26,984 39 14,479 20 11,158 18
Consumer................... 13,115 19 17,348 24 13,418 22
------- ---- ------- ---- ------- ----
Total............ 68,799 100% 70,914 100% 61,766 100%
==== ==== ====
Less:
Allowance for loan
losses................... (1,044) (1,583) (936)
Loans, net....... $67,755 $69,331 $60,830
======= ======= =======
</TABLE>
The following table shows the remaining maturities of loans by category at
December 31, 1997.
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
---------------------------------------------
DUE IN ONE DUE DUE AFTER
YEAR OR LESS ONE-FIVE YEARS FIVE YEARS
------------ -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Real Estate -- Mortgage.................. $18,942 $ 9,501 $1,400
Real Estate -- Construction.............. 9,244 -- --
Commercial............................... 12,636 1,843 --
Consumer................................. 4,772 11,949 627
------- ------- ------
TOTAL LOANS MATURITIES......... $45,594 $23,293 $2,027
======= ======= ======
Loans with Maturities of One Year or
Greater: FIXED RATE VARIABLE RATE
------- ------
Real Estate -- Mortgage.................. $ 2,585 $8,316
Real Estate -- Construction.............. -- --
Commercial............................... 1,843 --
Consumer................................. 12,576 --
------- ------
TOTAL LOANS.................... $17,004 $8,316
======= ======
</TABLE>
Credit Risk. Bullsboro establishes an allowance for loan losses in an amount it
deems adequate to provide for losses in the loan portfolio. Management of
Bullsboro assesses the adequacy of the allowance for loan losses based upon a
number of factors, including, among others, the size, composition and quality of
the loan portfolio; levels and trends in identified problem assets; use of
appraisals to estimate the value of collateral; and
53
<PAGE> 61
management's judgment as to prevailing and anticipated economic conditions. The
allowance for loan losses was $1,044,000, or 1.52% of total loans, at September
30, 1998. Total nonperforming loans at September 30, 1998 were $914,000, 1.33%
of total loans, compared to $1,189,000, 1.68% of total loans, at December 31,
1997.
The following is an analysis of Bullsboro's allowance for loan losses for the
indicated periods.
SUMMARY OF LOAN LOSS EXPERIENCE AND RELATED INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period........ $ 1,583 $ 936 $ 778
------- ------- -------
Loans charged-off:
Commercial.......................... 1,051 34 27
Real estate -- construction......... -- -- --
Real estate -- mortgage............. -- -- --
Consumer and other.................. 241 87 157
------- ------- -------
TOTAL CHARGE-OFFS........... 1,292 121 184
------- ------- -------
Recoveries:
Commercial.......................... 462 8 6
Real estate -- construction......... -- -- --
Real estate -- mortgage............. -- 1 1
Consumer and other.................. 83 43 46
------- ------- -------
TOTAL RECOVERIES............ 545 52 53
------- ------- -------
Net charge-offs (recoveries).......... 747 69 131
Provision charged to operating
expense............................. 208 716 289
------- ------- -------
BALANCE AT END OF PERIOD.... $ 1,044 $ 1,583 $ 936
======= ======= =======
Loans outstanding:
Average............................. $69,653 $69,358 $53,697
End of period....................... 68,799 70,914 61,766
Net charge-offs (recoveries) to
average loans outstanding........... 1.43% 0.10% 0.24%
Allowance for possible loan losses to
total loans outstanding at period
end................................. 1.52% 2.23% 1.52%
</TABLE>
(a) Annualized
Bullsboro does not allocate the allowance for loan losses by loan category. The
entire allowance is available to absorb losses in any category of loans.
54
<PAGE> 62
The following table shows the amounts of Bullsboro's nonperforming assets at the
indicated dates.
NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans...................... $896 $ 909 $271
Loans past due 90 days or more........ 18 280 162
Restructured loans.................... -- -- --
---- ------ ----
Total non-performing
loans.................... 914 1,189 433
Other real estate owned net
allowance........................... -- -- --
Other non-performing assets........... -- -- --
---- ------ ----
Total non-performing
assets................... $914 $1,189 $433
==== ====== ====
Total non-performing loans
to total loans........... 1.33% 1.68% 0.70%
Total non-performing assets
to total assets.......... 0.85% 1.22% 0.51%
</TABLE>
Nonperforming loans consist of loans on a nonaccrual basis, loans that are
contractually past due 90 days or more, and loans, the original terms of which
have been restructured. Interest accruals are discontinued on impaired loans
when, in management's opinion, the borrower may be unable to meet payments as
they become due. Interest income is subsequently recognized only to the extent
cash payments are received. During the first nine months of 1998, $9,000 in
interest income was received on nonaccrual loans. If interest on those loans had
been accrued, total interest income of $ 74,000 would have been recorded. In
addition to the above loans, management has identified $2.3 million in
performing loans outstanding at September 30, 1998, as potential problem loans,
where management has doubts as to the ability of the borrowers to comply with
present loan repayment terms. These loans are subject to continuing management
attention.
Investment Securities. Investment securities totaled $15,139,000 at September
30, 1998, up $1.6 million, or 12% from December 31, 1997. At year-end 1997,
total investment securities were $13,534,000, down $108,000, or 1%, from
year-end 1996. Average investment securities represented 16% and 13% of earning
assets in the first nine months of 1998 and 1997, respectively, and 11% and 17%
of earning assets in the years 1997 and 1996, respectively.
55
<PAGE> 63
The following table shows the maturities, book value, and weighted average yield
of investment securities at September 30, 1998. Yields are not adjusted to
reflect the effects of tax-exempt securities.
<TABLE>
<CAPTION>
MATURITIES WEIGHTED MATURITIES WEIGHTED MATURITIES WEIGHTED MATURITIES WEIGHTED
ONE AVERAGE ONE TO FIVE AVERAGE FIVE TO TEN AVERAGE OVER TEN AVERAGE
BOOK VALUE YEAR YIELD YEARS YIELD YEARS YIELD YEARS YIELD
---------- ---------- -------- ----------- -------- ----------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US treasury and
agencies........... $11,849 $2,003 5.45% $ 9,346 6.00% $ 500 6.00% $ -- --%
States and political
subdivisions....... 2,996 -- -- 2,124 4.26 707 4.29 165 4.65
Other securities..... 294 294 7.50 -- -- -- -- -- --
------- ------ ---- ------- ---- ------ ---- ---- ----
Total........ $15,139 $2,297 5.72% $11,470 5.68% $1,207 5.00% $165 4.65%
======= ====== ==== ======= ==== ====== ==== ==== ====
</TABLE>
The following table shows the book value of investment securities at the
indicated dates:
BOOK VALUE OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------
1998 1997 1996
------------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
U.S. Government and Agency Securities............ $ 8,545 $ 8,734 $11,324
State and municipal securities................... 2,996 1,562 135
Mortgage-backed securities....................... 3,304 2,966 2,183
Equity securities................................ 294 272 --
------- ------- -------
Total.................................. $15,139 $13,534 $13,642
======= ======= =======
</TABLE>
Deposits. Total deposits of $91,316,000 at September 30, 1998, were 3.4
million, or 4%, greater than at December 31, 1997. The most significant changes
from year-end 1997, occurred in interest-bearing demand deposits, which
increased $2.6 million or 27%, $100,000 and over time deposits, which increased
$15.6 million, or 77%, and other time deposits, which decreased $15.0 million,
or 44%. At December 31, 1997, total deposits were $87,870,000, up $10,598,000,
or 14%, over the $77,272,000 total at December 31, 1996. The most significant
change from year-end 1996 to year-end 1997 was a $7.6 million (58%) increase in
interest-bearing demand deposits.
The following table shows the amount of the Bank's certificates of deposit of
$100,000 or more by time remaining until maturity.
CERTIFICATE OF DEPOSIT OF OVER $100,000 BY MATURITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Three months or less...................... $ 6,117 $ 1,465 $ 2,223
Over thee months through one year......... 5,840 12,089 11,641
Over one year............................. 6,758 6,604 4,361
------- ------- -------
Total........................... $18,715 $20,158 $18,225
======= ======= =======
</TABLE>
56
<PAGE> 64
Capital Resources. At September 30, 1998, total stockholders' equity was
$10,887,000, or 10.10% of total assets, compared to $8,743,000, or 8.94% percent
of total assets, at year-end 1997, and $7,105,000, or 8.33%, at year-end 1996.
Stockholders equity grew 25% from December 31, 1997 to September 30, 1998, and
23% from year-end 1996 to year-end 1997. The growth in stockholders' equity was
primarily the result of net income in each period, and, for the first nine
months of 1998, $863,000 in proceeds from the exercise of stock options.
Bullsboro and the Bank are subject to various regulatory capital requirements.
Failure to meet minimum regulatory capital requirements can have direct,
material effects on Bullsboro and its operations. At September 30, 1998, the
Bank was "well capitalized" for regulatory purposes. See "Supervision and
Regulation-Capital Adequacy."
Liquidity. Liquidity is the ability to meet cash flow requirements as they
occur without adverse liquidation of longer-term assets. Bullsboro's primary
sources of liquidity are cash on hand, deposits in banks, federal funds sold,
and the fair value of securities available for sale. At September 30, 1998,
these liquid assets represented 29% of total deposits and other interest bearing
liabilities. Additional sources of liquidity are paydowns and maturities within
the investment portfolio, loan maturities and repayments, available lines to
purchase overnight funds from correspondent banks, and advances from the Federal
Home Loan Bank of Atlanta.
Asset/Liability Management. Net interest income, the primary component of
Bullsboro's net income, arises from the difference between the yield on interest
earning assets and the cost of interest bearing liabilities, and the relative
amounts of these assets and liabilities. Bullsboro manages its interest-related
assets and liabilities by coordinating the levels of, or gap between, interest
rate sensitive assets and liabilities to minimize changes in net interest income
despite changes in market interest rates. This asset/liability policy is
intended to stabilize the long-run earnings power of Bullsboro as it achieves
its growth objectives.
Effects of Inflation. The financial statements and related financial data
presented in this Proxy Statement have been prepared in accordance with
generally accepted accounting principles and practices within the banking
industry, which require the measurement of financial position and operating
results in terms of historical dollars without considering the changes in the
relative purchasing power of money over time due to inflation. Unlike most
industrial companies, virtually all the asset and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effect of
general levels of inflation.
YEAR 2000 ISSUES
Many computer programs now in use have not been designed to properly recognize
years after 1999. If not corrected, these programs could fail or create
erroneous results. This year 2000 ("Y2K") issue affects the entire banking
industry because of its reliance on computers and other equipment that use
computer chips, and may have significant effects on banking customers, bank
regulators, and the general economy.
In 1997, Management created a task force and established a Y2K Plan to prevent
or mitigate adverse effects of the Y2K issue on Bullsboro and its customers.
Goals of the Y2K Plan include identifying risks, testing data processing and
other systems and equipment used by Bullsboro, informing customers of Y2K issues
and risks, establishing a contingency plan for operating if Y2K issues cause
important systems or equipment to fail,
57
<PAGE> 65
implementing changes necessary to achieve Y2K compliance, and verifying that
these changes are effective. The Board of Directors reviews progress under the
plan each quarter.
Management designed the Y2K Plan to comply with the requirements for Y2K efforts
established by the Federal Deposit Insurance Corporation, the primary federal
regulator of the Bank. The FDIC also has performed Y2K examinations of the
Bank's Y2K Plan and the Bank's progress in implementing the plan. Federal
regulations prevent banks from disclosing the results of Y2K examinations by
banking regulators. The examinations do not represent approval or certification
of a bank or bank holding company's Y2K plans or efforts.
Bullsboro continues to implement the Y2K Plan. Bullsboro has met its Y2K goals
to date and believes that it will continue to meet the goals of the Y2K Plan. By
September 30, 1998, Bullsboro had performed risk assessments, had assessed the
Y2K preparedness of suppliers of data processing services to Bullsboro and of
large customers, had implemented its customer awareness program, had begun
development of the Y2K contingency plan, and was in the process of testing and
implementing necessary changes in hardware and software. Significant additional
steps must be taken to achieve Y2K compliance, including some steps that may not
yet be identified. Elements of the Y2K Plan, such as risk assessments, customer
communications, and testing of systems and equipment, are processes that will
continue into the year 2000.
The Y2K contingency plan calls for Bullsboro to manually process bank
transactions and to use other data processing methods, in the event that Y2K
efforts of Bullsboro and its data services providers are not successful. Delays
in processing banking transactions would result if Bullsboro were required to
use manual processing or other methods instead of its normal computer processes.
These delays could disrupt the normal business activities of Bullsboro and its
customers. Bullsboro must assure that the computer systems it uses to process
transactions are Year 2000 ready in order to avoid these disruptions.
Bullsboro's primary supplier of data processing services also has adopted a Y2K
plan and timetable to make the changes necessary for it to provide services in
the year 2000, and has provided written assurances to Bullsboro of its progress.
That supplier has been examined for Y2K readiness by federal bank examiners. The
supplier and Bullsboro are in the process of testing the software changes that
have been made to date. Bullsboro is also monitoring the progress of its other
suppliers of data processing services.
Management believes that the cost of resolving Y2K issues related to Bullsboro's
computer programs and those used by its suppliers of significant data processing
services will not be material to Bullsboro's business, operations, liquidity,
capital resources, or financial condition, based on information developed to
date and communications from data processing suppliers. Bullsboro estimates that
its total cash outlays in connection with Y2K compliance will be less than
$110,000, excluding costs of Company employees involved in Y2K compliance
activities. Less than $10,000 of this amount has been expended through September
30, 1998. Bullsboro is funding its Y2K expenditures through continuing
operations.
Although Bullsboro has completed an assessment of Y2K effects on its current
commercial lending and other customers, the actual effects on individual,
corporate and governmental customers of Bullsboro and on governmental
authorities that regulate Bullsboro and its subsidiaries, and any resulting
consequences to Bullsboro, cannot be determined with any assurance. Bullsboro's
belief that it, and its primary suppliers of data processing services,
58
<PAGE> 66
will achieve Y2K compliance, are based on a number of assumptions and on
statements made by third parties, and are subject to uncertainty. Bullsboro also
is not able to predict the effects, if any, on Bullsboro, financial markets or
society in general of the public's reaction to Y2K. Because of this uncertainty
and reliance upon assumptions and statements of third parties, Bullsboro cannot
be assured that the results of its Y2K Plan will be achieved. Management
believes, however, that Bullsboro will be able to accomplish its Y2K goals.
59
<PAGE> 67
INFORMATION ABOUT BULLSBORO
Bullsboro is a bank holding company organized under the laws of the state of
Georgia. Bullsboro operates principally through THE BANK of Newnan, which is a
state-chartered commercial bank and which provides a range of consumer and
commercial banking services through two offices in Coweta County, Georgia. At
September 30, 1998, Bullsboro had total consolidated assets of approximately
$107.7 million, total consolidated deposits of approximately $91.3 million, and
total consolidated stockholders' equity of approximately $10.9 million.
Bullsboro also engages in asset-based lending through a contractual relationship
between THE BANK of Newnan and a third-party. At September 30, 1998,
approximately $ of asset-based lending receivables were included in
Bullsboro's total assets. Bullsboro's principal executive office is located at
40 Bullsboro Drive, Newnan, Georgia, 30264 and its telephone number at such
address is (770) 253-8080.
BUSINESS AND PROPERTIES
THE BANK of Newnan has two banking offices. The main office is located at 40
Bullsboro Drive, Newnan, Georgia, and was renovated and enlarged in 1997 to
approximately 13,000 square feet. It is a two-story stucco structure with a full
basement, drive though facilities, and a twenty-four hour ATM. The branch office
is located at 3111 East Highway 24, Newnan, Georgia. It is a two-story building,
modeled after the style of the main office, and has 8,843 square feet. This
office also has drive through facilities and a twenty-four hour ATM. The bank
uses 4,277 square feet, or 48%, of the space. Of this 4,277, the factoring/asset
based lending department uses 1,856 square feet. Common area totals 1,277 square
feet and 3,289 square feet (37%) is leased to clients.
COMPETITION
Bullsboro and THE BANK of Newnan face vigorous competition in their market areas
from a number of sources, including bank holding companies and commercial banks,
savings and loan associations and other thrift institutions, and tax-exempt
credit unions, Bullsboro Changes in federal and state banking laws in the last
several years have made it easier for out of area financial institutions to
operate in Georgia, and for financial institutions located outside of Coweta
county to establish branch offices in the Bank's market. The Bank also competes
for interest bearing funds with brokerage firms, consumer finance companies,
commercial finance companies, money market funds, and federal, state, and
municipal issuers of short-term obligations. Many of these competitors have
greater financial resources than the Bank. At September 30, 1998, there were six
commercial banks and one savings bank competing with the Bank through offices in
the Bank's Coweta County market area. Institutions that do not have offices in
Coweta County also compete with the Bank.
