<PAGE> 1
As filed with the Securities and Exchange Commission on June 23, 1998
Registration No. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
Regions Financial Corporation
(Exact Name of Registrant as Specified in its Charter)
----------------------
<TABLE>
<S> <C> <C>
Delaware 6711 63-0589368
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
417 North 20th Street
Birmingham, AL 35203
(205) 326-7100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
Samuel E. Upchurch, Jr.
General Counsel and Corporate Secretary
417 North 20th Street
Birmingham, AL 35203
(205) 326-7860
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
<TABLE>
<S> <C> <C>
CHARLES C. PINCKNEY FRANK M. CONNER III STEVEN KAPLAN
LANGE, SIMPSON, ROBINSON & ALSTON & BIRD LLP ARNOLD & PORTER
SOMERVILLE LLP 601 PENNSYLVANIA AVENUE, N.W. 555 TWELFTH STREET, NW
417 NORTH 20TH STREET, SUITE 1700 NORTH BUILDING, SUITE 250 WASHINGTON, D.C. 20004-1202
BIRMINGHAM, AL 35203 WASHINGTON, D.C. 20004 (202) 942-5000
(205) 250-5000 (202) 508-3303
</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
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 64,764,991(1) $38.30882353(2) $2,481,070,577(2) $731,915.82 (3)
(551,907.00) (3)
------------
180,008.82
========================================================================================================================
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par value
$.625 per share, issuable by Regions Financial Corporation ("Regions") upon
consummation of the merger of First Commercial Corporation ("First
Commercial") with and into Regions.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee for the Regions
common stock is based on the average of the high and low sale prices of
First Commercial common stock on the Nasdaq National Market on June 16, 1998
($65.125), and computed based on the estimated maximum number of such
shares (38,097,053) that may exchanged for the securities being registered.
(3) In accordance with Rule 457(b), the filing fee of $551,907.00 paid pursuant
to Section 14(g) of the Securities Exchange Act of 1934, as amended, and
Rule 0-11 thereunder at the time of filing of the Joint Proxy Statement
included in this Registration Statement as preliminary proxy materials of
Regions and First Commercial has been credited to offset the $731,915.82
registration fee that would otherwise be payable.
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
(First Commercial Corporation Letterhead)
June 23, 1998
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
First Commercial Corporation ("First Commercial") to be held at the DoubleTree
Hotel, Grand Ballroom, 424 West Markham Street, Little Rock, Arkansas 72201 on
July 28, 1998, at 2:00 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 an Agreement and Plan of Merger, dated as of February 8, 1998 (the
"Agreement"), entered into with Regions Financial Corporation ("Regions")
pursuant to which First Commercial will merge (the "Merger") with and into
Regions, the subsidiaries of First Commercial will become subsidiaries of
Regions, and Regions as successor to First Commercial will continue the banking
operations of First Commercial's banking subsidiaries through Regions'
subsidiaries. Upon consummation of the Merger, each share of First Commercial
common stock issued and outstanding (together with any associated stock purchase
rights, but excluding certain shares held by First Commercial, Regions, or their
respective subsidiaries and excluding shares held by stockholders who perfect
their dissenters' rights) will be converted into 1.7 shares of Regions common
stock (the "Exchange Ratio"), (subject to possible adjustment as described in
the accompanying Joint Proxy Statement/Prospectus), with cash to be paid in lieu
of fractional share interests.
Regions is a regional bank holding company organized and existing under the
laws of the state of Delaware and headquartered in Birmingham, Alabama, with
banking operations located in Alabama, Florida, Georgia, Louisiana, South
Carolina, and Tennessee. As of March 31, 1998, 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 common stock is traded on the Nasdaq
National Market System under the symbol "RGBK". The closing price of Regions
common stock on June 19, 1998 was $39.75.
The accompanying Joint 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.
Consummation of the Merger is subject to certain conditions, including
approval of the Agreement by First Commercial stockholders and Regions
stockholders and approval of the Merger by various regulatory agencies.
Keefe, Bruyette & Woods, Inc., First Commercial's financial advisor, has
issued its opinion to your Board of Directors regarding the fairness to the
stockholders, from a financial point of view, of the Exchange Ratio. A copy of
the opinion is included as Appendix B to the Joint Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF FIRST COMMERCIAL HAS UNANIMOUSLY APPROVED AND
ADOPTED THE AGREEMENT AND CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AGREEMENT AND THE MERGER.
Stockholders of First Commercial 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 First Commercial shares in cash, as provided by
applicable law.
It is important to understand that approval of the Agreement requires the
affirmative vote of a majority of the outstanding shares of common stock of
First Commercial entitled to vote at the Special Meeting, not just a majority of
the votes cast. Consequently, a failure to vote will have the same effect as a
vote against the Agreement. Accordingly, whether or not you plan to attend the
Special Meeting, you are urged to complete, sign, and return promptly the
enclosed proxy card. If you attend the Special Meeting, you may vote in person
if you wish, even if you previously have returned your proxy card.
Sincerely,
/s/ Barnett Grace
Barnett Grace
Chairman, President,
and Chief Executive Officer
<PAGE> 3
FIRST COMMERCIAL CORPORATION
400 WEST CAPITOL AVENUE, LITTLE ROCK, ARKANSAS 72201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 28, 1998
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of First Commercial Corporation ("First Commercial") will be held at
the DoubleTree Hotel, Grand Ballroom, 424 West Markham Street, Little Rock,
Arkansas 72201 on July 28, 1998, at 2:00 p.m., local time, for the following
purposes:
1. Merger. To consider and vote on a proposal to approve the Agreement and
Plan of Merger, dated as of February 8, 1998 (the "Agreement"), by and between
First Commercial and Regions Financial Corporation ("Regions") pursuant to which
(i) First Commercial will merge with and into Regions (the "Merger") and (ii)
each share of First Commercial common stock issued and outstanding immediately
prior to the effective time of the Merger (together with any associated stock
purchase rights but excluding certain shares held by First Commercial, Regions,
or their respective subsidiaries, and excluding all shares held by stockholders
who perfect their dissenters' rights) will be converted into 1.7 shares of
Regions common stock, subject to possible adjustment, and with cash to be paid
in lieu of fractional share interests, all as described more fully in the
accompanying Joint Proxy Statement/Prospectus; and
2. Other Business. To transact such other business as may properly come
before the Special Meeting, including adjourning the Special Meeting to permit,
if necessary, further solicitation of proxies.
