<PAGE> 1
As filed with the Securities and Exchange Commission on July 9, 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)
----------------------
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<S> <C> <C>
Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies to:
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CHARLES C. PINCKNEY FRANK M. CONNER III RICHARD R. CHEATHAM
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD LLP KILPATRICK STOCKTON LLP
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. SUITE 2800
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 1100 PEACHTREE STREET
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 ATLANTA, GEORGIA 30309-4530
(205) 250-5000 (202) 508-3303 (404) 815-6500
</TABLE>
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Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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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
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<S> <C> <C> <C> <C>
Common Stock 2,915,200 $10.30581778 $30,043,520 $8,862.84
========================================================================================================================
</TABLE>
*Calculated in accordance with Rule 457(f) based on the total stockholders'
equity of the company being acquired as of March 31, 1998.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE> 2
Dear Etowah Bank Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Etowah Bank, to be held at Etowah Bank's main office, located at 140 W. Main
Street, Canton, Georgia, 30114, on _______, 1998, at _______:00 p.m., local
time, notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve (i) an Agreement and Plan of Reorganization, dated as of
February 26, 1998 (the "Agreement"), entered into with Regions Financial
Corporation ("Regions") pursuant to which a newly-formed, interim bank
subsidiary of Regions will merge (the "Merger") with and into Etowah Bank and
Regions will continue the banking operations of Etowah Bank as a subsidiary of
Regions (ii) the related Agreement and Plan of Merger; and (iii) a proposed
bylaw amendment to remove the 10% limitation on Etowah Bank capital stock by any
one holder. Upon consummation of the Merger, each share of Etowah Bank common
stock issued and outstanding (excluding certain shares held by Etowah Bank,
Regions, or their respective subsidiaries and excluding all shares held by
stockholders who perfect their dissenters' rights) will be converted into 3.2
shares of Regions common stock, subject to possible adjustment as described in
the accompanying Proxy Statement/Prospectus, with cash to be paid in lieu of any
fractional share interest.
The accompanying Proxy Statement/Prospectus includes a description of the
proposed Merger and provides other specific information concerning the Special
Meeting. Please read these materials carefully and consider thoughtfully the
information set forth in them.
The Merger has been approved unanimously by your Board of Directors and is
recommended by the Board to you for approval. Each member of the Board of
Directors of Etowah Bank has agreed to vote those Etowah Bank shares over which
such member has voting authority (other than in a fiduciary capacity) in favor
of the Merger. Consummation of the Merger is subject to certain conditions,
including approval of the Agreement by Etowah Bank stockholders and approval of
the Merger by various regulatory agencies.
Stockholders of Etowah Bank who perfect their dissenters' rights prior to
the proposed Merger and comply with applicable law will be entitled to receive
the fair value of their Etowah Bank shares in cash, as provided by applicable
law.
It is important to understand that approval of the Agreement requires the
affirmative vote of at least two-thirds of the outstanding shares of common
stock of Etowah Bank entitled to vote at the Special Meeting, not just
two-thirds of the votes cast. Consequently, a failure to vote will have the same
effect as a vote against the Agreement.
Accordingly, whether or not you plan to attend the Special Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, you may vote in person if you wish, even if you
previously have returned your proxy card. The proposed Merger with Regions is a
significant step for Etowah Bank, and your vote on this matter is of great
importance. On behalf of the Board of Directors, I urge you to vote for approval
of the Merger by marking the enclosed proxy card "FOR" Item One.
Sincerely,
Pierce T. Neese
Chairman and President
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ETOWAH BANK
140 W. MAIN STREET, CANTON, GEORGIA, 30114
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD _______, 1998
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Etowah Bank will be held at Etowah Bank's main office, located at
140 W. Main Street, Canton, Georgia, 30114 on _______, 1998, at _______:00 p.m.,
local time, for the following purposes:
1. Merger. To consider and vote on the Agreement and Plan of
Reorganization, dated as of February 26, 1998 (the "Agreement"), by and between
Etowah Bank and Regions Financial Corporation ("Regions") and the related
Agreement and Plan of Merger, pursuant to which (i) a newly-formed, interim bank
subsidiary of Regions will merge with and into Etowah Bank (the "Merger") (ii)
Etowah Bank will become a subsidiary of Regions, and (iii) each share of Etowah
Bank common stock (excluding certain shares held by Etowah Bank, Regions, or
their respective subsidiaries and excluding all shares held by stockholders who
perfect their dissenters' rights) will be converted into 3.2 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;
2. Bylaw Amendment. To consider and vote on a proposed amendment to the
Bylaws of Etowah Bank to delete Article II, Section 5 thereof, which provision
limits the ownership of capital stock of Etowah Bank to 10% for any one holder,
so as to allow Regions to acquire all of the common stock of Etowah Bank upon
consummation of the Merger; and
3. Other Business. To transact such other business as may properly come
before the Special Meeting, including adjourning the Special Meeting to permit,
if necessary, further solicitation of proxies.
Only stockholders of record at the close of business on _______, 1998, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of Etowah Bank have a right to dissent from the Merger and
obtain payment of the fair value of their shares in cash by complying with the
applicable provisions of applicable law, which are attached to the accompanying
Proxy Statement/Prospectus as Appendix D.
The Board of Directors of Etowah Bank unanimously recommends that holders
of Etowah Bank 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
Etowah Bank 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
Juanita Burrell
Corporate Secretary
_______, 1998
<PAGE> 4
ETOWAH BANK REGIONS FINANCIAL CORPORATION
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK
TO BE HELD _______, 1998 (PAR VALUE $.625)
_______ SHARES
This Proxy Statement/Prospectus constitutes a Prospectus of Regions
Financial Corporation, a regional bank holding company organized and existing
under the laws of the state of Delaware ("Regions"), and relates to the shares
of its common stock, par value $.625 per share ("Regions Common Stock"), which
are issuable to the stockholders of Etowah Bank, a commercial bank organized and
existing under the laws of the state of Georgia, upon consummation of the
proposed merger (the "Merger") described herein, by which a newly-formed,
interim bank subsidiary of Regions will merge with and into Etowah Bank pursuant
to the terms of an Agreement and Plan of Reorganization, dated as of February
26, 1998, by and between Regions and Etowah Bank (the "Agreement").
On the date and at the time that the Merger becomes effective (the
"Effective Time"), except as otherwise described herein, (i) a newly-formed,
interim bank subsidiary of Regions will merge with and into Etowah Bank, (ii)
Etowah Bank will become a subsidiary of Regions, and (iii) each outstanding
share of the $10.00 par value common stock of Etowah Bank ("Etowah Common
Stock") will be converted into 3.2 shares of Regions Common Stock, subject to
possible adjustment (the "Exchange Ratio"), with cash to be paid in lieu of any
fractional share interest. A copy of the Agreement is attached to this Proxy
Statement/Prospectus as Appendix A.
As a result of the Merger, the separate existence of Etowah Bank will
cease, the subsidiaries of Etowah Bank will become subsidiaries of Regions, and
Regions as successor to Etowah Bank will continue the banking operations of
Etowah Bank's banking subsidiaries through Regions' subsidiaries. For a further
description of the terms of the Merger, see "Description of the Transaction."
The Exchange Ratio is subject to a possible upward adjustment under certain
circumstances relating to the price of Regions Common Stock over a specified
period, in relation to a floor of $32.00 per share of Regions Common Stock and
to a weighted average price of 17 specified bank holding companies (the "Index
Group") over the same period. Under certain circumstances, described fully under
the caption "Description of the Transaction--Possible Adjustment of Exchange
Ratio," the Board of Directors of Etowah Bank is permitted to terminate the
Agreement, in which case Regions may avoid such termination by increasing the
Exchange Ratio as provided in the Agreement. This adjustment mechanism is
intended to provide to the holders of Etowah Common Stock partial protection
against a decline in value of Regions Common Stock to a per share amount below
the lesser of (i) $32.00 or (ii) the amount that would reflect a price
performance of Regions Common Stock that is 15% below the price performance of
the Index Group.
In making its determination of whether to terminate the Agreement, the
Board of Directors of Etowah Bank Board (the "Etowah Bank Board") would 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 Etowah Bank Board were to elect 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 would consider include the projected effect of the Merger on
Regions' pro forma earnings per share and whether Regions'
<PAGE> 5
assessment of Etowah Bank's earning potential as part of Regions justifies the
issuance of an increased number of Regions' shares. See "Description of the
Transaction--Possible Adjustment of Exchange Ratio."
Regions is under no obligation to adjust the Exchange Ratio. Moreover, even
if the value of Regions Common Stock declines to an amount below the specified
floor and thereby triggers Etowah Bank's right to terminate the Agreement, the
Etowah Bank Board may elect to consummate the Merger without terminating the
Agreement, notwithstanding approval of the Agreement by the holders of Etowah
Common Stock.
This Proxy Statement/Prospectus also constitutes a Proxy Statement of
Etowah Bank and is being furnished to the stockholders of Etowah Bank in
connection with the solicitation of proxies by the Board of Directors of Etowah
Bank for use at its special meeting of stockholders, including any adjournment
or postponement thereof (the "Special Meeting"), to be held on _______, 1998, to
consider and vote on the proposed Merger and related matters. This Proxy
Statement/Prospectus and the accompanying proxy card are first being mailed to
stockholders of Etowah Bank on or about _______, 1998.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is_______, 1998.
2
<PAGE> 6
AVAILABLE INFORMATION
Regions is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
This Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Regions (including any exhibits and amendments thereto,
the "Registration Statement") filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Proxy Statement/Prospectus does not include all of the information
in the Registration Statement, certain portions of which have been omitted
pursuant to the rules and regulations of the SEC. For further information about
Regions and the securities offered hereby, reference is made to the Registration
Statement. The Registration Statement may be inspected and copied, at prescribed
rates, at the SEC's public reference facilities at the addresses set forth
above. Regions Common Stock is traded in the Nasdaq National Market. Reports,
proxy statements, and other information concerning Regions may be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), 1735 K Street, N.W., Washington, D.C. 20006.
No person is authorized to give any information or to make any
representations other than those included in this Proxy Statement/Prospectus,
and if given or made, such information or representations must not be relied
upon as having been authorized by Regions or Etowah Bank. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, the securities offered hereby in any jurisdiction to or from
any person to or from whom it is unlawful to make such an offer or solicitation.
Neither the delivery of this Proxy Statement/Prospectus nor any distribution of
securities made hereunder shall under any circumstances create an implication
that there has been no change in the affairs of Regions or Etowah Bank since the
date hereof or that the information herein is correct as of any time subsequent
to the date hereof.
All information included or incorporated by reference in this Proxy
Statement/Prospectus with respect to Regions was supplied by Regions, and all
information included or incorporated by reference herein with respect to Etowah
Bank was supplied by Etowah Bank.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Regions pursuant
to the Exchange Act are hereby incorporated by reference herein:
1. Regions' Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
3
<PAGE> 7
2. Regions' Quarterly Reports on Form 10-Q for the three months ended
March 31, 1998;
3. Regions' Current Report on Form 8-K dated as of February 8, 1998,
and filed with the SEC on February 9, 1998; and
4. The description of Regions Common Stock under the heading "Item 1.
Capital Stock to be Registered" in the registration statement on Form 8-A of
Regions relating to Regions Common Stock and in any amendment or report filed
for the purpose of updating such description.
Regions' Annual Report on Form 10-K for the year ended December 31, 1997,
incorporates by reference specific portions of Regions' Annual Report to
Stockholders for that year (the "Regions Annual Report to Stockholders"), but
does not incorporate other portions of the Regions Annual Report to
Stockholders. Only those portions of the Regions Annual Report to Stockholders
captioned "Financial Summary & Review 1997," "Financial Statements and Notes,"
and "Historical Financial Summary" are incorporated herein. Other portions of
the Annual Report to Stockholders are NOT incorporated herein and are not a part
of the Registration Statement.
All documents filed by Regions pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any subsequently filed document which also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Those documents are available
upon request, without charge (except for the exhibits thereto), from Ronald C.
Jackson, Stockholder Assistance, Regions Financial Corporation, 417 North 20th
Street, Birmingham, Alabama 35203 (telephone (205) 326-7090). In order to ensure
timely delivery of the documents, any request should be made by _______, 1998.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus, documents incorporated by reference
herein, or any other written or oral statements made by or on behalf of Regions
may include forward-looking statements which reflect Regions' current views with
respect to future events and financial performance. Such forward-looking
statements are subject to certain uncertainties and other factors that may cause
actual results to differ materially from the views, beliefs, and projections
expressed in such statements. These uncertainties and other factors include, but
are not limited to, uncertainties relating to business and economic conditions,
the financial services industry, and Regions. The words "believe", "expect",
"anticipate", "project", and similar expressions signify forward-looking
statements. Readers are cautioned not to place undue reliance on any
forward-looking statements made by or on behalf of Regions. Any such statement
speaks only as of the date the statement was made. Regions undertakes no
obligation to update or revise any forward-looking statements.
4
<PAGE> 8
More specifically, Regions' current report on Form 8-K filed with the SEC
on February 9, 1998, pertaining to the merger of Regions and First Commercial
Corporation (the "First Commercial Acquisition") includes certain
forward-looking statements regarding each of Regions, First Commercial, and the
combined company following that transaction, including statements relating to
cost savings, enhanced revenues, accretion to reported earnings that may be
realized from the First Commercial Acquisition, and certain restructuring
charges expected to be incurred in connection with the First Commercial
Acquisition. Such forward-looking statements involve certain risks and
uncertainties, including a variety of factors that may cause Regions' actual
results to differ materially from the anticipated results or other expectations
expressed in such forward-looking statements. Factors that might cause such a
difference include, but are not limited to: (i) expected cost savings from the
First Commercial Acquisition and Regions' other pending acquisitions may not be
fully realized or realized within the expected time frame; (ii) revenues
following the First Commercial Acquisition and the other pending acquisitions
may be lower than expected, or deposit attrition, operating costs or customer
loss and business disruption following the First Commercial Acquisition and the
other pending acquisitions may be greater than expected; (iii) competitive
pressures among depository and other financial institutions may increase
significantly; (iv) costs or difficulties related to the integration of the
business of Regions, First Commercial, and the other pending acquisitions may be
greater than expected; (v) changes in the interest rate environment may reduce
margins; (vi) general economic or business conditions, either nationally or in
the states or regions in which Regions does business, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality or
a reduced demand for credit; (vii) legislative or regulatory changes may
adversely affect the businesses in which Regions is engaged; (viii) changes may
occur in the securities markets, and (ix) disruptions of the operations of the
combined company following the First Commercial Acquisition or any other
governmental or private entity as a result of the "year 2000 problem" may occur.
Additional information with respect to factors that may cause results to differ
materially from those contemplated by such forward-looking statements is
included in Regions' current and subsequent filings with the SEC.
5
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..............................................................................................
DOCUMENTS INCORPORATED BY REFERENCE................................................................................
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION........................................................
SUMMARY............................................................................................................
The Parties...................................................................................................
Special Meeting of Etowah Bank Stockholders...................................................................
Record Date; Vote Required....................................................................................
The Merger; Exchange Ratio....................................................................................
Dissenting Stockholders.......................................................................................
Reasons for the Merger; Recommendation of Etowah Bank's Board
of Directors.................................................................................................
Opinion of Etowah Bank's Financial Advisor....................................................................
Effective Time................................................................................................
Exchange of Stock Certificates................................................................................
Regulatory Approvals and Other Conditions.....................................................................
Waiver, Amendment, and Termination of the Agreement...........................................................
Interests of Certain Persons in the Merger....................................................................
Federal Income Tax Consequences of the Merger.................................................................
Material Differences in Stockholders' Rights..................................................................
Comparative Market Prices of Common Stock.....................................................................
Comparative Per Share Data....................................................................................
Selected Financial Data.......................................................................................
THE SPECIAL MEETING................................................................................................
General.......................................................................................................
Record Date; Vote Required....................................................................................
DESCRIPTION OF THE TRANSACTION.....................................................................................
General.......................................................................................................
Possible Adjustment of Exchange Ratio ........................................................................
Background of and Reasons for the Merger......................................................................
Opinion of Etowah Bank's Financial Advisor....................................................................
Effective Time of the Merger..................................................................................
Distribution of Regions Stock Certificates and
Payment for Fractional Shares...............................................................................
Conditions to Consummation of the Merger......................................................................
Regulatory Approvals..........................................................................................
Waiver, Amendment, and Termination of the Agreement...........................................................
Conduct of Business Pending the Merger........................................................................
Management Following the Merger...............................................................................
Interests of Certain Persons in the Merger....................................................................
Dissenting Stockholders.......................................................................................
Federal Income Tax Consequences of the Merger.................................................................
Accounting Treatment..........................................................................................
Expenses and Fees.............................................................................................
Resales of Regions Common Stock...............................................................................
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS.....................................................................
Antitakeover Provisions Generally.............................................................................
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<TABLE>
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Authorized Capital Stock......................................................................................
Amendment of Certificate of Incorporation and Bylaws..........................................................
Classified Board of Directors and Absence of Cumulative Voting................................................
Removal of Directors..........................................................................................
Limitations on Director Liability.............................................................................
Indemnification...............................................................................................
Special Meetings of Stockholders..............................................................................
Actions by Stockholders Without a Meeting.....................................................................
Stockholder Nominations.......................................................................................
Mergers, Consolidations, and Sales of Assets Generally........................................................
Business Combinations with Certain Persons....................................................................
Dissenters' Rights............................................................................................
Stockholders' Rights to Examine Books and Records.............................................................
Dividends.....................................................................................................
AMENDMENT TO ETOWAH BANK'S BYLAWS..................................................................................
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................................................
ETOWAH BANK MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................................
BUSINESS OF ETOWAH BANK
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF ETOWAH BANK........................................................
BUSINESS OF REGIONS................................................................................................
General.......................................................................................................
Acquisition Activity..........................................................................................
CERTAIN REGULATORY CONSIDERATIONS..................................................................................
General.......................................................................................................
Payment of Dividends..........................................................................................
Capital Adequacy..............................................................................................
Prompt Corrective Action......................................................................................
FDIC Insurance Assessments....................................................................................
DESCRIPTION OF REGIONS COMMON STOCK................................................................................
STOCKHOLDER PROPOSALS..............................................................................................
EXPERTS............................................................................................................
OPINIONS...........................................................................................................
INDEX TO ETOWAH BANK FINANCIAL STATEMENTS.......................................................................F-1
APPENDIX A--Agreement and Plan of Reorganization................................................................A-1
APPENDIX B--Plan of Merger......................................................................................B-1
APPENDIX C--Opinion of T. Stephen Johnson & Associates..........................................................C-1
APPENDIX D--Copy of Chapter 2, Article 13 of the Georgia Business
Corporation Code, pertaining to dissenters' rights.........................................................D-1
</TABLE>
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SUMMARY
The following is a summary of certain information included in this Proxy
Statement/Prospectus and the documents incorporated by reference herein. This
summary does not purport to be complete and is qualified in its entirety by the
more detailed information appearing elsewhere or incorporated by reference in
this Proxy Statement/Prospectus. Stockholders are urged to read carefully the
entire Proxy Statement/Prospectus, including the Appendices. As used in this
Proxy Statement/Prospectus, the terms "Regions" and "Etowah Bank" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
Etowah Bank. Etowah Bank is a commercial bank organized and existing under
the laws of the state of Georgia, headquartered in Canton, Georgia. Etowah Bank
provides a range of consumer and commercial banking services through 18 offices
in North Georgia. At March 31, 1998, Etowah Bank had total consolidated assets
of approximately $407 million, total consolidated deposits of approximately $348
million, and total consolidated stockholders' equity of approximately $30
million. Etowah Bank's principal executive office is located at 140 W. Main
Street, Canton, Georgia, 30114 and its telephone number at such address is (770)
479-8761.
Regions. Regions is a regional bank holding company organized and existing
under the laws of the state of Delaware and headquartered in Birmingham,
Alabama, with approximately 500 banking offices located in Alabama, Florida,
Georgia, Louisiana, South Carolina, and Tennessee as of March 31, 1998. At that
date, Regions had total consolidated assets of approximately $25.6 billion,
total consolidated deposits of approximately $20.3 billion, and total
consolidated stockholders' equity of approximately $2.1 billion. Regions is the
second largest bank holding company headquartered in Alabama in terms of assets,
based on March 31, 1998 information. Regions operates banking-related
subsidiaries engaged in mortgage banking, credit life insurance, leasing, and
securities brokerage activities with offices in various Southeastern states.
Through its subsidiaries, Regions offers a broad range of banking and
banking-related services.
Since December 31, 1997, Regions has completed acquisitions of six
financial institutions and has entered into definitive agreements or letters of
intent to acquire seven financial institutions, including Etowah Bank. For
information concerning Regions' acquisition activity, including the completed
and other pending acquisitions, see "Documents Incorporated by Reference,"
"Recent Developments--First Commercial Corporation Acquisition," and "Business
of Regions--Acquisition Activity."
Regions commenced operations in 1971, under its former name First Alabama
Bancshares, Inc., as a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Regions' principal executive
offices are located at 417 North 20th Street, Birmingham, Alabama 35203, and its
telephone number at such address is (205) 326-7100.
Additional information with respect to Regions and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Available Information," "Documents Incorporated by
Reference," and "Business of Regions."
8
<PAGE> 12
SPECIAL MEETING OF ETOWAH BANK STOCKHOLDERS
The Special Meeting will be held at 7:00 p.m., local time, on _______,
1998, at Etowah Bank's main office, located at 140 W. Main Street, Canton,
Georgia, 30114, for the purpose of considering and voting on approval of the
Agreement and to transact such other business as may properly come before the
meeting. See "The Special Meeting."
RECORD DATE; VOTE REQUIRED
The Etowah Bank Board has fixed the close of business on _______, 1998 as
the record date (the "Record Date") for determination of the stockholders
entitled to notice of and to vote at the Special Meeting. Only holders of record
of Etowah Common Stock on the Record Date will be entitled to vote at the
Special Meeting. Approval of the Agreement will require the affirmative vote of
at least two-thirds of the outstanding shares of Etowah Common Stock entitled to
vote at the Special Meeting, not just two-thirds of the votes cast. Approval of
the proposed bylaw amendment to remove the 10% limitation on ownership of Etowah
Bank capital stock by any one holder (the "Bylaw Amendment") will require the
affirmative vote of a majority of the outstanding shares of Etowah Common Stock
entitled to vote at the Special Meeting, and not just a majority of the votes
cast. As of the Record Date, there were 911,000 shares of Etowah Common Stock
outstanding and entitled to be voted.
The directors and executive officers of Etowah Bank and their affiliates
beneficially owned, as of the Record Date, 168,868 shares (or approximately
18.5% of the outstanding shares) of Etowah Common Stock. Each member of the
Board of Directors of Etowah Bank has agreed to vote those Etowah Bank shares
over which such member has voting authority (other than in a fiduciary capacity)
in favor of the Merger. The directors and executive officers of Regions and
their affiliates beneficially owned, as of the Record Date, no shares of Etowah
Common Stock. As of that date, neither Etowah Bank nor Regions held any shares
of Etowah Common Stock in a fiduciary capacity for others. See "The Special
Meeting--Record Date; Vote Required."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the acquisition of Etowah Bank by Regions
pursuant to the Merger of a newly-formed, interim bank subsidiary of Regions
with and into Etowah Bank. At the Effective Time, each share of Etowah Common
Stock then issued and outstanding (excluding shares held by Etowah Bank,
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)
will be converted into 3.2 shares of Regions Common Stock, subject to possible
adjustment.
No fractional shares of Regions Common Stock will be issued. Rather, cash
will be paid in lieu of any fractional share interest to which any Etowah Bank
stockholder would be entitled upon consummation of the Merger, based on the
closing price of Regions Common Stock on the Nasdaq National Market (as reported
by The Wall Street Journal, or, if not reported thereby, by another
authoritative source selected by Regions) on the last full trading day
immediately preceding the Effective Time. See "Description of the
Transaction--General."
9
<PAGE> 13
DISSENTING STOCKHOLDERS
Holders of Etowah Common Stock entitled to vote on approval of the
Agreement have the right to dissent from the Merger and, upon consummation of
the Merger and the satisfaction of certain specified procedures and conditions,
to receive fair value of such holders' shares of Etowah Common Stock in cash in
accordance with the applicable provisions of the Georgia Financial Institutions
Code and the Georgia Business Corporation Code (as supplemented by the Georgia
Financial Institutions Code in applicability to a Georgia state bank, the
"Georgia Act"). The procedures to be followed by dissenting stockholders are
summarized under "Description of the Transaction--Dissenters' Rights," and the
applicable provisions of the Georgia Act are reproduced as Appendix D.
REASONS FOR THE MERGER; RECOMMENDATION OF ETOWAH BANK'S BOARD OF DIRECTORS
Etowah Bank's Board of Directors has unanimously approved the Merger and
the Agreement and has determined that the Merger is fair to, and in the best
interests of, Etowah Bank and its stockholders. Accordingly, Etowah Bank's Board
unanimously recommends that Etowah Bank's stockholders vote FOR approval of the
Agreement. EACH MEMBER OF THE BOARD OF DIRECTORS OF ETOWAH BANK HAS AGREED TO
VOTE THOSE SHARES OF ETOWAH COMMON STOCK OVER WHICH SUCH MEMBER HAS VOTING
AUTHORITY (OTHER THAN IN A FIDUCIARY CAPACITY) IN FAVOR OF THE AGREEMENT. In
approving the Agreement, Etowah Bank's directors considered Etowah Bank's
financial condition, the financial terms and the income tax consequences of the
Merger, the likelihood of the Merger being approved by regulatory authorities
without undue conditions or delay, legal advice concerning the proposed Merger,
and the opinion of T. Stephen Johnson & Associates ("TSJ&A") that, as of the
date of its opinion, the consideration to be received in the Merger was fair,
from a financial point of view, to the stockholders of Etowah Bank. See
"Description of the Transaction--Background of and Reasons for the Merger."
OPINION OF ETOWAH BANK'S FINANCIAL ADVISOR
TSJ&A has rendered an opinion to Etowah Bank that, based on and subject to
the procedures, matters, and limitations described in its opinion and such other
matters as it considered relevant, as of the date of its opinion, the
consideration to be received in the Merger was fair, from a financial point of
view, to the stockholders of Etowah Bank. The opinion of TSJ&A is attached as
Appendix C to this Proxy Statement/Prospectus. Etowah Bank stockholders are
urged to read the opinion in its entirety for a description of the procedures
followed, matters considered, and limitations on the reviews undertaken in
connection therewith. See "Description of the Transaction--Opinion of Etowah
Bank's Financial Advisor."
EFFECTIVE TIME
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time will occur on the date and at the time that the
Georgia Certificate of Merger is filed and becomes effective with the Georgia
Secretary of State. Unless otherwise agreed upon by Regions and Etowah Bank, 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 to occur by the last business day of the month in which the last of the
following events occurs: (i) the effective date (including the expiration of any
applicable waiting period) of the last federal or state regulatory approval
required for the Merger and (ii) the date on which the Agreement is approved by
10
<PAGE> 14
the requisite vote of Etowah Bank stockholders; or such later date within 30
days thereof as specified by Regions. The parties expect that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the third quarter of 1998, although there can be no assurance
as to whether or when the Merger will occur. See "Description of the
Transaction--Effective Time of the Merger," "--Conditions to Consummation of the
Merger," and "--Waiver, Amendment, and Termination of the Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Time, Regions will cause the exchange agent
selected by Regions (the "Exchange Agent"), to mail to the former stockholders
of Etowah Bank a form letter of transmittal, together with instructions for the
exchange of such stockholders' certificates representing shares of Etowah Common
Stock for certificates representing shares of Regions Common Stock. ETOWAH BANK
STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE
FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. See "Description of the
Transaction--Distribution of Regions Stock Certificates and Payment for
Fractional Shares."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the Federal Deposit Insurance
Corporation (the "FDIC"), and the Department of Banking and Finance of the state
of Georgia (the "Georgia Department"). Applications for the requisite approvals
have been filed with these agencies, each of which has yet to issue its approval
of the Merger. There can be no assurance that the approvals of the Federal
Reserve, the FDIC, and the Georgia Department will be given or as to the timing
or conditions of such approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of Etowah Bank stockholders, receipt
of an opinion of counsel as to the tax-free nature of certain aspects of the
Merger, and certain other customary conditions. See "Description of the
Transaction--Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Time by mutual consent of the Boards of Directors of both
Etowah Bank and Regions, or by action of the Board of Directors of either
company under certain circumstances, including if the Merger is not consummated
by September 30, 1998, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason the
Merger is not consummated, Etowah Bank will continue to operate as a commercial
bank under its present management. See "Description of the Transaction--Waiver,
Amendment, and Termination of the Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Etowah Bank's management and Board of Directors have
interests in the Merger in addition to their interests as stockholders of Etowah
Bank generally. Those interests relate to, among other
11
<PAGE> 15
things, provisions in the Agreement regarding indemnification and eligibility
for certain Regions employee benefits. See "Description of the
Transaction--Interests of Certain Persons in the Merger."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Consummation of the Merger is conditioned on the receipt of an opinion of
counsel that, among other things, the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and no gain or loss will be recognized by holders of
Etowah Common Stock upon the exchange in the Merger of Etowah Common Stock
solely for Regions Common Stock except to the extent of any cash received in
lieu of fractional share interests in Regions Common Stock or as a result of
exercise of dissenters' rights. Subject to the provisions and limitations of
Section 302(a) of the Code, gain or loss will be recognized upon the receipt of
cash in lieu of fractional share interests and cash received by dissenters. See
"Description of the Transaction--Federal Income Tax Consequences of the Merger."
Because certain tax consequences of the Merger may vary depending upon the
particular circumstance of each stockholder and other circumstances, each Etowah
Bank stockholder is urged to consult such holder's own tax advisor to determine
the particular tax consequences to such holder of the Merger (including the
application and effect of state, local, and foreign income and other tax laws).
MATERIAL DIFFERENCES IN STOCKHOLDERS' RIGHTS
At the Effective Time, Etowah Bank stockholders, whose rights are governed
by the Georgia Act and by Etowah Bank's Articles of Incorporation and Bylaws,
will automatically become Regions stockholders, and their rights as Regions
stockholders will be determined by the Delaware General Corporation Law (the
"Delaware GCL") and by Regions' Certificate of Incorporation and Bylaws.
The rights of Regions stockholders differ from the rights of Etowah Bank
stockholders in several important respects, some of which constitute additional
antitakeover provisions provided for in Regions' governing documents. See
"Effect of the Merger on Rights of Stockholders."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock is traded in the over-the-counter market and quoted on
the Nasdaq National Market. Etowah Common Stock is not traded in any established
market. The following table sets forth, as of the indicated dates, (i) the last
sale price of Regions Common Stock and the sale price in the last known
transaction of purchase and sale of Etowah Common Stock, which occurred in
February 1997, and (ii) the equivalent per share price (as explained below) of
Etowah Common Stock. The indicated dates of January 12, 1998, and _______, 1998
represent, respectively, the last trading day immediately preceding public
announcement of the proposed acquisition of Etowah Bank by Regions and the
latest practicable date prior to the mailing of this Proxy Statement/Prospectus.
12
<PAGE> 16
<TABLE>
<CAPTION>
EQUIVALENT
PER
SHARE PRICE
REGIONS ETOWAH BANK OF ETOWAH BANK
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
<S> <C> <C> <C>
January 12, 1998 $ 39.13 $ 50.00 $ 125.22
_______, 1998 _______ _______ ________
</TABLE>
The equivalent per share price of Etowah Common Stock at each specified
date represents the last sale price of a share of Regions Common Stock on such
date multiplied by the Exchange Ratio of 3.2. Stockholders are advised to obtain
current market quotations for Regions Common Stock. No assurance can be given as
to the market price of Regions Common Stock at or after the Effective Time. See
"Comparative Market Prices and Dividends."
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Regions and Etowah Bank, (ii) a pro forma combined basis per share of Regions
Common Stock, giving effect to the Merger, and (iii) an equivalent pro forma
basis per share of Etowah Common Stock, giving effect to the Merger. The Regions
and Etowah Bank pro forma combined information and the Etowah Bank pro forma
Merger equivalent information give effect to the Merger on a
pooling-of-interests accounting basis and assume an Exchange Ratio of 3.2. See
"Description of the Transaction--Accounting Treatment." The pro forma data are
presented for information purposes only and are not necessarily indicative of
the results of operations or combined financial position that would have
resulted had the Merger been consummated at the dates or during the periods
indicated, nor are they necessarily indicative of future results of operations
or combined financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
Etowah Bank, including the respective notes thereto. Regions' historical
information has been adjusted to reflect a 2-for-1 stock split effected by
Regions on June 13, 1997. See "Documents Incorporated by Reference," "--Selected
Financial Data," and "Index to Etowah Bank Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ --------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited) (Unaudited, except Regions
and Etowah Bank historical)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Regions historical...................................... $.58 $.51 $2.20 $1.85 $1.60
Regions historical assuming dilution.................... .57 .50 2.15 1.81 1.58
Etowah Bank historical ................................. 1.76 1.16 5.66 5.01 5.00
Etowah Bank historical assuming dilution................ 1.76 1.16 5.66 5.01 5.00
Regions and Etowah Bank pro forma combined(1)........... .58 2.19 1.84 1.60
Regions and Etowah Bank pro forma combined
assuming dilution(1)............................... .56 2.14 1.81 1.58
Etowah Bank pro forma Merger equivalent(2).............. 1.86 7.01 5.89 5.12
Etowah Bank pro forma Merger equivalent
assuming dilution(2)............................... 1.79 6.85 5.79 5.06
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical...................................... .23 .20 .80 .70 .66
Etowah Bank historical.................................. .65 -- 2.25 2.25 1.85
Etowah Bank pro forma Merger equivalent(3).............. .74 .64 2.56 2.24 2.11
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical...................................... 14.23 13.08 13.99 12.76 11.69
Etowah Bank historical.................................. 32.98 29.52 31.71 27.85 25.54
Regions and Etowah Bank pro forma combined(1)........... 14.16
Etowah Bank pro forma Merger equivalent(2).............. 45.31
</TABLE>
13
<PAGE> 17
(1) Represents the combined results of Regions and Etowah Bank as if the Merger
were consummated on January 1, 1995 (or March 31, 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 3.2 shares of Regions Common Stock for each share of Etowah 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 $32.00. See "Description of the
Transaction--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 3.2 shares of Regions Common Stock for each share of
Etowah Common Stock.
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and Etowah Bank. Regions' historical per share
information has been adjusted to reflect a 2-for-1 stock split effected by
Regions on June 13, 1997. Etowah Bank's historical information has been adjusted
to reflect a 1 1/2-for-1 stock split declared in March, 1995. The data should be
read in conjunction with the historical financial statements, related notes, and
other financial information concerning Regions and Etowah Bank incorporated by
reference or included herein. Interim unaudited data for the three months ended
March 31, 1998 and 1997 of Regions and Etowah Bank reflect, in the opinion of
the respective managements of Regions and Etowah Bank, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the three months ended March 31, 1998,
are not necessarily indicative of results which may be expected for any other
interim period or for the year as a whole. See "Documents Incorporated by
Reference" and "Index to Etowah Bank Financial Statements."
14
<PAGE> 18
Selected Historical Financial Data of Regions
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, 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............. $ 485,716 $ 417,997 $ 1,653,084 $ 1,386,122 $ 1,259,600 $ 991,693 $ 746,544
Total interest expense............ 240,310 204,909 824,203 685,656 635,336 436,157 296,195
Net interest income............... 245,406 213,088 828,881 700,466 624,264 555,536 450,349
Provision for loan losses......... 12,119 11,194 41,773 29,041 30,271 20,580 24,695
Net interest income after
loan loss provision.............. 233,287 201,894 787,108 671,425 593,993 534,956 425,654
Total noninterest income
excluding security
(losses) gains ................. 77,380 64,031 258,012 217,624 187,830 171,705 169,318
Security (losses) gains .......... (69) 464 541 3,115 (424) 344 831
Total noninterest expense......... 178,637 154,213 600,341 553,801 487,461 442,376 383,130
Income tax expense................ 45,758 37,880 145,628 108,677 96,109 84,109 66,169
Net income........................ 86,203 74,296 299,692 229,686 197,829 180,520 146,504
PER SHARE DATA:
Net income........................ $ .58 $ .51 $ 2.20 $ 1.85 $ 1.60 $ 1.55 $ 1.41
Net income assuming dilution...... .57 .50 2.15 1.81 1.58 1.53 1.38
Cash dividends.................... .23 .20 .80 .70 .66 .60 .52
Book value........................ 14.23 13.08 13.99 12.76 11.69 10.63 9.93
OTHER INFORMATION:
Average number of shares
outstanding...................... 149,556 145,847 136,512 124,272 123,340 116,412 104,306
Average number of shares
outstanding, assuming
dilution........................ 152,571 149,014 139,421 126,777 125,289 118,223 106,126
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets...................... $25,629,065 $21,819,883 $23,034,228 $18,930,175 $ 16,851,774 $15,810,076 $13,163,161
Securities........................ 5,032,078 4,497,055 4,400,189 3,870,595 3,863,781 3,346,291 2,993,417
Loans, net of unearned income..... 18,045,378 15,503,711 16,394,905 13,311,172 11,542,311 10,855,195 8,430,931
Total deposits.................... 20,289,275 17,672,340 17,750,926 15,048,336 13,497,612 12,575,593 11,025,376
Long-term debt.................... 373,811 557,723 400,199 447,269 632,019 599,476 525,820
Stockholders' equity.............. 2,131,727 1,887,864 1,912,855 1,598,726 1,429,253 1,286,322 1,106,361
PERFORMANCE RATIOS:
Return on average assets(1)(6).... 1.39% 1.38% 1.41% 1.29% 1.21% 1.27% 1.38%
Return on average
stockholders' equity(1)(6)....... 16.65 16.01 16.29 15.19 14.29 15.26 15.76
Net interest margin(1)............ 4.34 4.36 4.27 4.27 4.21 4.37 4.77
Efficiency (2)(6)................. 54.60 54.73 54.36 59.44 58.79 59.44 60.23
Dividend payout................... 39.66 39.22 36.36 37.84 41.25 38.71 36.88
ASSET QUALITY RATIOS:
Net charge-offs to average
loans, net of unearned
income(1)....................... .21% .19% .25% .15% .17% .19% .23%
Problem assets to net loans
and other real estate (3)........ .74 .74 .71 .56 .59 .75 1.12
Nonperforming assets to net
loans and other real estate(4)... .84 .94 .81 .76 .68 .80 1.28
Allowance for loan losses to
loans, net of unearned income.... 1.23 1.34 1.19 1.32 1.38 1.32 1.48
Allowance for loan losses to
nonperforming assets (4)......... 146.52 141.97 145.53 173.65 202.55 164.48 115.88
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets................... 8.35% 8.63% 8.63% 8.49% 8.44% 8.35% 8.76%
Average loans to average deposits. 90.23 86.90 88.90 85.90 86.12 79.90 76.41
Tier 1 risk-based capital (5)..... 10.63 11.11 10.48 10.81 11.14 10.69 11.13
Total risk-based capital (5)...... 12.98 13.82 12.93 13.59 14.61 14.29 13.48
Tier 1 leverage (5)............... 7.62 7.65 7.52 7.44 7.49 8.21 10.11
</TABLE>
15
<PAGE> 19
- -------------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses)
from security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%. The ratios for periods prior to 1996 have not been restated to
reflect the combination with First National Bancorp effected March 1, 1996,
and accounted for as a pooling of interests, or any other
pooling-of-interests transactions.