LEGAL PROCEEDINGS
Bullsboro and THE BANK of Newnan 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 Bullsboro and THE BANK of Newnan. Unless otherwise indicated, each
person has sole
60
<PAGE> 68
voting and investment powers over the indicated shares. Information relating to
beneficial ownership of the Bullsboro is based upon the SEC's "beneficial
ownership" rules. Under these 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 a security, or "investment power,"
which includes the power to dispose or to direct the disposition of a security.
More than one person may be deemed to be a beneficial owner of the same
securities. A person is deemed to be a beneficial owner of any security that the
person has the right to acquire 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 Bullsboro issuable upon
exercise of options exercisable within 60 days from the record date are assumed
to be outstanding for the purpose of determining the percentage of shares
beneficially owned by that person. The SEC's rules sometimes cause the total
percentage ownership disclosed to be less than the sum of the individual
ownership percentages.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
OWNED
PRESENT OCCUPATION POSITION AND DIRECTOR OR AT THE RECORD
AND PRINCIPAL OFFICES HELD EXECUTIVE DATE
OCCUPATION FOR WITH BULLSBORO OFFICER AND PERCENT OF
NAME LAST FIVE YEARS AND BANK SINCE CLASS
- ---- ------------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Hamilton C. Arnall,
Jr................... Retired Chairman of Board 1987 8,990(1) 4.26%
F. Donald Bass......... Physician Director 1987 11,107 5.26%
D. Bruce Church........ Financial Planner Director 1993 2,407 1.14%
A. B. Edge, IV......... Attorney Director 1990 3,908(2) 1.85%
Clifford B. Glover,
III.................. Real Estate Broker Director 1987 3,951(3) 1.87%
C. Frank Holberg,
III.................. Director 1987 5,291(4) 2.51%
Dennis C. McEntire..... General Manager,
Newnan Utilities Director 1990 2,529 1.20%
Harry S. Rivers........ Director 1994 2,187 1.04%
Gus L. Wood............ Attorney Director 1987 5,470(5) 2.59%
President & CEO THE BANK
Bradley H. Murphey..... Banker of Newnan 1986 8,938(6) 4.09%
Executive Vice President
Lahman D. Moore........ Banker THE BANK of Newnan 1996 2,879(7) 1.35%
Vice-President
S. Richard Shook....... Banker THE BANK of Newnan 1989 2,994(8) 1.40%
Vice-President
John D. Fasick......... Banker THE BANK of Newnan 1993 3,847(9) 1.79%
Vice-President
James Kitchens......... Banker THE BANK of Newnan 1996 1,040(10) 0.49%
Chief Financial Officer
Clyde A. McArthur...... Banker THE BANK of Newnan 1998 -- 0.00%
</TABLE>
- -------------------------
(1) Hamilton C. Arnall, Jr., owns 8,347 shares directly, and controls 402
shares beneficially through the ownership of his wife and 241 shares
through the Arinco Corporation of which he is president.
61
<PAGE> 69
(2) Arthur B. Edge, IV, owns 3,137 shares directly and controls 671 shares
through his company's profit sharing and money purchase plans.
(3) Clifford B. Glover, III, owns 3,878 shares directly and his wife owns 73
shares.
(4) C. Frank Holberg, III, owns 4,155 shares directly, his wife Sandra Holberg
owns 1,016 shares and his son John owns 120 shares.
(5) Gus L. Wood owns 4,354 shares directly and controls 1,116 shares through
his company's profit sharing and money purchase plans.
(6) Bradley H. Murphey owns 1,244 shares directly and controls 7,694 shares
that are under option.
(7) Lahman D. Moore owns 0 shares directly and controls 2,879 shares under
option.
(8) S. Richard Shook owns 14 shares directly and has 2,890 shares under option.
(9) John D. Fasick owns 0 shares directly and controls 3,847 shares under
option.
(10) James Kitchens owns 0 shares directly and has 1,040 shares under option.
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, THE BANK of Newnan has loans, deposits and
other transactions with its executive officers, directors, and organizations
with which such persons are associated. Such transactions are on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with others. The aggregate amount of loans
to the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of September 30, 1998, were approximately $866,000.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF BULLSBORO
The following table sets forth certain information concerning the beneficial
owners of more than 5.0% of Bullsboro common stock, as of the record date.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (1)
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock.............. Dr. Donald Bass 11,107 4.76%
240 Jackson Street
Newnan, GA 30264
Common Stock.............. Dennis McDowell 19,606 8.40%
227 West Lakeshore Dr
Carrolton, GA 30217-1937
</TABLE>
62
<PAGE> 70
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 Merger (the "Other
Pending Acquisitions"). Certain aspects of the completed and other pending
acquisitions are presented in the following table:
<TABLE>
<CAPTION>
CONSIDERATION
-----------------------
APPROXIMATE
------------------------
ASSET ACCOUNTING
INSTITUTION SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- ------------ ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
RECENTLY COMPLETED ACQUISITIONS:
Greenville Financial Corporation,
located in
Greenville, South Carolina..... $ 134 $ 34 Regions Pooling of
Common Stock Interests
</TABLE>
63
<PAGE> 71
<TABLE>
<CAPTION>
CONSIDERATION
-----------------------
APPROXIMATE
------------------------
ASSET ACCOUNTING
INSTITUTION SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- ------------ ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
PALFED, Inc., located in
Aiken, South Carolina.......... $ 665 $ 145 Regions Pooling of
Common Stock Interests
First United Bancorporation,
located in Anderson, South
Carolina....................... 292 80 Regions Pooling of
Common Stock Interests
St. Mary Holding Corporation,
located in
Franklin, Louisiana............ 113 31 Regions Pooling
Common Stock of
Interests
Key Florida Bancorp, Inc.,
located in
Bradenton, Florida............. 212 39 Regions Pooling of
Common Stock Interests
First State Corporation, located
in
Albany, Georgia................ 540 161 Regions Pooling of
Common Stock Interests
First Commercial Corporation,
located in
Little Rock, Arkansas.......... 7,382 2,597 Regions Pooling of
Common Stock Interests
Village Bankshares, Inc. located
in
Tampa, Florida................. 211 46 Regions Pooling of
Common Stock Interests
Jacobs Bank, located in
Scottsboro, Alabama............ 186 47 Regions Pooling of
Common Stock Interests
Etowah Bank, located in
Canton, Georgia................ 409 99 Regions Pooling of
Common Stock Interests
First Community Banking Services,
Inc., located in Peachtree
City, Georgia.................. 125 30 Regions Pooling of
Common Stock Interests
OTHER PENDING ACQUISITIONS:
VB&T Bancshares Corporation,
located in
Valdosta, Georgia.............. 75 18 Regions Pooling of
Common Stock Interests
</TABLE>
64
<PAGE> 72
<TABLE>
<CAPTION>
CONSIDERATION
-----------------------
APPROXIMATE
------------------------
ASSET ACCOUNTING
INSTITUTION SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- ------------ ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Meigs County Bancshares, Inc.,
located in
Decatur, Tennessee............. $ 103 $ 23 Regions Pooling of
Common Stock Interests
St. James Bancorporation, Inc.,
located in
Lutcher, Louisiana............. 152 43 Regions Purchase
Common Stock
Arkansas Banking Company, located
in
Jonesboro, Arkansas............ 343 64 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 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. See "Where You Can Find More Information."
Regions accounted for the First Commercial Acquisition as a pooling of
interests. All historical financial information of Regions presented in this
Proxy Statement-Prospectus has been restated to reflect Regions' business
combination with First Commercial Corporation and other significant business
combinations consummated in the first quarter of 1998 which are accounted for as
poolings of interests. See "Where You Can Find More Information."
65
<PAGE> 73
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 Bullsboro. 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 Bullsboro are both bank holding companies registered with the
Federal Reserve Board under the Bank Holding Company Act. As such, Regions and
Bullsboro 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 Bullsboro are located has "opted out."
Accordingly, Regions has the ability to consolidate all of its bank subsidiaries
into a single bank with interstate branches
The Bank Holding Company Act generally prohibits Regions and Bullsboro 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
66
<PAGE> 74
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, 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 Bullsboro 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 Bullsboro (the FDIC and the applicable
state authority) regularly examine the operations of such institutions and have
authority to approve or disapprove mergers, consolidations, the establishment of
branches, and similar corporate actions. The federal and state banking
regulators also have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
Regions and Bullsboro are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both Regions and Bullsboro, 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 Bullsboro,
as well as by Regions and Bullsboro 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, without obtaining
governmental approvals,
67
<PAGE> 75
could declare aggregate dividends to Regions of approximately $252 million, and
the Bank could declare aggregate dividends to Bullsboro of approximately
$787,000.
The payment of dividends by Regions and Bullsboro and their subsidiary
depository institutions may also be affected or limited by other factors, such
as the requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Regions, Bullsboro, 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 Bullsboro 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. However,
small bank holding companies, like Bullsboro, generally are not required to
satisfy minimum capital ratios on a consolidated basis.
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%.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain an
additional cushion of 100 to 200 basis points above the stated minimums. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, the Federal Reserve Board has indicated that
it will consider a "tangible Tier 1 Capital leverage ratio" (deducting all
intangibles) and other indicators of capital strength in evaluating proposals
for expansion or new activities. Regions' Leverage Ratio at September 30, 1998
was 7.84%.
Each of Regions' and Bullsboro'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, Bullsboro, 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. At September 30, 1998, THE BANK of
68
<PAGE> 76
Newnan's Total Capital Ratio was 15.29%, its Tier 1 Capital Ratio was 14.04%,
and its Leverage Ratio was 9.68%.
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 Office of 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 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.
69
<PAGE> 77
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 Bullsboro had the requisite capital levels to qualify as well capitalized.
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 FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 500,000,000 shares of Regions common stock, of
which 221,111,474 shares were issued at September 30, 1998, none of which were
held as treasury shares, and 5,000,000 shares of preferred stock, none of which
are outstanding. No other class of stock is authorized.
70
<PAGE> 78
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 Merger
during May 1999. Under SEC rules, proposals of Regions stockholders intended to
be presented at that meeting must be received by Regions at its principal
executive offices within a reasonable time prior to the mailing of Regions' 1999
annual meeting proxy statement, for consideration by Regions for possible
inclusion in such proxy statement.
EXPERTS
The consolidated financial statements and the supplemental consolidated
financial statements of Regions, incorporated by reference in this Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, for the
periods indicated in their reports thereon which are included in the Annual
Report to Stockholders which is incorporated by reference in its Annual Report
on Form 10-K for the year ended December 31, 1997 and in its current report on
Form 8-K dated November 6, 1998. The financial statements audited by Ernst &
Young LLP have been incorporated by reference in reliance on their reports given
on their authority as experts in accounting and auditing.
The consolidated financial statements of Bullsboro, included in this
Registration Statement, have been audited by Mauldin & Jenkins, LLC, independent
auditors, for the periods indicated in their report. The financial statements
audited by Mauldin & Jenkins, LLC have been included herein in reliance on their
report given on their authority as experts in accounting and auditing.
OPINIONS
The legality of the shares of Regions common stock to be issued in the Merger
will be passed upon by Lange, Simpson, Robinson & Somerville LLP, Birmingham,
Alabama. Henry E. Simpson, partner in the law firm of Lange, Simpson, Robinson &
Somerville LLP, is a member of the Board of Directors of Regions. As of
, 1998, attorneys in the law firm of Lange, Simpson, Robinson &
Somerville LLP owned an aggregate of shares of Regions common
stock.
Certain tax consequences of the transaction have been passed upon by Alston &
Bird LLP, Atlanta, Georgia.
71
<PAGE> 79
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. The
SEC maintains a World Wide Web site on the Internet at "http://www.sec.gov" that
contains reports, proxy and information statements, and other information
regarding companies that file electronically with the SEC, including Regions.
Regions filed a Registration Statement on Form S-4 (the "Registration
Statement") to register the Regions common stock to be issued to Bullsboro
stockholders in the Merger with the SEC. 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. Although the Registration Statement has been filed
with the SEC, Bullsboro does not file other reports, proxy statements or other
documents with the SEC.
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. Information incorporated by reference from earlier
documents is superceded by information that has been incorporated by reference
from more recent documents.
This Proxy Statement-Prospectus incorporates by reference the documents listed
below that Regions has previously filed with the SEC. These documents contain
important information about Regions and its finances. Some of these filings have
been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
REGIONS SEC FILINGS (FILE NO. 0-6159) PERIOD/AS OF DATE
- ------------------------------------- -----------------
<S> <C>
Annual Report on Form 10-K............ Year ended December 31, 1997
Quarterly Reports on Form 10-Q........ Quarters ended March 31, June 30, and
September 30, 1998,
Current Reports on Form 8-K........... February 8, 1998; July 31, 1998;
November 6, 1998
</TABLE>
Regions also incorporates by reference additional documents that may be filed
with the SEC between the date of this Proxy Statement-Prospectus and the
consummation of the Merger or the termination of the Merger Agreement. These
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
Regions has supplied all information contained or incorporated by reference in
this Proxy Statement-Prospectus relating to Regions, and Bullsboro has supplied
all such information relating to Bullsboro.
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.
72
<PAGE> 80
Documents incorporated by reference are available from Regions without charge,
excluding all exhibits, except that if Regions has specifically incorporated by
reference an exhibit in this Proxy Statement-Prospectus, the exhibit will also
be available without charge. Stockholders may obtain documents incorporated by
reference in this Proxy Statement-Prospectus by requesting them in writing or by
telephone from Regions at the following address:
Regions Financial Corporation
417 North 20th Street
Birmingham, AL 35203
Attention: Shareholder Relations
Telephone: (205) 326-7090
You should rely only on the information contained or incorporated by reference
in this Proxy Statement-Prospectus. We have not authorized anyone to provide you
with information that is different from what is contained in this Proxy
Statement-Prospectus. This Proxy Statement-Prospectus is dated
1998. You should not assume that the information contained in this Proxy
Statement-Prospectus is accurate as of any date other than that date. Neither
the mailing of this Proxy Statement-Prospectus to stockholders nor the issuance
of Regions common stock in the Merger creates any implication to the contrary.