Only stockholders of record at the close of business on June 12, 1998, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Stockholders of First Commercial 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 Joint Proxy Statement/Prospectus as Appendix D.
The Board of Directors of First Commercial unanimously recommends that
holders of First Commercial 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
First Commercial 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
/s/ Donna Rogers
Donna Rogers
Corporate Secretary
June 23, 1998
<PAGE> 4
(Regions(r) Financial Corp. Logo)
June 23, 1998
Dear Stockholder:
You are cordially invited to attend the twenty-seventh Annual Meeting of
Stockholders of Regions Financial Corporation to be held at 10:00 a.m. on July
29, 1998, in Regions Training Center, located at 298 West Valley Avenue,
Birmingham, Alabama.
At the Annual Meeting, you will be asked to consider and vote on a proposal
to approve the Agreement and Plan of Merger, dated as of February 8, 1998 (the
"Agreement"), entered into with First Commercial Corporation ("First
Commercial") pursuant to which First Commercial will merge with and into Regions
(the "Merger"), with Regions as the surviving corporation. Upon consummation of
the Merger, each share of First Commercial common stock issued and outstanding
immediately prior to the effective time of the Merger (together with any
associated stock purchase rights, but excluding certain shares held by Regions
or First Commercial, or their respective subsidiaries, and excluding all shares
held by stockholders who perfect their dissenters' rights) will be converted
into 1.7 shares of Regions common stock (subject to possible adjustment as
described in the accompanying Joint Proxy Statement/Prospectus)(the "Exchange
Ratio"), with cash to be paid in lieu of fractional share interests.
You will also be asked to consider and vote on the election of three
nominees to the Regions Board of Directors and on an amendment to the
Certificate of Incorporation of Regions to increase the number of authorized
shares of Regions common stock from 240,000,000 shares to 500,000,000 shares.
The accompanying Joint Proxy Statement/Prospectus includes a description of
the proposed Merger and provides other specific information concerning the
Annual Meeting. Please read these materials carefully and consider thoughtfully
the information set forth in them.
The Merger has been approved by your Board of Directors and is recommended
by the Board to you for approval. Your Board believes that, among other
benefits, the Merger will result in a company with greater financial strength
and increased opportunity and flexibility for profitable expansion and
diversification. Consummation of the Merger is subject to certain conditions,
including approval of the Agreement by First Commercial stockholders and by
Regions stockholders, and approval of the Merger by various regulatory agencies.
The proposed Merger with First Commercial is a significant step for Regions
and your vote on this matter is of great importance. Approval of the Agreement
will require the affirmative vote of a majority of the shares of Regions common
stock outstanding and entitled to vote at the Annual Meeting. Approval of the
proposed amendment to the Regions Certificate of Incorporation will require the
affirmative vote of at least 75% of the shares of Regions common stock
outstanding and entitled to vote at the Annual Meeting. Accordingly, whether or
not you plan to attend the Annual Meeting, you are urged to complete, sign, and
return promptly the enclosed proxy card. In the alternative, you may vote your
shares by telephone or via the Internet. Instructions are included with the
proxy card. If you attend the Annual Meeting, you may vote in person if you
wish, even if you previously have returned your proxy card or voted by telephone
or on the Internet.
J.P. Morgan Securities Inc., Regions' financial advisor, has issued its
opinion to your Board of Directors regarding the fairness, from a financial
point of view, to Regions of the Exchange Ratio in the Merger. A copy of the
opinion is included as Appendix C to the Joint Proxy Statement/Prospectus.
<PAGE> 5
THE BOARD OF DIRECTORS OF REGIONS HAS APPROVED AND ADOPTED THE AGREEMENT
AND CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND RECOMMENDS THAT YOU
VOTE FOR (I) THE ADOPTION OF THE AGREEMENT AND APPROVAL OF THE MERGER, (II) THE
ELECTION OF THE THREE NOMINEES TO REGIONS BOARD OF DIRECTORS, AND (III) THE
AMENDMENT TO THE REGIONS CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF REGIONS COMMON STOCK FROM 240,000,000 SHARES TO 500,000,000
SHARES.
A reception and coffee will be held from 9:00 a.m. until 10:00 a.m. in the
Reception Area of Regions' Training Center. We hope you will find it convenient
to come early enough to enjoy this social time prior to the stockholders'
meeting.
Sincerely,
/s/ J. Stanley Mackin
J. Stanley Mackin
Chairman of the Board
<PAGE> 6
REGIONS FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 29, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Regions
Financial Corporation ("Regions") will be held in Regions' Training Center,
located at 298 West Valley Avenue, Birmingham, Alabama, on July 29, 1998, at
10:00 a.m. local time, for the purpose of considering and acting on the
following:
1. Merger. To consider and vote on a proposal to adopt the Agreement and
Plan of Merger, dated as of February 8, 1998 (the "Agreement"), entered into
with First Commercial Corporation ("First Commercial") pursuant to which (i)
First Commercial will merge (the "Merger") with and into Regions, (ii) each
share of the $3.00 par value common stock of First Commercial issued and
outstanding at the effective time of the Merger (together with any associated
stock purchase rights, but excluding certain shares held by Regions, First
Commercial, or their respective subsidiaries and excluding all shares held by
stockholders who perfect their dissenters' rights) will be converted into 1.7
shares of the $.625 par value common stock of Regions ("Regions Common Stock"),
subject to possible adjustment, with cash to be paid in lieu of fractional share
interests, (iii) Regions will assume the obligations of First Commercial under
various stock plans and programs, and (iv) following the Merger, four current
directors of First Commercial will be elected to the Board of Directors of
Regions, all as more fully described in the accompanying Joint Proxy Statement/
Prospectus.