(6) Ratios for 1996 excluding $19.0 million (after-tax) charged for SAIF
assessment and merger expenses are as follows: Return on average
stockholders' equity - 16.45%, Return on average total assets - 1.40%, and
Efficiency - 56.16%.
Selected Historical Financial Data of Etowah Bank
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, 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................ $ 9,107 $ 7,989 $ 33,200 $ 28,007 $ 23,436 $ 19,652 $ 16,611
Total interest expense .............. 4,178 3,752 15,783 13,065 9,809 7,496 7,072
Net interest income.................. 4,929 4,237 17,417 14,942 13,627 12,156 9,539
Provision for loan losses............ 150 225 797 865 470 657 360
Net interest income after
loan loss provision............. 4,779 4,012 16,620 14,077 13,157 11,499 9,179
Total noninterest income
excluding security gains
(losses)........................ 679 652 3,975 3,621 2,976 2,657 2,638
Security gains (losses).............. -- 40 40 (262) 28 6 --
Total noninterest expense............ 3,068 3,140 13,110 10,802 9,535 8,962 8,040
Income tax expense................... 792 516 2,408 2,129 2,126 1,620 1,112
Cumulative effect of a change in
accounting principle............. -- -- -- -- -- -- 85
Net income........................... 1,598 1,048 5,116 4,505 4,500 3,580 2,750
PER SHARE DATA:
Net income........................... $ 1.76 $ 1.16 $ 5.66 $ 5.01 $ 5.00 $ 3.98 $ 3.06
Net income assuming dilution......... 1.76 1.16 5.66 5.01 5.00 3.98 3.06
Cash dividends....................... .65 -- 2.25 2.25 1.85 1.50 1.17
Book value........................... 32.98 29.52 31.71 27.85 25.54 21.50 19.71
OTHER INFORMATION:
Average number of shares
outstanding......................... 910 904 905 900 900 900 900
STATEMENT OF CONDITION DATA
(PERIOD END):
Total assets......................... $ 406,818 $ 372,301 $ 432,121 $ 374,427 $ 293,830 $ 258,048 $ 238,288
Securities held to maturity.......... 12,049 12,642 12,637 12,649 12,542 18,389 54,103
Securities available for sale........ 67,951 74,495 91,255 75,768 60,011 40,675 --
Loans, net of unearned income........ 253,515 211,467 240,894 209,698 167,803 158,414 140,889
Total deposits....................... 347,693 325,042 370,502 326,522 267,465 235,176 219,011
FHLB advances........................ 26,624 20,133 28,313 21,697 1,989 2,763 --
Stockholders' equity................. 30,044 25,831 28,688 25,063 22,987 19,346 17,743
PERFORMANCE RATIOS:
Return on average assets(1).......... 1.52% 1.12% 1.34% 1.41% 1.76% 1.44% 1.16%
Return on average stockholders'
equity(1)....................... 21.77 16.47 18.91 18.66 20.75 19.30 16.28
Net interest margin(1)............... 5.43 4.96 5.03 5.06 5.81 6.09 4.83
Efficiency (2)....................... 56.21 66.75 63.53 61.95 59.00 63.28 68.04
Dividend payout...................... 36.93 -- 39.78 44.95 37.00 37.71 38.29
ASSET QUALITY RATIOS:
Net charge-offs to average loans,
net of unearned income(1)....... .02% .01% .08% .46% .06% .21% --
Problem assets to net loans and
other real estate (3)........... .35 1.11 .37 1.11 .24 .53 .79
Nonperforming assets to net loans
and other real estate (4)....... .82 1.87 1.17 2.29 .55 .70 1.40
Allowance for loan losses to loans,
net of unearned income.......... 1.12 1.10 1.14 1.01 1.27 1.09 .98
Allowance for loan losses to
nonperforming assets (4)........ 136.61 58.67 97.58 44.20 229.08 154.97 69.71
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets.................. 7.00% 6.82% 7.08% 7.54% 8.46% 7.47% 7.50%
Average loans to average deposits.... 77.67 70.06 71.97 69.43 75.55 65.20 60.42
Tier 1 risk-based capital (5)........ 9.47 9.71 9.20 9.40 11.25 10.12 10.24
Total risk-based capital (5)......... 10.42 10.62 10.10 10.20 12.41 11.18 11.20
Tier 1 leverage (5).................. 6.87 6.76 7.10 7.30 7.77 6.80 6.80
</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%.
16
<PAGE> 20
RECENT DEVELOPMENTS
THE FIRST COMMERCIAL ACQUISITION
On February 8, 1998, Regions and First Commercial Corporation ("First
Commercial") entered into an Agreement and Plan of Merger, pursuant to which
First Commercial will be acquired by Regions by means of the merger of First
Commercial with and into Regions, with Regions as the surviving entity (the
"First Commercial Acquisition"). Upon consummation of the First Commercial
Acquisition, Regions will exchange 1.7 shares of Regions Common Stock for each
share of First Commercial common stock outstanding, with a total of
approximately 64.8 million shares of Regions Common Stock expected to be issued
in the merger. Regions expects the First Commercial Acquisition to be accounted
for as a pooling of interests and expects to consummate the transaction during
the third quarter of 1998, subject to approval of Regions and First Commercial
stockholders in accordance with applicable law, approval of various regulatory
authorities, and other customary conditions of closing.
First Commercial is a multi-bank bank holding company headquartered in
Little Rock, Arkansas, with approximately 165 banking offices in Arkansas,
Tennessee, Texas, and Louisiana, and a 50% interest in two Oklahoma banks. First
Commercial also operates banking-related affiliates in the areas of mortgage
banking, trust services, securities brokerage, asset management, and accounts
receivable factoring. At March 31, 1998, First Commercial reported total
consolidated assets of approximately $7.4 billion, total consolidated deposits
of approximately $6.3 billion, and total consolidated stockholders equity of
approximately $636 million. Based on March 31, 1998 information, First
Commercial is the largest bank holding company headquartered in Arkansas and has
the largest market share of deposits in Arkansas of depository institutions with
offices in Arkansas.
Additional information with respect to the First Commercial Acquisition
is set forth in Regions' current report on Form 8-K filed with the SEC on
February 9, 1998 (the "First Commercial 8-K"). The First Commercial 8-K includes
or incorporates by reference certain forward looking statements, estimates, and
projections concerning the First Commercial Acquisition, which are subject to
various uncertainties and risks as explained above under the caption "Cautionary
Statement Concerning Forward Looking Information." Estimates and projections
concerning the future financial performance of Regions following the First
Commercial Acquisition are predicated on certain assumptions and depend upon
future events, the course of which cannot be ascertained with certainty, and
therefore such estimates and projections, including but not limited to estimates
concerning future levels of accretion and dilution of Regions' earnings per
share, future cost savings achievable in consolidation, and levels of merger
related charges, should be considered only as estimates and understood to be
uncertain and subject to risks of inaccuracy. Future events may cause Regions'
actual experience to differ materially from such estimates and projections. See
"Cautionary Statement Concerning Forward Looking Information."
IMPACT OF THE FIRST COMMERCIAL ACQUISITION ON REGIONS' FINANCIAL PERFORMANCE
Merger Charges. It is expected that Regions will incur charges arising
from the First Commercial Acquisition and from the assimilation of First
Commercial into the Regions organization. Anticipated charges would normally
arise from matters such as, but not limited to, legal and accounting fees,
financial advisory fees, consulting fees, payment of contractual benefits
triggered by a change of control, early retirement and involuntary separation
and related benefits, costs associated with elimination of duplicate facilities
and branch consolidations, data processing charges, cancellation of vendor
contracts, and similar costs which normally arise from the consolidation of
operational activities.
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<PAGE> 21
The First Commercial Acquisition is expected to be accounted for
as a pooling of interests. Regions currently estimates incurring aggregate
restructuring and merger-related charges of approximately $85 million (or $63
million after taxes) in connection with the consummation of the First Commercial
Acquisition. Substantially all of these charges are expected to be recognized in
the period in which the First Commercial Acquisition closes. The estimated
restructuring and merger-related charges include approximately $19 million in
noncash charges. The components of the anticipated merger-related charges are
summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Employee-related............................. $24,000
Occupancy and equipment...................... 10,000
Loss on divestiture of certain mortgage
servicing assets........................ 8,000
Conversion................................... 7,000
Investment banker, legal, accounting and
merger related costs.................... 28,500
-------
77,500
Charitable trust............................. 7,500
-------
Gross charges................................ 85,000
Taxes........................................ (22,000)
-------
$63,000
=======
</TABLE>
The estimate of anticipated charges to be incurred in connection with
consummating the First Commercial Acquisition is a preliminary estimate of the
significant charges which may, in the aggregate, be required and should be
viewed accordingly. Moreover, this estimate has been based on the due diligence
reviews that have been performed to date in connection with the First Commercial
Acquisition and may be subject to change. The actual charges incurred may be
higher or lower than what is currently contemplated, once First Commercial is
assimilated from an operational perspective and various contingencies are either
satisfied or eliminated.
Cost Savings and Revenue Enhancements. Regions believes it has the
ability to obtain substantial cost savings and to achieve substantial First
Commercial Acquisition enhancements in the operations of the combined companies
following the Merger. While no assurance can be given, based on present
information Regions estimates that following the First Commercial Acquisition it
can realize reductions in the noninterest expenses attributable to First
Commercial's operations of approximately $60 million, or 25% of First
Commercial's estimated 1998 noninterest expense. Regions anticipates realizing
approximately $16 million in pre-tax benefits from cost savings in 1998 and
approximately $60 million in pre-tax benefits from cost savings in 1999. These
estimates are based on the assumptions that by the end of 1998 Regions can
reduce operating costs in the areas of information technology (approximately
$5.7 million or 50% of First Commercial's estimated 1998 expense), general and
administrative expenses (approximately $6.0 million or 68% of First Commercial's
estimated 1998 expense), operations (approximately $5.8 million or 45% of First
Commercial's estimated 1998 expense), mortgage servicing (approximately $11.0
million or 38% of First Commercial's estimated 1998 expense), trust operations
(approximately $1.3 million or 15% of First Commercial's estimated 1998
expense), broker-dealer operations (approximately $.6 million or 16% of First
Commercial's estimated 1998 expense), community banks operations (approximately
$25.4 million or 16% of First Commercial's estimated 1998 expense), and in other
noninterest expense categories amounting to approximately $4.2 million. The
foregoing estimated possible reductions in noninterest expense are in the
financial statement categories of (i) salaries and employee benefits
(approximately $32 million), (ii) occupancy expenses (approximately $1 million),
(iii) furniture and equipment (approximately $1 million), and other noninterest
expenses (approximately $26 million for expense items such as data processing,
advertising, professional fees, and printing and supplies). In developing such
assumptions Regions evaluated First Commercial's noninterest expense structure,
identified elements of First Commercial noninterest expenses that could be
reduced or eliminated as duplicative or unnecessary, and quantified the
anticipated cost savings in various categories. Regions also took into account
its experience in assimilating previous acquisitions in assessing the
feasibility of the projected cost savings in each category, and concluded the
projections are feasible and realistic. In deriving the estimates of the amounts
of anticipated cost savings, Regions considered any applicable increases in its
expenditures necessary to operate the combined companies, and the above
estimates are presented net of any such increases.
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<PAGE> 22
Similarly with no assurance, Regions expects the combined company
following the First Commercial Acquisition to benefit from enhanced revenues in
specific areas. Regions anticipates that balance sheet restructuring can result
in pre-tax benefits of approximately $16 million in 1998 and $6 million in 1999,
primarily resulting from restructuring and reinvesting a portion of First
Commercial's securities portfolio into higher yielding securities. Regions also
anticipates generating pre-tax benefits of approximately $7.5 million in 1998
and $17 million in 1999 resulting from reinvesting excess capital, assuming a 6%
reinvestment rate on Tier 1 capital in excess of 7%. In addition, Regions
expects product enhancements and uniform application of Regions' policies to
increase revenues from First Commercial's operations approximating $3 million
pre-tax in 1998 and $6.6 million pre-tax in 1999, primarily resulting from
broader mortgage loan product line offerings, expanded commercial cash
management capabilities, and increased trust product offerings and
standardization of trust fee structures. While Regions anticipates that the
benefits derivable from the cost savings and revenue enhancements discussed
above will continue in future years, Regions has not attempted to quantify
identified benefits beyond 1999.
Projected Impact on Per Share Earnings. Based on its evaluation of the
possible cost savings, revenue enhancements, and other considerations, Regions
anticipates that consummation of the First Commercial Acquisition would result
in modest dilution of Regions' 1998 earnings per share and modest accretion to
1999 earnings per share. More specifically, assuming (i) the expense savings and
the revenue enhancements discussed above are as estimated, (ii) approximately
222 million shares of Regions Common Stock on a diluted basis are outstanding in
1998 and in 1999, (iii) the First Commercial Acquisition is consummated in the
third quarter of 1998, (iv) the conversion of First Commercial's operations
systems to Regions' operations systems is completed by year end 1998, (v) 1998
diluted earnings per share of Regions Common Stock are $2.35, and 1998 diluted
earnings per share of First Commercial Common Stock are $2.99, each of which
represents the First Call consensus earnings estimates as of February 6, 1998
(before public announcement of the First Commercial Acquisition), and (vi) 1999
diluted earnings per share of Regions Common Stock are $2.59 and 1999 diluted
earnings estimates per share of First Commercial Common Stock are $3.35, each of
which represents the First Call consensus earnings estimates, the First
Commercial Acquisition is estimated to dilute the 1998 per share earnings
estimates for Regions Common Stock by $.06 (or 2.5%) before giving effect to
anticipated merger-related charges, and add $.06 (or 2.5%) to the 1999 per share
earnings estimate for Regions Common Stock. The per share earnings estimates are
presented for illustrative purposes only and do not constitute projections of
Regions. The estimated effects of the First Commercial Acquisition on Regions'
future per share earnings necessarily depend on assumptions and uncertainties
which may cause actual results to differ materially from the anticipated
results. See "Cautionary Statement Concerning Forward-Looking Statements."
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of Etowah
Common Stock in connection with the solicitation by the Etowah Bank Board of
Directors of proxies for use at the Special Meeting, at which Etowah Bank
stockholders will be asked to vote upon a proposal to approve the
19
<PAGE> 23
Agreement. The Special Meeting will be held at 7:00 p.m., local time, on
_________, 1998, at the main offices of Etowah Bank, located at 140 W. Main
Street, Canton, Georgia, 30114.
Etowah Bank stockholders are requested promptly to sign, date, and return
the accompanying proxy card to Etowah Bank in the enclosed postage-paid,
addressed envelope. A stockholder's failure to return a properly executed proxy
card or to vote at the Special Meeting will have the same effect as a vote
against the Agreement.
Any Etowah Bank 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 Etowah Bank a signed proxy card bearing a later date, provided that such
notice or proxy card is actually received by Etowah Bank 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 Etowah Bank, 140
W. Main Street, Canton, Georgia, 30114, Attention: Corporate Secretary. A proxy
will not be revoked by death or supervening incapacity of the stockholder
executing the proxy unless, before the vote, notice of such death or incapacity
is filed with the Secretary. The shares of Etowah 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, FOR APPROVAL OF THE PROPOSED BYLAW AMENDMENT, 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. ANY PROXIES VOTED AGAINST THE
AGREEMENT WILL NOT BE VOTED IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL
MEETING. As of the date of this Proxy Statement/Prospectus, Etowah Bank is
unaware of any other matter to be presented at the Special Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees of
Etowah Bank, who will receive no additional compensation for such solicitation
but may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
Etowah Bank stockholders should not forward any stock certificates with
their proxy cards.
RECORD DATE; VOTE REQUIRED
Etowah Bank's Board of Directors has established the close of business on
_______, 1998, as the Record Date for determining the Etowah Bank stockholders
entitled to notice of and to vote at the Special Meeting. Only Etowah Bank
stockholders of record as of the Record Date will be entitled to vote at the
Special Meeting. As of the Record Date, there were approximately _______ holders
of 911,000 shares of Etowah Common Stock outstanding and entitled to vote at the
Special Meeting, with each share entitled to one vote. For information as to
persons known by Etowah Bank to beneficially own more than 5.0% of the
outstanding shares of Etowah Common Stock as of the Record Date, see "Voting
Securities and Principal Stockholders of Etowah Bank."
The presence, in person or by proxy, of a majority of the outstanding
shares of Etowah Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Special Meeting. For these purposes,
shares of Etowah Common Stock that are present, or represented by proxy, at the
Special
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<PAGE> 24
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 Etowah Common Stock in
"street" name on behalf of a beneficial owner lacks authority to vote such
shares in the absence of specific voting instructions from the beneficial owner.
Once a quorum is established, approval of the Agreement requires the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Etowah Common Stock entitled to vote at the Special Meeting. Approval of the
proposed Bylaw Amendment to remove the 10% limitation on ownership of Etowah
Bank capital stock will require the affirmative vote of a majority of
outstanding shares of Etowah Common Stock entitled to vote at the Special
Meeting, and not just a majority of the votes cast. 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 and the Bylaw Amendment. The Merger cannot be
consummated unless the Bylaw Amendment is approved.
The directors and executive officers of Etowah Bank and their affiliates
beneficially owned, as of the Record Date, 168,868 shares (or approximately
18.5% of the outstanding shares) of Etowah Common Stock. The directors and
executive officers of Regions and their affiliates beneficially owned, as of the
Record Date, no shares of Etowah Common Stock. As of that date, no subsidiary of
either Etowah Bank or Regions held any shares of Etowah Common Stock in a
fiduciary capacity for others.
DESCRIPTION OF THE TRANSACTION
The following material describes the material aspects of the Merger and the
Agreement. This description does not purport to be complete and is qualified in
its entirety by reference to the Appendices hereto, including the Agreement,
which is attached as Appendix A to this Proxy Statement/Prospectus and
incorporated herein by reference. All stockholders are urged to read the
Appendices in their entirety.
GENERAL
The Agreement provides generally for the acquisition of Etowah Bank by
Regions pursuant to the Merger of a newly-formed, interim bank subsidiary of
Regions with and into Etowah Bank. At the Effective Time, each share of Etowah
Common Stock (excluding shares held by Etowah Bank, 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 will be converted into 3.2 shares of Regions Common Stock,
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 will remain outstanding and unchanged as
a result of the Merger.
No fractional shares of Regions Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, Regions will make a cash
payment equal to the fractional part of a share which a Etowah Bank stockholder
would otherwise receive multiplied by the closing price of Regions Common Stock
on the Nasdaq National Market (as reported by The Wall Street Journal, or, if
not reported thereby, by another authoritative source selected by Regions), on
the last trading day prior to the Effective Time.
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
Under certain circumstances described below, the Exchange Ratio could be
adjusted pursuant to certain provisions of the Agreement. UNDER NO CIRCUMSTANCES
WOULD THE EXCHANGE RATIO BE LESS THAN 3.2 SHARES OF REGIONS COMMON STOCK FOR
EACH SHARE OF ETOWAH COMMON STOCK. An adjustment could occur only if the
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<PAGE> 25
Etowah Bank Board elects to terminate the Agreement pursuant to 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 (as reported by
The Wall Street Journal, or, if not reported thereby, another authoritative
source as chosen by Regions) for 10 consecutive full trading days in which such
shares are traded on the Nasdaq National Market ending at the close of trading
on the Determination Date.
The "Determination Date" is the date on which consent of the Federal
Reserve to the Merger shall be received (without regard to any requisite waiting
period thereof.)
The "Regions Ratio" is the number obtained by dividing the Average Closing
Price by $40.00.
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 January 20, 1998, less 15%.
If both:
(i) the Average Closing Price is less than $32.00; and
(ii) the Regions Ratio is less than the Index Ratio,
then Etowah Bank 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 Etowah Common Stock has a value (based on the
Average Closing Price) equal to the lesser of (i) $102.40 (corresponding to an
Average Closing Price of $32.00) or (ii) the value (based on the Average Closing
Price) of the number of shares of Regions Common Stock that would have been
exchanged for each share of Etowah 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 Etowah Bank
stockholders, the Etowah Bank Board may elect not to terminate the Agreement and
to consummate the Merger without resoliciting the Etowah Bank stockholders even
if Etowah Bank's Stock Price Termination Right is triggered and, as a result of
the Exchange Ratio, the value of shares of Regions Common Stock (valued at the
Average Closing Price) issued in exchange for each share of Etowah Common Stock
would be less than the lesser of (i) $102.40 or (ii) the value (based on the
Average Closing Price) of the number of shares of Regions Common Stock that
would have been exchanged for each share of Etowah Common Stock if the relative
performance of Regions Common Stock as determined above was 15% lower than the
relative performance of the Index Group.
These conditions reflect the parties' agreement that Etowah Bank's
stockholders will assume the risk of declines in the value of Regions Common
Stock to $32.00 per Regions share. Any adjustment of the Exchange Ratio
reflecting a decline in the price of Regions Common Stock to below $32.00 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%.
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<PAGE> 26
In making its determination of whether to terminate the Agreement, the
Etowah Bank 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 Etowah Bank 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 Etowah Bank'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, Etowah Bank may elect to proceed without the adjustment,
provided it does so within 12 days after the Determination Date. REGIONS IS
UNDER NO OBLIGATION TO ADJUST THE EXCHANGE RATIO.
The operation of the adjustment mechanism can be illustrated by three
scenarios. (For purposes of the scenarios, it has been assumed that the initial
Exchange Ratio is 3.2, the Starting Price of Regions Common stock is $40.00, and
the Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is
$32.00 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
Etowah Bank stockholders could have fallen from a pro forma
$128.00 per share, as of the Starting Date, to as little as a
pro forma $102.40 per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is
less than $32.00, but does not represent a decline from the
Starting Price of more than 15% than the decline of the common
stock prices of the Index Group. Under this scenario, there
also would be no possible adjustment to the Exchange Ratio,
even though the value of the consideration to be received by
Etowah Bank stockholders would have fallen from a pro forma
$128.00 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
$102.40 per share.
(3) The third scenario occurs if the Average Closing Price
declines below $32.00 and the Regions Ratio is below the Index
Ratio. Under this scenario, the adjustment in the Exchange
Ratio is designed to ensure that the Etowah Bank stockholders
receive shares of Regions Common Stock having a value (based
upon the Average Closing Price) that corresponds to at least
$102.40 per Etowah Bank share or a 15% decline from the stock
price performance reflected by the Index Group, whichever is
less.
Example 1. If the Average Closing Price were $28.00, and the
ending Index Price, as of the Determination Date, were $90,
the Regions Ratio (.70) would be below the Index Ratio (.75,
or .90 minus .15), and Etowah Bank could terminate the
Agreement unless Regions elected within five days to increase
the Exchange Ratio to equal 3.4286, which represents the
lesser of (a) 3.6571 [the result of dividing $102.40 (the
product of $32.00 and the 3.2 Exchange Ratio) by the Average
Closing Price ($28.00), rounded to the nearest thousandth] and
(b) 3.4286 [the result of dividing the Index Ratio (.75) times
3.2 by the Regions Ratio (.70), rounded to the nearest
thousandth]. Based upon the assumed $28.00 Average Closing
Price, the new Exchange Ratio would represent a value to the
Etowah Bank stockholders of $96.00 per Etowah Bank
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<PAGE> 27
share.
Example 2. If the Average Closing Price were $28.00, and the
ending Index Price, as of the Determination Date, were $100,
the Regions Ratio (.70) would be below the Index Ratio (.85,
or 1.00 minus .15), and Etowah Bank could terminate the
Agreement unless Regions elected within five days to increase
the Exchange Ratio to equal 3.6571, which represents the
lesser of (a) 3.6571 [the result of dividing $102.40 (the
product of $32.00 and the 3.2 Exchange Ratio) by the Average
Closing Price ($28.00), rounded to the nearest thousandth] and
(b) 3.8857 [the result of dividing the Index Ratio (.85) times
3.2 by the Regions Ratio (.70), rounded to the nearest
thousandth]. Based upon the assumed $28.00 Average Closing
Price, the new Exchange Ratio would represent a value to the
Etowah Bank stockholders of $102.40 per Etowah Bank 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 certificates for shares of Etowah Common Stock may be
more or less than the Average Closing Price. Etowah Bank stockholders are urged
to obtain current market quotations for Regions Common Stock. See "Comparative
Market Prices and Dividends."
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. During the last several years, there have been
significant developments in the banking and financial services industry. These
developments have included the increased emphasis and dependence on automation,
specialization of products and services, increased competition from other
financial institutions, and a trend toward consolidation and geographic
expansion, coupled with a relaxation of regulatory restrictions on interstate
conduct of business of financial institutions.
Etowah Bank and its Board of Directors concluded that it could best serve
its stockholders, employees, customers and community by combining with a
regional banking organization, provided that Etowah Bank could obtain a fair
price for its stockholders. Accordingly, Etowah Bank and Regions entered into
negotiations which culminated in the Agreement.
Etowah Bank management contacted T. Stephen Johnson and Associates on
November 14, 1997 to discuss the wave of bank mergers and the high premiums that
were being paid to the acquired banks. Management focused on which financial
institution, if any, would best fit Etowah's culture and franchise, while being
in a position to pay the highest premium for Etowah Bank stock. A consensus was
reached that Regions in Birmingham, Alabama would be a good candidate.
Mr. Johnson was then asked to confidentially contact senior management at
Regions to obtain an indication of Regions' interest and Regions responded
positively to the inquiry. A meeting was scheduled in Birmingham on December 5,
1997 with Pierce T. Neese, the Chairman of Etowah Bank, T. Stephen Johnson and
two senior officers of Regions. At this meeting financial information was
exchanged with Regions for each party to review.
Approximately two weeks later, Regions notified the consultant of its
interest in acquiring Etowah Bank through a tax free stock exchange. The
consultant invited the senior management team at Regions to meet at his office
with Mr. Neese to further discuss the terms and price of the proposed
transaction. At a meeting held on January 8, 1998, an exchange ratio of 3.3127
shares of Regions Common Stock was proposed,
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<PAGE> 28
subject to the approval of Etowah Bank's Board of Directors, a due diligence
review by Regions and the negotiation and signing of a definitive agreement.
On January 12, 1998, a special meeting of the Board of Directors was called
to inform the Board of the proposed offer. T. Stephen Johnson was present and
made the presentation to the Board. The value on January 12, 1998 of Regions
Common Stock was $39.125 per share which equaled an aggregate transaction value
of $117,375,000 or 409% of Etowah's book value and 23 times Etowah's trailing
twelve month earnings. Following discussion regarding the proposed transaction,
the Board voted to proceed with the offer subject to the shareholders' final
approval. The transaction was publicly announced by the Board of Etowah Bank on
January 13, 1998.
Over the next two weeks, teams from Regions Bank performed a due diligence
review of the records of Etowah Bank. During the due diligence review an issue
of concern to Regions was Etowah's securities portfolio, which contained
approximately $69.5 million of callable government agency bonds. These bonds are
issued with a certain maturity, but may be called and paid off prior to maturity
depending on the individual issue. Etowah Bank's strategy has been to purchase
these bonds because they pay a high rate of interest. However, callable
government agency bonds may involve a certain degree of risk as they may be
called at a time when interest rates are low and consequently, the funds
received would not be reinvested at a similar high rate of return. Regions
believed that there was a strong likelihood that these bonds would be called and
that this would have a negative effect on Etowah Bank's projected earnings for
1998. For this reason, Regions amended its offer by lowering the exchange ratio
to 3.1880 shares of Regions Common Stock for each share of Etowah Common Stock.
This new offer was not acceptable to Etowah's Board of Directors and
further negotiations took place. On February 25, 1998, a compromise was reached
at an exchange ratio of 3.2 shares of Regions Common Stock for each share of
Etowah Common Stock. The definitive agreement was signed on February 26, 1998.
Based on the price of Regions stock on February 25, 1998 the aggregate value of
the transaction was approximately $112.6 million or 393% of Etowah Bank's book
value and 22 times Etowah Bank's trailing twelve month earnings.
Another critical factor of Regions' decision to consummate the proposed
transaction with Etowah Bank was its ability to retain the current Chairman of
Etowah Bank as a key employee of the new entity and to help with the retention
of Etowah Bank's current business. Regions recognized that Mr. Neese had played
a major and vital role in defining the strategy and direction of Etowah Bank
over the last 23 years and contributed enormously to its success in many ways,
including in particular, the expansion program which brought Etowah bank from a
bank with 2 offices in one county to 18 offices in 5 counties, and from $24
million in total assets to over $400 million in total assets. Regions has agreed
to pay Mr. Neese a retention bonus of $500,000 for agreeing to continue to
perform his services for the new entity for one year after the merger is
completed. Further, if he provides consulting services for a five year period
commencing on the first anniversary date of the merger, he will receive
retirement benefits at a rate of $350,000 for life beginning one year after the
date of the closing of the acquisition. Regions will also provide him with the
appropriate office space during the term of his engagement with Regions.
Etowah Bank's Reasons for the Merger. In approving the Merger, the
directors of Etowah Bank considered a number of factors. Without assigning any
relative or specific weights to the factors, the Etowah Bank Board of Directors
considered the following material factors:
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(a) the information presented to the directors by the management of Etowah
Bank concerning the business, operations, earnings, asset quality, and financial
condition of Etowah Bank, including compliance with regulatory capital
requirements on an historical and prospective basis;
(b) the financial terms of the Merger, including the relationship of the
merger price to the market value, tangible book value, and earnings per share of
Etowah Common Stock and the partial protection against a decline in the market
value of Regions Common Stock;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of Etowah Common Stock for Regions Common Stock
for federal and state income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the opinion rendered by Etowah Bank's financial advisor to the effect
that, from a financial point of view, the exchange of Etowah Common Stock for
Regions Common Stock on the terms and conditions set forth in the Agreement is
fair to the holders of Etowah Common Stock;
(f) stockholders of Etowah Bank will receive shares of Regions Common
Stock, which is publicly traded on NASDAQ; there is no current public market for
Etowah Common Stock;
(g) 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;
(h) potential benefits and opportunities for employees of Etowah Bank, as a
result of both employment in a larger enterprise and Regions' benefit plans and
policies; and
(i) growth of Etowah Bank without affiliation with a larger bank holding
company would likely be limited because of Etowah Bank's need for increasing
capital resources to support that growth. Without such a combination, the Etowah
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 Etowah Board of Directors believed would be necessary
to maintain Etowah Bank as a viable independent entity.
The terms of the Merger were the result of arms-length negotiations between
representatives of Etowah Bank and representatives of Regions. Based upon the
consideration of the foregoing factors, the Board of Directors of Etowah Bank
unanimously approved the Merger as being in the best interests of Etowah Bank
and its stockholders. Each member of the Board of Directors of Etowah Bank has
agreed to vote those shares of Etowah Common Stock over which such member has
voting authority (other than in a fiduciary capacity) in favor of the Merger.
Etowah Bank's Board of Directors unanimously recommends that Etowah Bank
stockholders vote for approval of the Agreement.
Regions' Reasons for the Merger. The Regions Board of Directors has
approved the Agreement and determined that the Merger is in the best interests
of Regions and its stockholders. In approving the
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Agreement, the Regions Board considered a number of factors. Without assigning
any relative or specific weights to the factors, the Regions Board of Directors
considered the following material factors:
(a) a review, based in part on a presentation by Regions management, of (i)
the business, operations, earnings, and financial condition, including the
capital levels and asset quality, of Etowah Bank on an historical, prospective,
and pro forma basis and in comparison to other financial institutions in the
area, (ii) the demographic, economic, and financial characteristics of the
markets in which Etowah Bank operates, including existing competition, history
of the market areas with respect to financial institutions, and average demand
for credit, on an historical and prospective basis, and (iii) the results of
Regions' due diligence review of Etowah Bank; and
(b) a variety of factors affecting and relating to the overall strategic
focus of Regions, including Regions' desire to expand into markets in the
general vicinity of its core markets.
OPINION OF ETOWAH BANK'S FINANCIAL ADVISOR
T. Stephen Johnson & Associates, Inc. ("TSJ&A" or the "Advisor") is an
investment banking and financial services firm located in Atlanta, Georgia. As
part of its investment banking business, Advisor engages in the review of the
fairness of bank acquisition transactions from a financial perspective and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions and other transactions. Neither Advisor nor any of
its affiliates has a material financial interest in Etowah Bank or Regions.
Advisor was selected to advise Etowah Bank's Board of Directors based upon its
familiarity with Etowah Bank, the regional community banking industry and its
knowledge of the banking industry as a whole. No instructions were given or
limitations imposed by the Etowah Bank Board of Directors upon Advisor regarding
the scope of its investigation or the procedures it followed in rendering its
opinion.
Advisor has rendered its opinion (the "Fairness Opinion") to the Board of
Directors of Bank that the consideration to be received by the holders of Etowah
Bank common stock under the Merger Agreement is fair to such stockholders from a
financial point of view. A copy of the Fairness Opinion, which sets forth
certain assumptions made, matters considered and limitations on the review
undertaken, is attached as Appendix C to this Proxy Statement and should be read
in its entirety. The summary of the Fairness Opinion set forth herein is
qualified in its entirety by reference to the text of the Fairness Opinion.
In addition to rendering the Fairness Opinion, the Advisor was engaged by
Etowah Bank to act as advisor to the Board of Directors during the negotiations
with Regions for which a fee of $400,000 will be paid upon closing. This fee
includes rendering this Fairness Opinion.
In arriving at its Fairness Opinion, Advisor performed merger analyses
described below. Advisor also reviewed certain publicly available business and
financial information relating to Etowah Bank and Regions. Advisor also
considered certain financial and stock market data of Etowah Bank and Regions,
compared that data with similar data for certain other publicly-held banks and
bank holding companies and considered the financial terms of certain other
recent comparable community bank acquisition transactions in the southeastern
United States, as further discussed below. Advisor also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant. In connection with its
review, Advisor did not independently verify the foregoing information and
relied on such information as being complete and accurate in all material
respects. Financial forecasts prepared by Etowah Bank management and submitted
to Advisor were based on assumptions believed by Advisor to be reasonable and to
reflect currently available information, but Advisor did not independently
verify such information. Advisor did not make an independent evaluation or
appraisal of the assets of Etowah Bank or Regions.
In connection with rendering the Fairness Opinion, Advisor performed a
variety of financial analyses, including those summarized below. The summary set
forth below does not purport to be a complete description of the analyses
performed by Advisor in this regard. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized below, Advisor believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. In performing its
analyses, Advisor made numerous assumptions with respect to industry
performance, business and economic conditions and other matters, many of which
are beyond Etowah Bank's or Regions' control. The analyses performed by Advisor
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. No company
or transaction considered as a comparison in the analyses is identical to Etowah
Bank, Regions or the Merger. Accordingly, an analysis of the results of such
comparisons is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
companies and other factors that could affect the public trading value of the
companies involved in such comparisons. In addition, the analyses do not purport
to be appraisals or reflect the process by which or the prices at which
businesses actually may be sold or the prices at which any securities may trade
at the present time or at any time in the future.
Merger Analysis: The merger consideration to be received by Etowah Bank
Stockholders is based on a set exchange ratio for Regions common shares. The
value of the shares to be received is the current market value of Regions common
shares that currently trade over the counter on the NASDAQ National Market
System. Advisor calculated the merger consideration as of May 19, 1998. The May
19, 1998 closing price for Regions common shares was $42.50 per share. Based on
this closing price, the transaction value would total $123.9 million or $136 per
share based on 911,000 Etowah Bank common shares outstanding. This transaction
value equals 4.1239 times March 31, 1998 book value, 4.3740 times March 31, 1998
tangible book value and 21.865 times trailing twelve months earnings per share.