73
<PAGE> 81
INDEX TO BULLSBORO BANCSHARES FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1997 and 1996................................ F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997 and 1996.................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996................................ F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Balance Sheets as of September 30, 1998 and
1997 (Unaudited).......................................... F-20
Consolidated Statements of Income for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)................... F-21
Consolidated Statements of Stockholders' Equity for the Nine
Months Ended September 30, 1998 and 1997 (Unaudited)...... F-22
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 (Unaudited)............. F-23
Notes to Unaudited Consolidated Interim Financial
Statements................................................ F-25
</TABLE>
F-1
<PAGE> 82
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Bullsboro Bancshares, Inc. and Subsidiary
Newnan, Georgia
We have audited the accompanying consolidated balance sheets of Bullsboro
Bancshares, Inc. and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bullsboro
Bancshares, Inc. and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
February 20, 1998
F-2
<PAGE> 83
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 4,985,278 $ 4,408,196
Interest-bearing deposits in banks.................... 310,700 75,000
Federal funds sold.................................... 3,720,000 1,650,000
Securities available-for-sale......................... 11,971,806 13,641,683
Securities held-to-maturity........................... 1,561,929 0
Loans................................................. 70,914,486 61,766,050
Less allowance for loan losses........................ 1,583,000 936,116
----------- -----------
Loans, net.................................. 69,331,486 60,829,934
----------- -----------
Premises and equipment................................ 2,972,031 2,297,540
Other assets.......................................... 2,912,508 2,383,342
----------- -----------
Total assets................................ $97,765,738 $85,285,695
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand.......................... $10,545,735 $ 9,762,160
Interest-bearing demand............................. 20,741,865 13,157,259
Savings............................................. 2,675,362 2,952,135
Time, $100,000 and over, including brokered deposits
of $2,772,000 and $990,000....................... 20,158,336 18,224,979
Other time, including brokered deposits of $792,000
in 1997.......................................... 33,748,416 33,175,553
----------- -----------
Total deposits.............................. 87,869,714 77,272,086
Other liabilities..................................... 1,153,318 908,497
----------- -----------
Total liabilities........................... 89,023,032 78,180,583
----------- -----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 1,500,000 shares
authorized; 191,868 and 184,661 issued and
outstanding...................................... 191,868 184,661
Capital surplus..................................... 4,677,485 4,252,272
Retained earnings................................... 3,865,558 2,740,926
Unrealized gains (losses) on securities
available-for-sale, net of tax................... 7,795 (72,747)
----------- -----------
Total stockholders' equity.................. 8,742,706 7,105,112
----------- -----------
Total liabilities and stockholders'
equity................................... $97,765,738 $85,285,695
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 84
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans................................................... $8,730,237 $6,544,134
Taxable securities...................................... 800,401 865,609
Nontaxable securities................................... 30,085 4,112
Deposits in banks....................................... 8,920 387
Federal funds sold...................................... 174,984 110,555
---------- ----------
Total interest income......................... 9,744,627 7,524,797
---------- ----------
INTEREST EXPENSE
Deposits................................................ 3,805,353 3,214,259
Federal funds purchased................................. 1,631 537
Other borrowings........................................ 0 430
---------- ----------
Total interest expense........................ 3,806,984 3,215,226
---------- ----------
Net interest income........................... 5,937,643 4,309,571
Provision for loan losses............................... 716,000 289,106
---------- ----------
Net interest income after provision for loan
losses..................................... 5,221,643 4,020,465
---------- ----------
OTHER INCOME
Service charges on deposit accounts..................... 722,565 648,900
Other service charges and fees.......................... 176,452 234,863
Net realized gains on sales of securities
available-for-sale.................................... 0 28,899
Gain on sale of loans................................... 156,169 71,873
---------- ----------
Total other income............................ 1,055,186 984,535
---------- ----------
OTHER EXPENSES
Salaries and employee benefits.......................... 1,985,427 1,591,677
Equipment and occupancy expenses........................ 486,278 373,913
Other operating expenses................................ 1,397,569 1,114,119
---------- ----------
Total other expenses.......................... 3,869,274 3,079,709
---------- ----------
Income before income taxes.................... 2,407,555 1,925,291
INCOME TAX EXPENSE...................................... 839,737 700,182
---------- ----------
Net income.................................... $1,567,818 $1,225,109
========== ==========
Basic earnings per common share......................... $ 8.17 $ 6.39
========== ==========
Diluted earnings per common share....................... $ 7.42 $ 5.90
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 85
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON STOCK AVAILABLE- TOTAL
--------------------- CAPITAL RETAINED FOR-SALE, STOCKHOLDERS'
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAX EQUITY
------- ----------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1995.... 177,715 $ 1,777,150 $2,359,091 $1,823,561 $ (6,867) $5,952,935
Net income........... 0 0 0 1,225,109 0 1,225,109
Recapitalization..... 0 (1,599,435) 1,599,435 0 0 0
4% stock dividend.... 6,946 6,946 293,746 (307,744) 0 (7,052)
Net change in
unrealized gains
(losses) on
securities
available-for-sale,
net of tax......... 0 0 0 0 (65,880) (65,880)
------- ----------- ---------- ---------- -------- ----------
BALANCE,
December 31, 1996.... 184,661 184,661 4,252,272 2,740,926 (72,747) 7,105,112
Net income........... 0 0 0 1,567,818 0 1,567,818
4% stock dividend.... 7,207 7,207 425,213 (443,186) 0 (10,766)
Net change in
unrealized gains
(losses) on
securities
available-for-sale,
net of tax......... 0 0 0 0 80,542 80,542
------- ----------- ---------- ---------- -------- ----------
BALANCE,
December 31, 1997.... 191,868 $ 191,868 $4,677,485 $3,865,558 $ 7,795 $8,742,706
======= =========== ========== ========== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 86
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 1,567,818 $ 1,225,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 285,663 228,764
Provision for loan losses......................... 716,000 289,106
Deferred income taxes............................. (291,191) (84,478)
Deferred compensation expense..................... 111,991 89,580
Net realized gains on sales of securities
available-for-sale............................. 0 (28,899)
Gain on sale of loans............................. (156,169) (71,873)
Increase in interest receivable................... (75,374) (57,089)
Increase in interest payable...................... 7,746 25,232
Other operating activities........................ (10,950) 4,140
------------ ------------
Net cash provided by operating
activities............................. 2,155,534 1,619,592
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale.......... (3,755,019) (4,829,203)
Proceeds from sales of securities
available-for-sale................................ 0 1,526,250
Proceeds from maturities of securities
available-for-sale................................ 5,552,178 2,742,880
Purchases of securities held-to-maturity............ (1,561,929) 0
Net increase in Federal funds sold.................. (2,070,000) (1,550,000)
Net increase in interest-bearing deposits in
banks............................................. (235,700) (75,000)
Net increase in loans............................... (9,061,383) (13,177,148)
Purchase of premises and equipment.................. (960,154) (270,718)
Payment of life insurance premiums.................. (73,307) (274,207)
------------ ------------
Net cash used in investing activities..... (12,165,314) (15,907,146)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits............................ 10,597,628 14,603,909
Dividends paid...................................... (10,766) (7,052)
------------ ------------
Net cash provided by financing
activities............................. 10,586,862 14,596,857
------------ ------------
Net increase in cash and due from banks............. $ 577,082 $ 309,303
Cash and due from banks at beginning of year........ 4,408,196 4,098,893
------------ ------------
Cash and due from banks at end of year.............. $ 4,985,278 $ 4,408,196
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest.......................................... $ 3,799,238 $ 3,189,994
Income taxes...................................... $ 1,125,457 $ 827,781
NONCASH TRANSACTION
Unrealized (gains) losses on securities
available-for-sale................................ $ (127,282) $ 104,573
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 87
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Bullsboro Bancshares, Inc. (the Company) is a bank holding company whose
business is conducted by its wholly-owned subsidiary, The Bank of Newnan (the
Bank). The Bank is a commercial bank located in Newnan, Coweta County, Georgia.
The Bank provides a full range of banking services in its primary market area of
Coweta County and surrounding counties.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. Significant intercompany transactions and accounts are
eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the financial
services industry. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts and
disclosures of assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could differ from those
estimates.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from banks
are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Company has not experienced any losses in such
accounts.
SECURITIES
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. All
other debt securities are classified as available-for-sale and carried at fair
value with net unrealized gains and losses included in stockholders' equity, net
of tax. Equity securities without a readily determinable fair value are carried
at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
LOANS
Loans are carried at their principal amounts outstanding less deferred fees and
the allowance for loan losses. Interest income on loans is credited to income
based on the principal amount outstanding.
F-7
<PAGE> 88
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Loan origination fees on real estate loans are deferred and recognized as income
over the life of the loan. Loan origination fees and costs incurred on other
loans are recognized at the time the loan is recorded. Because net origination
loan fees and costs are not material, the results of operations are not
materially different than the results which would be obtained by accounting for
all loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is maintained at a level that management believes
to be adequate to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth, composition of the loan portfolio, and other risks inherent in the
portfolio. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses, and may require the Company to record additions to the allowance based
on their judgment about information available to them at the time of their
examinations.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due.
Interest income is subsequently recognized only to the extent cash payments are
received.
A loan is impaired when it is probable the Company will be unable to collect all
principal and interest payments due in accordance with the terms of the loan
agreement. Individually identified impaired loans are measured based on the
present value of payments expected to be received, using the contractual loan
rate as the discount rate. Alternatively, measurement may be based on observable
market prices or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair value, a
valuation allowance is established as a component of the allowance for loan
losses. Changes to the valuation allowance are recorded as a component of the
provision for loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent gains
or losses on sale and any subsequent adjustment to the value are recorded as
other expenses.
F-8
<PAGE> 89
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SALE OF LOANS
The Company originates and sells participations in certain loans. The amount of
gain on the sale of a specific loan is equal to the percentage resulting from
determining the fair value of the portion of the loan sold relative to the fair
value of the entire loan. Any gain that is materially in excess of or less than
the net premium received is deferred and amortized into income over the term of
the loan. Losses are recognized at the time the loan is identified as
held-for-sale and the loan's carrying value exceeds its fair value.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current income tax
provisions approximate taxes to be paid or refunded for the applicable year.
Deferred tax assets and liabilities are recognized for the temporary differences
between the bases of assets and liabilities as measured by tax laws and their
bases as reported in the financial statements. Deferred tax expense or benefit
is then recognized for the change in deferred tax assets or liabilities between
periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards and tax credits
will be realized. A valuation allowance would be recorded for those deferred tax
items for which it is more likely than not that realization would not occur.
The Company and the Bank file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to income taxes (benefits)
of the consolidated group.
EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the
weighted-average number of shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income by the sum of the weighted-average
number of shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options.
As of December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which
requires presentation of basic and diluted earnings per common share. The
adoption of this statement did not have a material effect on the Company's
financial statements.
F-9
<PAGE> 90
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
DECEMBER 31, 1997:
U. S. Government and agency
securities................. $ 8,683,221 $54,638 $ (3,945) $ 8,733,914
Equity securities............ 271,600 -- -- 271,600
Mortgage-backed securities... 3,005,175 11,163 (50,046) 2,966,292
----------- ------- --------- -----------
$11,959,996 $65,801 $ (53,991) $11,971,806
=========== ======= ========= ===========
DECEMBER 31, 1996:
U. S. Government and agency
securities................. $11,382,236 $27,025 $ (85,146) $11,324,115
State and municipal
securities................. 135,000 -- -- 135,000
Mortgage-backed securities... 2,239,919 8,586 (65,937) 2,182,568
----------- ------- --------- -----------
$13,757,155 $35,611 $(151,083) $13,641,683
=========== ======= ========= ===========
SECURITIES HELD-TO-MATURITY
DECEMBER 31, 1997:
State and municipal
securities................. $ 1,561,929 $ 9,861 $ (1,848) $ 1,569,942
=========== ======= ========= ===========
</TABLE>
The amortized cost and fair value of securities as of December 31, 1997 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid with or without penalty. Therefore, these
securities and equity securities are not included in the maturity categories in
the following summary.
<TABLE>
<CAPTION>
SECURITIES
SECURITIES AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------------- -----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less......... $ 1,497,688 $ 1,498,280 $ -- $ --
Due from one to five years...... 4,685,533 4,733,744 841,352 843,130
Due from five to ten years...... 500,000 503,765 620,577 623,108
Due after ten years............. 2,000,000 1,998,125 100,000 103,704
Mortgage-backed securities...... 3,005,175 2,966,292 -- --
Equity securities............... 271,600 271,600 -- --
----------- ----------- ---------- ----------
$11,959,996 $11,971,806 $1,561,929 $1,569,942
=========== =========== ========== ==========
</TABLE>
Securities with a carrying value of $8,971,000 and $5,379,000 at December 31,
1997 and 1996, respectively, were pledged to secure public deposits and for
other purposes.
F-10
<PAGE> 91
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gains on sales of securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Gross gains................................................. $ -- $28,899
Gross losses................................................ -- --
------- -------
Net realized gains.......................................... $ -- $28,899
======= =======
</TABLE>
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commercial............................................ $14,479,000 $11,158,000
Real estate -- construction........................... 5,996,000 10,089,000
Real estate -- mortgage............................... 33,091,000 27,101,000
Consumer installment and other........................ 17,532,604 13,614,021
----------- -----------
71,098,604 61,962,021
Deferred fees......................................... (184,118) (195,971)
Allowance for loan losses............................. (1,583,000) (936,116)
----------- -----------
Loans, net............................................ $69,331,486 $60,829,934
=========== ===========
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Balance, beginning of year............................... $ 936,116 $ 775,189
Provision for loan losses.............................. 716,000 289,106
Loans charged off...................................... (121,560) (183,383)
Recoveries of loans previously charged off............. 52,444 55,204
---------- ---------
Balance, end of year..................................... $1,583,000 $ 936,116
========== =========
</TABLE>
The total recorded investment in impaired loans was $1,671,000 and $270,000 at
December 31, 1997 and 1996, respectively. There were no loans that had related
allowances for loan losses determined in accordance with Statement of Financial
Standard No. 114 ("Accounting by Creditors for Impairment of a Loan") at
December 31, 1997 and 1996. The average recorded investment in impaired loans
for 1997 and 1996 was $449,000 and $230,000, respectively. Interest income
recognized for cash payments received was not material for the years ended 1997
and 1996.
F-11
<PAGE> 92
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has granted loans to certain directors, executive officers, and
their related entities. The interest rates on these loans were substantially the
same as rates prevailing at the time of the transaction and repayment terms are
customary for the type of loan involved. Changes in related party loans for the
year ended December 31, 1997 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year.................................. $ 840,053
Advances.................................................. 641,025
Repayments................................................ (607,510)
---------
Balance, end of year........................................ $ 873,568
=========
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Land.................................................. $ 411,943 $ 411,943
Buildings............................................. 1,868,594 1,535,067
Equipment............................................. 2,006,619 1,385,859
----------- -----------
4,287,156 3,332,869
Accumulated depreciation.............................. (1,315,125) (1,035,329)
----------- -----------
$ 2,972,031 $ 2,297,540
=========== ===========
</TABLE>
NOTE 5. EMPLOYEE BENEFIT PLANS
The Company has an employee stock ownership plan with 401(k) retirement plan
provisions for its full time employees, subject to certain minimum age and
service requirements. The total plan expense for the years ended December 31,
1997 and 1996 was $146,041 and $108,084, respectively. When an employee receives
a distribution of Company stock from the plan, the Company issues a put option
to the employee which permits the employee to sell the stock to the Company at
the stock's fair value. Shares owned by the plan were 9,938 (fair value of
$712,157) and 8,493 (fair value of $432,798) at December 31, 1997 and 1996,
respectively.
The Company has established deferred compensation plans for the executive
officers and directors of the Company. Provisions are made for future benefits
which will be payable over a period of time upon retirement. At December 31,
1997 and 1996, $315,746 and $234,179 had been accrued under these agreements,
respectively.
The Company has purchased and is the beneficiary of life insurance policies on
the executive officers and directors. These policies will be used to fund the
deferred compensation plans referred to above. The carrying values of these
policies at December 31, 1997 and 1996 were $1,405,629 and $1,257,415,
respectively.
F-12
<PAGE> 93
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a stock option plan for key employees and directors and has
reserved 52,000 shares of common stock. All options under the plan are granted
at the estimated fair market value at the date of grant and expire ten years
from the date of grant. At December 31, 1997, 12,566 options were available to
grant under the plan. Other pertinent information related to the options
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996
------------------ ------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Under option, beginning of year............ 34,634 $27.56 36,558 $27.56
Granted.................................. 5,840 50.96 -- --
Exercised................................ -- -- -- --
Terminated............................... -- -- (1,924) 27.56
------ ------
Under option and exercisable, end of
year..................................... 40,474 30.94 34,634 27.56
====== ======
</TABLE>
The options have a weighted-average remaining contractual life of seven years.
As permitted by SFAS No. 123 ("Accounting for Stock-Based Compensation"), the
Company recognizes compensation cost for stock-based employee compensation
awards in accordance with APB Opinion No. 25 ("Accounting for Stock Issued to
Employees"). The Company recognized no compensation cost for stock-based
employee compensation awards for the years ended December 31, 1997 and 1996. If
the Company had recognized compensation cost in accordance with SFAS No. 123,
net income and earnings per share would not have been materially effected.
NOTE 6. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- --------
<S> <C> <C>
Current................................................... $1,130,928 $784,660
Deferred.................................................. (291,191) (84,478)
---------- --------
Income tax expense........................................ $ 839,737 $700,182
========== ========
</TABLE>
F-13
<PAGE> 94
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's income tax expense differs from the amounts computed by applying
the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Income taxes at statutory rate.............. $818,569 34% $654,599 34%
Tax-exempt interest....................... (8,339) -- (1,870) --
State income taxes........................ 49,819 2 41,108 2
Other items, net.......................... (20,312) (1) 6,345 --
-------- -- -------- --
Income tax expense.......................... $839,737 35% $700,182 36%
======== == ======== ==
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves....................................... $545,927 $285,369
Deferred compensation.................................... 119,149 88,369
Securities available-for-sale............................ -- 42,725
Other.................................................... -- 8,923
-------- --------
665,076 425,386
-------- --------
Deferred tax liabilities:
Depreciation............................................. 66,316 75,092
Securities available-for-sale............................ 4,015 --
-------- --------
70,331 75,092
-------- --------
Net deferred tax assets.................................... $594,745 $350,294
======== ========
</TABLE>
NOTE 7. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator) and
weighted-average shares outstanding (the denominator) used in determining basic
and diluted earnings per common share (EPS):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
WEIGHTED-
NET AVERAGE
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS................................... $1,567,818 191,868 $8.17
=====
EFFECT OF DILUTIVE SECURITIES
Stock options............................. -- 19,503
---------- -------
Diluted EPS................................. $1,567,818 211,371 $7.42
========== ======= =====
</TABLE>
F-14
<PAGE> 95
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
WEIGHTED-
NET AVERAGE
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS................................... $1,225,109 191,868 $6.39
=====
EFFECT OF DILUTIVE SECURITIES
Stock options............................. -- 15,919
---------- -------
Diluted EPS................................. $1,225,109 207,787 $5.90
========== ======= =====
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-balance sheet
financial instruments which are not reflected in the financial statements. These
financial instruments include commitments to extend credit and standby letters
of credit. Such financial instruments are included in the financial statements
when funds are disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commitments to extend credit.......................... $17,713,000 $12,810,000
Standby letters of credit............................. 517,000 435,000
----------- -----------
$18,230,000 $13,245,000
=========== ===========
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending loans to customers. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment, and personal property.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers.