2. Election of Directors. To elect the three nominees named in the Joint
Proxy Statement/Prospectus as directors to serve for three year terms or until
their successors have been elected and qualified.
3. Amendment to Certificate of Incorporation. To consider and vote on a
proposal to approve an amendment to the Certificate of Incorporation to increase
the number of authorized shares of Regions Common Stock from 240,000,000 shares
to 500,000,000 shares.
4. Other Business. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 1, 1998, are
entitled to receive notice of and to vote at the meeting. A complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder shall be open to examination by any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting at the main office of Regions
Bank, 417 North 20th Street, Birmingham, Alabama. Stockholders are invited to
attend the meeting in person.
PLEASE SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
By Order of the Board of Directors
/s/ Samuel E. Upchurch, Jr.
Samuel E. Upchurch, Jr.
Corporate Secretary
June 23, 1998
<PAGE> 7
<TABLE>
<S> <C>
REGIONS FINANCIAL CORPORATION FIRST COMMERCIAL CORPORATION
PROXY STATEMENT FOR PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 29, 1998 TO BE HELD JULY 28, 1998
</TABLE>
REGIONS FINANCIAL CORPORATION
PROSPECTUS
COMMON STOCK
(PAR VALUE $.625)
UP TO 64,764,991 SHARES
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement") 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 First Commercial
Corporation, a bank holding company organized and existing under the laws of the
state of Arkansas ("First Commercial") upon consummation of the proposed merger
(the "Merger") described herein, by which First Commercial will merge with and
into Regions pursuant to the terms of an Agreement and Plan of Merger, dated as
of February 8, 1998, by and between Regions and First Commercial (the
"Agreement").
On the date and at the time the Merger becomes effective (the "Effective
Time"), except as otherwise described herein, (i) First Commercial will merge
with and into Regions, (ii) each share of the $3.00 par value common stock of
First Commercial ("First Commercial Common Stock") issued and outstanding
immediately prior to the effective time of the Merger (together with any
associated Preferred Stock Purchase Rights (as defined in the Agreement) but
excluding shares held by First Commercial, 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 of First Commercial who perfect their dissenters' rights) will be
converted into 1.7 shares of Regions Common Stock, subject to possible
adjustment (the "Exchange Ratio"), with cash to be paid in lieu of fractional
share interests, all as more fully described herein. A copy of the Agreement is
attached to this Joint Proxy Statement as Appendix A.
As a result of the Merger, the separate existence of First Commercial will
cease, the subsidiaries of First Commercial will become subsidiaries of Regions,
and Regions as successor to First Commercial will continue the banking
operations of First Commercial'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 $32.40 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 First Commercial 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 First Commercial Common Stock partial
protection against a decline in value of Regions Common Stock to a per share
amount below the lesser of (i) $32.40 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.
(continued on next page)
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
JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT IS JUNE 23, 1998.
<PAGE> 8
(continued from cover page)
In making its determination of whether to terminate the Agreement, the
Board of Directors of First Commercial (the "First Commercial 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 First Commercial 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' assessment
of First Commercial'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 First Commercial's right to terminate the Agreement,
the First Commercial Board may elect to consummate the Merger without
terminating the Agreement, notwithstanding approval of the Agreement by the
holders of First Commercial Common Stock.
Regions Common Stock and First Commercial Common Stock are both traded on
the Nasdaq National Market System ("Nasdaq NMS") under the symbols "RGBK" and
"FCLR", respectively. The last reported sale prices per share of Regions Common
Stock and First Commercial Common Stock as of June 19, 1998 (the latest
practicable trading day before the printing of this Joint Proxy Statement) were
$39.75 and $67.03 respectively. See "Summary -- Comparative Market Prices of
Common Stock" and "Comparative Market Prices and Dividends." The market prices
of Regions Common Stock and First Commercial Common Stock may change prior to
and, in the case of Regions, following consummation of the Merger.
This Joint Proxy Statement is being furnished (a) to the stockholders of
Regions in connection with the solicitation of proxies by the Board of Directors
of Regions (the "Regions Board") for use at its annual meeting of stockholders,
including any adjournment or postponement thereof (the "Regions Annual
Meeting"), to be held on July 29, 1998, to consider and vote on (i) the proposed
Merger, (ii) the election of three nominees as directors of Regions, and (iii) a
proposed amendment to Regions' Certificate of Incorporation (the "Regions
Certificate") increasing the number of authorized shares of Regions Common Stock
from 240,000,000 shares to 500,000,000 shares, and (b) to the stockholders of
First Commercial in connection with the solicitation of proxies by the First
Commercial Board for use at its special meeting of stockholders, including any
adjournment or postponement thereof (the "First Commercial Special Meeting"), to
be held on July 28, 1998, to consider and vote on the proposed Merger and
related matters.
This Joint Proxy Statement and the accompanying proxy cards are first being
mailed to stockholders of First Commercial and Regions on or about June 23,
1998.
<PAGE> 9
AVAILABLE INFORMATION
Regions (File No. 0-6159) and First Commercial (File No. 0-9676) are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, file 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 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, including First Commercial
and Regions.
This Joint Proxy Statement 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 Joint Proxy Statement 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. Each of
Regions Common Stock and First Commercial Common Stock is traded in the Nasdaq
NMS. Reports, proxy statements, and other information concerning Regions and
First Commercial 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 JOINT PROXY STATEMENT, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY REGIONS OR FIRST COMMERCIAL. THIS JOINT PROXY
STATEMENT 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 JOINT PROXY STATEMENT 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 FIRST COMMERCIAL 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 Joint Proxy
Statement with respect to Regions was supplied by Regions, and all information
included or incorporated by reference herein with respect to First Commercial
was supplied by First Commercial.