The Merger Agreement provides Etowah Bank the right to terminate the
transaction if the market value of Regions common shares fall more than 20
percent below a Starting Price and such change in market value is more than 15
percent when compared to the change of the market value of a predetermined group
of comparable bank holding companies over the same period (the "Index Group").
The Starting Price has been determined to equal $40.00 per share. Should the
market value of Regions common shares fall to below $32.00 per share and the
change in market value is more than 15 percent when compared to the change of
the market value of the Index Group, Etowah Bank could terminate the Merger
Agreement. Substantial changes in the market place would have to take place
between the date this analysis was performed and closing for this to happen.
Comparable Transactions Analysis: The Advisor reviewed the Merger as of May
20, 1998, for the purpose of determining purchase premiums that could be used in
comparing the Merger with other announced transactions. The Advisor reviewed the
purchase premiums paid in 108 transactions that were announced between July 1,
1997 and May 19, 1998 involving selling institutions headquartered in the
southeastern United States. Of these transactions, five involved selling
institutions that have been determined to be comparable transactions. They
include institutions representing commercial bank institutions with total assets
between $300 million and $1 billion with total equity less than 10.00 percent of
total assets. A listing of these transactions is attached to the Fairness
Opinion. On average, the comparable transactions reported an announced deal
price to book value of 3.185 times, an announced deal to tangible book value of
3.3725 and an announced deal price to earnings of 23.43 times. The Merger
compares favorably with these transactions.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time will occur on the date and at the time that the
Georgia Certificate of Merger relating to the Merger is filed and declared
effective with the Georgia Secretary of State. Unless otherwise agreed upon by
Regions and Etowah Bank, 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 to occur on the last business day of the month in which
the last of the following events occur: (i) the effective date (including the
expiration of any applicable waiting period) of the last federal or state
regulatory approval required for the Merger and (ii) the date on which the
Agreement is approved by the requisite vote of Etowah Bank 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 Etowah Bank anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated during the third quarter of 1998. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Regions or Etowah Bank generally may
terminate the Agreement if the Merger is not consummated by September 30, 1998,
unless the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See "--Conditions to Consummation of
the Merger" and "--Waiver, Amendment, and Termination of the Agreement."
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DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Time, Regions will cause an exchange agent
selected by Regions to mail to the former stockholders of Etowah Bank a form
letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of Etowah Common Stock for
certificates representing shares of Regions Common Stock.
ETOWAH BANK 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 Etowah Common Stock, together with a properly
completed letter of transmittal, there will be issued and mailed to each holder
of Etowah Common Stock surrendering such items a certificate or certificates
representing the number of shares of Regions Common Stock to which such holder
is entitled, if any, and a check for the amount to be paid in lieu of any
fractional share interest, without interest. After the Effective Time, to the
extent permitted by law, Etowah Bank 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 Etowah
Common Stock has been converted, regardless of whether such stockholders have
surrendered their Etowah Common Stock certificates. No dividend or other
distribution payable after the Effective Time with respect to Regions Common
Stock, however, will be paid to the holder of any unsurrendered Etowah Bank
certificate until the holder duly surrenders such certificate. Upon such
surrender, all undelivered dividends and other distributions and, if applicable,
a check for the amount to be paid in lieu of any fractional share interest will
be delivered to such stockholder, in each case without interest.
The stock transfer books of Etowah Bank will be closed at the effective
time of the Merger, and after the Effective Time there will be no transfers of
shares of Etowah Common Stock on Etowah Bank's stock transfer books. If
certificates representing shares of Etowah 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:
(a) approval from the Federal Reserve, the FDIC, and the Georgia
Department, and the expiration of all applicable waiting periods associated with
these approvals, without any conditions or restrictions that would, in the
reasonable judgment of Regions' Board of Directors, so materially adversely
impact the economic benefits of the transactions contemplated by the Agreement
as to render inadvisable the consummation of the Merger;
(b) the approval by the holders of the requisite number of shares of Etowah
Common Stock;
(c) 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;
(d) the receipt of a satisfactory opinion of counsel that the Merger
qualifies for federal income tax treatment as a reorganization under Section
368(a) of the Code, with the effects described under "--Certain
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Federal Income Tax Consequences of the Merger," including, among others, that
the exchange of Etowah Common Stock for Regions Common Stock will not give rise
to recognition of gain or loss to Etowah Bank stockholders, except to the extent
of any cash received; and
(e) filing with the NASD of notification for listing of additional shares
on the Nasdaq NMS for the shares of Regions Common Stock to be issued in the
Merger.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement which are customary in
transactions of this nature, including, among others: (i) the delivery by
Regions and Etowah Bank of opinions of their respective counsel and certificates
executed by their respective duly authorized officers as to the satisfaction of
certain conditions and obligations set forth in the Agreement; (ii) as of the
Effective Time, the accuracy of certain representations and warranties and the
compliance in all material respects with the agreements and covenants of each
party; and (iii) the absence of any action on behalf of Etowah Bank that would
preclude Regions from accounting for the Merger as a pooling of interests.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have been
submitted to the appropriate regulatory agencies.
Regions and Etowah Bank are not aware of any material governmental
approvals or actions that are required for consummation of the Merger, except as
described below. Should any other approval or action be required, it presently
is contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The relevant statutes
prohibit the Federal Reserve from approving the Merger (i) if it would result in
a monopoly or be in furtherance of any combination or conspiracy to monopolize
or attempt to monopolize the business of banking in any part of the United
States or (ii) if its effect in any section of the country may be to
substantially lessen competition or to tend to create a monopoly, or if it would
be a restraint of trade in any other manner, unless the Federal Reserve finds
that any anticompetitive effects are outweighed clearly by the public interest
and the probable effect of the transaction in meeting the convenience and needs
of the communities to be served. Under the BHC Act, the Merger may not be
consummated until the 30th day following the date of Federal Reserve approval,
which may be shortened by the Federal Reserve to the 15th day, during which time
the United States Department of Justice may challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the
effectiveness of the Federal Reserve's approval, unless a court specifically
orders otherwise.
The Merger also is subject to the approval of the FDIC and the Georgia
Department. In their evaluations, the FDIC and the Georgia Department may take
into account considerations similar to those applied by the Federal Reserve.
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WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Time, 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 Etowah
Bank approved by their respective Boards of Directors; provided, however, that
after approval by the Etowah Bank stockholders, no amendment that pursuant to
the Georgia Act requires further approval of the Etowah Bank stockholders,
including decreasing the consideration to be received by Etowah Bank
stockholders, may be made without the further approval of such stockholders.
The Agreement may be terminated, and the Merger abandoned, at any time
prior to the Effective Time, either before or after approval by Etowah Bank
stockholders, under certain circumstances, including:
(a) by the Board of Directors of either party upon final denial of any
required consent of any regulatory authority, if such denial is nonappealable or
was not appealed within the time limit for appeal;
(b) by the Board of Directors of either party, if the holders of the
requisite number of shares of Etowah Common Stock shall not have approved the
Agreement;
(c) by mutual consent of the Boards of Directors of Regions and Etowah
Bank;
(d) by the Board of Directors of either party (provided the terminating
party is not in material breach of any representation, warranty, covenant, or
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;
(e) by the Board of Directors of either party (provided the terminating
party is not in material breach of any representation, warranty, covenant, or
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
(f) by the Board of Directors of either party if the Merger shall not have
been consummated by September 30, 1998, but only if the failure to consummate
the Merger by such date has not been caused by the terminating party's breach of
the Agreement.
The Etowah Bank 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.
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CONDUCT OF BUSINESS PENDING THE MERGER
Each of Etowah Bank and Regions generally has agreed to operate its
business only in the usual, regular, and ordinary course, to preserve intact its
business organizations and assets and maintain its rights and franchises, and to
take no action which would materially adversely affect the ability of either
party to obtain any consents required for the Merger or to perform its covenants
and agreements under the Agreement and to consummate the Merger. The foregoing
shall not prevent Regions or any subsidiary of Regions from discontinuing or
disposing of any of its assets or business, or from acquiring or agreeing to
acquire any other entity or any assets thereof, if such action is, in the
judgment of Regions, desirable in the conduct of the business of Regions and its
subsidiaries. In addition, the Agreement includes certain other restrictions
applicable to the conduct of the business of either Etowah Bank or Regions prior
to consummation of the Merger, as described below.
Etowah Bank. Etowah Bank 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. Generally, Etowah Bank has agreed that, except
as specifically contemplated by the Agreement or previously disclosed to
Regions, it will not:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of Etowah Bank or its subsidiaries;
(b) incur, guarantee, or otherwise become responsible for, any additional
debt obligation or other obligation for borrowed money in excess of an aggregate
of $50,000 (for Etowah Bank and its subsidiaries on a consolidated basis) except
in the ordinary course of the business of Etowah Bank and its subsidiaries
consistent with past practices (which shall include creation of deposit
liabilities, purchases of federal funds, advances from the Federal Home Loan
Bank or the Federal Reserve Bank, and entry into repurchase agreements fully
secured by U.S. government or agency securities), or impose, or suffer the
imposition, on any share of stock held by Etowah Bank or its subsidiaries of any
lien or permit any such lien to exist;
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Etowah Bank or its subsidiaries, or declare or pay any dividend
or make any other distribution in respect of Etowah Common Stock; provided that
Etowah Bank may (to the extent legally able to do so), but shall not be
obligated to, declare and pay regular quarterly cash dividends on the Etowah
Common Stock at a rate not in excess of its most recent past practices as
disclosed to Regions, provided that any dividend declared or payable on the
shares of Etowah Common Stock for the quarterly period during which the
Effective Time occurs shall, unless otherwise agreed upon in writing by Regions
and Etowah Bank, be declared with a record date prior to the Effective Time only
if the normal record date for payment of the corresponding quarterly dividend to
holders of Regions Common Stock is before the Effective Time;
(d) 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 Etowah Common
Stock or any other capital stock of Etowah Bank or its subsidiaries, or any
stock appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock;
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(e) adjust, split, combine, or reclassify any capital stock of Etowah Bank
or its subsidiaries or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Etowah Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares of
capital stock of Etowah Bank's subsidiaries or any assets having in the
aggregate a book value in excess of $25,000, other than in the ordinary course
of business for reasonable and adequate consideration;
(f) acquire direct or indirect control over, or invest in equity securities
of, any entity, other than in connection with foreclosures in the ordinary
course of business, or acquisitions of control by Etowah Bank in its fiduciary
capacity;
(g) grant any increase in compensation or benefits to the employees or
officers of Etowah Bank or its subsidiaries except as previously disclosed to
Regions or as required by law; pay any bonus except pursuant to the provisions
of any applicable program or plan adopted by its Board of Directors prior to the
date of this Agreement and previously disclosed to Regions; enter into or amend
any severance agreements with officers of Etowah Bank or its subsidiaries except
as previously disclosed to Regions; grant any increase in fees or other
increases in compensation or other benefits to directors of Etowah Bank or its
subsidiaries;
(h) voluntarily accelerate the vesting of any stock-based compensation or
employee benefits;
(i) enter into or amend any employment contract between Etowah Bank or its
subsidiaries and any person (unless such amendment is required by law) that
Etowah Bank or its subsidiaries does not have the unconditional right to
terminate without liability (other than liability for services already
rendered), at any time on or after the Effective Time;
(j) except as previously disclosed to Regions, adopt any new employee
benefit plan or program of Etowah Bank or its subsidiaries or make any material
change in or to any existing employee benefit plans or programs of Etowah Bank
or its subsidiaries other than any such change that is required by law or that,
in the opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan;
(k) make any significant change in any accounting methods, principles, or
practices or systems of internal accounting controls, except as may be necessary
to conform to changes in regulatory accounting requirements or generally
accepted accounting principles ("GAAP");
(l) with certain exceptions, commence or settle any litigation for money
damages or imposing any material restrictions on the operations of Etowah Bank;
or
(m) except in the ordinary course of business, enter into or terminate any
material contract or make any change in any material lease or contract.
In addition, Etowah Bank has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Etowah Bank 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, Etowah Bank has agreed to
use reasonable efforts to cause its advisors and other representatives not to
engage in any of the foregoing activities.
Regions. Regions has generally agreed that Regions and each of its
subsidiaries will continue to conduct its business in a manner designed in its
reasonable judgment to enhance the long-term value of Regions
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Common Stock and the business prospect of Regions. The Agreement prohibits
Regions from amending its certificate of incorporation or bylaws in any manner
which is adverse to, and discriminates against, the holders of Etowah Common
Stock.
MANAGEMENT FOLLOWING THE MERGER
Upon consummation of the Merger, the present officers and directors of
Regions will retain their respective positions with Regions. Information
pertaining to the directors and executive officers of Regions, executive
compensation, certain relationships and related transactions, and other related
matters is included in Regions' Annual Report on Form 10-K for the year ended
December 31, 1997, incorporated herein by reference. See "Documents Incorporated
by Reference."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement generally provides that Regions will indemnify each person
entitled to indemnification from Etowah Bank or any of its subsidiaries to the
full extent permitted by Georgia Law and by Etowah Bank's Articles of
Incorporation or Bylaws six years from the Effective Time with respect to
matters occurring at or prior to the Effective Time.
The Agreement also provides that, after the Effective Time, Regions will
provide generally to officers and employees of Etowah Bank 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 Etowah Bank
or its subsidiaries prior to the Effective Time will be treated as service with
Regions or its subsidiaries. The Agreement further provides that Regions will
cause Etowah Bank to honor all employment, severance, consulting, and other
compensation contracts previously disclosed to Regions between Etowah Bank or
its subsidiaries and any current or former director, officer, or employee, and
all provisions for vested amounts earned or accrued through the Effective Time
under Etowah Bank's benefit plans.
Regions has agreed to pay Pierce T. Neese, Chairman and President of Etowah
Bank, a retention bonus of $500,000 for agreeing to continue to perform his
services for the new entity for one year after the Merger is completed. Further,
if he provides consulting services for a five year period commencing on the
first anniversary date of the merger, Regions will supplement his existing
retirement program such that he will receive annual retirement benefits at a
rate of $350,000 for life beginning one year after the date of the closing of
the Merger. Regions will also provide him with the appropriate office space
during the term of his engagement with Regions.
As of the Record Date, directors and executive officers of Etowah Bank
owned no shares of Regions Common Stock.
DISSENTING STOCKHOLDERS
By virtue of the provisions of the Financial Institutions Code of Georgia
applicable to Georgia state banks and trust companies, the rights of
stockholders who desire to dissent from the Merger are governed by the
provisions of Chapter 2, Article 13 of the Georgia Act. Pursuant to such
provisions, if the Merger is consummated, any holder of record of Etowah Common
Stock who (i) gives to Etowah Bank, prior to the vote at the Special Meeting
with respect to the approval of the Agreement, written notice of such holder's
intent to demand payment for such holder's shares, and (ii) does not vote in
favor thereof, shall be entitled to receive, upon compliance with the statutory
requirements summarized below, the fair value of such holder's shares as of the
Effective Time. The term "fair value" means the value of shares of Etowah Common
Stock immediately prior to the effectuation of the Merger, exclusive of any
appreciation or depreciation in anticipation of the Merger, as defined in
Article 13 of the
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Georgia Act. The fair value of Etowah Common Stock may be more or less than the
consideration that a holder of such stock would be entitled to receive in the
Merger. The following is a summary of the procedures to be followed by record
holders of Etowah Common Stock who wish to dissent from the Merger. A copy of
the pertinent provisions of Chapter 2, Article 13 of the Georgia Act is
reproduced as Appendix D 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 Etowah Bank 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. Stockholders who hold their shares of Etowah Common
Stock in brokerage accounts or other nominee forms and who wish to exercise
dissenters' rights should consult with their brokers to determine the
appropriate procedures for the making of demand for appraisal by such nominee.
The written objection requirement referred to above will not be satisfied
under the Georgia statutory provisions by merely voting against approval of the
Agreement by proxy or in person at the Special Meeting. Any holder of Etowah
Common Stock who returns a signed proxy but fails to provide instructions as to
the manner in which such shares are to be voted will be deemed to have voted in
favor of the transaction and will not be entitled to assert dissenters' rights
of appraisal. In addition to not voting in favor of the Agreement, a stockholder
wishing to preserve the right to dissent and seek appraisal must give a separate
written notice of such holder's intent to demand payment for such holder's
shares if the Merger is effected, as hereinabove provided.
Any written objection to the Agreement satisfying the requirements
discussed above should be addressed as follows: Etowah Bank, 140 W. Main Street,
Canton, Georgia 30114, Attention: Corporate Secretary.
If the Merger is authorized at the Special Meeting, Etowah Bank must
deliver a written dissenters' notice (the "Dissenters' Notice") to all holders
of Etowah Common Stock who have satisfied the foregoing requirements. The
Dissenters' Notice must be sent within ten days after the Effective Time and
must (i) state where the demand for payment must be sent and where and when
certificates for shares of Etowah 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
Etowah Bank must receive the demand for payment (which date may not be fewer
than 30 nor more than 60 days after the Dissenters' Notice is delivered), and
(iv) be accompanied by a copy of Article 13 of the Georgia Act.
A stockholder of record who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such stockholder will retain all other rights of a
stockholder until those rights are canceled or modified by the consummation of
the Merger. A record stockholder who does not demand payment or deposit such
holder's shares certificates where required, each by the date set in the
Dissenters' Notice, is not entitled to payment for such holder's shares under
Article 13.
Except as described below, Etowah Bank must, within ten days of the later
of the Effective Time 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 Etowah Bank 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 Etowah Bank
financial statements, (ii) Etowah Bank'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 Act, and (v) a copy of the Article 13 of the Georgia Act. If the
stockholder
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accepts Etowah Bank's offer by written notice to Etowah Bank within 30 days
after Etowah Bank's offer, payment must be made within 60 days after the later
of the making of the offer or the Effective Time.
If the Merger is not effected within 60 days after the date set for
demanding payment and depositing share certificates, Etowah Bank must return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, Etowah Bank must send a new Dissenter's Notice and repeat the payment
demand procedure described above.
Section 14-2-1327 of the Georgia Act provides that a dissenting stockholder
may notify Etowah Bank 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
Etowah Bank is less than the fair value of such holder's shares or that the
interest due has been calculated incorrectly, or (ii) Etowah Bank, having failed
to effect the Merger, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment. A dissenting stockholder waives such holder's
right to demand payment under Section 14-2-1327 unless such holder notifies
Etowah Bank of such holder's demand in writing within 30 days after Etowah Bank
makes or offers payment for such holder's shares. If Etowah Bank does not offer
payment within ten days of the later of the Effective Time or receipt of a
payment demand, then (i) the stockholder may demand the financial statements and
other information required to accompany Etowah Bank's payment offer, and Etowah
Bank must provide such information within ten days after receipt of the written
demand, and (ii) the stockholder may notify Etowah Bank 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, Etowah
Bank must commence a nonjury equity valuation proceeding in the Superior Court
of Cherokee 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 Etowah Bank does not commence the proceeding within those
60 days, it is required to pay each dissenting stockholder whose demand remains
unsettled, the amount demanded. Etowah Bank 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 Etowah Bank, 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 Etowah Bank if the
court finds Etowah Bank did not substantially comply with the requirements of
specified provisions of Article 13 of the Georgia Act, or against either Etowah
Bank or a dissenting stockholder if the court finds that such party acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by Article 13 of the Georgia Act.
If the court finds that the services of attorneys for any dissenting
stockholder were of substantial benefit to other dissenting stockholders
similarly situated, and that the fees for those services should not be assessed
against Etowah Bank, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting stockholders who were benefited. No action by
any dissenting stockholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right
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to dissent was given by Etowah Bank or Etowah Bank in compliance with the
Dissenters' Notice and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting
stockholder of Etowah Bank, but is qualified in its entirety by reference to
Article 13 of the Georgia Act, included in Appendix D to this Prospectus/Proxy
Statement. Any Etowah Bank 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 Etowah Bank stockholders, except as indicated above or otherwise required by
law.
Any dissenting Etowah Bank 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 ETOWAH COMMON STOCK. THE DISCUSSION MAY
NOT APPLY TO SPECIAL SITUATIONS, SUCH AS ETOWAH BANK STOCKHOLDERS, IF ANY, WHO
HOLD ETOWAH COMMON STOCK OTHER THAN AS A CAPITAL ASSET, WHO RECEIVED ETOWAH
COMMON STOCK UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, WHO HOLD ETOWAH 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.
Instead, consummation of the Merger is conditioned upon receipt by Regions
and Etowah Bank 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 Etowah Bank, it is such firm's opinion that:
(a) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. Etowah Bank and Regions will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by holders of Etowah Common Stock
upon the exchange in the Merger of all of their Etowah 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).
(c) The aggregate tax basis of the Regions Common Stock received by the
Etowah Bank stockholders in the Merger will, in each instance, be the same as
the aggregate tax basis of the Etowah Common Stock surrendered in exchange
therefor, less the basis of any fractional share of Regions Common Stock settled
by cash payment.
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(d) The holding period of the Regions Common Stock received by the Etowah
Bank stockholders in the Merger will, in each instance, include the holding
period of the Etowah Common Stock surrendered in exchange therefor, provided
that the Etowah Common Stock is held as a capital asset at the Effective Time.
(e) The payment of cash to Etowah Bank stockholders in lieu of fractional
share interests of Regions Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by Regions. These cash payments will be treated as having
been received as distributions in full payment in exchange for the stock
redeemed, as provided in Section 302(a) of the Code.
(f) Where solely cash is received by a Etowah Bank stockholder in exchange
for Etowah Common Stock pursuant to the exercise of dissenters' rights, such
cash will be treated as having been received in redemption of such holder's
Etowah 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. ETOWAH BANK STOCKHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO
THEM INDIVIDUALLY, INCLUDING TAX CONSEQUENCES UNDER STATE, LOCAL, OR FOREIGN
LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests as that term is used pursuant to GAAP, for accounting and financial
reporting purposes. Under the pooling-of-interests method of accounting, assets,
liabilities, and equity of the acquired company are carried forward to the
combined entity at their stated amounts.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Etowah 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. 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 Etowah Bank stockholders in the
Merger has been registered under the Securities Act, but that registration does
not cover resales of those shares by persons
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who control, are controlled by, or are under common control with, Etowah Bank
(such persons are referred to hereinafter as "affiliates" and generally include
executive officers, directors, and 10% stockholders) at the time of the Special
Meeting. Affiliates may not sell shares of Regions Common Stock acquired in
connection with the Merger, except pursuant to an effective registration
statement under the Securities Act or in compliance with SEC Rule 145 or in
accordance with a legal opinion satisfactory to Regions that such sale or
transfer is otherwise exempt from the Securities Act registration requirements.
Rule 145 promulgated under the Securities Act 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, affiliates of Etowah Bank 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 the currency of Regions'
periodic reporting obligations under the 1934 Act. After the one-year period and
within two years following the Effective Time, affiliates of Etowah Bank who are
not affiliates of Regions may effect such resales subject only to the currency
of Regions' periodic reporting requirements. After two years, such affiliates of
Etowah Bank who are not affiliates of Regions may resell their shares without
restriction. Persons who are affiliates of Regions after the Effective Time may
publicly resell the Regions Common Stock received by them in the Merger subject
to similar limitations and subject to certain filing requirements specified in
SEC Rule 144. Affiliates will receive additional information regarding the
effect of Rule 145 on their ability to resell Regions Common Stock received in
the Merger. Affiliates also would be permitted to resell Regions Common Stock
received in the Merger pursuant to an effective registration statement under the
Securities Act or an available exemption from the Securities Act registration
requirements. This Joint Proxy Statement does not cover any resales of Regions
Common Stock received by persons who may be deemed to be affiliates of Etowah
Bank or Regions.
Each person who Etowah Bank reasonably believes will be an affiliate of
Etowah Bank 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 Etowah Common Stock will be
exchanging their shares of a Georgia bank governed by the Georgia Financial
Institutions Code and Etowah Bank's Articles of Incorporation, as amended (the
"Articles"), and Bylaws, for shares of Regions, a Delaware corporation governed
by the Delaware GCL and Regions' Certificate of Incorporation (the
"Certificate") and Bylaws. Significant differences exist between the rights of
Etowah Bank 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 Financial Institutions Code and the Delaware GCL as
well as to Regions' Certificate and Bylaws and Etowah Bank'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 GCL described
under the heading "--Business Combinations With Certain Persons," are referred
to herein as the "Protective Provisions." In general, one purpose of the
Protective Provisions is to assist Regions' Board of Directors in playing a role
in connection with attempts to acquire control of Regions, so that the Board can
further and protect the interests of Regions and its stockholders as appropriate
under the circumstances, including, if the Board determines that a sale of
control is in their best interests, by enhancing the Board's ability to maximize
the value to be received by the stockholders upon such a sale.
Although Regions' management believes the Protective Provisions are,
therefore, beneficial to Regions' stockholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Regions' stockholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Regions may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believes such replacement is in the best
interests of Regions. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Certificate authorizes the issuance of up to 240,000,000
shares of Regions Common Stock, of which 149,797,609 shares were issued as of
March 31, 1998, none of which were held as treasury shares, and 5,000,000 shares
of preferred stock, none of which are outstanding. At Regions' annual meeting of
stockholders scheduled for July 29, 1998, Regions' stockholders will vote on a
proposal to approve an increase in the number of authorized shares of Regions
Common Stock from 240,000,000 shares to 500,000,000 shares. Regions' Board of
Directors may authorize the issuance of additional shares of Regions Common
Stock or preferred stock without further action by Regions' stockholders, unless
such action is required in a particular case by applicable laws or regulations
or by any stock exchange upon which Regions' capital stock may be listed. The
Certificate does not provide preemptive rights to Regions stockholders.
The authority to issue additional shares of Regions capital stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and
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compensation plans, acquisitions, and public or private sales for cash as a
means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of Regions. In addition, the sale
of a substantial number of shares of Regions Common Stock to persons who have an
understanding with Regions concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of Regions Common Stock (or
the right to receive Regions Common Stock) to Regions stockholders, may have the
effect of discouraging or increasing the cost of unsolicited attempts to acquire
control of Regions. Regions has committed not to issue shares of preferred stock
for any anti-takeover purpose, including any purpose to make a change in control
of Regions more costly or difficult.
Etowah Bank. Etowah Bank's authorized capital stock consists of 10,000,000
shares of Etowah Common Stock, which is the only class of capital stock
authorized and of which 911,000 shares were issued and outstanding as of the
Record Date.
Pursuant to the Financial Institutions Code, Stockholders of a bank are
entitled to preemptive rights with respect to the purchase of shares issued by
the bank in the same proportion of their holdings of shares in such bank,
unless the Articles otherwise provide. Etowah Bank's Articles of Incorporation
do not deny preemptive rights with respect to the issuance of shares of Etowah
Common Stock.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
Regions. The Delaware GCL generally provides that the approval of a
corporation's board of directors and the affirmative vote of a majority of (i)
all shares entitled to vote thereon and (ii) the shares of each class of stock
entitled to vote thereon as a class is required to amend a corporation's
certificate of incorporation, unless the certificate specifies a greater voting
requirement. The Certificate states that its provisions regarding authorized
capital stock, election, classification, and removal of directors, the approval
required for certain business combinations, meetings of stockholders, and
amendment of the Certificate and Bylaws may be amended or repealed only by the
affirmative vote of the holders of at least 75% of the outstanding shares of
Regions Common Stock.
The Certificate also provides that the Board of Directors has the power to
adopt, amend, or repeal the Bylaws. Any action taken by the stockholders with
respect to adopting, amending, or repealing any Bylaws may be taken only upon
the affirmative vote of the holders of at least 75% of the outstanding shares of
Regions Common Stock.
Etowah Bank. The Georgia Financial Institutions Code provides that a
Georgia bank's articles of incorporation may be amended by the affirmative vote
of a majority of the shares entitled to vote thereon, except that an amendment
changing the location of the bank or converting the bank into a trust company
requires the affirmative vote of at least two-thirds of all shares entitled to
vote thereon.
The Georgia Financial Institutions Code provides that the board of
directors of a bank has the power to adopt, amend, or repeal bylaws unless such
power is reserved exclusively to the stockholders by the articles or the bylaws.
The Bylaws provide that the stockholders have the power to adopt, amend, or
repeal the Bylaws of Etowah Bank by a vote of a majority of all the stockholders
at any regular or special meeting of stockholders.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Certificate provides that Regions' Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office.
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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.
Etowah Bank. Etowah Bank's Articles do not provide for a classified board
of directors and do not provide for cumulative voting rights for voting stock.
REMOVAL OF DIRECTORS
Regions. Under the Certificate, any director or the entire Board of
Directors may be removed only for cause and only by the affirmative vote of the
holders of at least 75% of Regions' voting stock.
Etowah Bank. The Georgia Financial Institutions Code provides that any
director or the entire Board of Directors may be removed without cause by the
vote of stockholders entitled to cast at least a majority of the votes which all
stockholders would be entitled to cast at an annual election of directors.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Certificate provides that a director of Regions will have no
personal liability to Regions or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a stockholder who has a valid claim that a
director acted in violation of such director's duties, if the action is among
those as to which liability is limited. This provision may reduce the likelihood
of stockholder derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breach of their duties, even though such action, if successful, might have
benefited Regions and its stockholders. The SEC has taken the position that
similar provisions added to other corporations' certificates of incorporation
would not protect those corporations' directors from liability for violations of
the federal securities laws.
Etowah Bank. The Georgia Financial Institutions Code generally permits a
bank's articles of incorporation to relieve directors of liability for money
damages for good faith conduct.
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INDEMNIFICATION
Regions. The Certificate provides that Regions will indemnify its officers,
directors, employees, and agents to the full extent permitted by the Delaware
GCL. Under Section 145 of the Delaware GCL as currently in effect, other than in
actions brought by or in the right of Regions, such indemnification would apply
if it were determined in the specific case that the proposed indemnitee acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of Regions and, with respect to any criminal
proceeding, if such person had no reasonable cause to believe that the conduct
was unlawful. In actions brought by or in the right of Regions, such
indemnification probably would be limited to reasonable expenses (including
attorneys' fees) and would apply if it were determined in the specific case that
the proposed indemnitee acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of Regions,
except that no indemnification may be made with respect to any matter as to
which such person is adjudged liable to Regions, unless, and only to the extent
that, the court determines upon application that, in view of all the
circumstances of the case, the proposed indemnitee is fairly and reasonably
entitled to indemnification for such expenses as the court deems proper. To the
extent that any director, officer, employee, or agent of Regions has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding, as discussed herein, whether civil, criminal, administrative, or
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.
Etowah Bank. Etowah Bank's Bylaws and Articles makes no express provision
for indemnification of directors, officers, employees, and agents.
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.
Etowah Bank. Under Etowah's Bylaws, special meetings of Etowah Bank
stockholders may be called at any time by a majority of the Board of Directors
of Etowah Bank. The Georgia Financial Institutions Code provides that special
meetings may be called upon the written request of not less than 25% of the
outstanding shares of the bank entitled to vote at such meetings.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Certificate provides that any action required or permitted to
be taken by Regions stockholders must be effected at a duly called meeting of
stockholders and may not be effected by any written consent by the stockholders.
These provisions would prevent stockholders from taking action, including action
on a business combination, except at an annual meeting or special meeting called
by the Board of Directors, chief executive officer, or secretary, even if a
majority of the stockholders were in favor of such action.
Etowah Bank. Under the Georgia Financial Institutions Code, action
requiring stockholder approval may be approved by the written consent of all
stockholders entitled to vote with respect to such action.
42
<PAGE> 46
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.
Etowah Bank. Etowah Bank's Bylaws provide that the stockholders of Etowah
may make any recommendation to the Board of Directors as they deem proper.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Certificate generally requires the affirmative vote of the
holders of at least 75% of the outstanding voting stock of Regions to effect (i)
any merger or consolidation with or into any other corporation, or (ii) any sale
or lease of any substantial part of the assets of Regions to any party that
beneficially owns 5.0% or more of the outstanding shares of Regions voting
stock, unless the transaction was approved by Regions' Board of Directors before
the other party became a 5.0% beneficial owner or is approved by 75% or more of
the Board of Directors after the party becomes such a 5.0% beneficial owner. In
addition, the Delaware GCL generally requires the approval of a majority of the
outstanding voting stock of Regions to effect (i) any merger or consolidation
with or into any other corporation, (ii) any sale, lease, or exchange of all or
substantially all of Regions property and assets, or (iii) the dissolution of
Regions. However, pursuant to the Delaware GCL, Regions may enter into a merger
transaction without stockholder approval if (i) Regions is the surviving
corporation, (ii) the agreement of merger does not amend in any respect Regions'
Certificate, (iii) each share of Regions stock outstanding immediately prior to
the effective date of the merger is to be an identical outstanding or treasury
share of Regions after the effective date of the merger, and (iv) either no
shares of Regions Common Stock and no shares, securities, or obligations
convertible into such stock are to be issued or delivered under the plan of
merger, or the authorized unissued shares or the treasury shares of Regions
Common Stock to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities, or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of Regions Common Stock outstanding immediately prior to the effective
date of the merger.
Etowah Bank. The Georgia Financial Institutions Code generally requires
that any adoption of a plan of merger or consolidation by a Georgia banking
corporation be approved by the affirmative vote of a majority of the directors
and the holders of at least two-thirds of all outstanding shares entitled to
vote thereon.
43
<PAGE> 47
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the Delaware GCL ("Section 203") places certain
restrictions on "business combinations" (as defined in Section 203 to include,
generally, mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested stockholder"
(as defined in Section 203 to include, generally, the beneficial owner of 15% or
more of the corporation's outstanding voting stock). Section 203 generally
applies to Delaware corporations, such as Regions, that have a class of voting
stock listed on a national securities exchange, authorized for quotation on an
interdealer quotation system of a registered national securities association, or
held of record by more than 2,000 stockholders, unless the corporation expressly
elects in its certificate of incorporation or bylaws not to be governed by
Section 203.
Regions has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination by
Regions or a subsidiary with an interested stockholder within three years after
the person or entity becomes an interested stockholder, unless (i) prior to the
time when the person or entity becomes an interested stockholder, Regions' Board
of Directors approved either the business combination or the transaction
pursuant to which such person or entity became an interested stockholder, (ii)
upon consummation of the transaction in which the person or entity became an
interested stockholder, the interested stockholder held at least 85% of the
outstanding Regions voting stock (excluding shares held by persons who are both
officers and directors and shares held by certain employee benefit plans), or
(iii) once the person or entity becomes an interested stockholder, the business
combination is approved by Regions' Board of Directors and by the holders of at
least two-thirds of the outstanding Regions voting stock, excluding shares owned
by the interested stockholder.
Etowah Bank. There are no provisions in the Georgia Financial Institutions
Code which place restrictions on certain business combinations.
DISSENTERS' RIGHTS
Regions. The rights of dissenting stockholders of Regions are governed by
the Delaware GCL. Pursuant thereto, except as described below, any stockholder
has the right to dissent from any merger of which Regions could be a constituent
corporation. No appraisal rights are available, however, for (i) the shares of
any class or series of stock that is either listed on a national securities
exchange, quoted on the Nasdaq National Market, or held of record by more than
2,000 stockholders or (ii) any shares of stock of the constituent corporation
surviving a merger if the merger did not require the approval of the surviving
corporation's stockholders, unless, in either case, the holders of such stock
are required by an agreement of merger or consolidation to accept for that stock
something other than: (a) shares of stock of the corporation surviving or
resulting from the merger or consolidation; (b) shares of stock of any other
corporation that will be listed at the effective date of the merger on a
national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 stockholders; (c) cash in lieu of fractional shares of
stock described in clause (a) or (b) immediately above; or (d) any combination
of the shares of stock and cash in lieu of fractional shares described in
clauses (a) through (c) immediately above. Because Regions Common Stock is
quoted on the Nasdaq National Market and is held of record by more than 2,000
stockholders, unless the exception described immediately above applies, holders
of Regions Common Stock do not have dissenters' rights.
44
<PAGE> 48
Etowah Bank. The rights of dissenting stockholders under Georgia law are
summarized under the caption "Description of the Transaction--Dissenting
Stockholders," and the pertinent provisions of the Georgia Act governing
dissenters' rights are included as Appendix D to this Proxy
Statement/Prospectus.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The Delaware GCL provides that a stockholder may inspect books and
records upon written demand under oath stating the purpose of the inspection, if
such purpose is reasonably related to such person's interest as a stockholder.
Etowah Bank. Under the regulations of the Georgia Department of Banking
and Finance, bank stockholders are entitled to review (i) certain reports filed
with the Department of Banking and Finance, (ii) each report of condition and
report of income since the last stockholders' meeting, (iii) a listing of all
stockholders and their addresses, and (iv) a listing of the compensation of each
director and the chief executive officer. Such stockholder requests, however,
must be made in a writing which sets forth the reasons for such request and
must contain a certification from such stockholder that he will not further
distribute any of the information so furnished.
DIVIDENDS
Regions. The Delaware GCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by Regions are derived from its
subsidiary depository institutions. There are various statutory limitations on
the ability of Regions' subsidiary depository institutions to pay dividends to
Regions. See "Certain Regulatory Considerations--Payment of Dividends."
Etowah Bank. As a Georgia state bank, Etowah Bank is subject to various
statutory and regulatory restrictions on the payment of dividends to its
stockholders. In general, Etowah Bank may pay dividends only out of retained
earnings, and only if the payment would not cause Etowah Bank to have less than
adequate capital under state and federal bank regulatory capital requirements.
See "Certain Regulatory Considerations--Payment of Dividends."