F-15
<PAGE> 96
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Collateral held varies as specified above and is required in instances which the
Company deems necessary.
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management of the Company, any liability
resulting from such proceedings would not have a material effect on the
Company's financial statements.
NOTE 9. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer loans to
customers in the Coweta County and surrounding counties. The ability of the
majority of the Company's customers to honor their contractual loan obligations
is dependent on the economy in the Company's market area.
Fifty-five percent of the Company's loan portfolio is concentrated in loans
secured by real estate, of which a substantial portion is secured by real estate
in the Company's primary market area. Accordingly, the ultimate collectibility
of the loan portfolio is susceptible to changes in market conditions in the
Company's primary market area. The other significant concentrations of credit by
type of loan are set forth in Note 3.
The Company, as a matter of policy, does not generally extend credit to any
single borrower or group of related borrowers in excess of 25% of statutory
capital, or approximately $1,284,000.
NOTE 10. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that may
be declared without prior regulatory approval. At December 31, 1997,
approximately $787,000 of retained earnings were available for dividend
declaration without regulatory approval.
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company and Bank
must meet specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company and Bank capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of total
and Tier I capital to risk-weighted assets and of Tier I capital to average
assets. Management believes, as of December 31, 1997, the Company and the Bank
meet all capital adequacy requirements to which they are subject.
As of December 31, 1997, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To
F-16
<PAGE> 97
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the
following table. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER
PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
-------------- -------------- --------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total Capital (to Risk Weighted
Assets):
Consolidated................... $9,652 13.16% $5,869 8.00% $7,337 10.00%
Bank........................... 9,603 13.09 5,869 8.00 7,337 10.00
Tier I Capital (to Risk Weighted
Assets):
Consolidated................... 8,735 11.91 2,935 4.00 4,402 6.00
Bank........................... 8,686 11.84 2,935 4.00 4,402 6.00
Tier I Capital (to Average
Assets):
Consolidated................... 8,735 8.96 3,900 4.00 4,875 5.00
Bank........................... 8,686 8.91 3,900 4.00 4,875 5.00
AS OF DECEMBER 31, 1996:
Total Capital (to Risk Weighted
Assets):
Consolidated................... 7,960 12.76 4,991 8.00 6,238 10.00
Bank........................... 7,892 12.65 4,991 8.00 6,239 10.00
Tier I Capital (to Risk Weighted
Assets):
Consolidated................... 7,178 11.50 2,497 4.00 3,745 6.00
Bank........................... 7,110 11.39 2,497 4.00 3,745 6.00
Tier I Capital (to Average
Assets):
Consolidated................... 7,178 9.25 3,104 4.00 3,880 5.00
Bank........................... 7,110 9.16 3,105 4.00 3,881 5.00
</TABLE>
F-17
<PAGE> 98
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets, statements of
income, and cash flows of Bullsboro Bancshares, Inc. as of and for the year
ended December 31, 1997 and period ended December 31, 1996:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash.................................................. $ 33,627 $ 51,847
Investment in subsidiary.............................. 8,693,440 7,037,930
Other assets.......................................... 15,639 15,335
---------- ----------
Total assets.................................. $8,742,706 $7,105,112
========== ==========
Stockholders' equity.................................... $8,742,706 $7,105,112
========== ==========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Income, dividends from subsidiary........................ $ -- $ 75,000
---------- --------
EXPENSE
Interest............................................... -- 430
Amortization........................................... 3,132 783
Other expenses......................................... 7,917 16
---------- --------
Total expenses................................. 11,049 1,229
---------- --------
Income (loss) before income tax benefits and
equity in undistributed income of
subsidiary.................................. (11,049) 73,771
Income tax benefits...................................... (3,898) (463)
---------- --------
Income (loss) before equity in undistributed income of
subsidiary............................................. (7,151) 74,234
Equity in undistributed income of subsidiary............. 1,574,969 176,575
---------- --------
Net income..................................... $1,567,818 $250,809
========== ========
</TABLE>
F-18
<PAGE> 99
BULLSBORO BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................. $1,567,818 $250,809
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization........................................ 3,132 783
Undistributed income of subsidiary.................. (1,574,969) (176,575)
Other operating activities.......................... (3,435) (16,118)
---------- --------
Net cash provided by (used in) operating
activities.................................. (7,454) 58,899
---------- --------
FINANCING ACTIVITIES
Dividends paid......................................... (10,766) (7,052)
---------- --------
Net cash used in financing activities.......... (10,766) (7,052)
---------- --------
Net increase (decrease) in cash.......................... (18,220) 51,847
Cash at beginning of year................................ 51,847 --
---------- --------
Cash at end of year...................................... $ 33,627 $ 51,847
========== ========
</TABLE>
NOTE 12. BUSINESS COMBINATION
On October 4, 1996, the Company acquired all of the outstanding stock of the
Bank in exchange for 177,715 shares of the Company's common stock. The
acquisition has been accounted for as a pooling of interest. The net income of
the Bank prior to the acquisition was $974,300 and has been included in the
consolidated statement of income.
F-19
<PAGE> 100
BULLSBORO BANCSHARES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
-------------
<S> <C>
ASSETS
Cash and due from banks..................................... $ 3,275,305
Interest-bearing deposits in banks.......................... 748,411
Federal funds sold.......................................... 14,890,000
Securities available-for-sale............................... 12,143,091
Securities held-to-maturity................................. 2,996,227
Loans....................................................... 68,798,874
Less allowance for loan losses.............................. (1,044,273)
------------
Loans, net........................................ 67,754,601
Premises and equipment...................................... 2,895,801
Other assets................................................ 3,017,388
------------
TOTAL ASSETS...................................... $107,720,825
============
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing demand............................... $ 10,281,401
Interest-bearing demand................................... 12,378,751
Savings accounts.......................................... 2,843,850
Money market accounts..................................... 11,188,573
Time, $100,000 and over, including brokered deposits of
$2,772,000 and $2,772,000.............................. 35,768,468
Other time, including brokered deposits of $692,980 and
$791,980............................................... 18,854,841
------------
Total Deposits.................................... 91,315,885
FHLB Advances............................................... 4,000,000
Other liabilities........................................... 1,517,224
------------
Total liabilities................................. 96,833,108
------------
SHAREHOLDERS' EQUITY:
Common stock, par value $1; 1,500,000 shares authorized;
issued and outstanding 211,094 (1998) and 184,661
(1997)................................................. 211,094
Capital surplus........................................... 5,521,174
Retained earnings......................................... 5,121,845
Accumulated Other Comprehensive Income.................... 33,604
------------
10,887,717
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $107,720,825
============
</TABLE>
See Notes to Consolidated Financial Statements.
F-20
<PAGE> 101
BULLSBORO BANCSHARES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans........................... $2,194,645 $2,275,616 $6,569,747 $6,421,921
Taxable securities.............. 175,170 179,091 542,457 610,326
Nontaxable securities........... 32,134 9,053 85,123 14,366
Deposits in banks............... 5,502 -- 15,356 --
Federal funds sold.............. 192,811 73,089 417,768 112,991
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME... 2,600,261 2,536,849 7,630,450 7,159,604
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest-bearing demand......... 58,907 53,720 202,258 154,022
Money market accounts........... 115,702 79,314 327,735 176,122
Savings accounts................ 16,498 17,879 48,151 53,357
Time deposits................... 815,575 842,528 2,480,466 2,401,696
Fed funds sold.................. -- -- -- 1,631
FHLB advances................... 60,559 -- 150,786 --
---------- ---------- ---------- ----------
Total interest
expense.............. 1,067,240 993,441 3,209,395 2,786,828
---------- ---------- ---------- ----------
Net interest income..... 1,533,021 1,543,408 4,421,055 4,372,776
Provision for loan losses......... 90,000 40,000 208,000 210,000
---------- ---------- ---------- ----------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES.......... 1,443,021 1,503,408 4,213,055 4,162,776
---------- ---------- ---------- ----------
OTHER INCOME:
Service charges on deposit
accounts..................... 204,811 189,673 596,154 534,381
Other service charges and
fees......................... 39,936 59,870 133,587 179,921
Gain on sales of loans.......... 32,546 -- 63,823 114,382
---------- ---------- ---------- ----------
TOTAL OTHER INCOME...... 277,293 249,543 793,564 828,684
---------- ---------- ---------- ----------
OTHER EXPENSES:
Salaries and Employee
Benefits..................... 487,149 534,738 1,359,983 1,472,163
Equipment and occupancy
expenses..................... 162,483 140,879 481,962 391,715
General and administrative...... 414,530 316,319 1,206,686 987,498
---------- ---------- ---------- ----------
TOTAL OTHER EXPENSES.... 1,064,162 991,936 3,048,631 2,851,376
---------- ---------- ---------- ----------
Income before income taxes........ 656,152 761,015 1,957,988 2,140,084
Income tax expense................ 233,300 272,840 701,700 784,894
---------- ---------- ---------- ----------
NET INCOME.............. $ 422,852 $ 488,175 $1,256,288 $1,355,190
========== ========== ========== ==========
Basic earnings per common share... $ 2.00 $ 2.54 $ 6.21 $ 7.06
========== ========== ========== ==========
Diluted earnings per common
share........................... $ 1.90 $ 2.27 $ 5.79 $ 6.41
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-21
<PAGE> 102
BULLSBORO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
------------------- CAPITAL RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES PAR VALUE SURPLUS EARNINGS INCOME EQUITY
------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1996........ 184,661 $184,661 $4,252,272 $2,740,926 $(72,747) $ 7,105,112
Net income............... 1,355,190 1,355,190
Change in unrealized gain
(loss) on available for
sale securities, net of
tax.................... 62,768 62,768
------- -------- ---------- ---------- -------- -----------
BALANCE,
September 30, 1997....... 184,661 $184,661 $4,252,272 $4,096,116 $ (9,979) $ 8,523,070
======= ======== ========== ========== ======== ===========
BALANCE,
December 31, 1997........ 191,868 $191,868 $4,677,485 $3,865,558 $ 7,795 $ 8,742,706
Net income............... 1,256,287 1,256,287
Common stock issued:
Director Stock Option
Plan................. 17,307 17,307 459,448 476,755
Tax benefit from
exercise of director
stock options........ 288,451 288,451
Officer Stock Option
Plan................. 1,919 1,919 95,790 97,709
Change in unrealized gain
(loss) on available for
sale securities, net of
tax.................... 25,809 25,809
------- -------- ---------- ---------- -------- -----------
BALANCE,
September 30, 1998....... 211,094 $211,094 $5,521,174 $5,121,845 $ 33,604 $10,887,717
======= ======== ========== ========== ======== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-22
<PAGE> 103
BULLSBORO BANCSHARES, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 1,256,288 $ 1,355,190
Adjustments to reconcile net income to net cash
(used in) provided from operating activities:
Depreciation and amortization expense............. 280,686 202,033
Provision for loan losses......................... 208,000 205,000
Deferred income taxes............................. (176,000) --
Deferred compensation expense..................... 12,000 72,000
(Gain) on sales of loans receivable............... (64,000) (114,000)
(Gain) Loss on other real estate owned, net....... 9,000 (23,000)
Decrease in interest receivable................... 118,000 52,000
Increase in interest payable...................... 6,000 1,000
Other operating activities........................ (208,004) 58,941
------------ ------------
Net cash provided by operating
activities............................. 1,441,970 1,809,164
------------ ------------
INVESTING ACTIVITIES:
Proceeds from principal repayments and maturities:
Available for sale securities.................. 5,889,000 4,838,000
Purchases of held to maturity securities....... (1,634,000) (1,362,500)
Purchases of available for sale securities........ (6,060,000) (2,737,000)
Net increase in Fed Funds Sold.................... (11,170,000) (6,275,000)
Net increase in interest-bearing deposits in
banks.......................................... (437,711) (154,595)
Loans originated and principal repayments, net.... 1,369,000 (6,862,000)
Purchases of premises and equipment............... (204,456) (494,208)
Proceeds from sales of other real estate.......... 473,000 35,000
------------ ------------
Net cash used in investing activities..... (11,775,167) (13,012,303)
------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits.......................... 4,048,517 12,250,441
Net increase in long-term borrowings.............. 4,000,000 --
Net proceeds from issuance of common stock........ 574,707 --
------------ ------------
Net cash provided by financing
activities............................. 8,623,224 12,250,441
------------ ------------
Net (decrease) increase in cash and due
from banks............................. (1,709,973) 1,047,302
------------ ------------
CASH AND DUE FROM BANKS:
Beginning of period............................... 4,985,278 4,408,196
------------ ------------
End of period..................................... $ 3,275,305 $ 5,455,498
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-23
<PAGE> 104
BULLSBORO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------------
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net income........................... $422,852 $488,175 $1,256,288 $1,355,190
Other comprehensive income (loss),
net of tax:
Unrealized holding gains (losses)
arising during period, net of
tax:............................ 32,306 22,287 25,809 62,768
-------- -------- ---------- ----------
Comprehensive income................. $455,158 $510,462 $1,282,097 $1,417,958
======== ======== ========== ==========
Net income........................... $422,852 $488,175 $1,256,288 $1,355,190
======== ======== ========== ==========
Weighted average common shares
outstanding:....................... 211,426 192,195 202,301 191,953
Basis earnings per share........... $ 2.00 $ 2.54 $ 6.21 $ 7.06
======== ======== ========== ==========
Effect of dilutive securities:
Stock options...................... 11,128 22,860 14,675 19,465
Weighted average common shares
outstanding:.................... 222,554 215,055 216,975 211,418
Diluted earnings per common
share........................... $ 1.90 $ 2.27 $ 5.79 $ 6.41
======== ======== ========== ==========
Weighted average common shares
outstanding:
Basic earnings per share........... 211,426 192,195 202,301 191,953
Effect of dilutive securities:
Stock options...................... 11,128 22,860 14,675 19,465
-------- -------- ---------- ----------
Weighted average common shares
outstanding:
Diluted earnings per share......... 222,554 215,055 216,976 211,418
======== ======== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-24
<PAGE> 105
BULLSBORO BANCSHARES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The consolidated financial statements included herein are unaudited, however,
such information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for the fair
statement of results for the interim period.
The results of operations for the nine month period ended September 30, 1998 are
not necessarily indicative of the results to be expected for the full year.
NOTE 2: PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of Bullsboro Bancshares, Inc. (the Company) and its wholly owned
subsidiary, THE BANK of Newnan. All significant intercompany transactions and
balances have been eliminated in consolidation.
NOTE 3: RECENTLY ADOPTED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board, (the"FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income, which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains, and losses)
in financial statements. In addition, SFAS No. 130 requires the Company to
classify items of other comprehensive income by their nature in a separate
financial statement or as a component of the statement of operation or the
statement of stockholders; equity and display the accumulated balance of other
comprehensive income separately in the shareholders' equity section of the
statement of financial condition. The Company adopted SFAS No. 130 on January 1,
1998 as required.
NOTE 4: EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the
weighted-average number of shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income by the sum of the weighted-average
number of shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options.
As of December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which
requires presentation of basic and diluted earnings per share. The adoption of
this statement did not have a material affect on the Company's financial
statements.
Following is a reconciliation of the common shares used in the calculations of
basic and diluted earnings per common share.
F-25
<PAGE> 106
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
BULLSBORO BANCSHARES, INC.