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;
2. Regions' Quarterly Report 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.
i
<PAGE> 10
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 Regions Annual Report to Stockholders are NOT incorporated herein and are
not a part of the Registration Statement.
The following documents previously filed with the SEC by First Commercial
pursuant to the Exchange Act are hereby incorporated by reference herein:
1. First Commercial's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997;
2. First Commercial's Quarterly Report on Form 10-Q for the three
months ended March 31, 1998; and
3. First Commercial's Current Report on Form 8-K, dated as of February
8, 1998, and filed with the SEC on February 13, 1998.
All documents filed by Regions and First Commercial pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this Joint
Proxy Statement and prior to the date of the First Commercial Special Meeting
shall be deemed to be incorporated by reference in this Joint Proxy Statement
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 JOINT PROXY STATEMENT 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), IF FILED BY REGIONS,
FROM RONALD C. JACKSON, STOCKHOLDER ASSISTANCE, REGIONS FINANCIAL CORPORATION,
417 NORTH 20TH STREET, BIRMINGHAM, ALABAMA 35203 (TELEPHONE (205) 326-7090), AND
IF FILED BY FIRST COMMERCIAL, FROM J. LYNN WRIGHT, FIRST COMMERCIAL CORPORATION,
400 WEST CAPITOL AVENUE, LITTLE ROCK, ARKANSAS 72201 (TELEPHONE (501) 371-7000).
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY JULY 22, 1998.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Joint Proxy Statement, 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.
More specifically, Regions' current report on Form 8-K filed with the SEC
on February 9, 1998, pertaining to the Merger, includes certain forward-looking
statements regarding each of Regions, First Commercial, and the combined company
following the Merger, including statements relating to cost savings, enhanced
revenues, accretion to reported earnings that may be realized from the Merger,
and certain restructuring and merger-related charges expected to be incurred in
connection with the Merger. Such forward-looking statements involve certain
risks and uncertainties, including a variety of factors that may
ii
<PAGE> 11
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 Merger and Regions' other pending acquisitions may not be fully
realized or realized within the expected time frame; (ii) revenues following the
Merger and the other pending acquisitions may be lower than expected, or deposit
attrition, operating costs or customer loss and business disruption following
the Merger 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 Merger 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.
iii
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... i
DOCUMENTS INCORPORATED BY REFERENCE......................... i
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... ii
SUMMARY..................................................... 1
The Parties............................................... 1
Meetings of Stockholders.................................. 2
The Merger................................................ 3
Additional Matters Relating to Regions' Annual Meeting.... 6
Comparative Market Prices of Common Stock................. 7
Comparative Per Share Data................................ 7
Selected Financial Data................................... 9
RECENT DEVELOPMENTS......................................... 13
First Commercial's Acquisition of Kemmons Wilson, Inc..... 13
Regions' Acquisitions..................................... 13
Impact of the Merger on Region's Financial Performance.... 14
MEETINGS OF STOCKHOLDERS.................................... 16
Date, Place, Time, and Purpose............................ 16
Record Dates, Voting Rights, Required Votes, and
Revocability of Proxies................................ 16
DESCRIPTION OF THE TRANSACTION.............................. 19
General................................................... 19
Possible Adjustment of Exchange Ratio..................... 19
Treatment of First Commercial Options..................... 22
Background of and Reasons for the Merger.................. 22
Opinion of First Commercial's Financial Advisor........... 29
Opinion of Regions' Financial Advisor..................... 32
Effective Time of the Merger.............................. 37
Distribution of Regions Stock Certificates and Payment for
Fractional Shares...................................... 38
Conditions to Consummation of the Merger.................. 38
Regulatory Approvals...................................... 39
Waiver, Amendment, and Termination of the Agreement....... 39
Conduct of Business Pending the Merger.................... 41
Management Following the Merger........................... 43
Interests of Certain Persons in the Merger................ 43
Dissenting Stockholders................................... 47
Federal Income Tax Consequences of the Merger............. 49
Accounting Treatment...................................... 50
Expenses and Fees......................................... 50
Resales of Regions Common Stock........................... 50
Option Agreement.......................................... 51
PRO FORMA FINANCIAL INFORMATION............................. 54
Pro Forma Combined Condensed Statement of Condition....... 54
Pro Forma Combined Condensed Statements of Income for
Regions and First Commercial........................... 56
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 59
CERTAIN REGULATORY CONSIDERATIONS........................... 60
General................................................... 60
Payment of Dividends...................................... 61
Capital Adequacy.......................................... 61
Prompt Corrective Action.................................. 62
FDIC Insurance Assessments................................ 63
</TABLE>
iv
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS.............. 64
Antitakeover Provisions Generally......................... 64
Authorized Capital Stock.................................. 64
Amendment of Certificate or Articles of Incorporation and
Bylaws................................................. 65
Classified Board of Directors and Absence of Cumulative
Voting................................................. 66
Removal of Directors...................................... 66
Limitations on Director Liability......................... 66
Indemnification........................................... 67
Special Meetings of Stockholders.......................... 67
Actions by Stockholders Without a Meeting................. 68
Stockholder Nominations................................... 68
Mergers, Consolidations, and Sales of Assets Generally.... 68
Business Combinations with Certain Persons................ 69
Dissenters' Rights of Appraisal........................... 70
Stockholders' Rights to Examine Books and Records......... 70
Dividends................................................. 70
ADDITIONAL MATTERS RELATING TO REGIONS' ANNUAL MEETING...... 71
Voting Securities and Principal Holders Thereof........... 71
Security Ownership of Certain Beneficial Owners........... 71
Security Ownership of Directors and Management............ 71
Election of Directors..................................... 72
Information on Directors.................................. 72
The Board and Committees of the Board..................... 74
Section 16 Transactions................................... 74
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS............... 75
EXECUTIVE COMPENSATION REPORT............................... 79
AMENDMENT OF REGIONS' CERTIFICATE OF INCORPORATION.......... 83
DESCRIPTION OF REGIONS CAPITAL STOCK........................ 83
STOCKHOLDER PROPOSALS....................................... 84
EXPERTS..................................................... 84
OPINIONS.................................................... 84
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Opinion of Keefe, Bruyette & Woods, Inc....... B-1
APPENDIX C -- Opinion of J.P. Morgan Securities Inc......... C-1
APPENDIX D -- Sections 4-27-1301 et seq., Arkansas Business
Corporation Act, pertaining to dissenters' rights......... D-1
APPENDIX E -- Proposed amendment to Article Fourth of
Regions' Certificate of Incorporation..................... E-1
</TABLE>
v
<PAGE> 14
SUMMARY
The following is a summary of certain information included in this Joint
Proxy Statement 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
Joint Proxy Statement. Stockholders are urged to read carefully the entire Joint
Proxy Statement, including the Appendices. As used in this Joint Proxy
Statement, the terms "Regions" and "First Commercial" refer to those entities,
respectively, and, where the context requires, to those entities and their
respective subsidiaries.