45
<PAGE> 49
AMENDMENT TO THE BYLAWS OF ETOWAH BANK
Article II, Section 5 of Etowah Bank's Bylaws currently provide that the
number of shares of Etowah Bank capital stock issued to any one person may not
exceed 10% of Etowah Bank's capital stock.
The Merger cannot be consummated unless the Bylaws are amended to alter or
remove this limitation, because as a result of the Merger, Regions would hold
all of the capital stock of Etowah Bank. In order to permit consummation of the
Merger, Etowah Bank's Board of Directors, subject to approval by the
stockholders, has approved the amendment of Etowah Bank's Bylaws to delete
Article II, Section 5 in its entirety. In the event the Merger is not approved
by the stockholders but the Bylaw amendment is approved, the amendment to the
Bylaws would take effect.
Approval of the proposed Amendment to the Bylaws will require the
affirmative vote of a majority of the outstanding shares of Etowah Bank Common
Stock.
THE BOARD OF DIRECTORS OF ETOWAH BANK RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PROPOSED AMENDMENT TO THE BYLAWS.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock is quoted on the Nasdaq National Market under the
symbol "RGBK." Etowah 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 Etowah Common Stock and the cash dividends declared
per share of Regions Common Stock and Etowah Common Stock for the indicated
periods. The prices indicated for Etowah Bank are based on actual transactions
in Etowah Common Stock of which Etowah Bank management is aware; however, for
the indicated period there has been only a very limited number of transactions
and all such transactions have involved limited numbers of shares in Etowah
Common Stock in the indicated periods, and no assurance can be given that the
indicated prices represent the actual market value of the Etowah 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
PRICE RANGE CASH DIVIDENDS
----------- DECLARED
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
1996
First Quarter ................ 24.00 20.38 .175
Second Quarter ............... 24.19 21.13 .175
Third Quarter................. 24.32 21.82 .175
Fourth Quarter................ 26.88 24.38 .175
1997
First Quarter................. 30.94 25.69 .20
Second Quarter................ 33.25 27.38 .20
Third Quarter................. 39.13 32.06 .20
Fourth Quarter................ 44.75 36.56 .20
1998
First Quarter ................ 43.50 37.94 .23
Second Quarter (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 Etowah Common Stock in
the last known transaction, which occurred in _______, were $ _______ and $
_______, respectively. On January 12, 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 Etowah Common Stock, were $39.13 and $48.50, respectively.
During 1996, there were trades of Etowah Bank stock known to management
ranging in prices from $37.50 to $40.00 per share in blocks of shares ranging
from 27 shares to 1,326 shares. During 1997, there were trades of Etowah Bank
stock known to management of Etowah Bank ranging in price from $40.00 per share
to $50.00 per share in blocks of shares ranging from 275 shares to 5,600 shares.
In 1998, there has been one trade of Etowah Bank stock known to management at
$53.50 per share in a block of 5,400 shares.
In each of 1996 and 1997, Etowah Bank paid total dividends of $2.25 per
share. In 1998, Etowah Bank began paying quarterly dividends and paid $.65 per
share in the first and second quarters of 1998.
46
<PAGE> 50
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Board of Directors out of funds legally available
therefor. Regions has paid regular quarterly cash dividends since 1971. Although
Regions currently intends to continue to pay quarterly cash dividends on the
Regions Common Stock, there can be no assurance that Regions' dividend policy
will remain unchanged after completion of the Merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the Board of Directors'
consideration of other relevant factors.
Regions is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends from its
subsidiary financial institutions, particularly Regions Bank in Alabama.
Regions' subsidiary depository institutions are subject to certain legal
restrictions on the amount of dividends they are permitted to pay. See "Certain
Regulatory Considerations--Payment of Dividends."
The holders of Etowah Bank Common Stock are entitled to receive dividends
when and if declared by the Board of Directors out of funds legally available
therefor. Although Etowah Bank currently intends to continue to pay quarterly
cash dividends on the Etowah Bank Common Stock, there can be no assurance that
Etowah Bank's dividend policy will remain unchanged after completion of the
Merger. The declaration and payment of dividends thereafter will depend upon
business conditions, operating results, capital and reserve requirements, and
the Board of Directors' consideration of other relevant factors.
47
<PAGE> 51
ETOWAH MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
financial condition and results of operations of Etowah Bank (Etowah) for the
three years ended December 31, 1997, and as of March 31, 1998 and 1997 and for
the three month periods then ended. Management's discussion should be read in
conjunction with the financial statements and accompanying notes presented
elsewhere in this Proxy Statement.
Year ended December 31, 1997 Compared to Year Ended December 31, 1996 and
Year ended December 31, 1996 Compared to Year Ended December 31, 1995
OVERVIEW
Net earnings for 1997 totaled $5,116,000 compared to $4,505,000 for 1996
and $4,500,000 for 1995. The increase in net earnings of $611,000 from 1996 to
1997 was caused primarily by an increase in all categories of interest earning
assets and service charges on deposits partially offset by an increase of
interest bearing liabilities, salaries and employee benefits expense of
$1,460,000 and occupancy expense of $503,000. Net interest income increased by
$2,475,000.
Return on average assets was 1.34% and return on average equity was 18.91%
for 1997, compared to 1.41% and 18.66%, respectively, for 1996 and 1.76% and
20.75%, respectively, for 1995.
Average assets in 1997 increased by $62,900,000 or 19.6%, from 1996 as a
result of an increase in customer deposits of $48,400,000 or 20.2% and an
increase of $6,100,000 or 34% in other interest bearing liabilities. The
increase in deposits was caused by increases in time deposits of $20,446,000, in
non-interest bearing demand deposits of $17,773,000, and demand deposits of
$5,500,000. The increase in deposits helped to fund the increase in loans of
$29,393,000 and investments of $15,487,000 as well as the changes in other asset
accounts.
The net interest margin, the percentage of net interest income to average
earning assets, decreased slightly in 1997, from 5.06% to 5.03%. The net
interest margin of 5.03% in 1997 is favorable to Etowah but is reflective of the
continued decline in interest rates as the spread between rates on deposits and
yields on investments and loans continues to decline at Etowah as well as within
the entire banking industry. Average earning assets comprised 90.7%, 92.2% and
91.6% of total average assets in 1997, 1996 and 1995, respectively.
RESULTS OF OPERATIONS
Net Interest Income. Etowah's primary source of revenue is net interest
income. Net interest income is the difference between interest earned on
interest earning assets and interest paid on interest bearing sources of funds.
The level of net interest income is determined primarily by the volume of
interest earning assets and the various rate spreads between the interest
earning assets and their funding sources.
Net interest income for 1997 was $17,417,000, compared to $14,942,000 for
1996 and $13,627,000 for 1995. The increase of $2,475,000 from 1996 to 1997 was
caused by the increase in average net interest-earning assets. The decrease in
the net interest margin was due to the net interest income not increasing
proportionately with the increase in average earning assets. Average
non-interest bearing deposits as a percent of total deposits remained relatively
stable from 1996 to 1997.
Loans continued to be the largest component of earnings assets as well as
the highest yielding asset of the Bank. Average loans for 1997 were $237,325,000
or 68.5% of average earning assets. Average investment securities totaled
$90,938,000 and comprised 26.2% of average earning assets. Federal funds sold
constitute the remainder of Etowah Bank's earning assets. The net yield on loans
declined .5% from 1996 to 1997. The net yield on investment securities also
declined 3.5% during that same time. The net yield on total earning assets
increased .9% from 1996 to 1997 while there was a .2% decrease in the rate paid
on interest bearing liabilities, for a net increase in the net interest spread
of 2.3%.
The following table presents the average balance sheets, net interest
income, yields earned and rates paid for each category of assets for the periods
indicated by setting forth, information regarding (i) the total dollar amount of
interest income of Etowah from interest-earning assets and the resultant average
yields; (ii) the
50
<PAGE> 52
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average rate; (iii) net interest income; (iv) interest rate spread;
and (v) net interest margin. Information is based on average daily balances
during the indicated periods.
AVERAGE BALANCES, NET INTEREST INCOME YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------ ------------------------------------ ------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE
------------ ----------- ------- ------------ ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........... $ 14,800,917 $ 891,642 6.02% $ 16,888,238 $ 917,506 5.43% $ 9,851,706
Loans........................ 237,324,833 26,059,174 10.98 192,037,233 21,209,460 11.04 171,346,906
Investment securities held to
maturity................... 12,642,973 682,807 5.40 12,737,878 692,175 5.43 17,887,837
Investment securities
available for sale......... 78,295,423 5,322,037 6.80 70,947,156 5,005,100 7.05 32,878,287
Other earning assets.......... 3,531,285 244,023 6.91 2,410,360 182,650 7.58 2,709,587
------------ ----------- ------------ ----------- ------------
Total interest-earning
assets....................... 346,595,431 33,199,683 9.58 295,020,865 28,006,891 9.49 234,674,323
Non-interest-earning assets... 36,624,761 25,308,425 21,521,340
------------ ------------ ------------
Total assets........... $383,220,192 $320,329,290 $256,195,663
============ ============ ============
Interest-bearing liabilities:
Deposits..................... $287,569,195 14,346,144 4.99 $239,170,445 12,011,100 5.02 $196,176,457
Other interest-bearing
liabilities................ 24,032,932 1,436,814 5.98 17,910,757 1,053,652 5.88 5,878,289
------------ ----------- ------------ ----------- ------------
Total interest-bearing
liabilities.................. 311,602,127 15,782,958 5.07 257,081,202 13,064,752 5.08 202,054,746
----------- -----------
Noninterest-bearing
liabilities:
Deposits..................... 42,205,386 37,413,576 30,628,396
Other noninterest-bearing
liabilities................ 2,359,671 1,687,955 1,826,239
------------ ------------ ------------
Total liabilities............. 356,167,184 296,182,733 234,509,381
Equity........................ 27,053,008 24,146,557 21,686,282
------------ ------------ ------------
Total liabilities and
shareholders'
equity............... $383,220,192 $320,329,290 $256,195,663
============ ============ ============
Net interest-earning
assets............... $ 34,993,304 $ 37,939,663 $ 32,619,577
============ ============ ============
Net interest income/
interest rate
spread............... $17,416,725 4.51 $14,942,139 4.41
=========== ===========
Net interest margin.... 5.03 5.06
Ratio of average
interest-earning assets to
average interest-bearing
liabilities.................. 111.23% 114.76%
<CAPTION>
1995
---------------------
AVERAGE
YIELD/
INTEREST COST
----------- -------
<S> <C> <C>
Interest-earning assets:
Federal funds sold........... $ 621,312 6.31%
Loans........................ 19,358,738 11.30
Investment securities held to
maturity................... 754,055 4.22
Investment securities
available for sale......... 2,494,504 7.59
Other earning assets.......... 207,271 7.65
-----------
Total interest-earning
assets....................... 23,435,880 9.99
Non-interest-earning assets...
Total assets...........
Interest-bearing liabilities:
Deposits..................... 9,413,038 4.80
Other interest-bearing
liabilities................ 396,195 6.74
-----------
Total interest-bearing
liabilities.................. 9,809,233 4.85
-----------
Noninterest-bearing
liabilities:
Deposits.....................
Other noninterest-bearing
liabilities................
Total liabilities.............
Equity........................
Total liabilities and
shareholders'
equity...............
Net interest-earning
assets...............
Net interest income/
interest rate
spread............... $13,626,647 5.13
===========
Net interest margin.... 5.81
Ratio of average
interest-earning assets to
average interest-bearing
liabilities.................. 116.14%
</TABLE>
- ---------------
(1) Nonaccrual loans and the interest income which was recorded on these loans
(both prior and subsequent to the time the loans were placed on nonaccrual
status, if any) are included in the yield calculation for loans in all
periods reported.
51
<PAGE> 53
Rate/Volume Analysis. The following table provides the components of
changes in net interest income in the format of a rate/volume analysis and
analyzes the dollar amount of changes in interest income and interest expense
for major components of interest-earning assets and interest-bearing
liabilities. The table distinguishes between (i) changes attributable to rate
(changes in rate multiplied by the prior period's volume), (ii) changes
attributable to volume (changes in volume multiplied by the prior period's
rate), (iii) mixed change (changes in rate multiplied by changes in volume), and
(iv) total increase (decrease) (sum of the previous columns).
ETOWAH BANK
RATE/VOLUME VARIANCE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1997/1996 1996/1995
---------------------------------------------- -----------------------------------------------
CHANGE ATTRIBUTABLE TO CHANGE ATTRIBUTABLE TO
---------------------------------------------- -----------------------------------------------
TOTAL TOTAL
RATE/ INCREASE/ RATE/ INCREASE/
VOLUME RATE VOLUME DECREASE VOLUME RATE VOLUME DECREASE
---------- --------- -------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning
assets:
Federal funds sold... $ (113,400) $ 99,881 $(12,345) $ (25,864) $ 443,769 $ (86,087) $ (61,488) $ 296,194
Loans................ 5,001,767 (123,038) (29,016) 4,849,713 2,337,589 (434,411) (52,456) 1,850,722
Investment securities
held to maturity... (5,157) (4,242) 32 (9,367) (217,095) 217,968 (62,754) (61,881)
Investment securities
available for
sale............... 518,397 (182,552) (18,908) 316,937 2,888,318 (175,044) (202,679) 2,510,595
Other earning assets... 84,941 (16,087) (7,481) 61,373 (22,889) (1,946) 215 (24,620)
---------- --------- -------- ---------- ---------- --------- --------- ----------
Total net
change in
income on
interest-
earning
assets....... 5,486,548 (226,038) (67,718) 5,192,792 5,429,692 (479,520) (379,162) 4,571,010
---------- --------- -------- ---------- ---------- --------- --------- ----------
Interest-bearing
liabilities:
Deposits............. 2,430,577 (79,455) (16,079) 2,335,043 2,062,959 438,911 96,192 2,598,062
Other
interest-bearing
liabilities........ 360,155 17,146 5,861 383,162 810,985 (50,388) (103,140) 657,457
---------- --------- -------- ---------- ---------- --------- --------- ----------
Total net
change in
expense on
interest-
bearing
liabilities... 2,790,732 (62,309) (10,218) 2,718,205 2,873,944 388,523 (6,948) 3,255,519
---------- --------- -------- ---------- ---------- --------- --------- ----------
Net change in net
interest income...... $2,695,816 $(163,729) $(57,500) $2,474,587 $2,555,748 $(868,043) $(372,214) $1,315,491
========== ========= ======== ========== ========== ========= ========= ==========
</TABLE>
Interest Rate Sensitivity. The interest rate sensitivity gap is the
difference between the amount of interest bearing assets and interest bearing
liabilities maturing in any given time frame. A primary objective of
asset/liability management is to maximize net interest margin while not
subjecting Etowah to significant interest rate risk in periods of rising or
falling interest rates. At December 31, 1997, Etowah's one year repricing gap,
defined as repricing assets minus repricing liabilities as a percentage of total
assets was (16.01)%, i.e. more of Etowah's liabilities than assets reprice
within a one year time frame. Management regularly reviews interest rate
exposure to analyze the impact of changes in market interest rates on net
interest income.
52
<PAGE> 54
The following table sets forth Etowah's interest rate sensitivity at
various time intervals as of December 31, 1997.
ETOWAH BANK
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
WITHIN THREE TO MORE THAN MORE THAN OVER
THREE TWELVE ONE YEAR TO THREE YEARS TO FIVE
MONTHS MONTHS THREE YEARS FIVE YEARS YEARS TOTAL
------------- ------------ ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold.... $ 21,600,000 $ 21,600,000
Loans................. 129,773,439 $ 18,636,662 $ 54,960,808 $ 29,398,497 $21,263,985 254,033,391
Investment securities
held to maturity.... 584,953 258,341 699,882 1,104,511 9,989,083 12,636,770
Investment securities
available for
sale................ 14,835,000 3,129,579 9,517,450 0 63,772,989 91,255,018
Other earning assets.... 0 0 0 0 4,123,350 4,123,350
------------- ------------ ------------ ------------ ----------- ------------
Total interest-
earning
assets....... 166,793,392 22,024,582 65,178,140 30,503,008 99,149,407 383,648,529
------------- ------------ ------------ ------------ ----------- ------------
Interest-bearing
liabilities:
Deposits.............. 159,334,246 94,912,438 38,839,817 29,813,367 0 322,899,868
Other interest-bearing
liabilities......... 940,554 2,821,662 10,786,649 5,324,432 8,439,819 28,313,116
------------- ------------ ------------ ------------ ----------- ------------
Total interest-
bearing
liabilities... 160,274,800 97,734,100 49,626,466 35,137,799 8,439,819 351,212,984
------------- ------------ ------------ ------------ ----------- ------------
Excess (deficiency) of
interest-earning
assets over
interest-bearing
liabilities........... 6,518,592 (75,709,518) 15,551,674 (4,634,791) 90,709,588
------------- ------------ ------------ ------------ -----------
Cumulative excess
(deficiency) of
interest-earning
assets over
interest-bearing
liabilities........... 6,518,592 (69,190,926) (53,639,252) (58,274,043) 32,435,545
------------- ------------ ------------ ------------ -----------
Cumulative excess
(deficiency) of
interest-earning
assets over
interest-bearing
liabilities as a
percent of total
assets................ 1.51% (16.01)% (12.41)% (13.49)% 7.51%
</TABLE>
Provision for Loan Losses. The provision for loan losses charged to
operating expense is the result of a continuing review and assessment of the
loan portfolio, taking into consideration the history of chargeoffs in the loan
portfolio by category, the current economic conditions in the lending area, the
payment history, the ability to repay and strength of collateral of specific
borrowers, and other relevant factors. The 1997 provision is $797,000, compared
to $865,000 in 1996 and $470,000 in 1995. Actual chargeoffs, net of recoveries,
were $178,000 in 1997, $875,000 in 1996 and $98,000 in 1995. The provision
exceeded net chargeoffs in 1997 and 1995, resulting in an increase in the
allowance for loan losses. For 1996, the allowance remained relatively stable.
Non-Interest Income. Non-interest income in 1997 totaled $4,015,000
compared to $3,359,000 in 1996 and $3,004,000 in 1995. The increase from 1996
was caused mostly by increases in service charges of $151,000, increases in
miscellaneous income of $137,000 and reduction in securities losses of $302,000.
The largest component of non-interest income in 1997 was service charge income,
which accounted for 88.2% of total non-interest income.
Non-Interest Expenses. Non-interest expenses were $13,110,000 in 1997,
compared to $10,802,000 in 1996 and $9,535,000 in 1995. Salaries and related
benefits increased $1,460,000 from 1996 to 1997 while occupancy expense
increased by $503,000 from 1996 to 1997 and other operating expenses increased
by $346,000. Salaries increased $824,000 from 1995 to 1996.
53
<PAGE> 55
Income Taxes. Etowah's effective tax rate was 32.0% in 1997, 32.1% in 1996
and 32.1% in 1995. The effective rate is less than the highest statutory rate
primarily because of tax-free income from municipal investments.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. In 1997, average investment securities increased
$7,253,000 from 1996. The increase was funded by a larger increase in deposits.
At December 31, 1997, Etowah had securities classified as available for sale as
well as held to maturity. Held to maturity securities were comprised of state,
county, and municipal bonds with a total market value of $13,150,000,
representing $516,000 in gross unrealized gains and $3,000 in gross unrealized
losses. Available for sale securities were comprised mainly of U.S. government
agencies, with a market value of $91,255,000. These securities had gross
unrealized gains of $83,000 and gross unrealized losses of $205,000. The
investment securities portfolio is used as a source of liquidity and a means of
managing interest rates and interest rate sensitivity. In addition, the
portfolio serves as a source of collateral on certain deposits.
Securities Portfolio. The carrying amount of securities at the dates
indicated is set forth in the table below:
Carrying Amount of Securities
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY
State, county and municipals...... $ 12,637 12.2% $12,649 14.3% $12,542 17.8%
-------- ----- ------- ----- ------- -----
AVAILABLE FOR SALE
U S Government agencies........... 91,128 87.7 70,168 79.4 51,207 72.4
Mortgage-backed securities........ 0 0.0 5,474 6.2 6,568 9.3
State, county and municipals...... 127 0.1 127 0.1 452 0.5
-------- ----- ------- ----- ------- -----
91,255 87.8 75,769 85.7 58,227 82.2
-------- ----- ------- ----- ------- -----
Total..................... $103,892 100.0% $88,418 100.0% $70,769 100.0%
======== ===== ======= ===== ======= =====
</TABLE>
Investment Securities Maturity Distribution. The amortized cost of
securities held to maturity and estimated market value of securities available
for sale at December 31, 1997, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Maturity Distribution at December 31, 1997
<TABLE>
<CAPTION>
ONE YEAR ONE TO FIVE TO OVER
OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
-------- ---------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
U S Government agencies
Amount.............................. $14,835 $12,520 $39,019 $24,754 $ 91,128
------- ------- ------- ------- --------
Yield............................... 5.53% 6.51% 7.08% 7.14%
State, county and municipals
Amount.............................. 843 1,931 7,875 2,115 12,764
------- ------- ------- ------- --------
Yield............................... 6.39% 5.20% 5.42% 5.44%
Total....................... $15,678 $14,451 $46,894 $26,869 $103,892
======= ======= ======= ======= ========
</TABLE>
Loans. Net loans outstanding at December 31, 1997 totaled $238,149,000
compared to $207,572,000 in 1996, an increase of $30,577,000 or 14.7%. Total
average loans in 1997 were $237,325,000, an increase of $45,300,000 from the
average for 1996.
54
<PAGE> 56
The following table sets forth the composition of Etowah's loan portfolio
by type of loan at the dates indicated:
Loan Portfolio Composition
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
% OF % OF % OF
BALANCE TOTAL BALANCE TOTAL BALANCE TOTAL
------------ ------ ------------ ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Types of loans:
Commercial and
industrial......... $125,718,763 52.79% $ 91,351,065 44.01% $ 58,479,615 35.30%
Real estate --
construction....... 53,402,329 22.42 54,055,358 26.04 50,027,294 30.20
Real
estate -- mortgage.. 38,707,986 16.25 31,102,541 14.98 38,940,892 23.51
Consumer and other.... 23,125,772 9.71 33,375,115 16.08 20,814,893 12.56
------------ ------ ------------ ------ ------------ ------
Total loans... 240,954,850 101.18 209,884,079 101.11 168,262,694 101.57
Less
Unearned interest..... (60,866) (0.03) (186,455) (0.09) (459,949) (0.28)
Allowance for loan
losses............. (2,744,868) (1.15) (2,125,962) (1.02) (2,135,506) (1.29)
------------ ------ ------------ ------ ------------ ------
Total loans,
net......... $238,149,116 100.00% $207,571,662 100.00% $165,667,239 100.00%
============ ====== ============ ====== ============ ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------- ---------------------
% OF % OF
BALANCE TOTAL BALANCE TOTAL
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Types of loans:
Commercial and industrial.................... $ 49,833,426 31.81% $ 47,615,489 34.14%
Real estate -- construction.................. 46,719,521 29.82 29,573,221 21.20
Real estate -- mortgage...................... 41,105,808 26.24 44,753,822 32.09
Consumer and other........................... 21,245,698 13.56 19,438,801 13.94
------------ ------ ------------ ------
Total loans.......................... 158,904,453 101.44 141,381,333 101.37
------------ ------ ------------ ------
Less
Unearned interest............................ (490,557) (0.31) (492,791) (0.35)
Allowance for loan losses.................... (1,763,647) (1.13) (1,413,000) (1.01)
------------ ------ ------------ ------
Total loans, net..................... $156,650,249 100.00% $139,475,542 100.00%
============ ====== ============ ======
</TABLE>
Commercial loans is the largest category of loans, comprising 52.8% and
44.0% of net loans at December 31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, fixed rate loans totaled $141,910,000 and
$99,669,000, respectively, and variable rate loans totaled $98,984,000 and
$110,194,000, respectively.
Non-Performing Assets. Nonaccrual loans, foreclosed assets and troubled
debt restructurings are included in non-performing assets. Non-performing assets
decreased $1,995,000 during 1997 to $2,813,000 at December 31, 1997.
Nonaccrual loans are loans on which the accrual of interest income has been
discontinued and previously accrued interest has been reversed because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
55
<PAGE> 57
The following table sets forth information with respect to non-performing
assets identified by Etowah, including nonaccrual loans, other real estate owned
and troubled debt restructurings at the dates indicated:
Nonperforming Assets:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans.............. $ 339,000 $1,999,000 $ 0 $ 0 $ 680,000
Accruing loans past due 90
days or more................ 1,919,000 2,485,000 536,000 267,000 883,000
Other real estate owned....... 555,000 324,000 396,000 871,000 464,000
---------- ---------- -------- ---------- ----------
Total nonperforming
assets............ $2,813,000 $4,808,000 $932,000 $1,138,000 $2,027,000
========== ========== ======== ========== ==========
Nonperforming assets to net
loans....................... 1.18% 2.32% .56% .73% 1.45%
Allowance for loan losses to
total loans at end of
period...................... 1.14 1.01 1.26 1.10 .99
Allowance for loan losses to
nonperforming assets........ 97.58 44.20 229.08 154.97 69.71
</TABLE>
Allowance for Loan Losses. Inherent in Etowah's lending activities is the
risk that loan losses will be experienced and that the risk of loss will vary
with the type of loan being made and the creditworthiness of the borrower over
the term of the loan. To reflect the currently perceived risk of loss associated
with Etowah's loan portfolio, provisions are made to the allowance for loan
losses. The allowance is created by direct charges against income and is
available for loan losses. The amount of the allowance for loan losses and the
provisions for loan losses are evaluated quarterly, based on management's
estimate of risk in the overall loan portfolio and the estimated exposure on
individual loans. In evaluating the adequacy of the allowance and the amount of
the provision, consideration is given to such factors as: management's
evaluation of specific loans; the level and composition of classified loans;
historical loss experience; results of examinations by regulatory agencies and
an internal asset review process; expectations of future national and local
economic conditions and their impact on particular industries and the individual
borrowers; the market value of collateral and strength of available guaranties;
concentrations of credit; and other judgmental factors. Etowah maintains an
allowance for loan losses which it believes is adequate to absorb reasonably
foreseeable losses in the loan portfolio.
The allowance for loan losses increased $619,000 from December 31, 1996 to
1997, to $2,745,000 and was 1.14% of total loans. The 1996 balance in the
allowance for loan losses was $2,126,000 or 1.01% of total loans.
56
<PAGE> 58
The following table summarizes the loan loss experience for each of the
periods indicated:
Allowance for Loan Losses
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at beginning of
year....................... $2,125,962 $2,135,506 $1,763,647 $1,413,000 $1,053,489
Provisions charged to
expense.................... 797,000 865,000 470,000 657,000 360,000
Chargeoffs:
Real estate................ 0 0 0 211,000 36,000
Commercial................. 77,000 813,000 16,000 91,000 5,000
Consumer and other......... 134,000 96,000 92,000 95,000 24,000
---------- ---------- ---------- ---------- ----------
Total charge
offs............. 211,000 909,000 108,000 397,000 65,000
---------- ---------- ---------- ---------- ----------
Recoveries:
Real estate................ 0 0 0 0 41,000
Commercial................. 9,000 7,000 3,000 66,000 19,000
Consumer and other......... 23,906 27,456 6,859 24,647 4,511
---------- ---------- ---------- ---------- ----------
Total recoveries... 32,906 34,456 9,859 90,647 64,511
---------- ---------- ---------- ---------- ----------
Net loan charge offs......... 178,094 874,544 98,141 306,353 489
---------- ---------- ---------- ---------- ----------
Balance at end of
period........... $2,744,868 $2,125,962 $2,135,506 $1,763,647 $1,413,000
========== ========== ========== ========== ==========
Allowance for loan losses to
total loans at end of
period..................... 1.15% 1.01% 1.23% 1.10% 0.99%
Allowance for loan losses to
total nonperforming
assets..................... 97.58 44.20 229.08 154.97 69.71
Net charge offs to average
loans...................... .08 .46 .06 .21 .00
Recoveries as a percentage of
charge offs................ 15.60 3.79 9.13 22.83 99.25
</TABLE>
Deposits. Total deposits at December 31, 1997 were $370,502,000, an
increase of $43,980,000 from the December 31, 1996 total of $326,522,000.
Average deposits in 1997 increased $48,399,000 from 1996. As noted earlier, an
increase occurred in the average balance of time deposits, non-interest bearing
demand deposits and interest bearing demand deposits.
Time deposits of $100,000 or more were $29,176,000 at December 31, 1997,
which comprised 7.88% of total deposits. These deposits consist primarily of
deposits from local customers with which Etowah has other banking relationships.
Etowah had no brokered deposits at December 31, 1997.
Deposit Average Balances and Rates. The following table indicates the
average daily amount of deposits and rates paid on such deposits for the periods
indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand.................. $42,205,386 0.00% $37,413,576 0.00% $30,628,396 0.00%
Interest bearing demand... 68,699,915 3.07 57,979,633 3.14 53,902,973 3.14
Savings................... 18,114,550 2.96 16,494,608 3.07 16,494,608 2.95
Time deposits............. 200,754,730 5.83 164,696,204 5.88 125,778,876 5.75
</TABLE>
57
<PAGE> 59
Maturities of Time Deposits of $100,000 or More. The maturities of time
deposits of $100,000 or more are summarized in the table below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Three months or less........................................ $14,769 $10,795
Over three months through twelve months..................... 25,988 23,119
Over one year through three years........................... 6,525 10,621
Over three years............................................ 7,029 0
------- -------
Total............................................. $54,311 $44,535
======= =======
</TABLE>
Liquidity. Liquidity involves Etowah's ability to raise funds to support
asset growth or to reduce assets, meet deposit withdrawals and other borrowing
needs, maintain reserve requirements and otherwise operate the Bank on an
ongoing basis.
As shown in the accompanying 1997 statement of cash flows, cash and cash
equivalents increased by $1,916,000 from December 31, 1996 to December 31, 1997.
Cash and cash equivalents were generated primarily by sales and maturities of
investment securities of $29,942,000, increases in customers' deposits of
$43,980,000, and advances from the Federal Home Loan Bank of $6,616,000. Cash
and cash equivalents were used for purchases of investment securities of
$44,788,000, increases in loans outstanding of $32,882,000, purchases of
premises and equipment of $4,580,000, purchase of cash surrender life insurance
policies of $5,100,000 and payment of dividends of $2,038,000. Overall,
operating activities provided net cash of $9,207,000.
Capital Resources. Etowah maintains adequate capital for regulatory
purposes and has sufficient capital to absorb the risks inherent in the
business. Risk-based capital requirements have been established that weight
different assets according to the level of risk associated with those types of
assets. The table below summarizes Etowah's capital levels at the dates
indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
----- -----
<S> <C> <C>
Tier I Capital to Average Assets............................ 7.10% 7.30%
Tier I Capital to Risk Weighted Assets...................... 9.20 9.40
Total Capital to Risk Weighted Assets....................... 10.10 10.20
</TABLE>
Three Months Ended March 31, 1998 Compared
to Three Months Ended March 31, 1997
The following discussion provides certain information concerning the
financial condition and results of operations of Etowah as of March 31, 1998 and
for the three month period then ended. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) which are necessary
for a fair presentation of results of operations for such three month period
have been made. Management's discussion should be read in conjunction with the
financial statements and accompanying notes presented elsewhere in this Proxy
Statement.
OVERVIEW
Net earnings for the three months ended March 31, 1998 totaled $1,598,000
compared to $1,048,000 for the same period in 1997.
Return on average assets was 1.52% and return on average equity was 21.77%
for the three months ended March 31, 1998 compared to 1.12% and 16.47%,
respectively, for the comparable period in 1997.
RESULTS OF OPERATIONS
Net Interest Income. Etowah's primary source of revenue is net interest
income. Net interest income is the difference between interest earned on
interest earning assets and interest paid on interest bearing sources
58
<PAGE> 60
of funds. The level of net interest income is determined primarily by the volume
of interest earning assets and the various rate spreads between the interest
earning assets and their funding sources.
Net interest income for the three month period ended March 31, 1998 totaled
$4,929,000, an increase of $697,000 or 16.4% from the $4,237,000 total for the
comparable period in 1997. The increase in net interest income was attributable
to an increase in total interest income of $1,118,000, which was partially
offset by an increase in total interest expense of $426,000.
Average interest earning assets for the three months ended March 31, 1998
were $363,133,000 and represented 88% of average total assets. An increase in
average loans outstanding of $34,639,000, partially offset by decreases in
average investment securities of $11,669,000 and federal funds sold of
$7,195,000, resulted in a increase in average interest earning assets of
$16,538,000 from December 31, 1997.
As of March 31, 1998, non-interest bearing demand deposits averaged
$45,868,000 or 12.96% of deposits compared to $38,522,000 or 12.01% of deposits
as of March 31, 1997. The large percentage of non-interest bearing deposits has
a positive impact on Etowah's net interest margin.
Net interest margin, the ratio of net interest income to average earning
assets, for the three months ended March 31, 1998 increased to 5.43%, an
increase of 47 basis points from December 31, 1997. The increase in net interest
margin in 1998 is a result of the higher percentage of assets invested in loans,
which is the highest yielding asset held by Etowah.
Net interest spread, the difference between the yield on earning assets and
the rate paid on interest bearing liabilities was 5.02% for the three months
ended March 31, 1998, an increase from December 31, 1997 of 51 basis points.
Interest Rate Sensitivity. The interest rate sensitivity gap is the
difference between the amount of interest bearing assets and interest bearing
liabilities maturing in any given time frame. A primary objective of
asset/liability management is to maximize net interest margin while not
subjecting Etowah to significant interest rate risk in periods of rising or
falling interest rates. At March 31, 1998 Etowah's one year repricing gap,
defined as repricing assets minus repricing liabilities, as a percentage of
total assets was (13.17)%, i.e. more of Etowah's liabilities than assets reprice
within a one year time frame. Management regularly reviews interest rate
exposure to analyze the impact of changes in market interest rates on net
interest income.
Provision for Possible Loan Losses. The provision for possible loan losses
charged to operating expense is the result of a continuing review and assessment
of the loan portfolio, taking into consideration the impact of economic
conditions on the borrower's ability to repay, past collection experience, the
risk characteristics of the loan portfolio and such other factors which deserve
current recognition. As of March 31, 1998, the provision for possible loan
losses totaled $150,000 compared to $225,000 for the same three month period in
1997.
Non-Interest Income. Non-interest income for the three month period ended
March 31, 1998 totaled $679,000 compared to $692,000 for the same period in
1997. The decrease resulted from a decrease in securities gains of $40,000.
Non-Interest Expenses. For the three month period ended March 31, 1998,
total non-interest expenses decreased $73,000 or 2.3% from the same period in
1997. Salaries and employee benefits decreased $11,000, other operating expenses
decreased by $85,000 and occupancy increased by $24,000.
Income Taxes. Etowah's effective tax rate was 33.1% for the three month
period ended March 31, 1998 compared to 32.9% for the same period in 1997. The
effective tax rate is less than the highest statutory rate primarily because of
tax-free income from municipal investments.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. Average investment securities for the three months
ended March 31, 1998 were $79,269,000 or 21.83% of average earning assets. Total
investment securities at March 31, 1998 were $80,000,000 including gross
unrealized gains of $68,000 and gross unrealized losses of $140,000. The
investment securities portfolio is used to make investments of various
maturities in order to improve the overall earning asset yield. It also serves
as a source of liquidity and as collateral to secure certain types of
59
<PAGE> 61
deposits. Investment securities are classified as available for sale or held to
maturity. The composition of the portfolio, effectively managed, limits Etowah's
exposure to changes in interest rates and economic conditions as they occur.
Loans and Non-Performing Assets. The loan portfolio is the largest
component of Etowah's earning assets. For the three months ended March 31, 1998,
average loans outstanding were $271,964,000 compared to $223,947,000 for the
same period in 1997.
Total non-performing assets at March 31, 1998 were 1.49% of total loans,
which is comparable to non-performing assets at December 31, 1997.
Nonaccrual loans are loans on which the accrual of interest income has been
discontinued and previously accrued interest has been reversed, because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on the cash basis.
Allowance for Loan Losses. At March 31, 1998 the allowance for possible
loan losses was $2,851,000 compared to $2,335,000 at March 31, 1997. The
allowance as a percent of loans outstanding was 1.12% and 1.10% as of March 31,
1998 and 1997, respectively. For the three month period ending March 31, 1998,
charge-offs exceeded recoveries by $44,000.
Deposits. Total deposits at March 31, 1998 were $347,693,000 which is
$22,651,000 or 6.97% higher than at March 31, 1997.
Time deposits of $100,000 or more were $43,396,000 at March 31, 1998. These
deposits consist primarily of deposits from local customers with which Etowah
has other banking relationships. Etowah had no brokered deposits at March 31,
1998.
Liquidity. Liquidity is the ability of Etowah to fund the needs of its
borrowers, depositors and creditors. Etowah's management maintains a strategy
that provides adequate liquidity and manages interest rate risk. Etowah's
liquidity sources, including cash flows from sales, maturities and paydowns of
loans and investment securities, federal funds purchased, securities sold under
agreements to repurchase and a base of core deposits, are considered adequate to
meet liquidity needs for normal operations.
Capital Resources. Etowah is required to comply with the risk-based
capital guidelines adopted by the FDIC. Those guidelines apply weighing factors
which vary according to the level of risk associated with each asset category.