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF JULY 16, 1998
A-1
<PAGE> 107
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties............................................................ A-6
Preamble........................................................... A-6
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER...................... A-6
1.1 Merger...................................................... A-6
1.2 Time and Place of Closing................................... A-7
1.3 Effective Time.............................................. A-7
1.4 Execution of Support Agreements............................. A-7
ARTICLE 2 -- TERMS OF MERGER....................................... A-7
2.1 Certificate of Incorporation................................ A-7
2.2 Bylaws...................................................... A-7
2.3 Directors and Officers...................................... A-7
ARTICLE 3 -- MANNER OF CONVERTING SHARES........................... A-8
3.1 Conversion of Shares........................................ A-8
3.2 Anti-Dilution Provisions.................................... A-8
3.3 Shares Held by BBI or Regions............................... A-8
3.4 Dissenting Stockholders..................................... A-8
3.5 Fractional Shares........................................... A-9
3.6 Conversion of Stock Rights.................................. A-9
ARTICLE 4 -- EXCHANGE OF SHARES.................................... A-10
4.1 Exchange Procedures......................................... A-10
4.2 Rights of Former BBI Stockholders........................... A-10
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF BBI................. A-11
5.1 Organization, Standing, and Power........................... A-11
5.2 Authority; No Breach By Agreement........................... A-11
5.3 Capital Stock............................................... A-12
5.4 BBI Subsidiaries............................................ A-12
5.5 Financial Statements........................................ A-13
5.6 Absence of Undisclosed Liabilities.......................... A-13
5.7 Absence of Certain Changes or Events........................ A-14
5.8 Tax Matters................................................. A-14
5.9 Assets...................................................... A-15
5.10 Environmental Matters....................................... A-15
5.11 Compliance with Laws........................................ A-16
5.12 Labor Relations............................................. A-17
5.13 Employee Benefit Plans...................................... A-17
5.14 Material Contracts.......................................... A-19
5.15 Legal Proceedings........................................... A-20
5.16 Reports..................................................... A-20
5.17 Statements True and Correct................................. A-20
5.18 Accounting, Tax, and Regulatory Matters..................... A-21
5.19 State Takeover Laws......................................... A-21
5.20 Charter Provisions.......................................... A-21
5.21 Support Agreements.......................................... A-21
5.22 Derivatives................................................. A-21
5.23 Year 2000................................................... A-21
</TABLE>
A-2
<PAGE> 108
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS............. A-22
6.1 Organization, Standing, and Power........................... A-22
6.2 Authority; No Breach By Agreement........................... A-22
6.3 Capital Stock............................................... A-23
6.4 Regions Subsidiaries........................................ A-23
6.5 SEC Filings; Financial Statements........................... A-23
6.6 Absence of Undisclosed Liabilities.......................... A-24
6.7 Absence of Certain Changes or Events........................ A-24
6.8 Compliance with Laws........................................ A-24
6.9 Legal Proceedings........................................... A-25
6.10 Reports..................................................... A-25
6.11 Statements True and Correct................................. A-25
6.12 Accounting, Tax, and Regulatory Matters..................... A-26
6.13 Derivatives................................................. A-26
6.14 Year 2000................................................... A-26
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.............. A-26
7.1 Affirmative Covenants of Both Parties....................... A-26
7.2 Negative Covenants of BBI................................... A-26
7.3 Adverse Changes in Condition................................ A-28
7.4 Reports..................................................... A-28
7.5 Incentive Compensation Program.............................. A-29
ARTICLE 8 -- ADDITIONAL AGREEMENTS................................. A-29
8.1 Registration Statement; Proxy Statement; Stockholder
Approval.................................................... A-29
8.2 Exchange Listing............................................ A-29
8.3 Applications................................................ A-30
8.4 Filings with State Offices.................................. A-30
8.5 Agreement as to Efforts to Consummate....................... A-30
8.6 Investigation and Confidentiality........................... A-30
8.7 Press Releases.............................................. A-31
8.8 Certain Actions............................................. A-31
8.9 Accounting and Tax Treatment................................ A-31
8.10 State Takeover Laws......................................... A-31
8.11 Charter Provisions.......................................... A-31
8.12 Agreement of Affiliates..................................... A-32
8.13 Employee Benefits and Contracts............................. A-32
8.14 Indemnification............................................. A-32
8.15 Certain Modifications....................................... A-33
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........ A-34
9.1 Conditions to Obligations of Each Party..................... A-34
9.2 Conditions to Obligations of Regions........................ A-35
9.3 Conditions to Obligations of BBI............................ A-36
ARTICLE 10 -- TERMINATION.......................................... A-37
10.1 Termination................................................. A-37
10.2 Effect of Termination....................................... A-40
10.3 Non-Survival of Representations and Covenants............... A-40
</TABLE>
A-3
<PAGE> 109
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 11 -- MISCELLANEOUS........................................ A-40
11.1 Definitions................................................. A-40
11.2 Expenses.................................................... A-47
11.3 Brokers and Finders......................................... A-47
11.4 Entire Agreement............................................ A-47
11.5 Amendments.................................................. A-47
11.6 Waivers..................................................... A-48
11.7 Assignment.................................................. A-48
11.8 Notices..................................................... A-48
11.9 Governing Law............................................... A-49
11.10 Counterparts................................................ A-49
11.11 Captions.................................................... A-49
11.12 Interpretations............................................. A-49
11.13 Enforcement of Agreement.................................... A-49
11.14 Severability................................................ A-49
Signatures......................................................... A-50
</TABLE>
A-4
<PAGE> 110
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1. -- Form of Support Agreement. (sec. 1.4).
2. -- Form of Affiliate Agreement. (sec.sec. 8.12, 9.2(d)).
3. -- Form of Claims Letter. (sec. 9.2(e)).
4. -- Opinion of BBI Counsel (sec. 9.2(f)).
5. -- Opinion of Regions Counsel (sec. 9.3(d)).
</TABLE>
A-5
<PAGE> 111
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as
of July 16, 1998, by and between BULLSBORO BANCSHARES, INC. ("BBI"), a
corporation organized and existing under the Laws of the State of Georgia, with
its principal office located in Newnan, Georgia; and REGIONS FINANCIAL
CORPORATION ("Regions"), a corporation organized and existing under the Laws of
the State of Delaware, with its principal office located in Birmingham, Alabama.
PREAMBLE
The Boards of Directors of BBI 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 BBI by Regions pursuant to the merger (the "Merger") of BBI with
and into Regions. At the effective time of the Merger, the outstanding shares of
the capital stock of BBI shall be converted into shares of the common stock of
Regions (except as provided herein). As a result, stockholders of BBI shall
become stockholders of Regions, and each of the subsidiaries of BBI 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 BBI, 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 BBI'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, BBI shall be merged with and into Regions in accordance with the
provisions of Sections 14-2-1101, 14-2-1103, and 14-2-1105 of the GBCC and
Section 252 of the DGCL and with the effect provided in Section 14-2-1106 of the
GBCC and Section 259 of the DGCL (the "Merger").
Regions shall be the Surviving Corporation resulting from the Merger and shall
continue to be governed by the Laws of the State of Delaware. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of BBI and Regions.
A-6
<PAGE> 112
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 Georgia
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia and the Delaware Certificate of
Merger shall become effective with the Secretary of State of the State of
Delaware (the "Effective Time"). Subject to the terms and conditions hereof,
unless otherwise mutually agreed upon by the duly authorized officers of each
Party, the Parties shall use their reasonable efforts to cause the Effective
Time to occur on the last business day of the month in which the last of the
following occurs: (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Merger; and (ii) the date on which
the stockholders of BBI 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 BBI 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.
A-7
<PAGE> 113
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 BBI, 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 BBI Common Stock (excluding shares held by any BBI
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 3.65 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 BBI changes the number of shares of
BBI Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, recapitalization, or similar transaction with
respect to such stock, the Exchange Ratio shall be proportionately adjusted. In
the event Regions changes the number of shares of Regions Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, or similar transaction with respect to such stock
and the record date therefor (if a record date is established for such
transaction) or the effective date thereof (in the case of a stock split or
similar transaction 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 BBI or Regions. Each of the shares of BBI Common Stock held
by any BBI Company or by any Regions Company, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Dissenting Stockholders. Any holder of shares of BBI Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Article 13 of the GBCC shall be entitled to receive the value of
such shares in cash as determined pursuant to such provision of Law; provided,
however, that no such payment shall be made to any dissenting stockholder unless
and until such dissenting stockholder has complied with the applicable
provisions of the GBCC and surrendered to the Surviving Corporation the
certificate or certificates representing the shares for which payment is being
made. In the event that after the Effective Time a dissenting stockholder of BBI
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 BBI Common Stock is
entitled under this Article Three (without interest) upon surrender by such
holder of the certificate or certificates representing shares of BBI Common
Stock held by such holder. BBI will establish an escrow account with an amount
sufficient to satisfy the maximum aggregate payment that may be required to be
paid to dissenting stockholders. Upon satisfaction of all claims of dissenting
stockholders, the remaining escrowed amount, reduced by payment of the fees and
expenses of the escrow agent, will be returned to BBI.
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3.5 Fractional Shares. Notwithstanding any other provision of this Agreement,
each holder of shares of BBI Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Regions
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Regions Common Stock multiplied by
the market value of one share of Regions Common Stock at the Effective Time. The
market value of one share of Regions Common Stock at the Effective Time shall be
the last sale price of Regions Common Stock on the Nasdaq NMS (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Regions) on the last trading day preceding the Effective
Time. No such holder will be entitled to dividends, voting rights, or any other
rights as a stockholder in respect of any fractional shares.
3.6 Conversion of Stock Rights.
(a) At the Effective Time, each award, option, or other right to purchase
or acquire shares of BBI Common Stock pursuant to stock options, stock
appreciation rights, or stock awards ("BBI Rights") granted by BBI under
the BBI 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 BBI Right, in
accordance with the terms of the BBI 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 BBI and
the Committee of BBI's Board of Directors (including, if applicable, the
entire Board of Directors of BBI) administering such BBI Stock Plan, (ii)
each BBI 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 BBI
Right shall be equal to the number of shares of BBI Common Stock subject to
such BBI 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 BBI Right shall be
adjusted by dividing the per share exercise (or threshold) price under each
such BBI 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 BBI Rights and any fraction of a share of
Regions Common Stock that otherwise would be subject to a converted BBI
Right shall represent the right to receive a cash payment equal to the
product of such fraction and the difference between the market value of one
share of Regions Common Stock and the per share exercise price of such
Right. The market value of one share of Regions Common Stock shall be the
last sale price of Regions Common Stock on the Nasdaq NMS (as reported by
The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Regions) on the last trading day preceding
the Effective Time. In addition, notwithstanding the provisions of clauses
(iii) and (iv) of the first sentence of this Section 3.5, each BBI 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.
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(b) All restrictions or limitations on transfer with respect to BBI Common
Stock awarded under the BBI Stock Plans or any other plan, program, or
arrangement of any BBI Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise
expressly provided in such plan, program, or arrangement, shall remain in
full force and effect with respect to shares of Regions Common Stock into
which such restricted stock is converted pursuant to Section 3.1 of this
Agreement. As soon as reasonably practicable after the Effective Time,
Regions shall file a registration statement on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate forms), with respect to
the shares of Regions Common Stock subject to such options and shall use
its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain
outstanding.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Regions and BBI
shall cause the exchange agent selected by Regions (the "Exchange Agent") to
mail to the former stockholders of BBI appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of BBI Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of BBI Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at
the Effective Time shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1 of this
Agreement, together with all undelivered dividends or distributions in respect
of such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.5 of this Agreement, each holder
of shares of BBI 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 BBI
Common Stock is entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the shares of BBI Common
Stock for exchange as provided in this Section 4.1. The certificate or
certificates of BBI 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 BBI 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 BBI Stockholders. At the Effective Time, the stock
transfer books of BBI shall be closed as to holders of BBI Common Stock
immediately prior to the Effective Time and no transfer of BBI 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 BBI Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement) shall from and
after the Effective Time represent for all purposes only the
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right to receive the consideration provided in Sections 3.1 and 3.5 of this
Agreement in exchange therefor, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by BBI in
respect of such shares of BBI 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 BBI 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 BBI Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing BBI 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 BBI 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
BBI 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 BBI
BBI hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. BBI is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of Georgia,
and has the corporate power and authority to carry on its business as now
conducted and to own, lease, and operate its Material Assets. BBI 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 BBI.
5.2 Authority; No Breach By Agreement.
(a) BBI 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 BBI, subject to the approval of this Agreement by the holders of
two-thirds of the outstanding shares of BBI Common Stock entitled to be
cast thereon, which is the only stockholder vote required for approval of
this Agreement
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and consummation of the Merger by BBI. Subject to such requisite stockholder
approval, this Agreement represents a legal, valid, and binding obligation of
BBI, enforceable against BBI 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 BBI, nor,
except as described in Section 5.2 of the BBI Disclosure Memorandum, the
consummation by BBI of the transactions contemplated hereby, nor compliance
by BBI with any of the provisions hereof or thereof, will (i) conflict with
or result in a breach of any provision of BBI'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 BBI Company under, any Contract or Permit of any BBI 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 BBI, 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 BBI 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 BBI,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by BBI of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of BBI consists, as of the date of this
Agreement, of 1,500,000 shares of BBI Common Stock, of which 209,175 shares
are issued and outstanding as of the date of this Agreement and not more
than 232,337 shares will be issued and outstanding at the Effective Time.
All of the issued and outstanding shares of BBI Common Stock are duly and
validly issued and outstanding and are fully paid and nonassessable under
the GBCC. None of the outstanding shares of BBI Common Stock has been
issued in violation of any preemptive rights of the current or past
stockholders of BBI.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the BBI Disclosure Memorandum, there are no shares of capital
stock or other equity securities of BBI outstanding and no outstanding
Rights relating to the capital stock of BBI.
5.4 BBI Subsidiaries. BBI has disclosed in Section 5.4 of the BBI Disclosure
Memorandum all of the BBI Subsidiaries as of the date of this Agreement. BBI or
one of its Subsidiaries owns all of the issued and outstanding shares of capital
stock of each BBI
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Subsidiary. No equity securities of any BBI Subsidiary are or may become
required to be issued (other than to another BBI Company) by reason of any
Rights, and there are no Contracts by which any BBI Subsidiary is bound to issue
(other than to another BBI Company) additional shares of its capital stock or
Rights or by which any BBI Company is or may be bound to transfer any shares of
the capital stock of any BBI Subsidiary (other than to another BBI Company).
There are no Contracts relating to the rights of any BBI Company to vote or to
dispose of any shares of the capital stock of any BBI Subsidiary. All of the
shares of capital stock of each BBI Subsidiary held by a BBI 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 BBI Company
free and clear of any Lien. Each BBI 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 BBI 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 BBI. Each BBI 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. BBI has disclosed in Section 5.5 of the BBI
Disclosure Memorandum, and has delivered to Regions copies of, all BBI Financial
Statements prepared for periods ended prior to the date hereof and will deliver
to Regions copies of all BBI Financial Statements prepared subsequent to the
date hereof. The BBI 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 BBI Companies, which are
or will be, as the case may be, complete and correct in all material respects
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 BBI Companies
as of the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows of the BBI Companies for the periods
indicated, in accordance with GAAP (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or, in the case of
interim financial statements, to normal recurring year-end adjustments which
were not or are not expected to be Material in amount or effect).
5.6 Absence of Undisclosed Liabilities. No BBI Company has any Liabilities that
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on BBI, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of BBI as of December 31, 1997, included in
the BBI Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to December
31, 1997. No BBI Company has incurred or paid any Liability since December 31,
1997, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not
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reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on BBI.
5.7 Absence of Certain Changes or Events. Since December 31, 1997, except as
disclosed in the BBI Financial Statements delivered prior to the date of the
Agreement or as otherwise disclosed in the BBI 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
BBI, and (ii) the BBI 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 BBI
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 BBI, 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 BBI, except to the extent reserved against in the BBI
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 BBI Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable taxing authorities)
that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
BBI Companies for the period or periods through and including the date of
the respective BBI Financial Statements has been made and is reflected on
such BBI Financial Statements.
(d) Each of the BBI 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 BBI.
(e) None of the BBI Companies has made any payments, or, except as
described in Section 5.8 of the BBI Disclosure Memorandum, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code.
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(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the BBI Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the BBI Companies that occurred during or after any
Taxable Period in which the BBI Companies incurred a net operating loss
that carries over to any Taxable Period ending after December 31, 1997.
(h) No BBI 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 BBI Company has or has had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Assets. The BBI Companies have good and marketable title, free and clear of
all Liens, to all of their respective Assets. All tangible properties used in
the businesses of the BBI Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
BBI's past practices. All Assets which are Material to BBI's business on a
consolidated basis, held under leases or subleases by any of the BBI 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 BBI Companies currently maintain
insurance in amounts, scope, and coverage reasonably necessary for their
operations. None of the BBI 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 BBI
Companies include all Material Assets required to operate the business of the
BBI Companies as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of BBI, each BBI 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 BBI.