THE PARTIES
First Commercial. First Commercial is a bank holding company organized and
existing under the laws of the state of Arkansas, and headquartered in Little
Rock, Arkansas. First Commercial operates principally through its subsidiary
banks (the "First Commercial Banks"), which provide a range of consumer and
commercial banking services through approximately 165 banking offices in
Arkansas, Texas, Tennessee, Louisiana and Oklahoma. At March 31, 1998, First
Commercial had 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. First Commercial's principal
executive office is located at 400 West Capitol Avenue, Little Rock, Arkansas
72201 and its telephone number at such address is (501) 371-7000.
On March 25, 1998, First Commercial completed its acquisition of Kemmons
Wilson, Inc. On that date Kemmons Wilson operated 15 banking offices in Arkansas
and Tennessee and had total consolidated assets of approximately $395 million,
total consolidated deposits of approximately $334 million, and total
consolidated stockholders' equity of approximately $15 million.
Additional information with respect to First Commercial and its
subsidiaries is included in documents incorporated by reference in this Joint
Proxy Statement. Copies of such documents, including First Commercial's
Quarterly Report on Form 10-Q for the three months ended March 31, 1998, Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, and Current
Report on Form 8-K dated as of February 8, 1998, are incorporated by reference
in this Joint Proxy Statement. See "Documents Incorporated by Reference."
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, 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 currently 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.
Since December 31, 1997, Regions has completed acquisitions of six
financial institutions and has entered into definitive agreements or letters of
intent to acquire six financial institutions, including First Commercial. For
information concerning Regions' acquisition activity, including the completed
and other pending acquisitions, see "Documents Incorporated by Reference" and
"Recent Developments -- Regions' Acquisitions."
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.
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<PAGE> 15
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 Joint Proxy Statement.
See "Available Information" and "Documents Incorporated by Reference."
MEETINGS OF STOCKHOLDERS
First Commercial. The First Commercial Special Meeting will be held at
2:00 p.m., local time, on July 28, 1998, at the DoubleTree Hotel, Grand
Ballroom, 424 West Markham Street, Little Rock, Arkansas 72201, 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 "Meetings of
Stockholders -- Date, Place, Time, and Purpose."
The First Commercial Board has fixed the close of business on June 12,
1998, as the record date (the "First Commercial Record Date") for determination
of the stockholders entitled to notice of and to vote at the First Commercial
Special Meeting Only holders of record of First Commercial Common Stock on the
First Commercial Record Date will be entitled to vote at the First Commercial
Special Meeting. Each share of First Commercial Common Stock is entitled to one
vote. Stockholders who execute proxies retain the right to revoke them at any
time prior to being voted at the First Commercial Special Meeting. As of the
First Commercial Record Date, there were 37,688,971 shares of First Commercial
Common Stock outstanding and entitled to be voted.
Approval of the Agreement by the stockholders of First Commercial will
require the affirmative vote of a majority of the outstanding shares of First
Commercial Common Stock entitled to vote at the First Commercial Special
Meeting.
The directors and executive officers of First Commercial and their
affiliates beneficially owned, as of the First Commercial Record Date, 6,077,465
shares (or approximately 16.13% of the outstanding shares) of First Commercial
Common Stock. The directors and executive officers of Regions and their
affiliates beneficially owned, as of the First Commercial Record Date, no shares
of First Commercial Common Stock. See "Meetings of Stockholders -- Record Dates,
Voting Rights, Required Votes, and Revocability of Proxies."
Regions. The Regions Annual Meeting will be held at the Regions Training
Center located at 298 West Valley Avenue, Birmingham, Alabama, on July 29, 1998,
at 10:00 a.m. local time. At the Regions Annual Meeting, Regions stockholders
will be asked to consider and vote on (i) a proposal to approve the Merger and
adopt the Agreement, (ii) a proposal to elect three nominees as directors of
Regions, and (iii) a proposal to amend the Regions Certificate to increase the
number of authorized shares of Regions Common Stock from 240,000,000 shares to
500,000,000 shares. See "Meetings of Stockholders -- Date, Place, Time, and
Purpose."