As of March 31, 1998, Etowah exceeds all minimum capital ratios, with the
following ratios:
<TABLE>
<S> <C>
Tier 1 risk-based capital................................... 9.47%
Total risk-based capital.................................... 10.42
Tier 1 leverage............................................. 6.87
</TABLE>
60
<PAGE> 62
BUSINESS OF ETOWAH BANK
Etowah Bank is a commercial bank organized under the laws of the state of
Georgia with its principal executive office located in Canton, Georgia. Etowah
Bank is a state-chartered commercial bank which provides a range of consumer and
commercial banking services through 18 offices in North, Georgia. At March 31,
1998, Etowah Bank had total consolidated assets of approximately $407 million,
total consolidated deposits of approximately $348 million, and total
consolidated stockholders' equity of approximately $30 million. Etowah Bank's
principal executive office is located at 140 W. Main Street, Canton, Georgia,
30114 and its telephone number at such address is (770) 479-8761.
COMPETITION
Etowah Bank encounters vigorous competition in its market areas for the
provision of depository institution financial services from a number of sources,
including bank holding companies and commercial banks, savings and loan
associations and other thrift institutions, other financial institutions, and
financial intermediaries that are domiciled in or operate in Cherokee County and
North, Georgia, where most of Etowah Bank's customers reside. Regional
interstate banking laws and other recent federal and state laws have resulted in
increased competition from both conventional banking institutions and other
businesses offering financial services and products. The Bank also competes for
interest bearing funds with a number of other financial intermediaries and
nontraditional consumer investment alternatives, including brokerage firms,
consumer finance companies, commercial finance companies, credit unions, money
market funds, and federal, state, and municipal issuers of short term
obligations. Many of these competitors have greater financial resources than
Etowah Bank. At March 31, 1998, in Cherokee County there were approximately 7
commercial banks, 3 savings banks, and 2 credit unions competing with Etowah
Bank.
LEGAL PROCEEDINGS
Etowah Bank is not party to any material legal proceedings other than
ordinary routine litigation incidental to their business.
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<PAGE> 63
MANAGEMENT
The following table presents information about the directors and executive
officers of Etowah Bank. Unless otherwise indicated, each person has sole voting
and investment powers over the indicated shares. Information relating to
beneficial ownership of the Etowah Bank is based upon "beneficial ownership"
concepts set forth in rules promulgated under the Exchange Act. Under such rules
a person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose or to direct the disposition of such security. Under the rules, more
than one person may be deemed to be a beneficial owner of the same securities. A
person is also deemed to be a beneficial owner of any security of which that
person has the right to acquire beneficial ownership within 60 days from the
record date. The footnotes to the table indicate how many shares each person has
the right to acquire within 60 days of the record date.
<TABLE>
<CAPTION>
POSITION AND DIRECTOR OR NUMBER OF SHARES
OFFICES HELD EXECUTIVE BENEFICIALLY OWNED
WITH ETOWAH BANK OFFICER AT THE RECORD DATE
NAME AND BANK SINCE AND PERCENT OF CLASS
- --------------------- -------- ----- --------------------
<S> <C> <C> <C> <C>
Pierce T. Neese Chairman, President and 1975 68,684 (7.5%)(1)
Chief Executive Officer
Harold L. Swindell Executive Vice President, 1987 4,633 *
Chief Operating Officer and
Director
Spencer Hoard Senior Vice President, Credit
Officer 1986 2,086 *
Charles C. Pilcher, Jr Senior Vice President 1992 589 *
James S. Smith Senior Vice President 1992 1,050 *
R. Michael Lewis Senior Vice President 1997 494 *
Alex Weatherby Vice Chairman of the Board 1979 4,917 * (2)
Rudolph J. Childre, Sr. Director 1974 22,914 (2.5%)
Roy A. Doss Director 1989 34,861 (3.8%)(3)
Donald T. Keeter Director 1994 19,852 (2.2%)
James L. Spears Director 1993 8,788 * (4)
</TABLE>
*Represents less than one percent.
(1) Does not include ____________ shares held in the company pension plan.
(2) Includes 861 shares held in his wife's name.
(3) Includes 14, 409 shares held in his wife's name.
(4) Includes 2,582 shares held in his wife's name.
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<PAGE> 64
TRANSACTIONS WITH MANAGEMENT
In the ordinary course of business, Etowah Bank has loans, deposits and
other transactions with its executive officers, directors, and organizations
with which such persons are associated. Such transactions are on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with others. The aggregate amount of loans
to the aforementioned persons and company(s) in which they have a 10% or more
ownership interest as of March 31, 1998, were approximately $_______.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF ETOWAH BANK
The following table sets forth certain information concerning the
beneficial owners of more than 5.0% of Etowah 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 Pierce T. Neese 68,684 7.5%
P.O. Box 679
Canton, Georgia 30114
Common Stock J. Mack Robinson 53,118(2) 5.83
4370 Peachtree Rd., N.E.
Atlanta, Georgia 30321
</TABLE>
(1) The information shown above is based upon information furnished by the named
persons. Information relating to beneficial ownership is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Exchange Securities
Act. Under such rules a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the power
to dispose or to direct the voting of such security, or "investment power,"
which includes the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any security of
which that person has the right to acquire beneficial ownership within 60 days.
Under the rules, more than one person may be deemed to be a beneficial owner of
the same securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she has no beneficial interest.
(2) Includes 22,068 shares held in the name of Delta Life insurance and 22,068
shares held in the name of Delta First Casualty. Does not include trustee
accounts for Mr. Robinson's daughters of 15,972 shares for which he disclaims
beneficial ownership.
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<PAGE> 65
BUSINESS OF REGIONS
GENERAL
Regions is a regional bank holding company organized and existing under the
laws of the state of Delaware and headquartered in Birmingham, Alabama, with
approximately 500 banking offices located in Alabama, Florida, Georgia,
Louisiana, South Carolina, and Tennessee as of March 31, 1998. At that date,
Regions had total consolidated assets of approximately $25.6 billion, total
consolidated deposits of approximately $20.3 billion and total consolidated
stockholders' equity of approximately $2.1 billion. Regions has banking
operations in Alabama, Florida, Georgia, Louisiana, South Carolina, and
Tennessee and banking-related subsidiaries engaged in mortgage banking, credit
life insurance, leasing, and securities brokerage activities with offices in
various Southeastern states. Through its subsidiaries, Regions offers a broad
range of banking and banking-related services.
Regions was organized under the laws of the state of Delaware and commenced
operations in 1971 under the name First Alabama Bancshares, Inc. In 1994, the
name of First Alabama Bancshares, Inc. was changed to Regions Financial
Corporation. Regions' principal executive offices are located at 417 North 20th
Street, Birmingham, Alabama 35203, and its telephone number at such address is
(205) 326-7100.
Regions continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business combinations
involving cash, debt, or equity securities can be expected. Any future business
combination or series of business combinations that Regions might undertake may
be material, in terms of assets acquired or liabilities assumed, to Regions'
financial condition. Recent business combinations in the banking industry have
typically involved the payment of a premium over book and market values. This
practice could result in dilution of book value and net income per share for the
acquirer.
Additional information about Regions and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Available Information" and "Documents Incorporated by Reference."
64
<PAGE> 66
ACQUISITION ACTIVITY
Since December 31, 1997, and as of the date of this Proxy
Statement/Prospectus, Regions has completed the acquisitions of six financial
institutions (the "Recently Completed Acquisitions" and has entered into
definitive agreements or letters of intent to acquire five 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:
65
<PAGE> 67
<TABLE>
<CAPTION>
CONSIDERATION
---------------
APPROXIMATE
------------------
ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
----------- ---------- ----- ---- ----------
(In millions)
<S> <C> <C> <C> <C>
Recently Completed Acquisitions:
Greenville Financial Corporation, located in 134 34 Regions Pooling
Greenville, South Carolina Common of
Stock Interests
PALFED, Inc., located in Aiken, 665 145 Regions Pooling
South Carolina Common of
Stock Interests
First United Bancorporation, located in Anderson, South 292 80 Regions Pooling
Carolina Common of
Stock Interests
St. Mary Holding Corporation, located in Franklin, 113 31 Regions Pooling
Louisiana Common of
Stock Interests
Key Florida Bancorp, Inc., located in Bradenton, Florida 212 39 Regions Pooling
Common of
Stock Interests
First State Corporation, located in Albany, Georgia 540 161 Regions Pooling
Common of
Stock Interests
Other Pending Acquisitions:
First Commercial Corporation, located in Little Rock, 6,887 2,587 Regions Pooling
Arkansas Common of
Stock Interests
First Community Banking Services, Inc., located in Peachtree 131 33 Regions Pooling
City, Georgia Common of
Stock Interests
Jacobs Bank, located in Scottsboro, Alabama 190 53 Regions Pooling
Common of
Stock Interests
Village Bankshares, Inc., located in Tampa, Florida 199 55 Regions Pooling
Common of
Stock Interests
VB&T Bancshares Corporation, located in Valdosta, Georgia 75 18 Regions Pooling
Common of
Stock Interests
Meigs County Bancshares, Inc. located in Decatur, 103 19 Regions Pooling
Tennessee Common of
Stock Interests
</TABLE>
66
<PAGE> 68
- -------
(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, approval of the stockholders of the institutions
to be acquired, and, in the case of the First Commercial Acquisition, approval
of the stockholders of Regions. 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
March 31, 1998, as of that date Regions' total consolidated assets would have
been increased by approximately $8.5 billion to approximately $34.1 billion; its
total consolidated deposits would have increased by approximately $7.3 billion
to approximately $27.6 billion; and its total consolidated stockholders' equity
would have increased by approximately $666 million to approximately $2.8
billion.
For additional information concerning the First Commercial Acquisition, see
"Recent Developments--First Commercial Corporation Acquisition."
67
<PAGE> 69
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and provides
certain specific information related to Regions and Etowah Bank. Additional
information is available in Regions' Annual Report on Form 10-K for the fiscal
year ended December 31, 1997. See "Documents Incorporated by Reference."
GENERAL
Regions is a bank holding company registered with the Federal Reserve under
the BHC Act. As such, Regions and its non-bank subsidiaries are subject to the
supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), 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 are located has "opted out." Accordingly,
Regions has the ability to and intends to consolidate all of its bank
subsidiaries into a single bank with interstate branches, and is engaged in a
consolidation program to that end.
The BHC Act generally prohibits Regions from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as
68
<PAGE> 70
undue concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices.
Each of Etowah Bank and the subsidiary depository institutions of Regions
is a member of 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 Etowah Bank
and the subsidiary institutions of Regions (the FDIC and the applicable state
authority in the case of state-chartered nonmember banks and the OTS in the case
of federally chartered thrift institutions) regularly examine the operations of
such institutions and have authority to approve or disapprove mergers,
consolidations, the establishment of branches, and similar corporate actions.
The federal and state banking regulators also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law.
PAYMENT OF DIVIDENDS
Regions is a legal entity separate and distinct from its banking, thrift,
and other subsidiaries. The principal sources of cash flow of Regions, including
cash flow to pay dividends to its stockholders, are dividends from its
subsidiary depository institutions. There are statutory and regulatory
limitations on the payment of dividends by these subsidiary depository
institutions to Regions, as well as by Regions and Etowah Bank to their
stockholders.
As to the payment of dividends, Etowah Bank and all of Regions'
state-chartered banking subsidiaries are subject to the respective laws and
regulations of the state in which the bank is located, and to the regulations of
the bank's primary federal regulator. Regions' thrift subsidiary is subject to
the OTS' capital distributions regulation.
If, in the opinion of the federal banking regulatory agency, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under 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 March 31, 1998, under dividend restrictions imposed under federal and
state laws, the subsidiary depository institutions of Regions, without obtaining
governmental approvals, could declare aggregate dividends to Regions of
approximately $172 million.
The payment of dividends by Regions and its subsidiary depository
institutions may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
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<PAGE> 71
CAPITAL ADEQUACY
Regions and its subsidiary depository institutions and Etowah Bank are
required to comply with the capital adequacy standards established by the
Federal Reserve in the case of Regions and the appropriate federal banking
regulator in the case of Etowah Bank and Regions' subsidiary depository
institutions. There are two basic measures of capital adequacy for bank holding
companies that have been promulgated by the Federal Reserve: a risk-based
measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The 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 March 31,
1998, Regions' consolidated Total Capital Ratio and its Tier 1 Capital Ratio
(i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 12.98% and
10.63%, respectively, and Etowah Bank's Total Capital Ratio and its Tier 1
Capital Ratios were 10.62% and 9.47%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3.0% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain 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 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' and Etowah Banks Leverage Ratios at
March 31, 1998 were 7.62% and 6.87%, respectively.
Each of Etowah Bank and Regions' subsidiary depository institutions is
subject to risk-based and leverage capital requirements adopted by its federal
banking regulator, which are substantially similar to those adopted by the
Federal Reserve. Each of the subsidiary depository institutions was in
compliance with applicable minimum capital requirements as of March 31, 1998.
None of Regions, Etowah Bank, nor any of Regions' subsidiary depository
institutions has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "--Prompt Corrective Action."
The Federal Reserve, the OCC, and the FDIC also have recently adopted final
regulations requiring regulators to consider interest rate risk (the risk
created 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
70
<PAGE> 72
bank's capital adequacy. The bank regulatory agencies' methodology for
evaluating interest rate risk requires banks with excessive interest rate risk
exposure to hold additional amounts of capital against such exposures. The OTS
also includes an interest-rate risk component in its risk-based capital
guidelines for savings associations that it regulates.
PROMPT CORRECTIVE ACTION
Current federal law establishes a system of prompt corrective action to
resolve the problems of undercapitalized institutions. Under this system the
federal banking regulators have established five capital categories ("well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized") and must take certain
mandatory supervisory actions, and are authorized to take other discretionary
actions, with respect to institutions in the three undercapitalized categories,
the severity of which will depend upon the capital category in which the
institution is placed. Generally, subject to a narrow exception, current federal
law requires the banking regulator to appoint a receiver or conservator for an
institution that is critically undercapitalized.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or greater,
a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be "well capitalized." An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be "adequately
capitalized." A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be "undercapitalized." A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be "significantly
undercapitalized," and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards plus the amount of outstanding cumulative perpetual
preferred stock (including related surplus), minus all intangible assets with
certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meet its capital restoration plan, subject to certain limitations. The
obligation of a controlling bank holding company to fund a capital restoration
plan is limited to the lesser of 5.0% of an undercapitalized subsidiary's assets
or the amount required to meet regulatory capital requirements. An
undercapitalized institution is also generally prohibited from increasing its
average total assets, making acquisitions, establishing any branches, or
engaging in any new line of business, except in accordance with an accepted
capital restoration plan or with the approval of the FDIC. In addition, the
appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of the law.
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<PAGE> 73
At March 31, 1998, Etowah Bank and all of the subsidiary depository
institutions of Regions 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.
In 1996, the FDIC imposed a special one-time assessment of approximately
65.7 basis points (0.657%) on a depository institution's assessable deposits
insured by the Savings Association Insurance Fund ("SAIF") held as of March 31,
1995 (or approximately 52.6 basis points on SAIF deposits acquired by banks in
certain qualifying transactions), and adopted revisions to the assessment rate
schedules that would generally eliminate the disparity between assessment rates
applicable to the deposits insured by the Bank Insurance Fund ("BIF") and the
SAIF. Regions anticipates that the net effect of the decrease in the premium
assessment rate on SAIF deposits will result in a reduction in its total deposit
insurance premium assessments through 1999 as compared to years prior to 1997,
assuming no further changes in announced premium assessment rates. Regions
recorded a charge against earnings for the special assessment in 1996 in the
pre-tax amounts of approximately $21.0 million.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
DESCRIPTION OF REGIONS COMMON STOCK
Regions is authorized to issue 240,000,000 shares of Regions Common Stock,
of which 149,797,609 shares were issued at March 31, 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. At Regions' annual
meeting of stockholders scheduled for July 29, 1998, Regions' stockholders will
vote on a proposal to approve an increase in the number of authorized shares of
Regions Common Stock from 240,000,000 shares to 500,000,000 shares.
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 March 31, 1998, under such
requirements and guidelines, Regions' subsidiary institutions had $172 million
of undivided profits legally available for the payment of dividends. See
"Certain Regulatory Considerations--Payment of Dividends."
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<PAGE> 74
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 of Regions at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
which is 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. The financial statements audited by Ernst & Young LLP have been
incorporated herein by reference in reliance on their report given on their
authority as experts in accounting and auditing.
The consolidated financial statements of Etowah Bank, included in this
Registration Statement, have been audited by Porter Keadle Moore, LLP,
independent auditors, for the periods indicated in their report thereon which is
included herein. The financial statements audited by Porter Keadle Moore, LLP
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.
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<PAGE> 75
INDEX TO ETOWAH BANK FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets as of December 31, 1997 and 1996............. F-3
Statements of Earnings for the Years Ended December 31,
1997, 1996, and 1995...................................... F-4
Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1997, 1996, and 1995................... F-5
Statements of Cash Flows for the Years Ended December 31,
1997, 1996, and 1995...................................... F-6
Notes to Financial Statements............................... F-7
Balance Sheets as of March 31, 1998 and 1997 (Unaudited).... F-20
Statements of Earnings for the Three Months Ended March 31,
1998 and 1997 (Unaudited)................................. F-21
Statements of Comprehensive Income for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)................. F-22
Statements of Cash Flows for the Three Months Ended March
31, 1998 and 1997 (Unaudited)............................. F-23
Statement of Changes in Stockholders' Equity for the Three
Months Ended March 31, 1998 and 1997 (Unaudited).......... F-24
Notes to Unaudited Interim Financial Statements............. F-25
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Etowah Bank
Canton, Georgia
We have audited the accompanying balance sheets of Etowah Bank as of
December 31, 1997 and 1996, and the related statements of earnings, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Bank'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 financial statements referred to above present fairly,
in all material respects, the financial position of Etowah Bank as of December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Porter Keadle Moore, LLP
Atlanta, Georgia
January 16, 1998, except for note 15 as to
which the date is February 26, 1998.
F-2
<PAGE> 77
ETOWAH BANK
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks, including reserve requirements of
$6,122,000 and $4,009,000................................. $ 24,550,030 $ 21,494,196
Federal funds sold.......................................... 21,600,000 22,740,000
------------ ------------
Cash and cash equivalents......................... 46,150,030 44,234,196
Investment securities held to maturity (market value of
$13,149,809 and $12,978,575).............................. 12,636,770 12,648,645
Investment securities available for sale.................... 91,255,018 75,768,383
Mortgage loans held for sale, at lower of aggregate cost or
market.................................................... 13,139,407 14,323,119
Loans, net.................................................. 238,149,116 207,571,662
Bank premises and equipment, net............................ 14,498,704 11,011,118
Intangible assets, net...................................... 1,773,245 1,993,181
Accrued interest receivable................................. 4,206,077 3,576,521
Other assets................................................ 10,312,970 3,300,275
------------ ------------
$432,121,337 $374,427,100
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.................................................... $ 47,602,395 $ 42,133,650
Interest-bearing demand................................... 93,222,312 75,448,676
Savings................................................... 18,207,869 17,915,619
Time...................................................... 182,293,906 157,632,644
Time, over $100,000....................................... 29,175,781 33,391,766
------------ ------------
Total deposits.................................... 370,502,263 326,522,355
Notes payable............................................... 28,313,117 21,697,182
Accrued interest payable.................................... 902,440 739,049
Other liabilities........................................... 3,715,673 405,610
------------ ------------
Total liabilities................................. 403,433,493 349,364,196
------------ ------------
Commitments
Stockholders' equity:
Common stock, $10 par value; 10,000,000 shares authorized;
905,600 and 900,000 shares issued and outstanding,
respectively........................................... 9,056,000 9,000,000
Additional paid in capital................................ 14,190,400 11,000,000
Retained earnings......................................... 5,514,573 5,436,192
Unrealized loss on investment securities available for
sale, net of tax....................................... (73,129) (373,288)
------------ ------------
Total stockholders' equity........................ 28,687,844 25,062,904
------------ ------------
$432,121,337 $374,427,100
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 78
ETOWAH BANK
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................ $26,059,174 $21,209,460 $19,358,738
Interest on deposits with other banks................. 9,790 3,853 21,768
Interest on federal funds sold........................ 881,852 913,653 599,544
Interest on investment securities:
U.S. Treasury...................................... -- 433 606,466
U.S. Government agency............................. 5,523,197 4,743,566 1,333,330
Mortgage-backed securities......................... 42,863 414,908 622,531
State, county and municipal........................ 682,807 692,175 754,055
Marketable equity securities....................... -- 28,843 139,448
----------- ----------- -----------
Total interest income......................... 33,199,683 28,006,891 23,435,880
----------- ----------- -----------
Interest expense:
Demand................................................ 2,107,247 1,821,384 1,693,987
Savings............................................... 535,794 507,182 487,397
Time.................................................. 8,993,497 7,575,374 5,722,741
Time, over $100,000................................... 2,709,606 2,107,160 1,508,913
Other................................................. 1,436,814 1,053,652 396,195
----------- ----------- -----------
Total interest expense........................ 15,782,958 13,064,752 9,809,233
----------- ----------- -----------
Net interest income........................... 17,416,725 14,942,139 13,626,647
Provision for loan losses............................... 797,000 865,000 470,000
----------- ----------- -----------
Net interest income after provision for loan
losses........................................ 16,619,725 14,077,139 13,156,647
----------- ----------- -----------
Other income:
Service charges -- deposits........................... 2,046,085 1,895,348 1,778,537
Other service charges and fees........................ 1,493,933 1,428,830 1,060,080
Securities gains (losses)............................. 39,818 (262,400) 27,710
Miscellaneous......................................... 434,732 297,506 138,086
----------- ----------- -----------
Total other income............................ 4,014,568 3,359,284 3,004,413
----------- ----------- -----------
Other expenses:
Salaries and employee benefits........................ 7,214,153 5,754,122 4,929,738
Occupancy............................................. 2,536,082 2,033,296 1,829,952
Other operating....................................... 3,360,077 3,014,359 2,775,133
----------- ----------- -----------
Total other expenses.......................... 13,110,312 10,801,777 9,534,823
----------- ----------- -----------
Earnings before income taxes..................... 7,523,981 6,634,646 6,626,237
Income taxes............................................ 2,408,000 2,129,300 2,126,000
----------- ----------- -----------
Net earnings.................................. $ 5,115,981 4,505,346 4,500,237
=========== =========== ===========
Net earnings per share.................................. $ 5.65 $ 5.01 $ 5.00
=========== =========== ===========
Weighted average number of shares outstanding........... 904,666 900,000 900,000
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 79
ETOWAH BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON INVESTMENT
SECURITIES
ADDITIONAL AVAILABLE
COMMON PAID-IN RETAINED FOR SALE,
STOCK CAPITAL EARNINGS NET OF TAX TOTAL
---------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994....... $6,000,000 $ 6,000,000 $ 8,120,609 $(774,438) $19,346,171
Net earnings..................... -- -- 4,500,237 -- 4,500,237
Change in net unrealized gain
(loss) on investment securities
available for sale............. -- -- -- 805,243 805,243
Transfers........................ -- 3,000,000 (3,000,000) -- --
Stock dividend declared.......... 3,000,000 -- (3,000,000) -- --
Cash dividends declared ($1.85
per share)..................... -- -- (1,665,000) -- (1,665,000)
---------- ----------- ----------- --------- -----------
Balance, December 31, 1995....... 9,000,000 9,000,000 4,955,846 30,805 22,986,651
Net earnings..................... -- -- 4,505,346 -- 4,505,346
Change in net unrealized gain
(loss) on investment securities
available for sale............. -- -- -- (404,093) (404,093)
Transfers........................ -- 2,000,000 (2,000,000) -- --
Cash dividends declared ($2.25
per share)..................... -- -- (2,025,000) -- (2,025,000)
---------- ----------- ----------- --------- -----------
Balance, December 31, 1996....... 9,000,000 11,000,000 5,436,192 (373,288) 25,062,904
Net earnings..................... -- -- 5,115,981 -- 5,115,981
Issuance of 5,600 shares......... 56,000 190,400 -- -- 246,400
Change in net unrealized gain
(loss) on investment securities
available for sale............. -- -- -- 300,159 300,159
Transfers........................ -- 3,000,000 (3,000,000) -- --
Cash dividends declared ($2.25
per share)..................... -- -- (2,037,600) -- (2,037,600)
---------- ----------- ----------- --------- -----------
Balance, December 31, 1997....... $9,056,000 $14,190,400 $ 5,514,573 $ (73,129) $28,687,844
========== =========== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 80
ETOWAH BANK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 5,115,981 $ 4,505,346 $ 4,500,237
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:
Depreciation, amortization and accretion................ 1,216,621 1,049,854 1,178,938
Provision for loan losses............................... 797,000 865,000 470,000
Provision for deferred taxes............................ (208,377) 87,791 (166,000)
Loss (gain) on sales of investment securities........... (39,818) 262,400 (27,710)
Loss (gain) on sales of other real estate............... (68,468) (2,074) 15,626
Writedown of other real estate.......................... 46,078 48,985 11,199
Gain on disposal of bank premises and equipment......... (6,290) (706) (1,657)
Change in:
Interest receivable................................... (633,806) (744,717) (394,966)
Interest payable...................................... 163,390 25,541 200,354
Cash surrender value of life insurance................ (19,638) -- --
Other assets.......................................... (1,657,972) (1,519,951) (473,607)
Accrued expenses and other liabilities................ 3,318,333 56,833 137,527
Mortgage loans held for sale.......................... 1,183,712 (6,620,904) (3,899,974)
------------ ------------ ------------
Net cash provided (used) by operating activities.... 9,206,746 (1,986,602) 1,549,967
------------ ------------ ------------
Cash flows from investing activities:
Net change in interest-bearing deposits with other
banks................................................... -- -- 195,000
Purchases of investment securities held to maturity....... -- (298,692) (882,792)
Purchases of investment securities available for sale..... (44,787,908) (29,989,073) (41,876,313)
Proceeds from maturities of investment securities held to
maturity................................................ -- 180,000 1,846,991
Proceeds from maturities of investment securities
available for sale...................................... 24,631,927 10,403,458 24,306,117
Proceeds from sales of investment securities available for
sale.................................................... 5,309,624 2,741,527 4,196,958
Net change in loans....................................... (32,881,575) (42,744,850) (9,391,468)
Proceeds from sales of bank premises and equipment........ 13,590 51,664 46,240
Purchases of bank premises and equipment.................. (4,579,890) (5,552,239) (804,796)
Purchase of cash value life insurance policies............ (5,100,000) -- --
Proceeds from sales of other real estate.................. 1,388,681 -- 352,957
Improvements to other real estate......................... (90,004) -- --
------------ ------------ ------------
Net cash used by investing activities............... (56,095,555) (65,208,205) (22,011,106)
------------ ------------ ------------
Cash flows from financing activities:
Net change in demand and savings deposits................. 23,534,631 3,938,711 12,243,241
Net change in time deposits............................... 20,445,277 55,118,276 20,045,783
Net change in notes payable............................... 6,615,935 19,707,818 773,897
Dividends paid............................................ (2,037,600) (2,025,000) (1,665,000)
Proceeds from issuance of common stock.................... 246,400 -- --
------------ ------------ ------------
Net cash provided by financing activities........... 48,804,643 76,739,805 29,850,127
------------ ------------ ------------
Net change in cash and cash equivalents..................... 1,915,834 9,544,998 9,388,988
Cash and cash equivalents at beginning of year.............. 44,234,196 34,689,198 25,300,210
------------ ------------ ------------
Cash and cash equivalents at end of year.................... $ 46,150,030 $ 44,234,196 $ 34,689,198
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 15,619,566 13,039,211 9,608,879
Income taxes............................................ 2,371,000 2,363,000 2,264,000
Noncash investing and financing activities:
Securities transferred, at amortized cost, from held to
maturity to available for sale.......................... -- -- 4,872,417
Change in unrealized loss on investment securities
available for sale, net of tax.......................... 300,159 (404,093) 805,243
Transfer of loans to other real estate.................... 2,039,326 -- 644,273
Financed sales of other real estate....................... 532,205 24,573 739,795
</TABLE>
See accompanying notes to financial statements.
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE> 81
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are presented in accordance with generally
accepted accounting principles and conform to general practices within the
banking industry. The following is a summary of the more significant policies.
The Bank commenced business in 1927 upon receipt of its banking charter
from the Georgia Department of Banking and Finance (the DBF). The Bank is
primarily regulated by the DBF and the Federal Deposit Insurance Corporation and
undergoes periodic examinations by these regulatory agencies. The Bank provides
a full range of commercial and consumer banking services throughout Cherokee,
Cobb, Douglas, Fulton and Paulding Counties in Georgia.
The accounting principles followed by the Bank, and the methods of applying
these principles, conform with generally accepted accounting principles (GAAP)
and with general practices in the banking industry. In preparing the financial
statements in conformity with GAAP, management is required to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ significantly from these estimates. Material estimates
common to the banking industry that are particularly susceptible to significant
change in the near term include, but are not limited to, the determination of
the allowance for loan losses, the valuation of real estate acquired in
connection with or in lieu of foreclosure on loans, and valuation allowances
associated with the realization of deferred tax assets which are based on future
taxable income.
Investment Securities
The Bank classifies its securities in one of three categories: trading,
available for sale, or held to maturity. Trading securities are bought and held
principally for the purpose of selling them in the near term. Held to maturity
securities are those securities for which the Bank has the ability and intent to
hold the securities until maturity. All other securities not included in trading
or held to maturity are classified as available for sale. At December 31, 1997
and 1996, the Bank has no trading securities.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at cost, adjusted for the amortization or accretion of
premiums or discounts. Unrealized holding gains and losses, net of the related
tax effect, on securities available for sale are excluded from earnings and are
reported as a separate component of stockholders' equity until realized.
Transfers of securities between categories are recorded at fair value at the
date of transfer. Unrealized holding gains or losses associated with transfers
of securities from held to maturity to available for sale are recorded as a
separate component of stockholders' equity. The unrealized holding gains or
losses included in the separate component of stockholders' equity for securities
transferred from available for sale to held to maturity are maintained and
amortized into earnings over the remaining life of the security as an adjustment
to yield in a manner consistent with the amortization or accretion of premium or
discount on the associated security.
A decline in the market value of any available for sale or held to maturity
investment below cost that is deemed other than temporary is charged to earnings
and establishes a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses for
securities classified as available for sale and held to maturity are included in
earnings and are derived using the specific identification method for
determining the cost of securities sold.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value. At December 31, 1997 and 1996, the cost of mortgage loans held for
sale approximates the market value.
F-7
<PAGE> 82
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Loans and Allowance for Loan Losses
Loans are stated at the principal amount outstanding, net of unearned
interest and the allowance for loan losses. Interest income on loans is
primarily calculated by using the simple interest method on daily balances of
the principal amount outstanding.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that collection of interest is
doubtful.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance represents an amount which, in management's judgement,
will be adequate to absorb probable losses on existing loans that may become
uncollectible.
Management's judgement in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrower's ability to
pay, overall portfolio quality, and review of specific problem loans.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgements of information available to them at the time
of their examination.
A loan is impaired when, based on current information and events, it is
probable that all amounts due according to the contractual terms of the loan
agreement will not be collected. Impaired loans are measured based on the
present value of expected future cash flows, discounted at the loan's effective
interest rate, or at the loan's observable market price, or at the fair value of
the collateral of the loan if the loan is collateral dependent.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed primarily by the straight-line method over the
estimated useful lives of the assets. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is reflected in income for the period.
The cost of maintenance and repairs is charged to expense as incurred, whereas
significant renewals and improvements are capitalized.
Intangible Assets
Intangible assets include deposit assumption premiums from the purchase of
certain assets and liabilities of several financial institutions prior to 1993.
The deposit assumption premiums are being amortized over fourteen (14) years,
the estimated average life of the deposit base acquired, using the straight line
method.
Other Real Estate
Properties acquired through foreclosure are carried at the lower of cost
(defined as fair value at foreclosure) or fair value less estimated costs to
dispose. Accounting standards define fair value as the amount that is expected
to be received in a current sale between a willing buyer and seller other than
in a forced or liquidation sale. Fair values at foreclosure are based on
appraisals. Losses arising from the acquisition of
F-8
<PAGE> 83
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
foreclosed properties are charged against the allowance for loan losses.
Subsequent writedowns are provided by a charge to income through the allowance
for losses on other real estate in the period in which the need arises.
Income Taxes
Deferred tax assets and liabilities are recorded for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized to the extent that realization of such
benefits is more likely than not. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which the assets and liabilities are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income tax expense in the period that includes the
enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Bank's assets and liabilities
result in deferred tax assets, an evaluation of the probability of being able to
realize the future benefits indicated by such an asset is required. A valuation
allowance is provided for the portion of the deferred tax asset when it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. In assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities, projected future
taxable income, and tax planning strategies.
Net Earnings Per Share
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share" became effective for the Bank for the year ended December 31, 1997. This
new standard specifies the computation, presentation and disclosure requirements
for earnings per share and is designed to simplify previous earnings per share
standards and to make domestic and international practices more compatible.
Earnings per common share are based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per share.
All earnings per common share amounts have been restated to conform to the
provisions of SFAS No. 128. Net earnings per share is calculated as net earnings
divided by average number of shares outstanding.
(2) INVESTMENT SECURITIES
Investment securities at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
State, county and municipals............. $12,636,770 $515,916 $ (2,877) $13,149,809
=========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
State, county and municipals............. $12,648,645 $372,671 $(42,741) $12,978,575
=========== ======== ======== ===========
</TABLE>
F-9
<PAGE> 84
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Government agencies................ $91,256,755 $ 76,504 $(205,008) $91,128,251
State, county and municipals............ 120,144 6,623 -- 126,767
----------- -------- --------- -----------
$91,376,899 $ 83,127 $(205,008) $91,255,018
=========== ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Government agencies................ $70,868,325 $ 32,781 $(732,808) $70,168,298
Mortgage-backed securities.............. 5,402,012 80,052 (8,370) 5,473,694
State, county and municipals............ 120,193 6,198 -- 126,391
----------- -------- --------- -----------
$76,390,530 $119,031 $(741,178) $75,768,383
=========== ======== ========= ===========
</TABLE>
The amortized cost and fair value of investment securities at December 31,
1997, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES HELD SECURITIES AVAILABLE
TO MATURITY FOR SALE
DECEMBER 31, 1997 DECEMBER 31, 1997
------------------------- -------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government agencies:
Within 1 year............................. $ -- $ -- $14,886,043 $14,835,000
1 to 5 years.............................. -- -- 12,499,200 12,520,262
5 to 10 years............................. -- -- 38,979,736 39,018,739
More than 10 years........................ -- -- 24,891,776 24,754,250
----------- ----------- ----------- -----------
$ -- $ -- $91,256,755 $91,128,251
=========== =========== =========== ===========
State, county and municipals:
Within 1 year............................. $ 843,294 $ 843,897 $ -- $ --
1 to 5 years.............................. 1,804,393 1,837,891 120,144 126,767
5 to 10 years............................. 7,874,870 8,268,265 -- --
More than 10 years........................ 2,114,213 2,199,756 -- --
----------- ----------- ----------- -----------
$12,636,770 $13,149,809 $ 120,144 $ 126,767
=========== =========== =========== ===========
Total securities
Within 1 year............................. $ 843,294 $ 843,897 $14,886,043 $14,835,000
1 to 5 years.............................. 1,804,393 1,837,891 12,619,344 12,647,029
5 to 10 years............................. 7,874,870 8,268,265 38,979,736 39,018,739
More than 10 years........................ 2,114,213 2,199,756 24,891,776 24,754,250
----------- ----------- ----------- -----------
$12,636,770 $13,149,809 $91,376,899 $91,255,018
=========== =========== =========== ===========
</TABLE>
Proceeds from sales of securities available for sale during 1997, 1996 and
1995 were $5,309,624, $2,741,527 and $4,196,958, respectively. Gross gains of
$39,818, $3,588 and $27,710, respectively, were realized on those sales. Gross
losses of $265,988 were realized on the 1996 sales.
F-10
<PAGE> 85
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Securities with a carrying value of approximately $62,033,000 and
$53,317,000 at December 31, 1997 and 1996, respectively, were pledged to secure
public deposits or for other purposes.
(3) LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Commercial and industrial............................... $125,718,763 $ 91,351,065
Real estate -- construction............................. 53,402,329 54,055,358
Real estate -- mortgage................................. 38,707,986 31,102,541
Consumer and other...................................... 23,125,772 33,375,115
------------ ------------
Total loans................................... 240,954,850 209,884,079
Less: Unearned interest................................. 60,866 186,455
Allowance for loan losses......................... 2,744,868 2,125,962
------------ ------------
Total net loans............................... $238,149,116 $207,571,662
============ ============
</TABLE>
The Bank grants loans and extensions of credit to individuals and a variety
of firms and corporations located primarily in Cherokee, Cobb, Douglas, Fulton
and Paulding Counties in northern Georgia. Although the Bank has a diversified
loan portfolio, a substantial portion is collateralized by real estate and is
dependent upon the real estate market.
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year................... $2,125,962 $2,135,506 $1,763,647
Provisions charged to operating expenses....... 797,000 865,000 470,000
Loan charge-offs............................... (211,268) (909,968) (108,300)
Recoveries..................................... 33,174 35,424 10,159
---------- ---------- ----------
Balance at end of year......................... $2,744,868 $2,125,962 $2,135,506
========== ========== ==========
</TABLE>
(4) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land...................................................... $ 5,792,747 $ 3,765,247
Buildings and improvements................................ 7,250,673 6,213,691
Construction in progress.................................. 691,325 351,301
Furniture and equipment................................... 6,451,692 5,365,907
----------- -----------
20,186,437 15,696,146
Less accumulated depreciation............................. 5,687,733 4,685,028
----------- -----------
$14,498,704 $11,011,118
=========== ===========
</TABLE>
Depreciation expense was approximately $1,085,000, $812,000 and $750,000 in
1997, 1996 and 1995, respectively.