(b) There is no Litigation pending or, to the Knowledge of BBI, threatened
before any court, governmental agency, or authority, or other forum in
which any BBI Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may reasonably be expected to be
named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring
at, on, under, or involving a site owned, leased, or operated by any BBI
Company or any of its Participation Facilities, except for such Litigation
pending
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or threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BBI.
(c) There is no Litigation pending, or to the Knowledge of BBI, threatened
before any court, governmental agency, or board, or other forum in which
any of its Loan Properties (or BBI 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 BBI.
(d) To the Knowledge of BBI, 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 BBI.
(e) To the Knowledge of BBI, during the period of (i) any BBI Company's
ownership or operation of any of their respective current properties, (ii)
any BBI Company's participation in the management of any Participation
Facility, or (iii) any BBI 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 BBI. Prior to the period of (i) any BBI
Company's ownership or operation of any of their respective current
properties, (ii) any BBI Company's participation in the management of any
Participation Facility, or (iii) any BBI Company's holding of a security
interest in a Loan Property, to the Knowledge of BBI, 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 BBI.
5.11 Compliance with Laws. BBI is duly registered as a bank holding company
under the BHC Act. Each BBI 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
BBI, 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 BBI. None of the BBI 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 BBI; 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 BBI 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 BBI, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a
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Material Adverse Effect on BBI, or (iii) requiring any BBI 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 BBI Company is the subject of any Litigation asserting
that it or any other BBI 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 BBI Company to bargain with any labor
organization as to wages or conditions of employment, nor is any BBI 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 BBI Company, pending or
threatened, or to the Knowledge of BBI, is there any activity involving any BBI
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) BBI has disclosed to Regions in writing prior to the execution of the
Agreement and in Section 5.13 of the BBI Disclosure Memorandum, and has
delivered or made available to Regions prior to the execution of this
Agreement correct and complete copies in each case of, all Material BBI
Benefits Plans. For purposes of this Agreement, "BBI 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 BBI 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 BBI Benefit Plans which is an "employee welfare
benefit plan," as that term is defined in Section 3(l) of ERISA, or an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "BBI ERISA Plan." Any BBI ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code or Section 3(35) of ERISA) is referred to herein as a
"BBI Pension Plan." Neither BBI nor any BBI 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 BBI Company that was intended to qualify under Section 401(a) of the
Internal Revenue Code and with respect to which any BBI Company has any
Liability, is disclosed as such in Section 5.13 of the BBI Disclosure
Memorandum.
(b) BBI 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 BBI Benefit
Plans (including insurance contracts), and all amendments thereto, (ii)
with respect to any such BBI
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Benefit Plans or amendments, all determination letters, Material rulings,
Material opinion letters, Material information letters, or Material
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1994, (iii) annual reports or returns, audited or unaudited
financial statements, actuarial valuations and reports, and summary annual
reports prepared for any BBI Benefit Plan with respect to the most recent
plan year, and (iv) the most recent summary plan descriptions and any
Material modifications thereto.
(c) All BBI 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 BBI. Each BBI 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 BBI 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 BBI ERISA Plan has been determined to be
exempt from Tax under Section 501(a) of the Internal Revenue Code and BBI
is not aware of any circumstance which will or could reasonably result in
revocation of such exemption. With respect to each BBI Benefit Plan to the
Knowledge of BBI, 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 BBI. There is no Material pending or, to the Knowledge of
BBI, threatened Litigation relating to any BBI ERISA Plan.
(d) No BBI Company has engaged in a transaction with respect to any BBI
Benefit Plan that, assuming the Taxable Period of such transaction expired
as of the date of this Agreement, would subject any BBI Company to a
Material tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on BBI. Neither BBI nor any administrator or fiduciary of any BBI 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 BBI 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 BBI. No oral or written representation or communication
with respect to any aspect of the BBI Benefit Plans has been made to
employees of any BBI 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 BBI.
(e) No BBI Pension Plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the Assets of any such plan exceeds the plan's "benefit liabilities," as
that term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance
with all applicable legal requirements. Since the date of the most recent
actuarial valuation, there has been (i) no Material change in the financial
position or funded status of any BBI Pension Plan, (ii) no change in the
actuarial assumptions with respect to any BBI Pension Plan, and
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(iii) no increase in benefits under any BBI 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 BBI. Neither any BBI Pension Plan nor any "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any BBI Company, or the single-employer plan of any entity
which is considered one employer with BBI under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether
or not waived) (a "BBI ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code
or Section 302 of ERISA. All contributions with respect to a BBI Pension
Plan or any single-employer plan of a BBI ERISA Affiliate have or will be
timely made and there is no lien or expected to be a lien under Internal
Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under Internal
Revenue Code Section 4971. No BBI Company has provided, or is required to
provide, security to a BBI Pension Plan or to any single-employer plan of a
BBI 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 BBI, except to the extent any failure would not have a
Material Adverse Effect on BBI.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any BBI Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any BBI 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 BBI).
(g) No BBI Company has any obligations for retiree health and retiree life
benefits under any of the BBI Benefit Plans other than with respect to
benefit coverage mandated by applicable Law.
(h) Except as described in Section 5.13 of the BBI Disclosure Memorandum,
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 BBI Company from any BBI Company under any BBI
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any BBI 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 BBI
Disclosure Memorandum, none of the BBI Companies, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $50,000, (ii) any Contract relating to the borrowing
of money by any BBI Company or the guarantee by any BBI Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
and (iii) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by BBI with the SEC as of the date of
this Agreement if BBI were required to file a Form 10-K with the SEC (together
with all Contracts referred to in
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Sections 5.9 and 5.13(a) of this Agreement, the "BBI Contracts"). With respect
to each BBI Contract: (i) the Contract is in full force and effect; (ii) no BBI
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
BBI; (iii) no BBI 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 BBI, 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
BBI, or has repudiated or waived any Material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of any BBI Company for
money borrowed is prepayable at any time by such BBI Company without penalty or
premium.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge of
BBI, threatened against any BBI 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
BBI, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any BBI
Company, that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on BBI.
(b) Section 5.15(b) of the BBI Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any BBI
Company is a party and which names a BBI Company as a defendant or
cross-defendant.
5.16 Reports. Since December 31, 1994, or the date of organization if later,
each BBI 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 BBI. 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 BBI Company or any Affiliate thereof regarding BBI 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 BBI Company or any Affiliate
thereof for inclusion in the Proxy Statement to be mailed to BBI's stockholders
in connection with the Stockholders' Meeting will, when first mailed to the
stockholders of BBI, 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 BBI Company or any Affiliate
thereof is responsible for
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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. No BBI Company or any Affiliate
thereof has taken or agreed to take any action, and BBI 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 BBI Company has taken all necessary action to
exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "control share," "fair price," "business combination," or other
anti-takeover laws and regulations of the State of Georgia (collectively,
"Takeover Laws") including those Laws contained within Sections 14-2-1110 et
seq. and 14-2-1131 et seq. of the GBCC.
5.20 Charter Provisions. Each BBI 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 BBI 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 BBI Company that may
be directly or indirectly acquired or controlled by it.
5.21 Support Agreements. Each of the directors of BBI has executed and
delivered to Regions a Support Agreement in substantially the form as Exhibit 1
to this Agreement.
5.22 Derivatives. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for BBI's own account, or for the account of one or more
the BBI 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. BBI represents and warrants that all computer software
necessary for the conduct of its business (the "Software") is designed to be
used prior to, during, and after the calendar year 2000 A.D., and that the
Software will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century. BBI further represents and warrants that the Software accepts,
calculates, sorts, extracts and otherwise processes date inputs and date values,
and returns and displays date values, in a consistent manner regardless of the
dates used, whether before, on, or after January 1, 2000.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to BBI 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 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.
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6.3 Capital Stock. The authorized capital stock of Regions consists, as of the
date of this Agreement, of 240,000,000 shares of Regions Common Stock, of which
136,696,150 shares were issued and outstanding and 322,221 shares were held as
treasury shares as of December 31, 1997. All of the issued and outstanding
shares of Regions Common Stock are, and all of the shares of Regions Common
Stock to be issued in exchange for shares of BBI 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 BBI Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of
Regions.
6.4 Regions Subsidiaries. Regions or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each Regions Subsidiary. No
equity securities of any Regions Subsidiary are or may become required to be
issued (other than to another Regions Company) by reason of any Rights, and
there are no Contracts by which any Regions Subsidiary is bound to issue (other
than to another Regions Company) additional shares of its capital stock or
Rights or by which any Regions Company is or may be bound to transfer any shares
of the capital stock of any Regions Subsidiary (other than to another Regions
Company). There are no Contracts relating to the rights of any Regions Company
to vote or to dispose of any shares of the capital stock of any Regions
Subsidiary. All of the shares of capital stock of each Regions Subsidiary held
by a Regions Company are fully paid and, except as provided in statutes pursuant
to which depository institution Subsidiaries are organized, nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Regions Company free and clear of
any Lien. Each Regions Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each Regions Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions. Each Regions Subsidiary
that is a depository institution is an "insured depository institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund or
Savings Association Insurance Fund.
6.5 SEC Filings; Financial Statements.
(a) Regions has filed and made available to BBI all forms, reports, and
documents required to be filed by Regions with the SEC since January 1 of
the second fiscal year prior to the date of this Agreement (collectively,
the "Regions SEC Reports"). The Regions SEC Reports (i) at the time filed,
complied in all Material respects with the applicable requirements of the
1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a Material fact or omit to state a Material fact required to
be stated in such Regions SEC Reports or necessary in order to make the
statements in such
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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 December 31, 1997,
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 December 31, 1997. No Regions Company has incurred or paid any
Liability since December 31, 1997, except for such Liabilities incurred or paid
in the ordinary course of business consistent with past business practice and
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions.
6.7 Absence of Certain Changes or Events. Since December 31, 1997, except as
disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, and (ii) the Regions Companies have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
6.8 Compliance with Laws. Regions is duly registered as a bank holding company
under the BHC Act. Each Regions Company has in effect all Permits necessary for
it to own, lease, or operate its Material Assets and to carry on its business as
now conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions. None of the Regions Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
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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 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 December 31, 1994, or the date of organization if later,
each Regions Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
6.11 Statements True and Correct. None of the information supplied or to be
supplied by any Regions Company or any Affiliate thereof regarding Regions or
such Affiliate for inclusion in the Registration Statement to be filed by
Regions with the SEC will, when the Registration Statement becomes effective, be
false or misleading with respect to any Material fact, or contain any untrue
statement of a Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any Regions Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to BBI's
stockholders in connection with the Stockholders' Meeting, will, when first
mailed to the stockholders of BBI, 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.
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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 BBI a complete and accurate copy of
Regions' plan, including an estimate of the anticipated associated costs, for
implementing modifications to Regions' hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, Regions
shall endeavor to continue its efforts to implement such plan.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Both Parties. Unless the prior written consent of
the other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to (i) operate its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organization and Assets and maintain its
rights and franchises, (iii) use its reasonable efforts to maintain its current
employee relationships, and (iv) take no action which would (a) adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement; provided, that the foregoing shall not prevent
any Regions Company from discontinuing or disposing of any of its Assets or
business, or from acquiring or agreeing to acquire any other Person or any
Assets thereof, if such action is, in the judgment of Regions, desirable in the
conduct of the business of Regions and its Subsidiaries.
7.2 Negative Covenants of BBI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, BBI
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of Regions, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any BBI Company, or
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(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money (other than
indebtedness of a BBI Company to another BBI Company) in excess of an
aggregate of $100,000 (for the BBI Companies on a consolidated basis),
except in the ordinary course of the business consistent with past
practices (which shall include, for BBI 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 BBI
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
BBI 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 BBI Company, or declare or pay any dividend or
make any other distribution in respect of BBI's capital stock, except that
BBI shall be permitted to pay dividends, with payment and record dates
consistent with past practice at an annualized amount not in excess of the
total amount of dividends paid by BBI in the 12-month period ending on the
date of this Agreement; 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 BBI Common Stock or any
other capital stock of any BBI 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 BBI
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of BBI Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any BBI Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another BBI 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 BBI
Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of
new wholly-owned Subsidiaries organized to conduct or continue activities
otherwise permitted by this Agreement; or
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(g) grant any increase in compensation or benefits to the employees or
officers of any BBI Company, except (i) as required by Law or (ii) as set
forth in Section 7.2(g) of the BBI Disclosure Memorandum; 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 BBI Company; grant any
increase in fees or other increases in compensation or other benefits to
directors of any BBI 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 BBI Company and
any Person (unless such amendment is required by Law) that the BBI 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 BBI Company or make any
Material change in or to any existing employee benefit plans of any BBI
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; provided that BBI may, subject to satisfaction of
the condition included in Section 9.1(h) of this Agreement, amend the BBI
Stock Option Plan to provide for the conversion of stock options issued
thereunder in accordance with Section 3.6 of this Agreement; 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 BBI Company for Material money damages or restrictions upon the
operations of any BBI Company; or
(l) except in the ordinary course of business, modify, amend, or terminate
any Material Contract or waive, release, compromise, or assign any Material
rights or claims.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all reports required to
be filed by it with Regulatory Authorities between the date of this Agreement
and the Effective Time and shall deliver to the other Party copies of all such
reports promptly after the same are filed. If financial statements are contained
in any such reports filed with the SEC, such financial statements will fairly
present the consolidated financial position of the entity filing such statements
as of the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not Material). As of their respective
dates, such reports filed with the SEC will comply in all Material respects with
the Securities Laws and will not contain any untrue statement of a Material fact
or omit to state a Material fact required to be
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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.
7.5 Incentive Compensation Program. The BBI Companies are not prohibited from
accruing or paying amounts based upon achievement of 1998 performance goals, as
set forth in Section 7.5 of the BBI Disclosure Memorandum, for the BBI Incentive
Compensation Program determined on a pro rata, year-to-day basis, for the six
months ended June 30, 1998 and the period ending on the last day of the month
immediately preceding the date on which the BBI stockholders approve the Merger
at the Stockholders' Meeting.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Stockholder Approval. As soon as
reasonably practicable after execution of this Agreement, Regions shall file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of Regions Common
Stock upon consummation of the Merger. BBI shall furnish all information
concerning it and the holders of its capital stock as Regions may reasonably
request in connection with such action. BBI shall call a Stockholders' Meeting,
to be held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement and such other related matters as it deems appropriate. In connection
with the Stockholders' Meeting, (i) BBI shall prepare and file with the SEC a
Proxy Statement and mail such Proxy Statement to its stockholders, (ii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Proxy Statement, (iii) the Board
of Directors of BBI shall recommend to its stockholders the approval of the
matters submitted for approval, and (iv) he Board of Directors and officers of
BBI shall use their reasonable efforts to obtain such stockholders' approval,
provided that each of Regions and BBI may withdraw, modify, or change in an
adverse manner to the other Party its recommendations if the Board of Directors
of such Party, after having consulted with and based upon the advice of outside
counsel, determines in good faith that the failure to so withdraw, modify, or
change its recommendation could constitute a breach of the fiduciary duties of
BBI's Board of Directors under applicable Law. In addition, nothing in this
Section 8.1 or elsewhere in this Agreement shall prohibit accurate disclosure by
BBI of information that is required to be disclosed in the Registration
Statement or the Proxy Statement or in any other document required to be filed
with the SEC (including, without limitation, a Solicitation/Recommendation
Statement on Schedule 14D-9) or otherwise required to be publicly disclosed by
applicable Law or regulations or rules of the NASD.
8.2 Exchange Listing. Regions shall use its reasonable efforts to list, prior
to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of Regions Common Stock to be issued to the holders of BBI
Common Stock pursuant to the Merger.
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8.3 Applications. Regions shall promptly prepare and file, and BBI shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
8.4 Filings with State Offices. Upon the terms and subject to the conditions of
this Agreement, Regions shall execute and file the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware and the Georgia
Certificate of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and conditions
of this Agreement, each Party agrees to use, and to cause its Subsidiaries to
use, its reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper, or advisable under
applicable Laws to consummate and make effective, as soon as reasonably
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including, without limitation, using its reasonable efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it
and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation
shall be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily with normal operations. No investigation
by a Party shall affect the representations and warranties of the other
Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its and its Subsidiaries' businesses, operations,
and financial positions and shall not use such information for any purpose
except in furtherance of the transactions contemplated by this Agreement.