The Regions Board has fixed the close of business on June 1, 1998, as the
record date (the "Regions Record Date") for determination of the stockholders
entitled to notice of and to vote at the Regions Annual Meeting. Only holders of
record of shares of Regions Common Stock on the Regions Record Date will be
entitled to notice of and to vote at the Regions Annual Meeting. Each share of
Regions Common Stock is entitled to one vote. Stockholders who execute proxies
retain the right to revoke them at any time prior to being voted at the Regions
Annual Meeting. On the Regions Record Date, there were 149,910,562 shares of
Regions Common Stock issued and outstanding. See "Meetings of
Stockholders -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
Adoption of the Agreement and approval of the Merger by the stockholders of
Regions will require the affirmative vote of a majority of the outstanding
shares of Regions Common Stock entitled to vote at the Regions Annual Meeting.
Approval of the proposed amendment to the Regions Certificate will require the
affirmative vote of at least 75% of the outstanding shares of Regions Common
Stock entitled to vote at the
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<PAGE> 16
Regions Annual Meeting. The amendment of the Regions Certificate is not a
condition to consummation of the Merger. In the election of directors, nominees
may be elected by a plurality vote, with the three nominees receiving the
highest number of votes elected.
The directors and executive officers of Regions and their affiliates
beneficially owned, as of the Regions Record Date, 5,374,792 shares (or
approximately 3.59% of the outstanding shares) of Regions Common Stock. The
directors and executive officers of First Commercial and their affiliates
beneficially owned no shares of Regions Common Stock. See "Meetings of
Stockholders -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
THE MERGER
The Agreement provides generally for the acquisition of First Commercial by
Regions pursuant to the Merger of First Commercial with and into Regions, with
Regions as the surviving corporation resulting from the Merger. At the Effective
Time, each share of First Commercial Common Stock then issued and outstanding
(together with any associated Preferred Stock Purchase Rights (as defined in the
Agreement) but excluding shares held by First Commercial, 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 shares
held by First Commercial stockholders who perfect their dissenters' rights) will
be converted into 1.7 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 First
Commercial stockholder would be entitled upon consummation of the Merger, based
on the closing price of Regions Common Stock on the Nasdaq NMS (as reported by
The Wall Street Journal, or, if not reported thereby, by another authoritative
source selected by Regions) on the last trading day immediately preceding the
Effective Time. See "Description of the Transaction -- General."
Reasons for the Merger; Recommendations of the Boards of Directors of First
Commercial and Regions. The First Commercial Board believes that the Agreement
and the Merger are in the best interests of First Commercial and its
stockholders, and the Regions Board believes that the Agreement and the Merger
are in the best interests of Regions and its stockholders. Each Board has
approved the matters to be adopted or approved by its respective stockholders.
The First Commercial Board recommends that the First Commercial stockholders
vote FOR approval of the Agreement. The Regions Board recommends that the
Regions stockholders vote FOR adoption of the Agreement and approval of the
Merger. The Boards of Directors of First Commercial and Regions believe that,
among other things, the Merger will result in a company with expanded
opportunities for profitable growth and that the combined resources and capital
of First Commercial and Regions will provide an enhanced ability to compete in
the changing and competitive financial services industry. See "Description of
the Transaction -- Background of and Reasons for the Merger."
Opinions of Financial Advisors. Keefe, Bruyette & Woods, Inc. ("KBW"),
First Commercial's financial advisor, has rendered an opinion to First
Commercial that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters it considered
relevant, as of the date of its opinion, the Exchange Ratio was fair, from a
financial point of view, to the stockholders of First Commercial. The opinion of
KBW is included as Appendix B to this Joint Proxy Statement. First Commercial
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 First Commercial's Financial Advisor."
Similarly, J.P. Morgan Securities Inc. ("J.P. Morgan") has rendered an
opinion to Regions that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters it considered
relevant, as of the date of its opinion, the Exchange Ratio was fair, from a
financial point of view, to Regions. The opinion of J.P. Morgan is included as
Appendix C to this Joint Proxy Statement. Regions 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 Regions' Financial
Advisor."
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<PAGE> 17
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 Delaware Certificate of Merger and the Arkansas Articles of
Merger are filed and become effective with, respectively, the Delaware Secretary
of State and the Arkansas Secretary of State. Unless otherwise agreed upon by
Regions and First Commercial, 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 or before the 15th business day
following the last of the following events to 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 First Commercial and Regions
stockholders. 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 an exchange agent selected by Regions (the "Exchange Agent"), to mail
to the former stockholders of First Commercial a form letter of transmittal,
together with instructions for the exchange of such stockholders' certificates
representing shares of First Commercial Common Stock for certificates
representing shares of Regions Common Stock. FIRST COMMERCIAL 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"), which has been granted, and the bank regulatory authorities of
various states. Applications for the requisite approvals have been filed with
these agencies. Each of the applicable state regulatory authorities has yet to
issue its approval of the Merger. There can be no assurance that the approvals
of the state regulatory authorities 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 approvals of First Commercial and Regions
stockholders, receipt of an opinion of counsel as to the tax-free nature of
certain aspects of the Merger, receipt of a letter dated as of the Effective
Time from Regions' independent auditors to the effect that the Merger will
qualify for pooling-of-interests accounting treatment, 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
the mutual consent of the Boards of Directors of both First Commercial and
Regions, or by action of the Board of Directors of either company under certain
circumstances, including if the Merger is not consummated by December 31, 1998,
unless the failure to consummate by such time is due to a breach of the
Agreement by the party seeking to terminate. If the Merger is not consummated
for any reason, First Commercial will continue to operate as a bank holding
company under its present management. See "Description of the
Transaction -- Waiver, Amendment, and Termination of the Agreement."
Dissenting Stockholders. Holders of First Commercial 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
First Commercial Common Stock in cash in accordance with the applicable
provisions of the Arkansas Business Corporation Act of 1987 (the "ABCA"). The
procedures to be followed by dissenting stockholders are summarized under
"Description of the Transaction -- Dissenters' Rights." The applicable
provisions of the ABCA are reproduced as Appendix D.
Holders of Regions Common Stock do not have dissenters' rights with respect
to the Merger.