F-11
<PAGE> 86
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as
follows:
<TABLE>
<S> <C>
1998....................................................... $142,816,506
1999....................................................... 23,014,921
2000....................................................... 15,824,894
2001....................................................... 12,128,674
2002 and thereafter........................................ 17,684,692
------------
$211,469,687
============
</TABLE>
(6) FEDERAL HOME LOAN BANK TRANSACTIONS
The Bank entered into agreements with the Federal Home Loan Bank of Atlanta
(FHLB) whereby the FHLB agreed to provide the Bank credit facilities under
varying terms. Any amounts advanced by the FHLB are secured under a Blanket
Security Lien covered by all of the Bank's 1-4 family first mortgage loans.
The agreement allows the Bank to borrow up to $35,000,000 at interest rates
that vary depending on the borrowing period. This agreement renews annually,
expires on December 31, 1998, and is used to fund mortgage loans to the Bank's
customers over payment terms longer than those normally extended by the Bank.
The Bank has notes payable to the FHLB amounting to $28,313,117 and $21,697,182
at December 31, 1997 and 1996, respectively, most with quarterly level principal
payments, plus interest at rates that vary from 5.42% to 7.71% through 2007.
Maturities of the notes payable for future years are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 3,762,216
1999........................................................ 3,762,216
2000........................................................ 3,762,216
2001........................................................ 3,848,050
2002........................................................ 6,698,884
Thereafter.................................................. 6,479,535
-----------
$28,313,117
===========
</TABLE>
(7) COMMITMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheet. The contract amount of these instruments reflects the extent
of involvement the Bank has in particular classes of financial instruments.
The 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 and financial guarantees written is represented by the
contractual amount of these instruments. The same credit policies are used in
making commitments and conditional obligations as for on-balance-sheet
instruments.
In most cases collateral or other security is required to support financial
instruments with credit risk.
F-12
<PAGE> 87
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
APPROXIMATE
CONTRACT AMOUNT
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit.............................. $56,012,000 $38,290,000
Standby letters of credit and financial guarantees
written................................................ $ 73,000 $ 134,500
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank, upon extension of credit is based on management's
credit evaluation. The type of collateral held varies, but may include
unimproved and improved real estate, certificates of deposit, or personal
property.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to local businesses. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds real
estate, equipment and certificates of deposit as collateral supporting those
commitments for which collateral is deemed necessary. The amount collateralized
was 100% at December 31, 1997 and 1996.
(8) CAPITAL TRANSACTIONS
During 1997 and 1996 the Bank's Board of Directors authorized transfers of
$3,000,000 and $2,000,000, respectively, from retained earnings to additional
paid-in capital. This transfer was approved to increase the statutory capital
base as defined in the Georgia banking statutes.
On March 16, 1995, the Board of Directors authorized a 1 1/2-for-1 stock
split of the Bank's $10 par value common stock effected in the form of a 50%
stock dividend. As a result, 300,000 additional shares were issued and retained
earnings was reduced by $3,000,000.
(9) EMPLOYEE AND DIRECTOR BENEFIT PLANS
The Bank has a defined benefit pension plan covering substantially all its
employees. The benefits are based on years of service and the employee's
compensation during the last five years of employment. The Bank's funding policy
is to contribute annually the maximum amount that can be deducted for federal
income tax purposes. The plan is subject to the Employee Retirement Income
Security Act of 1974 (ERISA), and the Bank's 1997 and 1996 contribution exceeded
the minimum funding requirements of ERISA.
F-13
<PAGE> 88
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the pension plan's funded status and amounts
recognized in the Bank's financial statements at December 31, 1997 and 1996.
Plan assets are stated at fair value and consist of cash, certificates of
deposit and common equity trust funds.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accumulated benefit obligation including vested benefits of
$1,954,533 and $1,673,392................................. $2,059,873 $1,809,183
========== ==========
Projected benefit obligation for services rendered to
date...................................................... 2,849,113 2,513,532
Plan assets at fair value................................... 3,114,098 2,653,170
---------- ----------
Projected benefit obligation less than plan assets.......... 264,985 139,638
Unrecognized transition obligation.......................... (55,363) (61,876)
Prior service cost not yet recognized in net periodic
pension cost.............................................. (8,580) (9,264)
Unamortized net gain from past experience different from
that assumed and effects of changes in assumptions........ 98,257 135,359
---------- ----------
Prepaid pension cost included in other assets............... $ 299,299 $ 203,857
========== ==========
</TABLE>
Net pension cost for the years ended December 31, 1997, 1996 and 1995 is
comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned...................... $183,438 $ 155,321 $ 134,274
Interest cost on projected benefit obligation........ 199,763 176,627 146,123
Actual return on plan assets......................... (247,003) (217,120) (183,542)
Net amortization and deferral of actuarial gains and
losses............................................. (7,197) (7,197) (7,197)
-------- --------- ---------
$129,001 $ 107,631 $ 89,658
======== ========= =========
</TABLE>
The following assumptions were used in determining the actuarial present
value of the projected benefit obligations at December 31, 1997 and 1996.
<TABLE>
<S> <C>
Discount rate............................................... 8.00%
Rate of increase in future compensation levels.............. 5.50%
Expected long-term rate of return on assets................. 9.00%
</TABLE>
The Bank has a non-qualified executive retirement plan for employees whose
contribution by the Bank to the defined benefit plan was limited due to certain
ERISA rules. Contributions during 1997, 1996 and 1995 amounted to $68,067,
$58,532 and $38,293, respectively.
The Bank has a 401(k) profit sharing plan covering substantially all
employees subject to certain minimum age and service requirements. Contributions
to the plan are determined annually by the Board of Directors. The Bank
contributed $91,306, $79,489, and $73,286 in 1997, 1996 and 1995, respectively,
to the profit sharing plan.
In March 1997, the Bank initiated a postretirement benefit plan to provide
retirement benefits to certain executive officers and the Board of Directors and
to provide death benefits for their designated beneficiaries. Under the plan,
the Bank purchased split-dollar whole life insurance contracts on the lives of
those officers and each Director. Upon the death of the participants, the Bank
will be reimbursed for the costs associated with its liability to provide these
benefits. At December 31, 1997, the cash surrender value of the insurance
contracts was approximately $5,119,000. No net expenses were incurred during
1997.
F-14
<PAGE> 89
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES
The components of income tax expense for the years ended December 31, 1997,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current.......................................... $2,616,377 $2,041,509 $2,292,000
Deferred (reduction)............................. (208,377) 87,791 (166,000)
---------- ---------- ----------
$2,408,000 $2,129,300 $2,126,000
========== ========== ==========
</TABLE>
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings before
taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Pretax income at statutory rates................. $2,558,120 $2,255,780 $2,252,921
Add (deduct):
Tax-exempt interest income.................. (232,120) (238,851) (228,024)
State income taxes, net of federal tax
effect.................................... 71,940 34,394 171,600
Other....................................... 10,060 77,977 (70,497)
---------- ---------- ----------
$2,408,000 $2,129,300 $2,126,000
========== ========== ==========
</TABLE>
The following summarizes the sources and expected tax consequences of
future taxable deductions (income) which comprise the net deferred tax asset.
The deferred tax asset is included as a component of other liabilities at
December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Allowance for loan losses................................. $ 919,124 $ 620,205
Unrealized loss on investment securities available for
sale................................................... 48,752 248,859
Other..................................................... 65,168 57,926
--------- ---------
Total gross deferred income tax assets............ 1,033,044 926,990
--------- ---------
Deferred income tax liabilities:
Accumulated depreciation.................................. (88,172) (36,530)
Accreted discount on acquired loans....................... (799,430) (749,257)
Other..................................................... (14,563) (18,594)
--------- ---------
Total gross deferred income tax liabilities....... (902,165) (804,381)
--------- ---------
Net deferred income tax asset..................... $ 130,879 $ 122,609
--------- ---------
</TABLE>
(11) RELATED PARTY TRANSACTIONS
In the normal course of business, executive officers and directors of the
Bank, including certain business organizations and individuals associated with
them, maintain a variety of banking relationships with the Bank. Loans to
executive officers and directors are made on terms comparable to those available
to other Bank customers. The following table summarizes related party loan
activity during 1997:
<TABLE>
<S> <C>
Beginning balance........................................... $3,106,000
New loans................................................... 930,000
Repayments.................................................. (506,000)
----------
Ending balance.............................................. $3,530,000
==========
</TABLE>
F-15
<PAGE> 90
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(12) OTHER OPERATING EXPENSES
Components of other operating expenses which are greater than 1% of
interest income and other income are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Legal and professional fees........................ $278,019 $400,474 $107,184
Stationery and printing............................ 557,043 481,373 372,700
FDIC assessment.................................... 39,062 34,016 263,019
Telephone.......................................... 307,784 263,043 239,098
Amortization expense -- core deposits.............. $219,936 $219,936 $219,936
</TABLE>
(13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized on the face of the balance sheet, for which it is
practicable to estimate that value. The assumptions used in the estimation of
the fair value of the Bank's financial instruments are detailed below. Where
quoted prices are not available, fair values are based on estimates using
discounted cash flows and other valuation techniques. The use of discounted cash
flows can be significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The following disclosures
should not be considered a surrogate of the liquidation value of the Bank, but
rather a good-faith estimate of the increase or decrease in value of financial
instruments held by the Bank since purchase, origination, or issuance.
Cash and Short-term Investments
For cash, due from banks, federal funds sold and interest-bearing deposits
with other banks, the carrying amount is a reasonable estimate of fair value.
Investment Securities
Fair values for investment securities are based on quoted market prices.
Loans and Mortgage Loans Held For Sale
The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. For variable rate loans, the carrying
amount is a reasonable estimate of fair value. Mortgage loans held for sale are
carried at cost which is a reasonable estimate of fair value.
Deposit Liabilities
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of fixed maturity certificates of deposit is estimated by discounting the
future cash flows using the rates currently offered for deposits of similar
remaining maturities.
Cash Surrender Value of Life Insurance
Cash values of life insurance policies are carried at the value for which
such policies may be redeemed for cash.
F-16
<PAGE> 91
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Commitments to Extend Credit and Standby Letters of Credit
Because commitments to extend credit and standby letters of credit are made
using variable rates, the contract value is a reasonable estimate of fair value.
Commitments to Originate First Mortgage Loans
For commitments to originate fixed-rate first mortgage loans, fair value
considers the terms of the agreements, the creditworthiness of the
counterparties and the difference between current levels of interest rates and
the committed rates. As the Bank's terms are for a short duration, the contract
value is a reasonable estimate of fair value.
Federal Home Loan Bank Advances
The fair value of advances from the Federal Home Loan Bank is estimated by
discounting the future cash flows using the current rates at which similar
advances would be obtained.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Bank's financial instruments, fair value estimates are based on many judgements.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgement and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates. Accordingly,
such information, which pertains to the Bank's financial instruments, is based
on the requirements set forth in SFAS No. 107 and does not purport to represent
the aggregate net fair value of the Bank.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include premises and equipment, other real
estate, deferred income taxes, the mortgage banking operation and intangible
assets. In addition, the tax ramifications related to the unrealized gains and
losses can have a significant effect on the fair value estimates and have not
been considered in the estimates.
F-17
<PAGE> 92
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount and estimated fair values of the Bank's financial
instruments at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------- ---------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Cash and short-term
investments................ $ 46,150,030 $ 46,150,030 $ 44,234,196 $ 44,234,196
Investment securities......... 104,013,669 104,404,827 88,417,028 88,746,958
Loans......................... 238,149,116 238,353,451 207,571,662 208,275,317
Mortgage loans held for
sale....................... 13,139,407 13,139,407 14,323,119 14,323,119
Cash surrender value of life
insurance.................. 5,119,638 5,119,638 -- --
Liabilities:
Deposits...................... 370,502,263 371,126,657 326,522,355 327,649,027
Advances from Federal Home
Loan Bank.................. 28,313,117 28,463,230 21,697,182 20,305,459
Unrecognized financial
instruments:
Commitments to extend
credit..................... 56,012,000 56,012,000 38,290,000 38,290,000
Standby letters to credit..... 20,000 20,000 134,500 134,500
</TABLE>
(14) REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
F-18
<PAGE> 93
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------- ------------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital (to Risk Weighted
Assets)..................... $29,733,000 10.10% $23,551,000 8.00% $29,438,000 10.00%
Tier I Capital (to Risk
Weighted Assets)............ 26,988,000 9.20% 11,734,000 4.00% 17,601,000 6.00%
Tier I Capital (to Average
Assets)..................... $26,988,000 7.10% $15,205,000 4.00% $19,006,000 5.00%
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets)..................... $25,569,000 10.20% $20,054,000 8.00% $25,068,000 10.00%
Tier I Capital (to Risk
Weighted Assets)............ 23,443,000 9.40% 9,976,000 4.00% 14,964,000 6.00%
Tier I Capital (to Average
Assets)..................... $23,443,000 7.30% $12,845,000 4.00% $16,057,000 5.00%
</TABLE>
(15) BUSINESS COMBINATION
On February 26, 1998, Etowah Bank entered into an Agreement and Plan of
Reorganization (Agreement) with Regions Financial Corporation (Regions) to be
effective upon the consent of various regulatory authorities and shareholder
approval. Among other items, the Agreement provides for the conversion of each
of the 911,000 common shares of Etowah Bank as of February 26, 1998 into 3.2
shares of Regions common stock. The transaction is expected to be consummated
during the second quarter of 1998.
F-19
<PAGE> 94
ETOWAH BANK
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 13,351,033 $ 14,390,845
Federal funds sold.......................................... 12,920,000 22,040,000
------------ ------------
Cash and cash equivalents......................... 26,271,033 36,430,845
Investment securities held to maturity...................... 12,049,007 12,641,548
Investment securities available for sale.................... 67,951,290 74,494,765
Mortgage loans held for sale, at lower of aggregate cost or
market.................................................... 19,342,227 13,200,688
Loans (net of allowance for loan losses of $2,851,048 and
$2,334,748, respectively)................................. 250,663,471 209,129,812
Bank premises and equipment, net............................ 13,828,610 10,740,425
Intangible assets, net...................................... 1,718,261 1,938,197
Other assets................................................ 14,994,182 13,724,571
------------ ------------
$406,818,081 $372,300,851
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.................................................... $ 45,702,140 $ 43,386,393
Interest-bearing demand................................... 71,467,132 66,794,169
Savings................................................... 18,709,037 18,035,058
Time...................................................... 168,419,334 162,951,123
Time, over $100,000....................................... 43,395,835 33,874,948
------------ ------------
Total deposits.................................... 347,693,478 325,041,691
Notes payable............................................... 26,623,613 20,132,679
Other liabilities........................................... 2,457,470 1,295,136
------------ ------------
Total liabilities................................. 376,774,561 346,469,506
------------ ------------
Commitments
Stockholders' equity:
Common stock, $10 par value; 10,000,000 shares authorized;
911,000 and 905,600 shares issued and outstanding,
respectively........................................... 9,110,000 9,056,000
Additional paid in capital................................ 17,425,300 11,190,400
Retained earnings......................................... 3,524,255 6,484,192
Unrealized loss on investment securities available for
sale, net of tax....................................... (16,035) (899,247)
------------ ------------
Total stockholders' equity........................ 30,043,520 25,831,345
------------ ------------
$406,818,081 $372,300,851
============ ============
</TABLE>
See accompanying notes to unaudited financial statements.
F-20
<PAGE> 95
ETOWAH BANK
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
Interest income:
Interest and fees on loans................................ $7,391,994 $6,102,739
Interest on federal funds sold............................ 88,240 368,257
Interest on investment securities:
Taxable................................................ 1,418,744 1,309,190
Non-taxable............................................ 164,425 170,701
Other..................................................... 43,443 38,120
---------- ----------
Total interest income............................. 9,106,846 7,989,007
---------- ----------
Interest expense:
Demand.................................................... 576,951 526,669
Savings................................................... 131,741 130,406
Time...................................................... 2,331,369 2,095,284
Time, over $100,000....................................... 716,762 695,476
Other..................................................... 420,806 304,140
---------- ----------
Total interest expense............................ 4,177,629 3,751,975
---------- ----------
Net interest income............................... 4,929,217 4,237,032
Provision for loan losses................................... 150,000 225,000
---------- ----------
Net interest income after provision for loan
losses.......................................... 4,779,217 4,012,032
---------- ----------
Other income:
Service charges -- deposits............................... 453,806 448,525
Securities gains.......................................... 234 39,818
Miscellaneous............................................. 224,646 203,754
---------- ----------
Total other income................................ 678,686 692,097
---------- ----------
Other expenses:
Salaries and employee benefits............................ 1,685,355 1,696,502
Occupancy................................................. 634,866 607,037
Other operating........................................... 747,360 836,590
---------- ----------
Total other expenses.............................. 3,067,581 3,140,129
---------- ----------
Earnings before income taxes...................... 2,390,322 1,564,000
Income taxes................................................ 792,000 516,000
---------- ----------
Net earnings...................................... $1,598,322 $1,048,000
========== ==========
Net earnings per share...................................... $ 1.76 $ 1.16
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
F-21
<PAGE> 96
ETOWAH BANK
STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net earnings................................................ $1,598,322 $1,048,000
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for
sale:
Holding gains (losses) arising during period, net of
tax of $34,993 and $322,361........................... 57,094 (525,959)
Reclassification adjustments for gains included in net
earnings, net of tax of $89 and $15,131............... (145) (24,687)
---------- ----------
Total other comprehensive income (loss)........... 56,949 (550,646)
---------- ----------
Comprehensive income.............................. $1,655,271 $ 497,354
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
F-22
<PAGE> 97
ETOWAH BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 1,598,322 $ 1,048,000
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:
Depreciation, amortization and accretion............... 207,092 277,102
Provision for loan losses.............................. 150,000 225,000
Loss (gain) on sales of investment securities.......... (234) (39,818)
Change in other........................................ (1,875,725) (902,850)
Mortgage loans held for sale........................... (6,202,820) 1,122,431
------------ -----------
Net cash provided (used) by operating
activities...................................... (6,123,365) 1,729,865
------------ -----------
Cash flows from investing activities:
Purchases of investment securities available for sale..... (28,980,625) (5,000,000)
Proceeds from maturities of investment securities held to
maturity............................................... 584,900 --
Proceeds from sales, calls and maturities of investment
securities available for sale.......................... 52,500,000 5,500,000
Net change in loans....................................... (12,664,355) (1,783,150)
Purchases of bank premises and equipment.................. (397,523) (351,301)
Purchase of cash value life insurance policies............ -- (5,100,000)
------------ -----------
Net cash provided (used) by investing
activities...................................... 11,042,397 (6,734,451)
------------ -----------
Cash flows from financing activities:
Net change in deposits.................................... (22,808,785) (1,480,662)
Net change in notes payable............................... (1,689,504) (1,564,503)
Dividends paid............................................ (588,640) --
Proceeds from issuance of common stock.................... 288,900 246,400
------------ -----------
Net cash provided (used) by financing
activities...................................... (24,798,029) (2,798,765)
------------ -----------
Net change in cash and cash equivalents..................... (19,878,997) (7,803,351)
Cash and cash equivalents at beginning of year.............. 46,150,030 44,234,196
------------ -----------
Cash and cash equivalents at end of year.................... $ 26,271,033 $36,430,845
============ ===========
</TABLE>
See accompanying notes to unaudited financial statements.
F-23
<PAGE> 98
ETOWAH BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON INVESTMENT
SECURITIES
ADDITIONAL AVAILABLE
COMMON PAID-IN RETAINED FOR SALE,
STOCK CAPITAL EARNINGS NET OF TAX TOTAL
---------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997.......... $9,000,000 $11,000,000 $5,436,192 $(373,288) $25,062,904
Net earnings...................... -- -- 1,048,000 -- 1,048,000
Issuance of 5,600 shares.......... 56,000 190,400 -- -- 246,000
Change in net unrealized gain
(loss) on investment securities
available for sale.............. -- -- -- (525,959) (525,959)
---------- ----------- ---------- --------- -----------
Balance, March 31, 1997........... $9,056,000 $11,190,400 $6,484,192 $(899,247) $25,831,345
========== =========== ========== ========= ===========
Balance, January 1, 1998.......... $9,056,000 $14,190,400 $5,514,573 $ (73,129) $28,687,844
Net earnings...................... -- -- 1,598,322 -- 1,598,322
Issuance of 5,400 shares.......... 54,000 234,900 -- -- 288,900
Change in net unrealized gain
(loss) on investment securities
available for sale.............. -- -- -- 57,094 57,094
Transfers......................... -- 3,000,000 (3,000,000) -- --
Cash dividends declared ($.65 per
share).......................... -- -- (588,640) -- (588,640)
---------- ----------- ---------- --------- -----------
Balance, March 31, 1998........... $9,110,000 $17,425,300 $3,524,255 $ (16,035) $30,043,520
========== =========== ========== ========= ===========
</TABLE>
See accompanying notes to unaudited financial statements.
F-24
<PAGE> 99
ETOWAH BANK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements included the accounts of Etowah Bank (the Bank).
The financial information furnished herein reflects all adjustments which
are, in the opinion of management, necessary to present a fair statement of the
results of operations and financial position for the periods covered herein. All
such adjustments are of a normal recurring nature.
(2) CASH AND CASH EQUIVALENTS
For presentation in the financial statements, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds sold.
(3) COMPREHENSIVE INCOME
In 1997, the Financial Accounting and Standards Board issued Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 established standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Bank has elected to present comprehensive income in a
separate statement of comprehensive income. Accumulated other comprehensive
income is solely related to the net of tax effect of unrealized gains on
securities available for sale.
F-25
<PAGE> 100
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
ETOWAH BANK
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF FEBRUARY 26, 1998
A-1
<PAGE> 101
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Parties................................................................ A-6
Preamble............................................................... A-6
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER.......................... A-6
Merger......................................................
1.1 A-6
Time and Place of Closing...................................
1.2 A-6
Effective Time..............................................
1.3 A-6
Execution of Support Agreements.............................
1.4 A-7
ARTICLE 2 -- TERMS OF MERGER........................................... A-7
Articles of Incorporation...................................
2.1 A-7
Bylaws......................................................
2.2 A-7
Directors and Officers......................................
2.3 A-7
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................... A-7
Conversion of Shares........................................
3.1 A-7
Anti-Dilution Provisions....................................
3.2 A-7
Shares Held by Etowah or Regions............................
3.3 A-8
Fractional Shares...........................................
3.4 A-8
Dissenting Stockholders.....................................
3.5 A-8
ARTICLE 4 -- EXCHANGE OF SHARES........................................ A-8
Exchange Procedures.........................................
4.1 A-8
Rights of Former Etowah Stockholders........................
4.2 A-9
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF ETOWAH.................. A-9
Organization, Standing, and Power...........................
5.1 A-9
Authority; No Breach by Agreement...........................
5.2 A-9
Capital Stock...............................................
5.3 A-10
Etowah Subsidiaries.........................................
5.4 A-10
Financial Statements........................................
5.5 A-11
Absence of Undisclosed Liabilities..........................
5.6 A-11
Absence of Certain Changes or Events........................
5.7 A-11
Tax Matters.................................................
5.8 A-11
Assets......................................................
5.9 A-12
Environmental...............................................
5.10 A-12
Compliance with Laws........................................
5.11 A-13
Labor Relations.............................................
5.12 A-13
Employee Benefit Plans......................................
5.13 A-14
Material Contracts..........................................
5.14 A-15
Legal Proceedings...........................................
5.15 A-15
Statements True and Correct.................................
5.16 A-16
Tax, Accounting, and Regulatory Matters.....................
5.17 A-16
Articles of Incorporation Provisions........................
5.18 A-16
Support Agreements..........................................
5.19 A-16
Derivatives Contracts.......................................
5.20 A-17
Year 2000...................................................
5.21 A-17
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS................. A-17
Organization, Standing, and Power...........................
6.1 A-17
Authority; No Breach by Agreement...........................
6.2 A-17
Capital Stock...............................................
6.3 A-18
</TABLE>
A-2
<PAGE> 102
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SEC Filings; Financial Statements...........................
6.4 A-18
Absence of Undisclosed Liabilities..........................
6.5 A-18
Absence of Certain Changes or Events........................
6.6 A-18
Compliance with Laws........................................
6.7 A-18
Legal Proceedings...........................................
6.8 A-19
Statements True and Correct.................................
6.9 A-19
Tax, Accounting, and Regulatory Matters.....................
6.10 A-19
Year 2000...................................................
6.11 A-20
Matters Relating to Regions Merger Subsidiary...............
6.12 A-20
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.................. A-20
Covenants of Both Parties...................................
7.1 A-20
Covenants of Etowah.........................................
7.2 A-20
Covenants of Regions........................................
7.3 A-22
Adverse Changes in Condition................................
7.4 A-22
Reports.....................................................
7.5 A-22
ARTICLE 8 -- ADDITIONAL AGREEMENTS..................................... A-22
Registration Statement; Proxy Statement; Stockholder
8.1 Approval.................................................... A-22
Nasdaq NMS Listing..........................................
8.2 A-23
Applications................................................
8.3 A-23
Agreement as to Efforts to Consummate.......................
8.4 A-23
Investigation and Confidentiality...........................
8.5 A-23
Press Releases..............................................
8.6 A-23
Certain Actions.............................................
8.7 A-23
Tax Matters.................................................
8.8 A-24
Agreements of Affiliates....................................
8.9 A-24
Employee Benefits and Contracts.............................
8.10 A-24
Indemnification.............................................
8.11 A-25
Articles of Incorporation Provisions........................
8.12 A-25
Regions Merger Subsidiary Organization......................
8.13 A-25
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE......... A-26
Conditions to Obligations of Each Party.....................
9.1 A-26
Conditions to Obligations of Regions........................
9.2 A-27
Conditions to Obligations of Etowah.........................
9.3 A-27
ARTICLE 10 -- TERMINATION.............................................. A-28
Termination.................................................
10.1 A-28
Effect of Termination.......................................
10.2 A-30
Non-Survival of Representations and Covenants...............
10.3 A-31
ARTICLE 11 -- MISCELLANEOUS............................................ A-31
Definitions.................................................
11.1 A-31
Expenses....................................................
11.2 A-35
Brokers and Finders.........................................
11.3 A-35
Entire Agreement............................................
11.4 A-36
Amendments..................................................
11.5 A-36
Waivers.....................................................
11.6 A-36
Assignment..................................................
11.7 A-36
Notices.....................................................
11.8 A-36
Governing Law...............................................
11.9 A-37
</TABLE>
A-3
<PAGE> 103
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Counterparts................................................
11.10 A-37
Captions....................................................
11.11 A-37
Severability................................................
11.12 A-37
SIGNATURES............................................................. A-37
</TABLE>
A-4
<PAGE> 104
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Support Agreement. (sec. 1.4).
2 -- Form of Plan of Merger. (sec. 1.1).
3 -- Form of agreement of affiliates of Etowah. (sec. 8.9).
4 -- Form of Claims Letter. (sec. 9.2).
5 -- Form of Opinion Letter of Etowah's Counsel. (sec. 9.2).
6 -- Form of Opinion Letter of Regions' Counsel. (sec. 9.3).
</TABLE>
A-5
<PAGE> 105
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of February 26, 1998, by and between ETOWAH BANK ("Etowah"), a
bank organized and existing under the laws of the State of Georgia, with its
principal office located in Canton, 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 Etowah and Regions are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective stockholders. This Agreement provides for the acquisition of Etowah
by Regions pursuant to the merger ("Merger") of a newly formed, wholly-owned
interim state bank subsidiary of Regions to be organized under the Laws of the
State of Georgia ("Regions Merger Subsidiary") with and into Etowah. Etowah
shall be the surviving bank of the merger. At the effective time of such merger,
the outstanding shares of the capital stock of Etowah shall be converted into
shares of the common stock of Regions (except as provided herein). As a result,
stockholders of Etowah shall become stockholders of Regions and Etowah shall
continue to conduct its business and operations as a wholly-owned subsidiary of
Regions. The transactions described in this Agreement are subject to the
approvals of the stockholders of Etowah, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Department of
Banking and Finance of the State of Georgia, and other applicable federal and
state regulatory authorities and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the merger (i) for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code and (ii) for accounting purposes shall be accounted for as a "pooling of
interests."
As a condition and inducement to Regions' willingness to consummate the
transactions contemplated by this Agreement, prior to the execution of this
Agreement, each of Etowah's directors will execute and deliver 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, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement and the
Plan of Merger, at the Effective Time, Regions Merger Subsidiary shall be merged
into and with Etowah in accordance with the provisions of Sections 7-1-531
through 7-1-537 of the FICG and with the effect provided in Section 7-1-536 of
the FICG. Etowah shall be the Surviving Bank of the Merger and shall continue to
be governed by the Laws of the State of Georgia. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the Boards of Directors of Etowah and Regions, and the Plan of Merger, in
substantially the form of Exhibit 2, which will be approved and adopted by the
Boards of Directors of Etowah and Regions Merger Subsidiary upon the
organization of Regions Merger Subsidiary.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their duly authorized officers, may mutually agree. The place of
Closing shall be at the offices of Regions, or such other place as may be
mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Georgia
Certificate of Merger reflecting the Merger shall become
A-6
<PAGE> 106
effective with the Secretary of State of the State of Georgia (the "Effective
Time"). Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by the duly authorized officers of each Party, the
Parties shall use their reasonable efforts to cause the Effective Time to occur
on the last business day of the month in which occurs the last to occur of (i)
the effective date (including expiration of any applicable waiting period) of
the last required Consent of any Regulatory Authority having authority over
approving or exempting the Merger, and (ii) the date on which the stockholders
of Etowah approve this Agreement and the Plan of Merger to the extent such
approval is required by applicable Law; or such later date within 30 days
thereof as may be specified by Regions.
1.4 EXECUTION OF SUPPORT AGREEMENTS. Immediately prior to the execution of
this Agreement by the Parties and as a condition hereto, each of the directors
of Etowah is executing and delivering to Regions a Support Agreement in
substantially the form of Exhibit 1 to this Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Etowah in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Bank after the Effective Time until otherwise
amended or repealed.
2.2 BYLAWS. The Bylaws of Etowah in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Bank after the Effective
Time until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Etowah 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 Bank from
and after the Effective Time in accordance with the Bylaws of the Surviving
Bank. The officers of Etowah 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 Bank from and after the Effective Time in
accordance with the Bylaws of the Surviving Bank.
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 the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Regions Merger Subsidiary Common Stock issued and
outstanding at the Effective Time shall be converted into and exchanged for
one share of Etowah Common Stock.
(c) Each share of Etowah Common Stock (excluding shares held by Etowah
or any of its Subsidiaries or by Regions or any of its Subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts
previously contracted) issued and outstanding at the Effective Time shall
be converted into 3.2 shares of Regions Common Stock, subject to adjustment
as provided in Section 10.1(g) of this Agreement (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event Etowah changes the number of
shares of Etowah Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock, the Exchange Ratio shall be proportionately adjusted. In
the event Regions changes the number of shares of Regions Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a
A-7
<PAGE> 107
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 SHARES HELD BY ETOWAH OR REGIONS. Each of the shares of Etowah Common
Stock held by any Etowah Company or by any Regions Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement or the Plan of Merger, each holder of shares of Etowah Common Stock
exchanged pursuant to the Merger, or of options to purchase shares of Etowah
Common Stock, who would otherwise have been entitled to receive a fraction of a
share of Regions Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Regions
Common Stock multiplied by the market value of one share of Regions Common Stock
at the Effective Time, in the case of shares exchanged pursuant to the Merger,
or the date of exercise, in the case of options. The market value of one share
of Regions Common Stock at the Effective Time or the date of exercise, as the
case may be, shall be the last sale price of such common stock on the Nasdaq NMS
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time, in
the case of shares exchanged pursuant to the Merger, and the date of exercise,
in the case of options. No such holder will be entitled to dividends, voting
rights, or any other rights as a stockholder in respect of any fractional
shares.
3.5 DISSENTING STOCKHOLDERS. Any holder of shares of Etowah Common Stock
who perfects such holder's dissenters' rights of appraisal in accordance with
and as contemplated by Section 7-1-537 of the FICG and Sections 14-2-1301 et
seq. of the GBCC or other applicable Law shall be entitled to receive the value
of such shares in cash as determined pursuant to such provision of Law;
provided, that no such payment shall be made to any dissenting stockholder
unless and until such dissenting stockholder has complied with the applicable
provisions of Section 7-1-537 of the FICG and Sections 14-2-1301 et seq. of the
GBCC or other applicable Law and surrendered to Etowah 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 Etowah 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 holders' shares of Etowah Common Stock is entitled
under this Article 3 (without interest) upon surrender by such holder of the
certificate or certificates representing shares of Etowah Common Stock held by
such holder.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions shall
cause the exchange agent selected by Regions (the "Exchange Agent") to mail to
the former stockholders of Etowah appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Etowah Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of Etowah Common Stock (other than shares
to be canceled pursuant to Section 3.3 of this Agreement or as to which
dissenters' rights have been perfected as provided in Section 3.5 of this
Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of Etowah
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 Etowah Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates
A-8
<PAGE> 108
representing the shares of Etowah Common Stock for exchange as provided in this
Section 4.1. The certificate or certificates of Etowah Common Stock so
surrendered shall be duly endorsed as the Exchange Agent may require. Any other
provision of this Agreement notwithstanding, neither Regions, Etowah, nor the
Exchange Agent shall be liable to a holder of Etowah 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 ETOWAH STOCKHOLDERS. At the Effective Time, the stock
transfer books of Etowah shall be closed as to holders of Etowah Common Stock
immediately prior to the Effective Time, and no transfer of Etowah 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 Etowah Common Stock (other
than shares to be canceled pursuant to Section 3.3 or 3.5 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1 and 3.4 of this
Agreement in exchange therefor. To the extent permitted by Law, former
stockholders of record of Etowah 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 Etowah Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing Etowah 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 Etowah 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 Etowah Common Stock certificate, both the Regions Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered cash payments to be paid for fractional
share interests (without interest) shall be delivered and paid with respect to
each share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ETOWAH
Etowah hereby represents and warrants to Regions as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Etowah is a state bank 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. Etowah 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 Etowah. Etowah is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund.
5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Etowah has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby, subject to the approval of this Agreement and
the Plan of Merger by the required vote of the outstanding shares of Etowah
Common Stock. The execution, delivery, and performance of this Agreement and the
Plan of Merger and the consummation of the transactions contemplated herein,
including the Merger, have been or will be duly and validly authorized by all
necessary corporate action in respect thereof on the part of Etowah, subject to
the approval of this Agreement by the required vote of the issued and
outstanding shares of Etowah Common Stock. Subject to such requisite stockholder
approval, this Agreement and the Plan of Merger represent legal, valid, and
binding obligations of Etowah, enforceable against Etowah in accordance with
their respective terms (except in all cases as such
A-9
<PAGE> 109
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 and the Plan of
Merger by Etowah, nor the consummation by Etowah of the transactions
contemplated hereby or thereby, nor compliance by Etowah with any of the
provisions hereof or thereof, will (i) subject to the amendment of the Bylaws,
conflict with or result in a breach of any provision of Etowah'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 Etowah Company under, any Contract or Permit of any Etowah Company,
where such Default or Lien is reasonably likely to have individually or in the
Aggregate a Material Adverse Effect on Etowah, or (iii) subject to receipt of
the requisite approvals referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any Etowah Company or any of their Material
Assets where such violation would have, individually or in the Aggregate, a
Material Adverse Effect on Etowah.
(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 Etowah, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
Etowah of the Merger and the other transactions contemplated in this Agreement
and the Plan of Merger.
5.3 CAPITAL STOCK. (a) The authorized capital stock of Etowah consists of
10,000,000 shares of Etowah Common Stock, of which 911,000 shares are issued and
outstanding as of the date of this Agreement and not more than 911,000 shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of Etowah Common Stock are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of Etowah Common Stock has been issued in violation of any preemptive rights of
the current or past stockholders of Etowah.
(b) Except as set forth in Section 5.3(a) of this Agreement and the Plan of
Merger, there are no shares of capital stock or other equity securities of
Etowah outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of Etowah or contracts, commitments, understandings, or arrangements by
which Etowah is or may be bound to issue additional shares of Etowah capital
stock or options, warrants, or rights to purchase or acquire any additional
shares of its capital stock.
5.4 ETOWAH SUBSIDIARIES. Etowah has disclosed in Section 5.4 of the Etowah
Disclosure Memorandum all of the Etowah Subsidiaries as of the date of this
Agreement. Etowah or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each Etowah Subsidiary. No equity
securities of any Etowah Subsidiary are or may become required to be issued
(other than to a Etowah Company) by reason of any options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of any such Subsidiary, and there are no Contracts
by which any Etowah Subsidiary is bound to issue (other than to an Etowah
Company) additional shares of its capital stock or options, warrants, or rights
to purchase or acquire any additional shares of its capital stock or by which
any Etowah Company is or may be bound to transfer any shares of the capital
stock of any Etowah Subsidiary (other than to an Etowah Company). There are no
Contracts relating to the rights of any Etowah Company to vote or to dispose of
any shares of the capital stock of any Etowah Subsidiary. All of the shares of
capital stock of each Etowah Subsidiary held by an Etowah Company are duly
authorized, validly issued, and fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Etowah Company free and clear of
any Lien. Each Etowah Subsidiary is either a bank, a savings association or a
corporation, and is duly organized, validly existing, and in good standing under
the Laws of the
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jurisdiction in which it is chartered or incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and operate its
Assets and to carry on its business as now conducted. Each Etowah 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 Etowah.