If this Agreement is terminated prior to the Effective Time, each Party
shall promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information
received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the
other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a
Material breach of any representation, warranty, covenant, or agreement of
the other Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access
or disclosure would violate or
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prejudice the rights of its customers, jeopardize the attorney-client or
similar privilege with respect to such information or contravene any Law,
rule, regulation, Order, judgment, decree, fiduciary duty, or agreement
entered into prior to the date of this Agreement. The Parties will use
their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, Regions and BBI 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 8.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party's disclosure obligations
imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the transactions
contemplated hereby, no BBI Company nor any Affiliate thereof nor any
Representatives thereof retained by any BBI 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, BBI 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 BBI'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 BBI's Board of Directors under
applicable Law; provided, that BBI 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
BBI or access to BBI's books, records, or properties in connection therewith,
the other Person shall have entered into a confidentiality agreement
substantially similar to the Confidentiality Agreement previously entered into
between BBI and Regions. Nothing contained in this Section 8.8 shall prohibit
the Board of Directors of BBI from complying with Rule 14e-2, promulgated under
the 1934 Act. BBI shall (i) immediately cease and cause to be terminated any
existing activities, discussions, or negotiations with any Persons conducted
heretofore with respect to any of the foregoing, and (ii) direct and use its
reasonable efforts to cause of all its Representatives not to engage in any of
the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and agrees to
use its reasonable efforts to cause the Merger, and to take no action which
would cause the Merger not, to qualify for treatment as a pooling of interests
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each BBI Company shall take all necessary steps to
exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.11 Charter Provisions. Each BBI 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
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of any BBI 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 BBI Company that may be directly or indirectly
acquired or controlled by it.
8.12 Agreement of Affiliates. BBI has disclosed in Section 8.12 of the BBI
Disclosure Memorandum each Person whom it reasonably believes may be deemed an
"affiliate" of BBI for purposes of Rule 145 under the 1933 Act. BBI 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 BBI 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 BBI 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
BBI in exchange for shares of BBI Common Stock shall not be transferable until
such time as financial results covering at least 30 days of combined operations
of Regions and BBI have been published within the meaning of Section 201.01 of
the SEC's Codification of Financial Reporting Policies, regardless of whether
each such affiliate has provided the written agreement referred to in this
Section 8.12 (and Regions shall be entitled to place restrictive legends upon
certificates for shares of Regions Common Stock issued to affiliates of BBI
pursuant to this Agreement to enforce the provisions of this Section 8.12).
Regions shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of Regions Common Stock
by such affiliates.
8.13. Employee Benefits and Contracts. Following the Effective Time, Regions
shall provide generally to officers and employees of the BBI Companies, who at
or after the Effective Time become employees of a Regions Company, employee
benefits under employee benefit plans (other than stock option or other plans
involving the potential issuance of Regions Common Stock except as set forth in
this Section 8.13), on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the Regions Companies to
their similarly situated officers and employees. For purposes of participation
and vesting (but not accrual of benefits) under such employee benefit plans, (i)
service under any qualified defined benefit plans of BBI shall be treated as
service under Regions' qualified defined benefit plans, (ii) service under any
qualified defined contribution plans of BBI shall be treated as service under
Regions' qualified defined contribution plans, and (iii) service under any other
employee benefit plans of BBI shall be treated as service under any similar
employee benefit plans maintained by Regions. Regions also shall cause BBI and
its Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 0.13 of the BBI Disclosure
Memorandum to Regions between any BBI 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
BBI Benefit Plans.
8.14 Indemnification.
(a) Subject to the conditions set forth in paragraph (b) below, for a
period of six (6) years after the Effective Time, Regions shall indemnify,
defend, and hold
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harmless each Person entitled to indemnification from a BBI Company (each,
an "Indemnified Party") against all Liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the full
extent permitted by Georgia Law and BBI's Articles of Incorporation and
Bylaws, in each case as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation.
Without limiting the foregoing, in any case in which approval by BBI is
required to effectuate any indemnification, Regions shall cause BBI 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 BBI
shall have the right to assume the defense thereof and Regions shall not be
liable to such Indemnified Parties for any legal expenses of other counsel
or any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Regions or BBI 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 BBI and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Regions or
BBI shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that (i) Regions shall be obligated pursuant to this paragraph (b)
to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate (to the extent
reasonably appropriate under the circumstances) in the defense of any such
Litigation, and (iii) Regions shall not be liable for any settlement
effected without its prior written consent; and provided further that
Regions shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law.
(c) If Regions or any of its successors or assigns shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or
substantially all of its Assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of
Regions shall assume the obligations set forth in this Section 8.14.
(d) The provisions of this Section 8.14 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs
and representatives.
8.15 Certain Modifications. Regions and BBI shall consult with respect to their
loan, litigation, and real estate valuation policies and practices (including
loan classifications and levels of reserves) and BBI 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 BBI also shall
consult with respect to the character, amount, and timing of restructuring and
Merger-related expense charges to be taken by each of the Parties in connection
with the transactions contemplated by this Agreement and shall take such charges
in accordance with GAAP as may be mutually agreed upon by the Parties.
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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 BBI as a consequence of any modifications
or charges undertaken solely on account of this Section 8.15.
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 BBI shall have approved this
Agreement, and the consummation of the transactions contemplated hereby,
including the Merger, as and to the extent required by Law and by the
provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force
and effect and all waiting periods required by Law shall have expired. No
Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (excluding requirements relating to the raising of
additional capital or the disposition of Assets or deposits) which in the
reasonable good faith judgment of the Board of Directors of Regions would
so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party. No Consent obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable good faith
judgment of the Board of Directors of Regions would so materially adversely
impact the economic or business benefits of the transactions contemplated
by this Agreement so as to render inadvisable the consummation of the
Merger.
(d) Legal Proceedings. No court or governmental or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced,
or entered any Law or Order (whether temporary, preliminary, or permanent)
or taken any other action which prohibits, restricts, or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding,
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all
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necessary approvals under state securities Laws or the 1933 Act or 1934 Act
relating to the issuance or trading of the shares of Regions Common Stock
issuable pursuant to the Merger shall have been received.
(f) Exchange Listing. The shares of Regions Common Stock issuable pursuant
to the Merger shall have been approved for listing on the Nasdaq NMS,
subject to official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion from
Alston & Bird LLP, in a form reasonably satisfactory to such Party (the
"Tax Opinion"), dated the date of the Effective Time, substantially to the
effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, (ii) no gain or
loss will be recognized by holders of BBI Common Stock who exchange all of
their BBI 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 BBI Common Stock who exchange all of
their BBI Common Stock solely for Regions Common Stock in the Merger will
be the same as the tax basis of the BBI 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 BBI Common Stock solely for Regions
Common Stock in the Merger will be the same as the holding period of the
BBI Common Stock surrendered in exchange therefor, provided that such BBI
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 BBI and Regions reasonably satisfactory in
form and substance to such counsel.
(h) Pooling Letter. Each Party shall have received a letter, dated as of
the Effective Time, in a form reasonably acceptable to such Party, from
Ernst & Young LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
9.2 Conditions to Obligations of Regions. The obligations of Regions to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by Regions pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of BBI 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 BBI 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 BBI 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 BBI 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 BBI; provided that, for purposes of this sentence only,
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those representations and warranties which are qualified by references to
"material," "Material," "Material Adverse Effect," or variations thereof, or to
the "Knowledge" of BBI or to a matter being "known" by BBI shall be deemed not
to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of BBI 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. BBI shall have delivered to Regions (i) a certificate,
dated as of the Effective Time and signed on its behalf by its duly
authorized officers, to the effect that the conditions of its obligations
set forth in Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by BBI'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 BBI the affiliates agreement referred to in Section 8.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of
Regions that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(e) Claims Letters. Each of the directors and executive officers of BBI
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 BBI, in substantially the form of
Exhibit 4.
9.3 Conditions to Obligations of BBI. The obligations of BBI 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 BBI 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.
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(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
(c) Certificates. Regions shall have delivered to BBI (i) a certificate,
dated as of the Effective Time and signed on its behalf by its duly
authorized officers, to the effect that the conditions of its obligations
set forth in Section 9.3(a) and 9.3(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by
Regions' Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as BBI and its counsel
shall request.
(d) Legal Opinion. BBI shall have received a written opinion, dated as of
the Effective Time, of counsel to Regions, in substantially the form of
Exhibit 5.
(e) Fairness Opinion. BBI shall have received a fairness opinion from
[Mercer Capital], dated within five days of the date of the Proxy
Statement, stating that the Exchange Ratio is fair to the shareholders of
BBI from a financial point of view.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the stockholders of BBI 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 BBI; 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 BBI 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 BBI 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 BBI 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
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which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Regions or BBI 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 January 31, 1999, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of BBI 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 BBI, 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 BBI 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 BBI of such election and
the revised Exchange Ratio,
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whereupon no termination shall have occurred pursuant to this Section 10.1(g)
and this Agreement shall remain in effect in accordance with its terms (except
as the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the daily last sales
prices of Regions Common Stock as reported on the Nasdaq NMS (as reported
by The Wall Street Journal or, if not reported thereby, another
authoritative source as chosen by Regions) for the ten consecutive full
trading days in which such shares are traded on the Nasdaq NMS ending at
the close of trading on the Determination Date.
"Determination Date" shall mean the date on which the BBI 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...................... 3.56%
BB&T Corporation............................ 6.02
Compass Bancshares, Inc..................... 3.01
Fifth Third Bancorp......................... 6.86
First American Corporation.................. 2.61
First Security Corporation.................. 7.78
First Tennessee National Corporation........ 5.66
First Virginia Banks, Inc................... 2.29
Hibernia Corporation........................ 6.55
Huntington Bancshares, Inc.................. 8.49
Mercantile Bancorporation, Inc.............. 5.91
SouthTrust Corporation...................... 7.09
Star Banc Corporation....................... 4.21
Summit Bancorp.............................. 7.83
SunTrust Banks, Inc......................... 9.34
Union Planters Corporation.................. 3.69
Wachovia Corporation........................ 9.10
------
Total............................. 100.00%
======
</TABLE>
"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.
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"Starting Date" shall mean the fourth full trading day following the
announcement by press release of the Merger.
"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 8.6(b) of this Agreement shall survive any such
termination and abandonment, and (ii) a termination pursuant to Sections
10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the breaching
Party from Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 and Sections 8.12 and 8.14 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer
or exchange offer or any proposal for a merger, acquisition of all of the
stock or Assets of, or other business combination involving such Party or
any of its Subsidiaries or the acquisition of a substantial equity interest
in, or a substantial portion of the Assets of, such Party or any of its
Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character, and
description, whether real, personal,
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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.
"BBI COMMON STOCK" shall mean the $1.00 par value common stock of BBI.
"BBI COMPANIES" shall mean, collectively, BBI and all BBI Subsidiaries.
"BBI DISCLOSURE MEMORANDUM" shall mean the written information entitled
"BBI Disclosure Memorandum" delivered prior to the execution of this
Agreement to Regions describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section 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.
"BBI FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of BBI as of
December 31, 1997, 1996 and 1995, and the related statements of income,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for each of the three years ended December 31, 1997,
1996, and 1995, included in the BBI Disclosure Memorandum, and (ii) the
consolidated statements of condition of BBI (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 December 31,
1997.
"BBI STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans of BBI.
"BBI SUBSIDIARIES" shall mean the Subsidiaries of BBI, which shall include
the BBI Subsidiaries described in Section 5.4 of this Agreement and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of BBI in the future and owned by BBI at the Effective Time.
"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 BBI
and Regions.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or
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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.
"GBCC" shall mean the Georgia Business Corporation Code as amended.
"GEORGIA CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Regions and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder.
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"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 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
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Merger or the other transactions contemplated by this Agreement, provided
that "Material Adverse Effect" shall not be deemed to include the impact of
(a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes
in GAAP or regulatory accounting principles generally applicable to banks
and their holding companies, (c) actions and omissions of a Party (or any
of its Subsidiaries) taken with the prior informed consent of the other
Party in contemplation of the transactions contemplated hereby, and (d) the
Merger and compliance with the provisions of this Agreement on the
operating performance of the Parties.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NMS" shall mean the National Market System of The Nasdaq Stock
Market.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"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 BBI or Regions, and "PARTIES" shall mean both BBI
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 BBI 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 BBI Common Stock.
"REGIONS COMMON STOCK" shall mean the $.625 par value common stock of
Regions.
"REGIONS COMPANIES" shall mean, collectively, Regions and all Regions
Subsidiaries.
"REGIONS FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of Regions as
of December 31, 1997, 1996, and 1995, and the related statements of income,
changes in
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stockholders' equity, and cash flows (including related notes and
schedules, if any) 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 December 31, 1997.
"REGIONS SUBSIDIARIES" shall mean the Subsidiaries of Regions and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Regions in the future and owned by Regions at the Effective
Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-4,
or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by Regions under the
1933 Act with respect to the shares of Regions Common Stock to be issued to
the stockholders of BBI in connection with the transactions contemplated by
this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of 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 BBI
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
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foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean Regions as the surviving corporation
resulting from the Merger.
"TAX" OR "TAXES" shall mean all federal, state, local, and foreign taxes,
charges, fees, levies, imposts, duties, or other assessments, including
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property, personal
property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
"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>
Average Closing Price.................. Section 10.1(g)
BBI Benefit Plans...................... Section 5.13(a)
BBI Contracts.......................... Section 5.14
BBI ERISA Affiliate.................... Section 5.13(e)
BBI ERISA Plan......................... Section 5.13(a)
BBI Rights............................. Section 3.6(a)
BBI Pension Plan....................... Section 5.13(a)
BBI SEC Reports........................ Section 5.5(a)
Claim.................................. Section 8.15(a)
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 8.14
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)
Starting Date.......................... Section 10.1(g)
</TABLE>
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<TABLE>
<S> <C>
Starting Price......................... Section 10.1(g)
Takeover Laws.......................... Section 5.19
Tax Opinion............................ Section 9.1(g)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and
fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that Regions shall bear and pay
the filing fees payable in connection with the Registration Statement and
the Proxy Statement and one-half of the printing costs incurred in
connection with the printing of the Registration Statement and the Proxy
Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party
of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 Brokers and Finders. Except for U.S. Banking Alliance, Inc. and Mercer
Capital as to BBI, 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
BBI or Regions, each of BBI and Regions, as the case may be, agrees to indemnify
and hold the other Party harmless of and from any Liability in respect of any
such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Sections 8.12 and 8.14 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be amended
by a subsequent writing signed by each of the Parties upon the approval of the
Boards of Directors of each of the Parties, whether before or after stockholder
approval of this Agreement has been obtained; provided, that the provisions of
this Agreement relating to the manner or basis in which shares of BBI 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 Regions Common Stock and BBI Common Stock, as the case may
be, 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 BBI, to waive or extend the
time for the compliance or fulfillment by BBI 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, BBI, 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 BBI 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 BBI.
(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>
BBI: BULLSBORO BANCSHARES, INC.
40 Bullsboro Drive
Newnan, Georgia 30264
Telecopy Number: (770) 254-0892
Attention: Bradley H. Murphey
President and Chief Executive Officer
</TABLE>
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<TABLE>
<S> <C>
Copy to Counsel: KENNEDY BARIS & LUNDY L.L.P.
Suite 300
4719 Hampden Lane
Bethesda, Maryland 20814-2944
Telecopy Number: (301) 654-1733
Attention: James I. Lundy III
Regions: REGIONS FINANCIAL CORPORATION
417 N. 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive
Financial Officer
Copy to Counsel: REGIONS FINANCIAL CORPORATION
417 N. 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7751
Attention: Samuel E. Upchurch, Jr.
General Counsel
</TABLE>
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws, except to the extent that the Laws of the State of
Georgia relate to the consummation of the Merger or (ii) the Laws of either such
State are preempted by federal Law.
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.
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
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terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: BULLSBORO BANCSHARES, INC.
By: /s/ JENNIE P. STEFANCHICK By: /s/ BRADLEY H. MURPHEY
------------------------------------------ ------------------------------------------
Jennie P. Stefanchick Bradley H. Murphey
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: /s/ SAMUEL E. UPCHURCH, JR. By: /s/ RICHARD D. HORSLEY
------------------------------------------ ------------------------------------------
Samuel E. Upchurch, Jr. Richard D. Horsley
Corporate Secretary Vice Chairman and
Executive Financial Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
November 11, 1998
The Board of Directors
c/o Mr. Hamilton C. Arnall, Jr.
Chairman of the Board of Directors
Bullsboro Bancshares, Inc.
40 Bullsboro Drive
Newnan, Georgia 30263
Re: Fairness Opinion Regarding the Acquisition of Bullsboro Bancshares, Inc. by
Regions Financial Corporation
Dear Directors:
Mercer Capital Management, Inc. ("Mercer Capital") has been retained by the
Board of Directors of Bullsboro Bancshares, Inc. ("Bullsboro") to issue a
fairness opinion regarding the financial terms of the proposed merger between
Bullsboro and Regions Financial Corporation ("Regions") from the perspective of
the Bullsboro common stockholders. Mercer Capital previously issued a
preliminary opinion, dated July 16, 1998, to coincide with the signing of the
Agreement and Plan of Merger ("the Agreement").