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<PAGE> 18
Interests of Certain Persons in the Merger. Following the Merger, those
persons serving as directors of Regions immediately prior to the Effective Time
will continue as directors of Regions. In addition, at the first scheduled
meeting of the Regions Board of Directors following the Merger, the number of
directors of Regions shall be increased by four and John W. Allison, Barnett
Grace, Frank D. Hickingbotham, and Michael W. Murphy, each of whom is currently
a Director of First Commercial ("First Commercial Nominees"), shall be elected
to serve as Directors of Regions to serve as members of such classes of Regions
Board of Directors as necessary so that each class of the Regions Board of
Directors is as nearly as equal in number as practicable. The First Commercial
Nominees will receive consistent with Regions' normal practices the fees paid to
all Regions Directors for such Board service, currently a retainer of $10,000
per year and $1,000 per meeting. All other current First Commercial Directors
shall be offered positions as directors of a current First Commercial subsidiary
with operations in Arkansas, Texas and Oklahoma, and shall be compensated for
such service consistent with First Commercial's current practices for such board
service. If following the Merger, First Commercial subsidiaries on which current
First Commercial directors serve as directors are eliminated, such First
Commercial directors shall be offered positions on Regions' advisory boards for
Arkansas, Texas or Oklahoma and shall be compensated for such service consistent
with First Commercial's current practices for advisory board service. The
Agreement also contains provisions relating to, among other things, employee
benefits, indemnification of directors and officers, and directors' and
officers' liability insurance following the Merger.
As of the Effective Time, Regions will enter into a three-year employment
agreement with Barnett Grace, Chairman, Chief Executive Officer and President of
First Commercial, providing that Mr. Grace will be appointed Regional President
of Regions' operations in Arkansas, Texas, and Oklahoma and a member of Regions'
Executive Council. Under the terms of his employment agreement, Mr. Grace will
be guaranteed a minimum annual salary of $435,000 and a minimum annual bonus of
$400,900 for fiscal year 1999 and $340,000 in each year thereafter. At the
Effective Time, Mr. Grace will also be granted options to purchase 35,000 shares
of Regions Common Stock at an exercise price equal to the then-current market
price of Regions Common Stock and a restricted stock award covering $2,750,000
worth of Regions Common Stock based on the then-current market price of Regions
Common Stock. At the Effective Time, Regions will enter into three-year
employment agreements with three other current executive officers of First
Commercial which will provide for (i) minimum annual salaries, in the aggregate,
of $692,000, (ii) minimum annual bonuses, in the aggregate, of $379,880 for
fiscal year 1999 and $283,000 in each year thereafter, (iii) options in the
aggregate to purchase 45,000 shares of Regions Common Stock, and (iv) restricted
stock awards in the aggregate covering $3,250,000 worth of Regions Common Stock.
The Employment Agreements also provide these First Commercial executives with
severance benefits under certain circumstances during the terms of the
agreements. Regions has also agreed to employ three other current executive
officers of First Commercial for a period of one year following the Merger
during which period these individuals will be paid (i) minimum annual salaries,
in the aggregate, of $561,000, and (ii) minimum annual bonuses, in the
aggregate, of $332,000. See "Description of the Transaction -- Management
Following the Merger" and "-- Interests of Certain Persons in the Merger." The
terms of the Merger were negotiated for First Commercial primarily by the First
Commercial Executive Committee with the assistance of representatives from KBW.
See "Description of the Transaction -- Background of and Reasons for the
Merger." The First Commercial Executive Committee is comprised of eight
nonmanagement directors and Mr. Grace and Edwin P. Henry, one of the individuals
who Regions has agreed to employ for a period of one year following the Merger.
The First Commercial Board was aware of these interests and considered
them, among other matters, in approving the Agreement and the transactions
contemplated thereby. The base annual salaries, annual bonuses, stock option
grants and termination and other employee benefits offered by Regions under its
proposed three-year employment agreements with Mr. Grace and the three other
First Commercial executives are comparable to the amounts of such compensation
and benefits each would have received as an executive of First Commercial during
fiscal year 1998 if First Commercial had remained an independent institution. It
is not anticipated that the executives would have received awards comparable to
the awards of restricted Regions Common Stock during fiscal year 1998. The
restricted stock awards were offered to Mr. Grace and the three other First
Commercial executives receiving such awards by Regions as an inducement to
accept employment with Regions following the Merger because Regions views the
retention of these individuals as important to
5
<PAGE> 19
the operation of the combined entity following the Merger, particularly in the
Arkansas, Texas and Oklahoma region, and partially as consideration for these
individuals relinquishing their existing severance/change in control agreements.
Federal Income Tax Consequences of the Merger. Consummation of the Merger
is conditioned on the receipt of an opinion of Alston & Bird LLP in substance
that, among other things, the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the exchange in the Merger of First Commercial Common Stock for
Regions Common Stock will not give rise to gain or loss to First Commercial
stockholders, except to the extent of any cash received in lieu of fractional
share interests or as a result of exercise of dissenters' rights. Gain
recognition, if any, will not be in excess of the amount of cash received.
Subject to the provisions and limitations of Section 302(a) of the Code, gain or
loss will be recognized upon the receipt of cash in lieu of fractional share
interests or 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 FIRST
COMMERCIAL 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).
Accounting Treatment. It is intended that the Merger will be accounted for
as a pooling of interests for accounting and financial reporting purposes. It is
a condition to consummation of the Merger that Regions and First Commercial
receive a letter from Regions' independent accountants, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment. See
"Description of the Transaction -- Accounting Treatment."
Differences in Stockholders' Rights. At the Effective Time, First
Commercial stockholders, whose rights are presently governed by the ABCA and by
First Commercial's Second Amended and Restated Articles of Incorporation (the
"First Commercial Articles") and Bylaws, will automatically become Regions
stockholders, and their rights as Regions stockholders will be determined by the
Delaware General Corporation Law (the "DGCL") and by the Regions Certificate and
Bylaws. The rights of Regions stockholders differ from the rights of First
Commercial 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."