5.5 FINANCIAL STATEMENTS. Etowah has disclosed in Section 5.5 of the
Etowah Disclosure Memorandum, and has delivered to Regions copies of, all Etowah
Financial Statements prepared for periods ended prior to the date hereof and
will deliver to Regions copies of all Etowah Financial Statements prepared
subsequent to the date hereof. The Etowah 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
Etowah Companies, which are or will be, as the case may be, complete and correct
and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (ii) present or will present, as
the case may be, fairly the consolidated financial position of the Etowah
Companies as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows of the Etowah 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 Etowah Company has any Material
Liabilities that are reasonably likely to have, individually or in the aggregate
a Material Adverse Effect on Etowah, except Liabilities which are accrued or
reserved against in the consolidated balance sheet of Etowah as of September 30,
1997 included in the Etowah Financial Statements or reflected in the notes
thereto. No Etowah Company has incurred or paid any Liability since September
30, 1997, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate a Material Adverse Effect on
Etowah.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997, except
as disclosed in the Etowah Financial Statements delivered prior to the date of
this Agreement, to the Knowledge of Etowah, (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 Etowah, and (ii)
the Etowah Companies have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after the
date of this Agreement, would represent or result in a Material breach or
violation of any of the covenants and agreements of Etowah provided in Article
Seven of this Agreement.
5.8 TAX MATTERS. (a) All Tax returns required to be filed by or on behalf
of any of the Etowah Companies have been timely filed, or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1996, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file or untimely filings, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect on
Etowah, and all returns filed are complete and accurate in all Material respects
to the Knowledge of Etowah. All Taxes shown on filed returns have been paid.
There is no audit examination, deficiency, refund Litigation or penalties due or
owed 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 Etowah, except to the extent reserved against in the Etowah
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 Etowah 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.
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(c) To the Knowledge of Etowah, adequate provision for any Taxes due or to
become due for any of the Etowah Companies for the period or periods through and
including the date of the respective Etowah Financial Statements has been made
and is reflected on such Etowah Financial Statements.
(d) Each of the Etowah 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 Etowah.
(e) None of the Etowah Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Liens with respect to Taxes due and payable upon any of
the assets of the Etowah Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Etowah Companies that occurred during or after any
taxable period in which the Etowah Companies incurred a net operating loss that
carries over to any taxable period ending after December 31, 1996.
(h) No Etowah Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) All Material elections with respect to Taxes affecting the Etowah
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.8 of the Etowah Disclosure Memorandum. After the date
hereof, no election with respect to Taxes will be made without the prior written
consent of Regions, which consent will not be unreasonably withheld.
(j) No Etowah Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
5.9 ASSETS. Except as disclosed or reserved against in the Etowah
Financial Statements made available prior to the date of this Agreement, the
Etowah Companies have good and marketable title, free and clear of all Liens, to
all of their respective Assets that are material to the business of the Etowah
Companies. All Material tangible properties used in the businesses of the Etowah
Companies are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Etowah's past
practices. All Assets which are material to the business of the Etowah
Companies, which are held under leases or subleases by any of the Etowah
Companies, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
5.10 ENVIRONMENTAL. (a) To the Knowledge of Etowah, each Etowah Company,
its Participation Facilities, and its Loan Properties are, and have been, in
compliance with all Environmental Laws, except for instances of non-compliance
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Etowah.
(b) There is no Litigation pending or, to the Knowledge of Etowah,
threatened before any court, governmental agency, or authority, or other forum
in which any Etowah Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material (as defined below) or oil, whether or not
occurring at, on, under, or involving a site owned, leased, or operated by any
Etowah Company
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or any of its Participation Facilities, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Etowah.
(c) There is no Litigation pending or, to the Knowledge of Etowah,
threatened before any court, governmental agency, or board, or other forum in
which any of its Loan Properties (or Etowah in respect of such Loan Property)
has been or, with respect to threatened Litigation, may be named as a defendant
or potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring at, on,
under, or involving a Loan Property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Etowah.
(d) To the Knowledge of Etowah, 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 Etowah.
(e) To the Knowledge of Etowah, during the period of (i) any Etowah
Company's ownership or operation of any of their respective current properties,
(ii) any Etowah Company's participation in the management of any Participation
Facility, or, (iii) any Etowah Company's holding of a security interest in a
Loan Property, there have been no releases of Hazardous Material or oil in, on,
under, or affecting (or potentially affecting) such properties, except such as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Etowah. Prior to the period of (i) any Etowah Company's
ownership or operation of any of their respective current properties, (ii) any
Etowah Company's participation in the management of any Participation Facility,
or (iii) any Etowah Company's holding of a security interest in a Loan Property,
there were no releases of Hazardous Material or oil in, on, under, or affecting
any such property, Participation Facility, or Loan Property, except such as are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Etowah.
5.11 COMPLIANCE WITH LAWS. Each Etowah 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 Etowah, 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 Etowah. Except as disclosed in
Section 5.11 of the Etowah Disclosure Memorandum, none of the Etowah Companies:
(a) is in violation of any Material Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Etowah; and
(b) has received any written 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 Etowah
Company is not in compliance with any of the Material Laws or Material
Orders which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Etowah; (ii) threatening to
revoke any Material Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Etowah; or (iii) requiring any Etowah 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 Material manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of
dividends.
5.12 LABOR RELATIONS. No Etowah Company is the subject of any Litigation
asserting that it or any other Etowah 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 Etowah Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Etowah Company a party to or
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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 Etowah Company, pending or threatened, or
to its Knowledge, is there any activity involving any Etowah Company's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.13 EMPLOYEE BENEFIT PLANS. (a) Etowah has disclosed in Section 5.13 of
the Etowah Disclosure Memorandum, and has delivered or made available to Regions
prior to the execution of this Agreement copies in each case of, all written
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 written health plans, all life insurance plans, and all other
written employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any Etowah Company for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Etowah Benefit Plans"). Any of the Etowah 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 "Etowah ERISA Plan." Any Etowah 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
"Etowah Pension Plan." On or after September 26, 1980, neither Etowah nor any
Etowah Company has had an "obligation to contribute" (as defined in ERISA
Section 4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3)
and 3(37)(A)). The only "employee pension benefit plan," as defined in Section
3(2) of ERISA, ever maintained by any Etowah Company that was intended to
qualify under Section 401(a) of the Internal Revenue Code, are the Etowah, Inc.
Employee Savings and Stock Ownership Plan and the Etowah, Inc. Pension Plan.
(b) Etowah 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
Etowah Benefit Plans (including insurance contracts), and all amendments
thereto, (ii) with respect to any such Etowah Benefit Plans or amendments, all
determination letters, rulings, opinion letters, information letters, or
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after December
31, 1991, (iii) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any Etowah Benefit Plan with respect to the most recent three plan
years, and (iv) the most recent summary plan descriptions and any Material
modifications thereto.
(c) All Etowah Benefit Plans are in compliance in all Material respects
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 Etowah. Each
Etowah 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 Etowah is not aware of any circumstances which
will or could result in revocation of any such favorable determination letter.
Each trust created under any Etowah ERISA Plan has been determined to be exempt
from Tax under Section 501(a) of the Internal Revenue Code and Etowah is not
aware of any circumstance which will or could result in revocation of such
exemption. With respect to each Etowah Benefit Plan to the Knowledge of Etowah,
no event has occurred which will or could give rise to a loss of any intended
Tax consequences under the Internal Revenue Code or to any Tax under Section 511
of the Internal Revenue Code. There is no Material pending or, to the Knowledge
of Etowah, threatened Litigation relating to any Etowah ERISA Plan. No Etowah
Company has engaged in a transaction with respect to any Etowah Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any Etowah Company to a Material tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA,
that individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on Etowah.
(d) No Etowah 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
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"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan terminated
in accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no Material change in the
financial position of any Etowah Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Etowah Pension Plan, and (iii) no increase in
benefits under any Etowah Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Etowah or materially adversely affect
the funding status of any such plan. Neither any Etowah Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Etowah Company, or the single-employer
plan of any entity which is considered one employer with Etowah under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Etowah Company has provided, or is required to provide,
security to a Etowah Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(e) No liability under Title IV of ERISA has been or is expected to be
incurred by any Etowah Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any ERISA Affiliate.
(f) Except as required pursuant to the continuation coverage provisions of
Section 4980B of the Code and the parallel provisions of ERISA, no Etowah
Company has any obligations for retiree health and retiree life benefits under
any of the Etowah Benefit Plans and, to the Knowledge of Etowah, there are no
restrictions on the rights of such Etowah Company to amend or terminate any such
plan without incurring any Liability thereunder.
(g) Except as set forth in Section 5.13(g) of the Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Etowah Company
from any Etowah Company under any Etowah Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Etowah Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(h) No oral or written representation or communication with respect to any
aspect of the Etowah Benefit Plans has been made to employees of any of the
Etowah Companies prior to the date hereof which is not in accordance with the
written or otherwise preexisting terms and provisions of such plans. All Etowah
Benefit Plan documents and annual reports or returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports, and summary
plan descriptions issued with respect to the Etowah Benefit Plans are correct
and complete and there have been no changes in the information set forth
therein.
5.14 MATERIAL CONTRACTS. Except as disclosed in Section 5.14 of the Etowah
Disclosure Memorandum, none of the Etowah 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 Etowah Company or the guarantee by any Etowah Company of any
such obligation (other than Contracts evidencing deposit liabilities, purchases
of federal funds, fully-secured repurchase agreements, and Federal Home Loan
Bank advances, trade payables, and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contracts between
or among Etowah Companies; and (iv) any other Contract or amendment thereto that
would be required to be filed as an exhibit to a Form 10-K filed by Etowah with
the Securities and Exchange Commission (the "SEC") as of the date of this
Agreement if Etowah were required to file a Form 10-K with the SEC (together
with all Contracts referred to in Section 5.9 of this Agreement, the "Etowah
Contracts"). None of the Etowah Companies is in Default under any Etowah
Contract which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Etowah.
5.15 LEGAL PROCEEDINGS. Except to the extent specifically reserved against
in the Etowah Financial Statements dated prior to the date of this Agreement or
as disclosed in the Etowah Disclosure Memorandum,
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there is no Litigation instituted or pending, or, to the Knowledge of Etowah,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Etowah Company, or against any Asset, interest, or right of any of
them, that is reasonably likely to have, if adversely determined, individually
or in the aggregate, a Material Adverse Effect on Etowah, nor are there any
Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any Etowah Company, that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Etowah.
Section 5.15 of the Etowah Disclosure Memorandum provides a list of all
Litigation in which a Etowah company is a named defendant.
5.16 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Etowah Company or any
Affiliate thereof to Regions pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of Material fact or will omit to state a Material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Etowah Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by Regions with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any Material
fact, or contain any untrue statement of a Material fact, or omit to state any
Material fact required to be stated thereunder or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Etowah Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to Etowah's stockholders in connection with the
Stockholders' Meeting, and any other documents to be filed by a Etowah Company
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the stockholders of Etowah, 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 Etowah
Company or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply as
to form in all Material respects with the provisions of applicable Law.
5.17 TAX, ACCOUNTING, AND REGULATORY MATTERS. Except as specifically
contemplated by this Agreement, no Etowah Company or any Affiliate thereof has
taken any action, or agreed to take any action, or has any Knowledge of any fact
or circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement. To the Knowledge of Etowah, there exists no
fact, circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without
imposition of any condition of the type described in the second sentence of such
Section 9.1(b).
5.18 ARTICLES OF INCORPORATION PROVISIONS. Each Etowah Company has taken
all action so that the entering into of this Agreement and the Plan of Merger
and the consummation of the Merger and the other transactions contemplated by
this Agreement and the Plan of Merger do not and will not result in the grant of
any rights to any Person (other than a Regions Company) under the Articles of
Incorporation, Bylaws, or other governing instruments of any Etowah Company or
restrict or impair the ability of Regions to vote, or otherwise to exercise the
rights of a stockholder with respect to, shares of any Etowah Company that may
be acquired or controlled by it.
5.19 SUPPORT AGREEMENTS. Each of the directors of Etowah has executed and
delivered to Regions an agreement in substantially the form of Exhibit 1 to this
Agreement.
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5.20 DERIVATIVES CONTRACTS. Neither Etowah nor any of its Subsidiaries is
a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract, or any
other interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative contract (including various
combinations thereof) and which might reasonably be expected to have a Material
Adverse Effect on Etowah.
5.21 YEAR 2000. Except as disclosed in Section 5.22 of the Etowah
Disclosure Memorandum, to the Knowledge of Etowah, all computer software
necessary for the conduct of its business (the "Software") is designed to be
used prior to, during, and after the calendar year 2000 A.D., and that the
Software will operate during each such time period without error relating to the
year 2000, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century. Except as disclosed in Section 5.22 of the Etowah Disclosure
Memorandum, Etowah further represents and warrants that the Software accepts,
calculates, sorts, extracts and otherwise processes date inputs and date values,
and returns and displays date values, in a consistent manner regardless of the
dates used, whether before, on, or after January 1, 2000.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to Etowah as follows:
6.1 ORGANIZATION, STANDING, AND POWER. Regions is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Material Assets. Regions is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Regions has the corporate power
and authority necessary to execute, deliver, and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Regions. This Agreement represents a legal, valid, and binding
obligation of Regions, enforceable against Regions in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Regions' Certificate of Incorporation
or Bylaws, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
Regions Company under, any Contract or Permit of any Regions Company, which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.1(b) of this Agreement, violate any Law or Order
applicable to any Regions Company or any of their respective 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
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or in the aggregate, a Material Adverse Effect on Regions, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by Regions of the Merger and the other transactions contemplated in
this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of Regions consists as of
the date of this Agreement, of 240,000,000 shares of Regions Common Stock, of
which 136,696,150 shares were issued and outstanding and 322,221 shares were
held as treasury shares as of September 30, 1997. All of the issued and
outstanding shares of Regions Common Stock are, and all of the shares of Regions
Common Stock to be issued in exchange for shares of Etowah 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 Etowah Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
stockholders of Regions.
6.4 SEC FILINGS; FINANCIAL STATEMENTS. (a) Regions has filed all forms,
reports, and documents required to be filed by Regions with the SEC since
December 31, 1994, (collectively, the "Regions SEC Reports"). The Regions SEC
Reports (i) at the time filed, complied in all Material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such Regions SEC Reports or necessary in
order to make the statements in such Regions SEC Reports, in light of the
circumstances under which they were made, not misleading.
(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented or will fairly present the consolidated financial
position of Regions and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be Material in amount or effect.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. To the Knowledge of Regions, no
Regions Company has any Material Liabilities that are reasonably likely to have
individually or in the aggregate a Material Adverse Effect on Regions, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Regions as of September 30, 1997 included in the Regions Financial
Statements or reflected in the notes thereto. No Regions Company has incurred or
paid any Liability since September 30, 1997, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Regions.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997, except
as disclosed in the Regions Financial Statements filed with the SEC after such
date and prior to the date of this Agreement, there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions.
6.7 COMPLIANCE WITH LAWS. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its Material Assets and to carry on
its business as now conducted, except for those Permits the absence of which is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, and there has occurred
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no Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Regions. None of the Regions Companies:
(a) is in violation of any Material Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions; and
(b) has received any written notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any Regions
Company is not in compliance with any of the Material Laws or Material
Orders which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions; (ii) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions; or
(iii) requiring any Regions Company (x) to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or (y) to adopt any Board
resolution or similar undertaking which restricts materially the conduct of
its business, or in any Material manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of
dividends.
6.8 LEGAL PROCEEDINGS. Except to the extent specifically reserved against
in the Regions Financial Statements dated prior to the date of this Agreement,
there is no Litigation instituted or pending, or, to the Knowledge of Regions,
threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Regions Company, or against any Asset, interest, or right of any of
them, nor are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Regions Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions.
6.9 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument, or
other writing furnished or to be furnished by any Regions Company or any
Affiliate thereof to Etowah pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of Material fact or will omit to state a Material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Regions Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by Regions with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any Material
fact, or contain any untrue statement of a Material fact, or omit to state any
Material fact required to be stated therein 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 Etowah's stockholders in connection with the
Stockholders' Meeting, and any other documents to be filed by any Regions
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the stockholders of Etowah, 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 therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Stockholders' Meeting, be false or
misleading with respect to any Material fact, or omit to state any Material fact
required to be stated thereunder or necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any Regions Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.
6.10 TAX, ACCOUNTING, AND REGULATORY MATTERS. Except as specifically
contemplated by this Agreement, no Regions Company or any Affiliate thereof has
taken any action, or agreed to take any action, or has any Knowledge of any fact
or circumstance that is reasonably likely to (i) prevent the transactions
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contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement. To the Knowledge of Regions, there exists no
fact, circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without
imposition of any condition of the type described in the second sentence of such
Section 9.1(b).
6.11 YEAR 2000. Regions has disclosed to Etowah 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.
6.12 MATTERS RELATING TO REGIONS MERGER SUBSIDIARY. At the Effective Time,
Regions Merger Subsidiary will be a state bank duly organized under the Laws of
the State of Georgia, and will have the corporate power and authority to carry
on its business as contemplated by this Agreement and the Plan of Merger and to
own, lease, and operate its Material Assets. Regions Merger Subsidiary will have
the corporate power and authority necessary to execute, deliver, and perform its
obligations under this Agreement and the Plan of Merger and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance of the Plan of Merger and the consummation of the transactions
contemplated therein, including the Merger, will be duly and validly authorized
by all necessary corporate action in respect thereof on the part of Regions
Merger Subsidiary, subject to the approval of the Plan of Merger by Regions as
the sole stockholder of Regions Merger Subsidiary, which is the only stockholder
vote required for approval of the Plan of Merger, and the consummation of the
Merger by Regions Merger Subsidiary.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 COVENANTS OF BOTH PARTIES. Unless the prior written consent of the
other Party shall have been obtained, and except as otherwise expressly
contemplated herein, each Party shall and shall cause each of its Subsidiaries
to from the date of this Agreement until the Effective Time or termination of
this Agreement (i) operate its business only in the usual, regular, and ordinary
course, (ii) preserve intact its business organizations and Assets and maintain
its rights and franchises, and (iii) take no action which would materially
adversely affect the ability of any Party to (a) obtain any Consents required
for the transactions contemplated hereby, or (b) perform its covenants and
agreements under this Agreement and the Plan of Merger in all Material respects
and to consummate the Merger; provided, that the foregoing shall not prevent any
Regions Company from discontinuing or disposing of any of its Assets or
business, or from acquiring or agreeing to acquire any other Person or any
Assets thereof, if such action is, in the judgment of Regions, desirable in the
conduct of the business of Regions and its Subsidiaries.
7.2 COVENANTS OF ETOWAH. Except as specifically contemplated or permitted
by this Agreement or as disclosed in the Etowah Disclosure Memorandum, from the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, Etowah covenants and agrees that it will not do
or agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following without the prior written consent of a duly
authorized officer of Regions:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any Etowah Company; or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a Etowah Company to another Etowah Company) in excess
of an aggregate of $50,000 (for the Etowah Companies on a consolidated
basis) except in the ordinary course of the business of Etowah Companies
consistent with past practices (which shall include, for Etowah, creation
of deposit liabilities, purchases of federal funds, advances from the
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Federal Home Loan Bank or the Federal Reserve Bank, and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any share of stock
held by any Etowah Company of any Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Etowah Company, or declare or pay any dividend or
make any other distribution in respect of any Etowah Common Stock; provided
that Etowah may (to the extent legally able to do so), but shall not be
obligated to, declare and pay regular quarterly cash dividends on the
Etowah Common Stock at a rate not in excess of, and in accordance with
Etowah's most recent past practices for cash dividends as disclosed in
Section 7.2(c) of the Etowah Disclosure Memorandum, provided that any
dividend declared or payable on the shares of Etowah Common Stock for the
quarterly period during which the Effective Time occurs shall, unless
otherwise agreed upon in writing by Regions and Etowah, be declared with a
record date prior to the Effective Time only if the normal record date for
payment of the corresponding quarterly dividend to holders of Regions
Common Stock is before the Effective Time; or
(d) except pursuant to the exercise of stock options outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of Etowah Common Stock or any other capital stock of any Etowah
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
Etowah Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Etowah Common Stock or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber any shares
of capital stock of any Etowah Subsidiary (unless any such shares of stock
are sold or otherwise transferred to another Etowah Company) or any Assets
having in the aggregate a book value in excess of $25,000 other than in the
ordinary course of business for reasonable and adequate consideration; or
(f) acquire direct or indirect control over, or invest in equity
securities of, any Person, other than in connection with (i) foreclosures
in the ordinary course of business, or (ii) acquisitions of control by
Etowah in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Etowah Company except as disclosed in Section 7.2(g) of the
Etowah Disclosure Memorandum or as required by Law; pay any bonus except
pursuant to the provisions of any applicable program or plan adopted by its
Board of Directors prior to the date of this Agreement and disclosed in
Section 7.2(g) of the Etowah Disclosure Memorandum; enter into or amend any
severance agreements with officers of any Etowah Company except as
disclosed in Section 7.2(g) of the Etowah Disclosure Memorandum; grant any
increase in fees or other increases in compensation or other benefits to
directors of any Etowah Company; or
(h) voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits; or
(i) enter into or amend any employment Contract between any Etowah
Company and any Person (unless such amendment is required by Law) that the
Etowah Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(j) except as disclosed in Section 7.2 of the Etowah Disclosure
Memorandum, adopt any new employee benefit plan or program of any Etowah
Company or make any Material change in or to any existing employee benefit
plans or programs of any Etowah Company other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan; or
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(k) make any significant change in any accounting methods, principles,
or practices or systems of internal accounting controls, except as may be
necessary to conform to changes in regulatory accounting requirements or
GAAP; or
(l) commence or settle any Material Litigation other than in
accordance with past practice; provided that, except to the extent
specifically reserved against in the Etowah Financial Statements dated
prior to the date of this Agreement, no Etowah Company shall settle any
Litigation involving any Liability of any Etowah Company for Material money
damages or imposing Material restrictions upon the operations of any Etowah
Company; or
(m) except in the ordinary course of business, enter into or terminate
any Material Contract or make any change in any Material lease or Contract.
7.3 COVENANTS OF REGIONS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Regions
covenants and agrees that: (i) it will not, without the prior written consent of
a duly authorized officer of Etowah amend the Certificate of Incorporation or
Bylaws of Regions, in each case, in any manner which is adverse to, and
discriminates against, the holders of Etowah Common Stock; and (ii) it will
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment, to enhance the long-term value of
the Regions Common Stock and the business prospects to Regions.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which is reasonably likely to cause or constitute a Material breach
of any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and each Party shall deliver to the other Party
copies of all such reports filed by such Party promptly after the same are
filed. If financial statements are contained in any such reports filed with such
Regulatory Authority, 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 or regulatory accounting principles, as applicable (subject in the
case of interim financial statements to normal recurring year-end adjustments
that are not Material). As of their respective dates, such reports filed with
the SEC, will comply in all Material respects with the Securities Laws and will
not contain any untrue statement of a Material fact or omit to state a Material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to a
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER APPROVAL. As soon
as reasonably practicable after the execution of this Agreement, Regions shall
file the Registration Statement with the SEC, provided Etowah has provided, on a
reasonably timely basis, all information concerning Etowah necessary for
inclusion in the Registration Statement, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act as soon
as reasonably practicable after the filing thereof and take any action required
to be taken under other applicable securities Laws in connection with the
issuance of the shares of Regions Common Stock upon consummation of the Merger.
Etowah shall promptly furnish all information concerning it and the holders of
its capital stock as Regions may reasonably request in connection with such
action. Etowah shall call a Stockholders' Meeting, to be held within forty-five
(45) days after the Registration Statement is declared effective by the SEC, for
the purpose of voting upon approval of (i) this Agreement, (ii) the Plan of
Merger, and (iii) such other related matters as it deems appropriate. In
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connection with the Stockholders' Meeting, (i) Etowah shall mail the Proxy
Statement to all of its stockholders, (ii) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (iii) the Board of Directors of Etowah
shall recommend (subject to compliance with their fiduciary duties as advised in
writing by counsel to such Board) to its stockholders the approval of this
Agreement and the Plan of Merger, and (iv) the Board of Directors and officers
of Etowah shall use their reasonable efforts to obtain such stockholders'
approval (subject to compliance with their fiduciary duties as advised in
writing by counsel to such Board).
8.2 NASDAQ NMS LISTING. Regions shall file with the NASD a notification
for the listing on the Nasdaq NMS relating to the proposed issuance of the
shares of Regions Common Stock to be issued to the holders of Etowah Common
Stock pursuant to the Merger.
8.3 APPLICATIONS. As soon as reasonably practicable after execution of
this Agreement, Regions shall prepare and file, and Etowah shall cooperate in
the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement and the Plan of Merger seeking the requisite Consents necessary
to consummate the transactions contemplated by this Agreement and the Plan of
Merger. Regions shall use all reasonable efforts to obtain the requisite
Consents of all Regulatory Authorities as soon as reasonably practicable after
the filing of the appropriate applications.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including, without limitation: (i) amending the Bylaws of Etowah
to permit the consummation of the transactions contemplated by this Agreement
and (ii) using its reasonable efforts to lift or rescind any Order adversely
affecting its ability to consummate the transactions contemplated herein and to
cause to be satisfied the conditions applicable to such Party referred to in
Article Nine of this Agreement and the Plan of Merger, 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.
8.5 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Effective Time,
each Party will keep the other Party advised of all Material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unreasonably with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
8.6 PRESS RELEASES. Prior to the Effective Time, Etowah and Regions shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
8.6 shall be deemed to prohibit any Party from making any disclosure which its
counsel advises as necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, no Etowah Company nor any Affiliate thereof
nor any investment banker, attorney, accountant, or other
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representative (collectively, "Representatives") retained by any Etowah Company
shall directly or indirectly solicit any Acquisition Proposal by any Person.
Except to the extent necessary to comply with the fiduciary duties of Etowah's
Board of Directors as advised in writing by counsel to such Board of Directors,
no Etowah Company or any Affiliate or Representative thereof shall furnish any
non-public information that it is not legally obligated to furnish, negotiate
with respect to, any Acquisition Proposal, and shall direct and use its
reasonable efforts to cause all of its Representatives not to engage in any of
the foregoing, but Etowah may communicate information about such an Acquisition
Proposal to its stockholders if and to the extent that it is required to do so
in order to comply with its legal obligations. Etowah shall promptly notify
Regions orally and in writing in the event that it receives any inquiry or
proposal relating to any such transaction. Etowah shall immediately cease and
cause to be terminated as of the date of this Agreement any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing.
8.8 TAX MATTERS. The Parties agree to use their reasonable efforts to
obtain written opinions of Alston & Bird LLP to the effect that (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of Etowah Common Stock
for Regions Common Stock will not give rise to gain or loss to the stockholders
of Etowah with respect to such exchange (except to the extent of any cash
received), and (iii) each of Etowah and Regions will be a party to that
reorganization within the meaning of Section 368(b) of the Internal Revenue Code
("Tax Opinions"). In rendering such Tax Opinions, counsel shall be entitled to
rely upon representations of officers of Etowah and Regions reasonably
satisfactory in form and substance to such counsel. Each of the Parties
undertakes and agrees to use its reasonable efforts to cause the Merger, and to
take no action which would cause the Merger not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for Federal income tax purposes.
8.9 AGREEMENT OF AFFILIATES. Etowah has disclosed in Section 8.9 of the
Etowah Disclosure Memorandum each Person whom it reasonably believes is an
"affiliate" of Etowah for purposes of Rule 145 under the 1933 Act. Etowah shall
use its reasonable efforts to cause each such Person to deliver to Regions not
later than 30 days prior to the Effective Time a written agreement,
substantially in the form of Exhibit 3, providing that such Person will not
sell, pledge (except for pledges that are made with recourse), transfer, or
otherwise dispose of the shares of Etowah Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not sell,
pledge (except for pledges that are in place as of the date of this Agreement or
that are made with recourse), 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 Etowah 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 Etowah in exchange for shares of Etowah Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of Regions and Etowah have been published within the meaning
of Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.9 (and Regions shall be entitled to place
restrictive legends upon certificates for shares of Regions Common Stock issued
to affiliates of Etowah pursuant to this Agreement to enforce the provisions of
this Section 8.9). Regions shall not be required to maintain the effectiveness
of the Registration Statement under the 1933 Act for the purposes of resale of
Regions Common Stock by such affiliates.
8.10 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
Regions shall provide generally to officers and employees of the Etowah
Companies, who at or after the Effective Time become employees of a Regions
Company, employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Regions Common Stock except
as set forth in this Section 8.10), on terms and conditions which when taken as
a whole are substantially similar to those currently provided by the Regions
Companies to their similarly situated officers and employees. For purposes of
participation and vesting (but not accrual of benefits) under such employee
benefit plans, (i) service under any qualified defined benefit plans of Etowah
shall be treated as service under Regions' qualified defined benefit plans, (ii)
service under any qualified defined contribution plans of Etowah shall be
treated as service under Regions' qualified
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defined contribution plans, and (iii) service under any other employee benefit
plans of Etowah shall be treated as service under any similar employee benefit
plans maintained by Regions. Regions also shall cause Etowah and its
Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 8.10 of the Etowah Disclosure
Memorandum to Regions between any Etowah 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
Etowah Benefit Plans.
8.11 INDEMNIFICATION. (a) Subject to the conditions set forth in paragraph
(b) below, for a period of six (6) years after the Effective Time, Regions shall
indemnify, defend, and hold harmless each person entitled to indemnification
from a Etowah 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 Etowah'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
Etowah is required to effectuate any indemnification, Regions shall cause Etowah
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 Etowah 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 Etowah 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
Etowah and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Regions or Etowah 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.
8.12 ARTICLES OF INCORPORATION PROVISIONS. Each Etowah Company shall take
all necessary action to ensure that the entering into of this Agreement and the
Plan of Merger and the consummation of the Merger and the other transactions
contemplated hereby and thereby 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 Etowah 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 Etowah Company that may be
directly or indirectly acquired or controlled by it.
8.13 REGIONS MERGER SUBSIDIARY ORGANIZATION. Regions shall organize
Regions Merger Subsidiary as a state bank under the Laws of the State of
Georgia. Prior to the Effective Time, the outstanding capital stock of Regions
Merger Subsidiary shall consist of 1,000 shares of Regions Merger Subsidiary
Common Stock, all of which shares shall be owned by Regions. Prior to the
Effective Time, Regions Merger Subsidiary shall not (i) conduct any business
operations whatsoever or (ii) enter into any Contract or agreement of any kind,
acquire any assets or incur any Liability, except as may be specifically
contemplated by this Agreement or the Plan of Merger or as the Parties may
otherwise agree. Regions, as the sole stockholder of Regions Merger Subsidiary,
shall vote prior to the Effective Time the shares of Regions Merger Subsidiary
Common Stock in favor of the Plan of Merger.
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ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each Party to perform this Agreement and 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 Etowah shall have
approved this Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby, including the Merger, as and
to the extent required by Law or by the provisions of any governing
instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent so obtained which is necessary to consummate the
transactions as contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable good faith judgment of the Board of
Directors of Regions would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement and the Plan
of Merger so as to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
all other Consents required for consummation of the Merger (other than
those referred to in Section 9.1(b) of this Agreement) or for the
preventing of any Default under any Contract or Permit of such Party which,
if not obtained or made, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on such Party. No Consent obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable 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 and the Plan of Merger 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 and the Plan of Merger.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Regions Common Stock issuable
pursuant to the Merger shall have been received.
(f) Nasdaq NMS Listing. The shares of Regions Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
NMS.
(g) Tax Matters. Each Party shall have received a copy of the Tax
Opinions referred to in Section 8.8 of this Agreement. Each Party shall
have delivered to the other a Certificate, dated as of the date of the Tax
Opinion, signed by its duly authorized officers, to the effect that, to the
best Knowledge and belief of such officers, the statement of facts and
representations made on behalf of the management of such Party, presented
to the legal counsel delivering the Tax Opinions were at the date of such
presentation, true, correct, and complete, and are on the date of such
Certificate, to the extent contemplated by the presentation, true, correct,
and complete, as though such presentation had been made on the date of such
Certificate.
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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 Etowah 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 Etowah 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 Etowah set forth in Sections 5.17 and
5.18 of this Agreement shall be true and correct in all material respects.
There shall not exist inaccuracies in the representations and warranties of
Etowah set forth in this Agreement (including the representations and
warranties set forth in Sections 5.3, 5.17 and 5.18) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Material Adverse Effect on Etowah; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "Material" or "Material Adverse Effect" or to the "Knowledge"
of Etowah shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Etowah 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
including, without limitation, amending the Bylaws of Etowah to permit the
consummation of the transactions contemplated by this Agreement.
(c) Certificates. Etowah shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that the conditions of its
obligations set forth in Sections 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Etowah'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 and thereby, all in such reasonable detail as Regions
and its counsel shall request.
(d) Claims Letters. Each of the directors and executive officers of
Etowah shall have executed and delivered to Regions letters in
substantially the form of Exhibit 4 to this Agreement.
(e) Legal Opinion. Regions shall have received a written opinion,
dated as of the Effective Time, of counsel to Etowah, in substantially the
form of Exhibit 5 to this Agreement.
(f) Affiliate Agreements. Regions shall have received from each
affiliate of Etowah the affiliates agreement referred to in Section 8.9 of
this Agreement.
(g) Pooling Treatment. Etowah shall not have taken any action that
would prevent the Merger from qualifying for pooling-of-interests
accounting treatment under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF ETOWAH. The obligations of Etowah 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 Etowah 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
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Section 6.10 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of Regions set forth in this Agreement (including the
representations and warranties set forth in Sections 6.3 and 6.10) such
that the aggregate effect of such inaccuracies has, or is reasonably likely
to have, a Material Adverse Effect on Regions; provided that, for purposes
of this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" shall be
deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
(c) Certificates. Regions shall have delivered to Etowah (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that the conditions of its
obligations set forth in Sections 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Regions' Board of Directors evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement and the Plan of Merger, as appropriate, and the consummation of
the transactions contemplated hereby and thereby, all in such reasonable
detail as Etowah and its counsel shall request.
(d) Legal Opinion. Etowah shall have received a written opinion,
dated as of the Effective Time, of counsel to Regions, in substantially the
form of Exhibit 6 to this Agreement.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of
Etowah, 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 Etowah; 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 Etowah and Section 9.3(a)
in the case of Regions or in Material breach of any covenant or other
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such inaccuracy and
which inaccuracy would provide the terminating Party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Etowah 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 Etowah and Section 9.3(a)
in the case of Regions or in Material breach of any covenant or other
agreement contained in this Agreement) in the event of a Material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Etowah fail to vote their approval of this Agreement and
the Plan of Merger and the transactions contemplated hereby as required
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by applicable law at the Etowah Stockholders' Meeting where the
transactions were presented to such stockholders for approval and voted
upon; or
(e) By the Board of Directors of Etowah or by the Board of Directors
of Regions in the event that the Merger shall not have been consummated by
September 30, 1998, in each case only if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Etowah and Section 9.3(a)
in the case of Regions or in Material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger (other than as contemplated by Section 10.1(d) of this Agreement)
cannot be satisfied or fulfilled by the date specified in Section 10.1(e)
of this Agreement as the date after which such Party may terminate this
Agreement; or
(g) By the Board of Directors of Etowah, 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 Etowah 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
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 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 Etowah of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section
10.1(g) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and
any references in this Agreement to "Exchange Ratio" shall thereafter be
deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section 10.1(g).
For purposes of this Section 10.1(g), the following terms shall
have the meanings indicated:
"Average Closing Price" shall mean the average of the daily last
sales prices of Regions Common Stock as reported on the Nasdaq NMS
(as reported by The Wall Street Journal or, if not reported thereby,
another authoritative source as chosen by Regions) for the 10
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 Consent of
the Board of Governors of the Federal Reserve System to the Merger
shall be received.
"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
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the Starting Date and before the Determination Date, any public
announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions
with a value exceeding 25% of the acquiror's market capitalization.
In the event that any such company or companies are removed from the
Index Group, the weights (which shall be determined based upon the
number of outstanding shares of common stock) shall be redistributed
proportionately for purposes of determining the Index Price. The 17
bank holding companies and the weights attributed to them are as
follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
- ---------------------- ---------
<S> <C>
AmSouth Bancorporation................................ 4.07%
BB&T Corporation...................................... 6.78
Compass Bancshares, Inc............................... 3.34
Fifth Third Bancorp................................... 7.84
First American Corporation............................ 2.96
First Security Corporation............................ 5.86
First Tennessee National Corporation.................. 3.25
First Virginia Banks, Inc............................. 2.62
Hibernia Corporation.................................. 6.62
Huntington Bancshares, Inc............................ 9.68
Mercantile Bancorporation, Inc........................ 6.60
SouthTrust Corporation................................ 5.05
Star Banc Corporation................................. 4.32
Summit Bancorp........................................ 8.91
SunTrust Banks, Inc................................... 10.67
Union Planters Corporation............................ 3.45
Wachovia Corporation.................................. 7.99
------
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
sale prices of the companies composing the Index Group.
"Starting Date" shall mean the fourth full trading day after 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 of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article Eleven and Section 8.5(b) of this Agreement shall survive any
such termination, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c),
or 10.1(f) of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination. Each of the Support Agreements
shall be governed by its own terms as to its termination.