Under the terms of the Agreement and Plan of Merger by and between Bullsboro
Bancshares, Inc. and Regions Financial Corporation, dated July 16, 1998,
Bullsboro shall be merged with and into Regions. Each share of Bullsboro Common
Stock issued and outstanding at the Effective Time (as defined in the Agreement)
shall be converted into 3.65 shares of Regions Common Stock. At the Effective
Time, each award, option, or other right to purchase or acquire shares of
Bullsboro Common Stock pursuant to stock options, stock appreciation rights, or
stock awards, which are outstanding at the Effective Time, shall be converted
into and become rights with respect to Regions Common Stock, and Regions shall
assume each Bullsboro right in accordance with the Bullsboro Stock Plan and
Stock Option Agreement.
Mercer Capital, as part of its investment banking and general valuation
businesses, is engaged to assist financial institutions and businesses in
merging with and acquiring other entities, and to value businesses and their
securities in connection with mergers and acquisitions, private placements,
corporate reorganization, estate tax matters, and other purposes. We have not
participated in the negotiations which led to the Agreement.
As part of the engagement, representatives of Mercer Capital visited with
Bullsboro management in Newnan, Georgia and with Regions management in
Birmingham, Alabama. Additional factors considered in rendering the opinion
include:
1. The terms of the Agreement;
2. The arms' length process by which the Agreement was negotiated;
3. The acquisition analysis of Bullsboro as prepared by Mercer Capital;
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Mr. Hamilton C. Arnall, Jr.
November 11, 1998
4. An analysis of the estimated pro-forma changes in book value per share,
earnings per share, and dividends per share from the perspective of the
Bullsboro shareholders;
5. A review of Bullsboro's audited financial statements, internally
prepared financial statements, and certain regulatory financial data for
the fiscal years ended December 31, 1995, 1996, and 1997 and the
quarters ended March 31 and June 30, 1998;
6. A review of Region's Annual Report to Shareholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1995, 1996, and 1997
and quarterly financial information for the quarters ended March 31 and
June 30, 1998 on Form 10-Q;
7. A review of Region's historical financial performance, selected
analysts' reports, and trading history on both an absolute and relative
basis in comparison to other publicly traded bank holding companies;
8. A comparison of the financial terms, to the extent publicly available,
of certain acquisition transactions which we deemed to be relevant for
purposes of this opinion; and,
9. Tax consequences of the merger for Bullsboro shareholders.
Mercer Capital neither compiled nor audited Bullsboro's or Region's financial
statements; nor have we independently verified the information reviewed. We have
relied upon such information as being complete and accurate in all material
respects. We have not made an independent valuation of the loan portfolio,
adequacy of the loan loss reserve or other assets or liabilities of either
institution.
Our opinion does not constitute a recommendation to any shareholder as to how
the shareholder should vote on the proposed merger; nor have we expressed any
opinion as to the prices at which any security of Regions or Bullsboro might
trade in the future. The opinion is necessarily based on economic, market,
financial and other conditions as they exist on, and on the information made
available to us, as of the date of this letter.
Based upon our analysis of the proposed transaction, it is our opinion as of the
date hereof that the Exchange Ratio is fair from a financial point of view to
the common stockholders of Bullsboro Bancshares, Inc.
Sincerely yours,
MERCER CAPITAL MANAGEMENT, INC.
Jeff K. Davis, CFA, ASA
Vice President
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APPENDIX C
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required for
the merger by Code Section 14-2-1103 or the articles of incorporation
and the shareholder is entitled to vote on the merger; or
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(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale
or exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash
under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
that Article 9 of this chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares under
this article may not challenge the corporate action creating his entitlement
unless the corporate action fails to comply with procedural requirements of this
chapter or the articles of incorporation or bylaws of the corporation or the
vote required to obtain approval of the corporate action was obtained by
fraudulent and deceptive means, regardless of whether the shareholder has
exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no right
of dissent in favor of the holder of shares of any class or series which, at the
record date fixed to determine the shareholders entitled to receive notice of
and to vote at a meeting at which a plan of merger or share exchange or a sale
or exchange of property or an amendment of
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the articles of incorporation is to be acted on, were either listed on a
national securities exchange or held of record by more than 2,000 shareholders,
unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise.
14-2-1303 Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
14-2-1320 Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section 14-2-1302
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Code Section 14-2-1322 no
later than ten days after the corporate action was taken.
14-2-1321 Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection (a)
of this Code section is not entitled to payment for his shares under this
article.
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14-2-1322 Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered;
and
(4) Be accompanied by a copy of this article.
14-2-1323 Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance with
the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
14-2-1324 Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.
14-2-1325 Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the later
of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
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(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to the
corporation within 30 days after the corporation's offer or is deemed to have
accepted such offer by failure to respond within said 30 days, payment for his
or her shares shall be made within 60 days after the making of the offer or the
taking of the proposed corporate action, whichever is later.
14-2-1326 Failure to take action.
(a) If the corporation does not take the proposed action within 60 days after
the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his
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shares and the amount of interest due and demand payment of his estimate of
the fair value of his shares and interest due.
14-2-1330 Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding, which shall
have the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in the proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law for
the service of a summons and complaint, and upon each nonresident dissenting
shareholder either by registered or certified mail or by publication, or in any
other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts for
the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted
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arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these attorneys reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
14-2-1332 Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought more
than three years after the corporate action was taken, regardless of whether
notice of the corporate action and of the right to dissent was given by the
corporation in compliance with the provisions of Code Section 14-2-1320 and Code
Section 14-2-1322.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the
Registrant to indemnify its officers and directors under certain circumstances.
The pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
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<PAGE> 166
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
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<PAGE> 167
"(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> 168
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 July 16, 1998, by and between Bullsboro BancShares, Inc. and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation--incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 333-67153.
4.2 -- By-laws of Regions Financial Corporation--incorporated by reference from S-4 Registration Statement
of Regions Financial Corporation, file no. 333-67153.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Mauldin & Jenkins, LLC
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- included in Exhibit 8.
23.5 -- Consent of Mercer Capital Management, Inc.
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> 169
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> 170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on this the 12th day of November, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
/s/ Richard D. Horsley
BY: --------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney- in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
II-6
<PAGE> 171
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ----------------------------- -----------------
<S> <C> <C>
/s/ Carl E. Jones, Jr.
- -------------------------- President and Chief Executive November 12, 1998
Carl E. Jones, Jr. Officer and Director
(principal executive officer)
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and November 12, 1998
Richard D. Horsley Executive Financial Officer
and Director
(principal financial officer)
/s/ Robert P. Houston
- -------------------------- Executive Vice President and November 12, 1998
Robert P. Houston Comptroller
(principal accounting officer)
/s/ Sheila S. Blair
- -------------------------- Director November 12, 1998
Sheila S. Blair
/s/ James B. Boone, Jr.
- -------------------------- Director November 12, 1998
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director November 12, 1998
Albert P. Brewer
/s/ James S.M. French
- -------------------------- Director November 12, 1998
James S.M. French
- -------------------------- Director
Barnett Grace
- -------------------------- Director
Frank D. Hickingbotham
/s/ Olin B. King
- -------------------------- Director November 12, 1998
Olin B. King
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board November 12, 1998
J. Stanley Mackin and Director
- -------------------------- Director
Michael W. Murphy
/s/ Henry E. Simpson
- -------------------------- Director November 12, 1998
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director November 12, 1998
Lee J. Styslinger, Jr.
- -------------------------- Director
Robert J. Williams
</TABLE>
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<PAGE> 172
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ---------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of July 16, 1998, by and between Bullsboro BancShares,
Inc. and Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
4.1 -- Certificate of Incorporation of Regions Financial Corporation--incorporated by reference from S-4
Registration Statement of Regions Financial Corporation, file no. 333-67153.
4.2 -- By-laws of Regions Financial Corporation--incorporated by reference from S-4 Registration Statement
of Regions Financial Corporation, file no. 333-67153.
5. -- Opinion re: legality.
8. -- Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Mauldin & Jenkins, LLC
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- included in Exhibit 8.
23.5 -- Consent of Mercer Capital Management, Inc.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page of the
registration statement.
99. -- Form of proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
November 12, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with Bullsboro BancShares, Inc.
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of Bullsboro BancShares,
Inc. ("Bullsboro") 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 Bullsboro upon consummation of the
Merger. The maximum number of shares of Regions to be issued in the Merger is
estimated to be 848,031.
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission, as such registration
statement has been amended to date. We have examined and are familiar with the
records relating to the organization of Regions and the documents and records as
we have deemed relevant for purposes of rendering this opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such conditions
capable of being waived, and upon consummation of the Merger, the shares of
Regions Common Stock issued pursuant to the Merger will be duly authorized,
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville LLP under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
/s/ Lange, Simpson, Robinson & Somerville LLP
<PAGE> 1
EXHIBIT 8
ALSTON&BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
Philip C. Cook Direct Dial: 404-881-7000
November 13, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Bullsboro Bancshares, Inc.
40 Bullsboro Drive
Newnan, Georgia 30264
Re: Merger Involving Regions Financial Corporation and
--------------------------------------------------
Bullsboro Bancshares, Inc.
--------------------------
Ladies and Gentlemen:
We have served as special counsel to Regions Financial Corporation, a
corporation organized under the laws of the State of Delaware ("Regions"), in
connection with the reorganization of Regions and Bullsboro Bancshares, Inc., a
corporation organized under the laws of the State of Georgia ("BBI"), pursuant
to the Agreement and Plan of Merger dated as of July 16, 1998 (the "Agreement"),
which sets forth the terms of the merger of BBI with and into Regions (the
"Merger"). In our capacity as special counsel to Regions, our opinion has been
requested with respect to certain of the federal income tax consequences of the
Merger.
Pursuant to the Merger, and as more fully described in the Agreement,
at the Effective Time, each share of BBI Common Stock issued and outstanding at
the Effective Time shall be converted into 3.65 shares of Regions Common Stock.
As a result, stockholders of BBI shall become stockholders of Regions, and each
of the subsidiaries of BBI shall continue to conduct its business and operations
as a subsidiary of Regions. All terms used herein without definition shall have
the respective meanings specified in the Agreement, and unless otherwise
specified, all section references herein are to the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE> 2
Regions Financial Corporation
Bullsboro Bancshares, Inc.
November 13, 1998
Page 2
In rendering the opinions expressed herein, we have examined such
documents as we deemed appropriate, including (i) the Agreement and (ii) the
Registration Statement on Form S-4 filed by Regions with the Securities and
Exchange Commission under the Securities Act of 1933, on November 13, 1998, as
amended, including the Proxy Statement/Prospectus constituting part thereof
(together the "Registration Statement"). In rendering the opinions expressed
herein, we have assumed with the consent of Regions and BBI, that the Agreement
and the Registration Statement accurately and completely describe the Merger and
that the Merger will be consummated in accordance with the Agreement and as
described in the Registration Statement.
In rendering the opinions expressed herein, we have relied with the
consent of Regions and BBI, 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 BBI to us dated November 5, 1998 and November 4,
1998, respectively (together, the "Certificates"), which we have assumed are
complete and accurate as of the date hereof and will be complete and accurate as
of the date on which the Merger is consummated.
Based on the foregoing, we are of the opinion that, under presently
applicable federal income tax law:
(1) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and BBI and Regions will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by holders of BBI Common Stock
upon the exchange in the Merger of all of their BBI Common Stock solely for
shares of Regions Common Stock (except with respect to any cash received in lieu
of a fractional share interest in Regions Common Stock).
(3) The aggregate tax basis of the Regions Common Stock received by
holders of BBI Common Stock who exchange all of their BBI Common Stock solely
for Regions Common Stock in the Merger will be the same as the tax basis of the
BBI 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 BBI Common Stock solely for Regions Common Stock in
the Merger will include the holding period of the BBI Common Stock surrendered
in
<PAGE> 3
Regions Financial Corporation
Bullsboro Bancshares, Inc.
November 13, 1998
Page 3
exchange therefor, provided that such BBI Common Stock is held as a capital
asset at the Effective Time.
(5) The payment of cash to holders of BBI Common Stock in lieu of
fractional share interests of Regions Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of the
exchange and then were redeemed by Regions. These cash payments will be treated
as having been received as distributions in full payment in exchange for the
Regions Common Stock redeemed, as provided in Section 302(a) of the Code.
(6) Where solely cash is received by a holder of BBI Common Stock in
exchange for BBI Common Stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of such holder's
BBI Common Stock, subject to the provisions and limitations of Section 302 of
the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. The federal income tax consequences described herein may not
apply to certain shareholders of BBI with special situations, including, without
limitation, shareholders who hold their BBI Common Stock other than as a capital
asset, who received their BBI Common Stock upon the exercise of employee stock
options or otherwise as compensation, who hold their BBI Common Stock as part of
a "straddle" or "conversion transaction" for federal income tax purposes, or are
foreign persons, insurance companies, or securities dealers.
In addition, our opinions are based solely on the documents that we
have examined, and the factual statements and factual representations set out in
the Certificates, which we have assumed were true on the date of the
Certificates, and are true on the date hereof. Our opinions cannot be relied
upon if any of the facts pertinent to the federal income tax treatment of the
Merger stated in such documents or any of the factual statements or factual
representations set out in the Certificates is, or later becomes, inaccurate.
Our opinions are limited to the tax matters specifically covered thereby, and we
have not been asked to address, nor have we addressed, any other tax
consequences of the Merger, including for example any issues related to
intercompany transactions, accounting methods, or changes in accounting methods
resulting from the Merger, or the consequences of the Merger under state, local
or foreign law. These opinions are provided solely for the benefit and use of
Regions and BBI. No other party or person is entitled to rely on the opinions.
<PAGE> 4
Regions Financial Corporation
Bullsboro Bancshares, Inc.
November 13, 1998
Page 4
We hereby consent to the use of this opinion and to the references made
to Alston & Bird LLP in the Registration Statement under the captions
"Summary--Federal Income Tax Consequences of the Merger" and "Description of
Transaction--Federal Income Tax Consequences of the Merger" and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Philip C. Cook
------------------------
Philip C. Cook, Partner
PCC:SA: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 848,031 shares of its common stock and
to the incorporation by reference therein of our report dated February 9, 1998
(except for Note Q as to which the date is February 13, 1998) with respect to
the consolidated financial statements of Regions Financial Corporation
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1997 and our report dated July 31, 1998 (except for Note Q as to
which the date is November 3, 1998) with respect to the supplemental
consolidated financial statements of Regions Financial Corporation included in
its Current Report on Form 8-K dated November 6, 1998, filed with the Securities
and Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
November 12, 1998
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EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
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We consent to the use in this Registration Statement of Regions Financial
Corporation on Form S-4 of our report relating to Bullsboro Bancshares, Inc.
dated February 20, 1998, and to the reference to us under the heading "EXPERTS"
in this Registration Statement.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
November 11, 1998
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EXHIBIT 23.5
NOVEMBER 13, 1998
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of our fairness opinion and references to
our firm in the Proxy Statement/Prospectus included in Regions Financial
Corporation's Registration Statement on Form S-4.
MERCER CAPITAL MANAGEMENT, INC.
By: /s/ Jeff Davis
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Vice President
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Bullsboro BancShares, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints ________ _______, ________
_______, and _______ _______, and each or any one of them, with full power of
substitution, as Proxies to represent and to vote as designated below, all the
shares of common stock of Bullsboro BancShares, Inc. (the "Company") held of
record by the undersigned on _______, 1998, at the Special Meeting of
Stockholders (the "Special Meeting") to be held on _______, 1998, or any
adjournments thereof.
1. Proposal to approve the Agreement and Plan of Merger, dated as of July
16, 1998 (the "Agreement"), by and between the Company and Regions Financial
Corporation ("Regions") pursuant to which the Company will merge with and into
Regions and each share of the Company's common stock (except for certain shares
held by the Company, Regions, or their respective subsidiaries) will be
converted into 3.65 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 meeting
or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder, and in the discretion of the persons
named as Proxies on all other matters which may properly come before the Special
Meeting or any adjournment thereof. If no direction is made, this proxy will be
voted in favor of Proposal 1.
[Reverse]
This Proxy revokes all prior proxies with respect to the Special Meeting
and may be revoked prior to its exercise.
Please date and sign exactly as name appears on your stock certificate.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated:___________________________________________, 1998.
- ---------------------------------------------
(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.