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10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles Two, Three, Four, and Eleven and Sections 8.9 and 8.11 of this
Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"AFFILIATE" of a Person shall mean (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by,
or under common control with such Person, (ii) any executive officer,
director, partner, employer, or direct or indirect beneficial owner of any
ten percent (10%) or greater equity or voting interest of such Person, or
(iii) any other Person for which a Person described in clause (ii) acts in
any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Reorganization,
including each of the Support Agreements and the other Exhibits delivered
pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"BUSINESS COMBINATION" shall mean an acquisition of, merger or
combination with, share exchange involving any class of voting stock of,
sale of more than fifty percent (50%) of the consolidated assets by, or
other business combination involving, or tender offer for or sale or
issuance of any equity securities involving an acquisition by a third party
of more than fifty percent (50%) of the voting stock of, Etowah, other than
the formation of a newly organized holding company for Etowah in which the
shares of Etowah Common Stock are exchanged for shares of the holding
company on a basis that does not cause the respective beneficial interests
of each stockholder to change or transactions with a Regions Company.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger issued by
the Secretary of State of the State of Georgia in connection with the
Merger.
"CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to
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terminate or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any Liability under, any Contract, Order,
or Permit.
"DGCL" shall mean the Delaware General Corporation Law.
"EFFECTIVE TIME" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean all Laws which are administered,
interpreted, or enforced by the United States Environmental Protection
Agency and state and local agencies with jurisdiction over pollution or
protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA PLAN" shall have the meaning provided in Section 5.13 of this
Agreement.
"ETOWAH BENEFIT PLANS" shall have the meaning set forth in Section
5.13 of this Agreement.
"ETOWAH COMMON STOCK" shall mean the $10.00 par value common stock of
Etowah.
"ETOWAH COMPANIES" shall mean, collectively, Etowah and all Etowah
Subsidiaries.
"ETOWAH DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Etowah Disclosure Memorandum" delivered prior to the date of this
Agreement, to Regions describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made.
"ETOWAH FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Etowah as of
September 30, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1997, and for each of the fiscal years ended December 31,
1996, 1995, and 1994, included in the Etowah Disclosure Memorandum, and
(ii) the consolidated balance sheets of Etowah (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 September
30, 1997.
"ETOWAH SUBSIDIARIES" shall mean the Subsidiaries of Etowah, which
shall include the Etowah Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Etowah in the future and owned by
Etowah at the Effective Time.
"EXCHANGE AGENT" shall have the meaning provided in Section 4.1 of
this Agreement.
"EXCHANGE RATIO" shall have the meaning provided in Section 3.1(b) of
this Agreement.
"EXHIBITS" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FICG" shall mean the Financial Institutions Code of Georgia.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601 et seq., or
any similar federal, state, or local Law.
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"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the knowledge
after due inquiry of the chairman, president, chief financial officer,
chief accounting officer, chief credit officer, general counsel (not
including outside counsel), any assistant or deputy general counsel, or any
senior or executive vice president of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting, or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including, without limitation, those
promulgated, interpreted, or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including,
without limitation, costs of investigation, collection, and defense),
claim, deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute, or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institutions, pledges to
secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability, but shall not include regular, periodic examinations
of depository institutions and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, is likely to have a Material adverse impact on (i) the
financial position, business, results of operations or prospects of such
Party and its Subsidiaries, taken as a whole, or (ii) the ability of such
Party to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement and the
Plan of Merger, provided that "material adverse effect" shall not be deemed
to include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles
generally applicable to banks, savings associations, and their holding
companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
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"MERGER" shall mean the merger of Regions Merger Subsidiary with and
into Etowah referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"PARTY" shall mean either Etowah or Regions and "PARTIES" shall mean
both Etowah 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.
"PLAN OF MERGER" shall mean the plan of merger providing for the
Merger, in substantially the form of Exhibit 2.
"PROXY STATEMENT" shall mean the proxy statement used by Etowah to
solicit the approval of its stockholders of the transactions contemplated
by this Agreement and the Plan of Merger and shall include the prospectus
of Regions relating to the shares of Regions Common Stock to be issued to
the stockholders of Etowah.
"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 September 30, 1997, and as of December 31, 1996 and 1995, and
the related statements of income, changes in stockholders' equity, and cash
flows (including related notes and schedules, if any) for the nine months
ended September 30, 1997, and for each of the three years ended December
31, 1996, 1995, and 1994, 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 September 30, 1997.
"REGIONS MERGER SUBSIDIARY" shall mean the wholly-owned interim state
bank subsidiary of Regions to be organized to effect the Merger under the
Laws of the State of Georgia and with the name of Regions Interim Bank.
"REGIONS MERGER SUBSIDIARY COMMON STOCK" shall mean the $1.00 par
value common stock of Regions Merger Subsidiary.
"REGIONS SUBSIDIARIES" shall mean the Subsidiaries of Regions.
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"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by Regions under the
1933 Act in connection with the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of Thrift Supervision,
the Office of the Comptroller of the Currency, the FDIC, all state
regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with
any Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders of
Etowah to be held pursuant to Section 8.1 of this Agreement and the Plan of
Merger, including any adjournment or adjournments thereof.
"SUBSIDIARY" or COLLECTIVELY "SUBSIDIARIES" shall mean all those
corporations, banks, associations, or other entities of which the entity in
question owns or controls fifty percent (50%) or more of the outstanding
equity securities either directly or through an unbroken chain of entities
as to each of which fifty percent (50%) or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided,
however, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"SUPPORT AGREEMENTS" shall mean the various Support Agreements, each
in substantially the form of Exhibit 1.
"SURVIVING BANK" shall mean Etowah as the surviving bank resulting
from the Merger.
"TAX" or "TAXES" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, of any nature whatsoever,
including interest, penalties, and additions imposed thereon or with
respect thereto.
11.2 EXPENSES. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that Regions shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 BROKERS AND FINDERS. Except as disclosed in the Etowah Disclosure
Memorandum, each of the Parties represents and warrants that neither it nor any
of its officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection with
this Agreement or the transactions contemplated hereby. In the event of a claim
by any broker or finder based upon his or its representing or being retained by
or allegedly representing or being retained by Etowah or Regions, each of Etowah
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.
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11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement,
expressed or implied, is intended to, or shall, confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.9 and 8.11 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Etowah Common Stock, there shall be made no
amendment decreasing the consideration to be received by Etowah stockholders
without the further approval of such stockholders.
11.6 WAIVERS. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, vice chairman, or other
authorized officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Etowah, to waive or extend the time for the
compliance or fulfillment by Etowah 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, Etowah, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Regions, to waive or extend the time for the compliance or fulfillment by
Regions of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Etowah 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 Etowah.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so received:
<TABLE>
<S> <C>
Etowah: Etowah Bank
8681 Highway 92
Suite 100
Woodstock, Georgia 30189
Telecopy Number: (770) 924-9360
Attention: Pierce T. Neese
Chairman and President
Copy to Counsel: Kilpatrick Stockton LLP
Suite 2800, 1100 Peachtree Street
Atlanta, Georgia 30309-4530
Telecopy Number: (404) 815-6555
Attention: Richard R. Cheatham
</TABLE>
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<TABLE>
<S> <C>
Regions: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive Financial Officer
Copy to Counsel: Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7751
Attention: Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
</TABLE>
11.9 GOVERNING LAW. Except to the extent the laws of the State of Georgia
apply to the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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: ETOWAH BANK
By: By:
------------------------------------------------- --------------------------------------------
Juanita Burrell Pierce T. Neese
Corporate Secretary Chairman and President
[BANK SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: By:
------------------------------------------------- --------------------------------------------
Samuel E. Upchurch, Jr. Carl E. Jones, Jr.
Corporate Secretary President and Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
PLAN OF MERGER
THIS PLAN OF MERGER (this "Plan of Merger") is made and entered into as of
the day of , 1998, by and between ETOWAH BANK
("Etowah"), a state bank organized and existing under the laws of the State of
Georgia, with its principal office located in Canton, Georgia, and ETOWAH
INTERIM BANK ("Interim"), a newly formed, wholly-owned interim state bank
subsidiary of Regions Financial Corporation ("Regions"), organized and existing
under the laws of the State of Alabama. Regions is a corporation organized and
existing under the laws of the State of Delaware, with its principal office
located in Birmingham, Alabama.
PREAMBLE
Each of the Boards of Directors of Interim and Etowah deems it advisable
and in the best interests of their respective institutions and the stockholders
thereof for Interim to be merged with and into Etowah (the "Merger") on the
terms and conditions provided in this Plan of Merger. This Plan of Merger is
made and entered into pursuant to an Agreement and Plan of Reorganization, dated
as of February 26, 1998, by and between Etowah and Regions (the "Agreement"). At
the Effective Time of the Merger, the outstanding shares of the capital stock of
Etowah shall be converted into shares of the common stock of Regions (subject to
certain exceptions as set forth in the Agreement). As a result, stockholders of
Etowah shall become stockholders of Regions, and Etowah shall continue to
conduct its business and operations as a wholly-owned subsidiary of Regions. It
is intended that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and for accounting purposes shall be accounted as a "pooling of
interests."
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Interim and Etowah hereby make,
adopt, and approve this Plan of Merger in order to set forth the terms and
conditions of the Merger of Interim into Etowah.
ARTICLE ONE
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
(in their singular and plural forms, as applicable) shall have the following
meanings:
"ABC" shall mean the Alabama Banking Code.
"AGREEMENT" shall mean the Agreement and Plan of Reorganization, dated
as of February 26, 1998, by and between Regions and Etowah, including each
of the supporting agreements and the other exhibits delivered pursuant
thereto and incorporated therein by reference.
"ARTICLES OF MERGER" shall mean the articles of merger to be executed
by Interim and Etowah filed with the Alabama Banking Department and the
Secretary of State of the State of Alabama in connection with the Merger.
"CERTIFICATE OF MERGER" shall mean the certificate of merger issued by
the Secretary of State of the State of Georgia under Section 7-1-535 of the
Financial Institutions Code of Georgia.
"CLOSING" shall mean the closing of the transactions contemplated
hereunder, as described in Section 5.1 of this Plan of Merger.
"EFFECTIVE TIME" shall mean the date and time on which the Merger
contemplated by this Plan of Merger becomes effective pursuant to the laws
of the State of Georgia, as defined in Section 5.2 of this Plan of Merger.
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"ETOWAH COMMON STOCK" shall mean the $10.00 par value common stock of
Etowah.
"ETOWAH COMPANIES" shall mean, collectively, Etowah and all Etowah
subsidiaries.
"EXCHANGE AGENT" shall have the meaning specified in Section 4.1 of
this Plan of Merger.
"EXCHANGE RATIO" shall have the meaning specified in Section 3.1(c) of
this Plan of Merger.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"INTERIM COMMON STOCK" shall mean the $.50 par value common stock of
Interim.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended.
"MERGER" shall mean the merger of Interim with and into Etowah, as
provided in Article Two of this Plan of Merger.
"NASDAQ/NMS" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"OTS" shall mean the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board).
"PARTY" shall mean either Interim or Etowah and "Parties" shall mean
both Interim and Etowah.
"REGIONS COMMON STOCK" shall mean the $.625 par value common stock of
Regions.
"REGIONS COMPANIES" shall mean, collectively, Regions and all Regions
subsidiaries.
"SURVIVING BANK" shall mean Etowah as the surviving bank resulting
from the Merger.
ARTICLE 2
TERMS OF MERGER
2.1 MERGER. Subject to the terms of this Plan of Merger and the Agreement,
at the Effective Time, Interim shall be merged with and into Etowah as
authorized by Section 7-1-530 of the Financial Institutions Code of Georgia and
Section 5-7A-1 of the ABC and in accordance with the provisions of Sections
7-1-531, 7-1-532, and 7-1-533 of the Financial Institutions Code of Georgia and
Section 5-7A-2 of the ABC. Etowah shall be the Surviving Bank resulting from the
Merger and shall continue to be governed by the laws of the State of Georgia as
a state bank operating under the name of "Etowah Bank." The Merger shall be
consummated pursuant to the terms of this Plan.
2.2 BUSINESS OF SURVIVING BANK. The business of the Surviving Bank from
and after the Effective Time shall continue to be that of a state bank organized
under the laws of the State of Georgia. The business shall be conducted from its
main office located in Canton, Georgia and its legally established branches,
which shall also include the main office and all branches, whether in operation
or approved but unopened, at the Effective Time, of Interim.
2.3 ASSUMPTION OF RIGHTS. At the Effective Time, the separate existence
and corporate organization of Interim shall be merged into and continued in the
Surviving Bank. All rights, franchises, and interests of both Interim and Etowah
in and to every type of property (real, personal, and mixed), and all choses in
action of both Interim and Etowah shall be transferred to and vested in the
Surviving Bank without any deed or other transfer. The Surviving Bank, upon
consummation of the Merger and without any order or other action on the part of
any court or otherwise, shall hold and enjoy all rights of property, franchises,
and interests, including appointments, designations, and nominations, and all
other rights and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee, receiver, and committee of
estates of incompetent persons, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by either Interim or Etowah at the Effective Time.
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2.4 ASSUMPTION OF LIABILITIES. All liabilities and obligations of both
Interim and Etowah of every kind and description shall be assumed by the
Surviving Bank, and the Surviving Bank shall be bound thereby in the same manner
and to the same extent that Interim and Etowah were so bound at the Effective
Time.
2.5 ACCOUNTS AND DEPOSITS. All accounts and deposits of Interim and Etowah
shall be and continue to be accounts and deposits of the Surviving Bank, without
change in their respective terms, maturity, minimum required balances or
withdrawal value. As of the Effective Time, each account or deposit of Interim
or Etowah shall be considered for dividend or interest purposes as an account or
deposit of the Surviving Bank from the time said account or deposit was opened
in Interim and Etowah and at all times thereafter until such account or deposit
ceases to be an account or deposit of the Surviving Bank.
2.6 ARTICLES OF INCORPORATION. As authorized by Section 7-1-536(d) of the
Financial Institutions Code of Georgia, the Articles of Incorporation of Etowah
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Bank until otherwise amended or repealed.
2.7 BYLAWS. The Bylaws of Etowah in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Bank until otherwise amended
or repealed.
2.8 BOARD OF DIRECTORS. Upon the Effective Time, the Board of Directors of
the Surviving Bank shall consist initially of the following
( ) individuals, who shall include the directors of Etowah in
office immediately prior to the Effective Time and shall continue to serve for
the terms to which such directors are elected prior to the Effective Time:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
</TABLE>
2.9 OFFICES. The main office of the Surviving Bank after the Effective
Time will be located at the main office of the Surviving Bank in Georgia. The
Surviving Bank's offices will after the Effective Time be located at the
locations set forth in Exhibit A to this Plan of Merger.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article Three,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Interim Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one share of Etowah Common Stock.
(c) Each share of Etowah Common Stock (excluding shares held by Etowah
or by any of its subsidiaries or by any Regions or any of its subsidiaries,
in each case other than in a fiduciary capacity or as a result of debts
previously contracted) issued and outstanding at the Effective Time shall
be converted into 3.2 shares of Regions Common Stock, subject to adjustment
as provided in Section 10.1(g) of the Agreement (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event Etowah changes the number of
shares of Etowah Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock the Exchange Ratio shall be proportionately adjusted. In
the event Regions changes the number of shares of Regions Common Stock issued
and outstanding prior to the
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Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not established)
shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 SHARES HELD BY ETOWAH OR REGIONS. Each of the shares of Etowah Common
Stock held by any Etowah Company or by any Regions Company, in each case other
than in a fiduciary capacity as a result of debts previously contracted, shall
be canceled and retired at the Effective Time and no consideration shall be
issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of the
Agreement or this Plan of Merger, each holder of shares of Etowah Common Stock
exchanged pursuant to the Merger, or of options to purchase shares of Etowah
Common Stock, who would otherwise have been entitled to receive a fraction of a
share of Regions Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Regions
Common Stock multiplied by the market value of one share of Regions Common Stock
at the Effective Time, in the case of shares exchanged pursuant to the Merger,
or the date of exercise, in the case of options. The market value of one share
of Regions Common Stock at the Effective Time or the date of exercise, as the
case may be, shall be the last sale price of such common stock on the Nasdaq/NMS
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time, in
the case of shares exchanged pursuant to the Merger, and the date of exercise,
in the case of options. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
3.5 DISSENTING STOCKHOLDERS. Any holder of shares of Etowah Common Stock
who perfects such holder's dissenters' rights of appraisal in accordance with
and as contemplated by Section 7-1-537 of the Financial Institutions Code of
Georgia and Section 14-2-1301 et seq. of the GBCC shall be entitled to receive
the value of such shares in cash as determined pursuant to such provision of
law; provided, however, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of Section 7-1-537 of the Financial Institutions Code of
Georgia and Section 14-2-1301 et seq. of the GBCC or other applicable laws and
surrendered to Etowah 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 Etowah 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 Etowah Common Stock is entitled under this Article Three (without interest)
upon surrender by such holder of the certificate or certificates representing
shares of Etowah Common Stock held by such holder.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Regions shall
cause the exchange agent selected by Regions (the "Exchange Agent") to mail to
the former stockholders of Etowah appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Etowah Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of Etowah Common Stock (other than shares
to be canceled pursuant to Section 3.3 of this Plan of Merger or as to which
dissenter's rights have been perfected as provided in Section 3.5 of this Plan
of Merger) 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 Plan of Merger, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Plan of Merger. To the extent
required by Section 3.4 of this Plan of Merger, each holder of shares of Etowah
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates
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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 Etowah Common Stock is entitled as a result of the Merger until such holder
surrenders his certificates of Etowah Common Stock for exchange as provided in
this Section 4.1. The certificate of Etowah Common Stock so surrendered shall be
duly endorsed as the Exchange Agent may require. Any other provision of this
Plan of Merger notwithstanding, neither Regions, Etowah, nor the Exchange Agent
shall be liable to a holder of Etowah 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 ETOWAH STOCKHOLDERS. At the Effective Time, the stock
transfer books of Etowah shall be closed as to holders of Etowah Common Stock
immediately prior to the Effective Time, and no transfer of Etowah 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 Plan of
Merger, each certificate theretofore representing shares of Etowah Common Stock
(other than shares to be canceled pursuant to Section 3.3 or 3.5 of this Plan of
Merger shall from and after the Effective Time represent for all purposes only
the right to receive the consideration provided in Sections 3.1 and 3.4 of this
Plan of Merger in exchange therefor. To the extent permitted by law, former
stockholders of record of Etowah 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 Etowah Common Stock
are converted, regardless of whether such holders have exchanged their
certificates representing Etowah Common Stock for certificates representing
Regions Common Stock in accordance with the provisions of this Plan of Merger.
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 Plan of Merger, 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 Etowah 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 Plan of Merger. However, upon
surrender of such Etowah Common Stock certificate, both the Regions Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered cash payments to be paid for fractional
share interests (without interest) shall be delivered and paid with respect to
each share represented by such certificate.
ARTICLE 5
CLOSING AND EFFECTIVE TIME
5.1 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as Etowah and
Regions, acting through their duly authorized officers, may mutually agree. The
place of Closing shall be at the offices of Regions, or such other place as may
be mutually agreed upon by Etowah and Regions .
5.2 EFFECTIVE TIME. The Merger and other transactions contemplated by the
Agreement shall become effective on the date and at the time that the Georgia
Certificate of Merger reflecting the Merger is issued by the Secretary of State
of the State of Georgia and the Alabama Articles of Merger become effective with
the Secretary of State of the State of Alabama (the "Effective Time"). Subject
to the terms and conditions thereof, unless otherwise mutually agreed upon in
writing by the duly authorized officers of each party to the Agreement, the
parties to the Agreement shall use their reasonable efforts to cause the
Effective Time to occur on the last business day of the month in which occurs
the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required consent of any regulatory
authority having authority over and approving or exempting the Merger, and (ii)
the date on which the stockholders of Etowah approve the Agreement and this Plan
of Merger to the extent such approval is required by applicable law; or such
later date within thirty (30) days thereof as may be specified by Regions.
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ARTICLE 6
EFFECTIVENESS
6.1 CONDITIONS PRECEDENT. Consummation of the Merger is conditioned upon
the approval of the Merger by the stockholders of Etowah and the sole
stockholder of Interim, as and to the extent required by law, and the receipt of
the requisite regulatory approvals as set forth in the Agreement. Additionally,
consummation of the Merger is conditioned upon the fulfillment of the conditions
precedent set forth in Article Nine of the Agreement or the waiver of such
conditions as provided in Section 11.6 of the Agreement.
6.2 TERMINATION. This Plan of Merger may be terminated at any time prior
to the Effective Time by the Parties hereto at any time after termination of the
Agreement as provided in Article Ten of the Agreement.
6.3 AMENDMENTS. To the extent permitted by law, this Plan of Merger may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Etowah Common Stock, there shall be made no
amendment decreasing the consideration to be received by Etowah stockholders
without the further approval of such stockholders.
6.4 WAIVERS. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, vice chairman, or other
authorized officer, shall have the right to waive on behalf of it and Interim
any default in the performance of any term of this Plan of Merger by Etowah, to
waive or extend the time for the compliance or fulfillment by Etowah of any and
all of its obligations under this Plan of Merger, and to waive any or all of the
conditions precedent to the obligations of Regions under this Plan of Merger,
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, Etowah, acting through its Board of
Directors, chief executive officer, or other authorized officer, shall have the
right to waive any default in the performance of any term of this Plan of Merger
by Regions, to waive or extend the time for the compliance or fulfillment by
Regions or Interim of any and all of their obligations under this Plan of
Merger, and to waive any or all of the conditions precedent to the obligations
of Etowah under this Plan of Merger, 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 Etowah.
ARTICLE 7
MISCELLANEOUS
7.1 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 in
Section 11.8 of the Agreement (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
received.
7.2 GOVERNING LAW. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Georgia.
7.3 COUNTERPARTS. This Plan of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.4 INCONSISTENT PROVISIONS. The Parties agree that, to the extent any of
the provisions of this Plan of Merger shall conflict or be inconsistent with any
provision of the Agreement, the provisions of the Agreement shall control and
prevail and the Parties hereto agree to execute such amendments to this Plan of
Merger to conform the provisions hereof to the provisions of the Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto duly authorized all as of the day and year first
above written.
ETOWAH BANK
[BANK SEAL]
By:
------------------------------------
Pierce T. Neese
Chairman and President
ATTEST:
--------------------------------------------------
Juanita Burrell
Corporate Secretary
A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS
OF ETOWAH BANK
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
</TABLE>
ETOWAH BANK
[BANK SEAL]
By:
------------------------------------
------------------------------------
------------------------------------
<TABLE>
<S> <C>
ATTEST:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
</TABLE>
A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS
OF ETOWAH INTERIM BANK
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
</TABLE>
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APPENDIX C
(T.STEPHEN JOHNSON & ASSOCIATES, INC. LETTERHEAD)
July ,1998
Board of Directors
Etowah Bank
140 W. Main Street
Canton, Georgia 30114
Dear Directors:
T. Stephen Johnson & Associates, Inc., Roswell, Georgia ("TSJ&A") has been
asked to render an opinion as to the fairness from a financial point of view of
the consideration to be received by the shareholders of Etowah Bank, Canton,
Georgia ("Etowah") in connection with the proposed merger of Etowah with and
into Regions Financial Corporation, Birmingham, Alabama ("Regions"), pursuant to
an Agreement and Plan of Reorganization (the "Merger Agreement") dated as of
February 26, 1998 (the "Merger"). The Merger Agreement calls for each
outstanding share of Etowah common stock to be converted into the right to
receive 3.2 shares of Regions common stock.
TSJ&A is an investment banking and consulting firm that specializes in the
valuation of closely-held corporations and provides fairness opinions as part of
its practice. Because of its prior experience in the appraisal of southeastern
financial institutions involved in mergers, it has developed an expertise in
fairness opinions related to the securities of southeastern financial
institutions.
Etowah retained TSJ&A to serve as financial advisor to analyze the value of
Etowah in a merger or acquisition transaction; solicit potential acquirers'
interest in entering into a merger or acquisition transaction with Etowah, and
to negotiate the terms, amount and form of consideration; consult with
management regarding merger or acquisition transaction; and provide a fairness
opinion for which compensation will be received.
In performing its analysis, TSJ&A relied upon and assumed without
independent verification, the accuracy and completeness of all information
provided to it. TSJ&A has not performed any independent appraisal or evaluation
of the assets of Etowah or of Regions or any of its subsidiaries. As such, TSJ&A
does not express an opinion as to the fair market value of Etowah. The opinion
of financial fairness expressed herein is necessarily based on market, economic
and other relevant considerations as they exist and can be evaluated as of July
, 1998.
In arriving at its opinion, TSJ&A reviewed and analyzed audited and
unaudited financial information regarding Etowah and Regions, the Merger, the
Merger Agreement, a draft of SEC filings, federal regulatory applications as
well as publicly available information regarding actual comparable transactions.
The merger consideration to be received by Etowah Shareholders is based on
a set exchange ratio for Regions common shares. The value of the shares to be
received is the current market value of Regions common shares that currently
trade over the counter on the NASDAQ National Market System. The May 19, 1998
closing price for Regions common shares was $42.50 per share. Based on this
closing price, the transaction value would total $123.9 million or $136 per
share based on 911,000 Etowah common shares outstanding. This transaction value
equals 4.1239 times March 31, 1998 book value, 4.3740 times March 31, 1998
tangible book value and 21.865 times trailing twelve months earnings per share.
The Merger Agreement provides Etowah the right to terminate the transaction
if the market value of Regions common shares fall more than 20 percent below a
Starting Price and such change in market value is more than 15 percent when
compared to the change of the market value of a predetermined group of
comparable bank holding companies over the same period (the "Index Group"). The
Starting Price has been determined to equal $40.00 per share. Should the market
value of Regions common shares fall to below $32.00
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<PAGE> 145
Board of Directors
Etowah Bank
July , 1998
Page 2
per share and the change in market value is more than 15 percent when compared
to the change of the market value of the Index Group, Etowah could terminate the
Merger Agreement. Substantial changes in the market place would have to take
place between the date of this letter and closing for this to happen.
TSJ&A reviewed the Merger as of May 20, 1998, for the purpose of
determining purchase premiums that could be used in comparing the Merger with
other announced transactions. TSJ&A reviewed the purchase premiums paid in 108
transactions that were announced between July 1, 1997 and May 19, 1998 involving
selling institutions headquartered in the southeastern United States. Of these
transactions, five involved selling institutions that have been determined to be
comparable transactions. They include institutions representing commercial bank
institutions with total assets between $300 million and $1 Billion with total
equity less than 10.00 percent of total assets. A listing of these transactions
is attached. On average, the comparable transactions reported an announced deal
price to book value of 3.185 times, an announced deal to tangible book value of
3.3725 and an announced deal price to earnings of 23.43 times.
Therefore, in consideration of the above, it is the opinion of TSJ&A that,
based on the structure of the Merger and the analyses that have been performed,
the consideration to be received by the shareholders of Etowah is fair from a
financial point of view.
Sincerely,
T. Stephen Johnson & Associates, Inc.
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<PAGE> 146
APPENDIX D
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 Right to dissent.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
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<PAGE> 147
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
14-2-1320 Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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<PAGE> 148
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321 Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 Duty to demand payment.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
14-2-1324 Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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<PAGE> 149
14-2-1325 Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326 Failure to take action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
D-4
<PAGE> 150
14-2-1330 Court action.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332 Limitation of actions.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
D-5
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation of the Registrant
provides:
"(a) The corporation shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the General
Corporation Law of Delaware. (b) No director of the corporation shall be
personally liable to the corporation or its stockholders for monetary
damages, for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit."
Section 145 of the Delaware General Corporation law empowers the Registrant
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
II-1
<PAGE> 152
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
II-2
<PAGE> 153
"(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> 154
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 Reorganization, dated as of February 26, 1998, by and between Etowah Bank and
Regions Financial Corporation -- included as Appendix A to the Proxy Statement/Prospectus.
2.2 -- Form of Plan of Merger by and between Etowah Bank and Etowah Interim Bank.
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference from
S-4 Registration Statement of Regions Financial Corporation, file no. 333-37361.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Porter, Keadle, Moore, LLP
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP-- to be included in Exhibit 8.
23.5 -- Consent of T. Stephen Johnson & Assoc.-- to be filed by amendment.
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature page
of the registration statement.
99. -- Form of proxy.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
II-4
<PAGE> 155
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 156
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 8th day of July, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
BY: /s/ Richard D. Horsley
----------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney- in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
/s/ Carl E. Jones, Jr.
- -------------------------- President and Chief Executive July 8, 1998
Carl E. Jones, Jr. Officer and Director
(principal executive officer)
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and July 8, 1998
Richard D. Horsley Executive Financial Officer
and Director
(principal financial officer)
/s/ Robert P. Houston
- -------------------------- Executive Vice President and July 8, 1998
Robert P. Houston Comptroller
(principal accounting officer)
<PAGE> 157
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- -------------------------- ------------------
<S> <C> <C>
/s/ Sheila S. Blair
- -------------------------- Director July 8, 1998
Sheila S. Blair
/s/ William B. Boles, Sr.
- -------------------------- Director July 8, 1998
William B. Boles, Sr.
/s/ James B. Boone, Jr.
- -------------------------- Director July 8, 1998
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director July 8, 1998
Albert P. Brewer
/s/ James S.M. French
- -------------------------- Director July 8, 1998
James S.M. French
/s/ Olin B. King
- -------------------------- Director July 8, 1998
Olin B. King
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board July 8, 1998
J. Stanley Mackin and Director
/s/ Henry E. Simpson
- -------------------------- Director July 8, 1998
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director July 8, 1998
Lee J. Styslinger, Jr.
- -------------------------- Director
Robert J. Williams
</TABLE>
<PAGE> 158
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
2.1 -- Agreement and Plan of Reorganization, dated as of February 26, 1998, by and between Etowah Bank
and Regions Financial Corporation -- included as Appendix A to the Proxy
Statement/Prospectus.
2.2 -- Form of Plan of Merger by and between Etowah Bank and Etowah Interim Bank
4.1 -- Certificate of Incorporation of Regions Financial Corporation -- incorporated by reference
from S-4 Registration Statement of Regions Financial Corporation, file no. 333-37361.
4.2 -- By-laws of Regions Financial Corporation -- incorporated by reference from S-4 Registration
Statement of Regions Financial Corporation, file no. 333-37361.
5. -- Opinion re: legality.
8. -- Form of Opinion re: tax matters.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Porter, Keadle, Moore, LLP
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in Exhibit 5.
23.4 -- Consent of Alston & Bird LLP -- to be included in Exhibit 8.
23.5 -- Consent of T. Stephen Johnson & Assoc. -- to be filed by amendment
24. -- Power of Attorney -- the manually signed power of attorney is set forth in the signature
page of the registration statement.
99. -- Form of proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
July 8, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Acquisition of Etowah Bank
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of an interim subsidiary
of Regions with and into Etowah Bank ("Etowah") (the "Merger") with Etowah to
become a wholly-owned subsidiary of Regions, 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 Etowah upon consummation of the Merger.
The maximum number of shares of Regions to be issued in the Merger is estimated
to be 2,915,200.
We have examined and are familiar with the registration statement on Form
S-4 filed with the Securities and Exchange Commission, as such registration
statement has been amended to date. We have examined and are familiar with the
records relating to the organization of Regions and the documents and records as
we have deemed relevant for purposes of rendering this opinion.
Based on the foregoing it is our opinion that upon satisfaction of the
conditions precedent to consummation of the Merger, or waiver of such conditions
capable of being waived, and upon consummation of the Merger, the shares of
Regions Common Stock issued pursuant to the Merger will be duly authorized,
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the reference to Lange, Simpson, Robinson &
Somerville LLP under the caption "Opinions" in the proxy statement/prospectus
forming a part of the registration statement.
Very truly yours,
/s/ Lange, Simpson, Robinson & Somerville LLP
<PAGE> 1
EXHIBIT 8
[ALSTON & BIRD LLP LETTERHEAD]
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
FORM OF TAX OPINION
July __, 1998
Regions Financial Corporation
417 N. 20th Street, Suite 1700
Birmingham, AL 35203
Etowah Bank
140 W. Main Street
Canton, Georgia 30114
Re: Agreement and Plan of Merger By and Between Etowah Bank. and
Regions Financial Corporation
Ladies and Gentlemen:
We have served as counsel to Regions Financial Corporation ("Regions")
in connection with the proposed reorganization of Regions and Etowah Bank
("Etowah") pursuant to the Agreement and Plan of Merger dated as of February 26,
1998 (the "Agreement") which provides for the acquisition of Etowah by Regions
pursuant to the merger ("Merger") of a newly formed, wholly-owned interim state
bank subsidiary of Regions to be organized under the laws of the State of
Georgia ("Regions Merger Subsidiary") with and into Etowah. All terms used
herein without definition shall have the respective meanings specified in the
Agreement, and unless otherwise specified, all section references herein are to
the Internal Revenue Code of 1986, as amended (the "Code"). In our capacity as
counsel to Regions, our opinion has been requested with respect to certain of
the federal income tax consequences of the Merger.
In rendering the opinions expressed herein, we have examined such
documents as we deemed appropriate, including:
(1) The Agreement; and
<TABLE>
<S> <C> <C>
1211 East Morehead Street 3605 Glenwood Avenue, Suite 310 601 Pennsylvania Avenue, N.W.
P. O. Drawer 34009 P. O. Drawer 31107 North Building, 11th Floor
Charlotte, NC 28234-4009 Raleigh, NC 27622-1107 Washington, DC 20004-2601
704-331-6000 919-420-2200 202-756-3300
Fax: 704-334-2014 Fax: 919-881-3175 Fax: 202-756-3333
</TABLE>
<PAGE> 2
Regions Financial Corporation
July __, 1998
Page 2
(2) The Registration Statement on Form S-4 filed by Regions with the
Securities and Exchange Commission under the Securities Act of 1933, on July __,
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 Etowah and Regions that the Agreement and the Registration Statement
accurately and completely describe the Merger and that the Merger will be
consummated in accordance with the Agreement and as described in the
Registration Statement.
In rendering the opinions expressed herein, we have relied with the
consent of Etowah and Regions upon the accuracy and completeness of the factual
statements and factual representations (which factual statements and factual
representations we have neither investigated nor verified) contained in the
certificates of Etowah and Regions to us dated July ___, 1998 and July ___,
1998, respectively, (the "Certificates"), which we have assumed are complete and
accurate as of the date hereof and will be complete and accurate as of the date
on which the Merger is consummated.
Based on the foregoing, and subject to the assumptions and
qualifications set forth in the Registration Statement under the heading
"Description of the Transaction--Federal Income Tax Consequences of the Merger,"
we are of the opinion that, under presently applicable federal income tax law:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and Regions and Etowah 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 Etowah Common Stock
upon the exchange in the Merger of all of their Etowah 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 Etowah Common Stock who exchange all of their Etowah Common Stock
solely for Regions Common Stock in the Merger will be the same as the tax basis
of the Etowah 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 Etowah Common Stock solely for Regions Common Stock in
the Merger will include the holding period of the Etowah Common Stock
surrendered in
<PAGE> 3
Regions Financial Corporation
July __, 1998
Page 3
exchange therefor, provided that such Etowah Common Stock is held as a capital
asset at the Effective Time.
5. The payment of cash to holders of Etowah 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 Etowah Common Stock in
exchange for Etowah Common Stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of such holder's
Etowah Common stock, subject to the provisions and limitations of Section 302 of
the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, and the factual statements and factual representations
set out in the Certificates, which we have assumed are true on the date hereof
and will be true on the date on which the Merger is consummated. Our opinions
cannot be relied upon if any of the facts pertinent to the Federal income tax
treatment of the Merger stated in such documents or any of the factual
statements or factual representations set out in the Certificates is, or later
becomes, inaccurate. Our opinions are limited to the tax matters specifically
covered thereby, and we have not been asked to address, nor have we addressed,
any other tax consequences of the Merger, including for example any issues
related to intercompany transactions, accounting methods, or changes in
accounting methods resulting from the Merger, or the consequences of the Merger
under state, local or foreign law.
We hereby consent to the use of this opinion and to the references made
to Alston & Bird LLP in the Registration Statement under the captions
"Summary--Federal Income Tax Consequences of the Merger" and "Description of
Transaction--Federal Income Tax Consequences of the Merger" and to the filing of
this opinion as an exhibit to the Registration Statement.
<PAGE> 4
Regions Financial Corporation
July __, 1998
Page 4
Very truly yours,
ALSTON & BIRD LLP
By:
---------------------------------------
Terence J. Greene, Partner
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Regions Financial
Corporation for the registration of up to 2,915,200 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 (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
July 8, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 16, 1998, except for note 15 as to
which the date is February 26, 1998, accompanying the financial statements of
Etowah Bank contained in the Form S-4 Registration Statement and Prospectus. We
consent to the use of the aforementioned report in this Form S-4 Registration
Statement and Prospectus and to the use of our name as it appears under the
caption "Experts."
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
July 9, 1998
<PAGE> 1
ETOWAH BANK
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 Etowah Bank (the "Bank") 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 Reorganization, dated as of
February 26, 1998, by and between the Bank and Regions Financial Corporation
(the "Regions") and the related Plan of Merger (together, the "Agreement")
pursuant to which an interim subsidiary of Regions will merge with and into the
Bank, with the Bank to become a wholly-owned subsidiary of Regions, and each
share of the Company's common stock (except for certain shares held by the Bank,
Regions, or their respective subsidiaries) will be converted into 3.2 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.
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.