Option Agreement. First Commercial, as issuer, and Regions, as grantee,
entered into a stock option agreement (the "Option Agreement") pursuant to which
First Commercial granted Regions an option to purchase, under certain
circumstances and subject to certain adjustments and limitations, up to
7,480,450 shares of First Commercial Common Stock at a price of $59.00 per
share. The Option Agreement is exercisable upon the occurrence of certain events
that create the potential for another party to acquire control of First
Commercial. To the best knowledge of First Commercial, no such event which would
permit exercise of the Option Agreement has occurred as of the date of this
Joint Proxy Statement. The Option Agreement was granted by First Commercial as a
condition of and in consideration for Regions' entering into the Agreement and
is intended to increase the likelihood that the Merger will be effected by
making it more difficult and more expensive for a third party to acquire control
of First Commercial. See "Description of the Transaction -- Option Agreement."
ADDITIONAL MATTERS RELATING TO THE REGIONS ANNUAL MEETING
At the Regions Annual Meeting, the stockholders of Regions also will be
voting on (i) a proposal to elect three nominees as directors of Regions and
(ii) a proposal to amend the Regions Certificate to increase the number of
authorized shares of Regions Common Stock from 240,000,000 shares to 500,000,000
shares.
6
<PAGE> 20
COMPARATIVE MARKET PRICES OF COMMON STOCK
Regions Common Stock and First Commercial Common Stock are traded in the
over-the-counter market and are quoted in the Nasdaq NMS, under the symbols
"RGBK" and "FCLR," respectively. The following table sets forth the last sale
price of Regions Common Stock, the last sale price of First Commercial Common
Stock, and the equivalent per share price (as explained below) of First
Commercial Common Stock at the close of trading on February 6, 1998, the last
trading day immediately preceding public announcement of the Merger, and June
19, 1998, the latest practicable date prior to the mailing of this Joint Proxy
Statement:
<TABLE>
<CAPTION>
EQUIVALENT
PER SHARE
PRICE OF
REGIONS FIRST COMMERCIAL FIRST COMMERCIAL
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK COMMON STOCK
- -------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
February 6, 1998........................... $40.50 $66.88 $68.85
June 19, 1998.............................. 39.75 67.03 67.58
------ ------ ------
</TABLE>
The equivalent per share price of First Commercial 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 1.7. Stockholders are advised
to obtain current market quotations for Regions Common Stock and First
Commercial 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 First Commercial, (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 First Commercial Common Stock, giving effect to the
Merger. The Regions and First Commercial pro forma combined information and the
First Commercial pro forma equivalent information give effect to the Merger on a
pooling-of-interests accounting basis and assume an Exchange Ratio of 1.7. 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 pro forma financial data does not give
effect to anticipated enhancements in revenue and reductions in expenses at
First Commercial in connection with the Merger.
7
<PAGE> 21
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Regions and
First Commercial, including the respective notes thereto, incorporated by
reference herein. Historical information has been adjusted to reflect a 2-for-1
stock split effected by Regions on June 13, 1997, a 5% stock dividend declared
by First Commercial in October 1996, and a 5% stock dividend declared by First
Commercial in November 1997. See "Documents Incorporated by Reference," and
"-- Selected Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------
1998 1997 1997 1996 1995
------ ----- --------- -------- --------
(UNAUDITED) (UNAUDITED EXCEPT REGIONS
AND FIRST COMMERCIAL HISTORICAL)
<S> <C> <C> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM 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
First Commercial historical................... .73 .60 2.26 2.20 1.91
First Commercial historical assuming
dilution................................... .72 .60 2.23 2.18 1.89
Regions and First Commercial pro forma
combined(1)................................ .53 1.92 1.67 1.45
Regions and First Commercial pro forma
combined assuming dilution(1).............. .52 1.88 1.64 1.43
First Commercial pro forma equivalent(2)...... .90 3.26 2.84 2.47
First Commercial pro forma equivalent assuming
dilution(2)................................ .88 3.20 2.79 2.43
DIVIDENDS DECLARED PER COMMON SHARE
Regions historical............................ $ .23 $ .20 $ .80 $ .70 $ .66
First Commercial historical................... .28 .23 .97 .80 .70
First Commercial pro forma equivalent(3)...... .39 .34 1.36 1.19 1.12
BOOK VALUE PER COMMON SHARE (PERIOD END)
Regions historical............................ $14.23
First Commercial historical................... 16.91
Regions and First Commercial pro forma
combined(1)................................ 12.65
First Commercial pro forma equivalent(2)...... 21.51
</TABLE>
- ---------------
(1) Represents the combined results of Regions and First Commercial as if the
Merger were consummated on January 1, 1995 (or March 31, 1998 in the case of
Book Value Per Common Share Data), and were accounted for as a pooling of
interests.
(2) Represents pro forma combined information multiplied by the Exchange Ratio
of 1.7 shares of Regions Common Stock for each share of First Commercial
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 $32.40. 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 1.7 shares of Regions Common Stock for each share of
First Commercial Common Stock.
8
<PAGE> 22
SELECTED FINANCIAL DATA
The following tables present certain selected historical financial
information for Regions and First Commercial. Regions' historical per share
information has been adjusted to reflect a 2-for-1 stock split effected by
Regions on June 13, 1997, and First Commercial's historical per share
information has been adjusted to reflect a 5% stock dividend declared by First
Commercial in October 1996, and a 5% stock dividend declared by First Commercial
in November 1997. The data should be read in conjunction with the historical
financial statements, related notes, and other financial information concerning
Regions and First Commercial incorporated by reference or included herein.
Interim unaudited data for the three months ended March 31, 1998 and 1997 of
Regions and First Commercial reflect, in the opinion of the respective
managements of Regions and First Commercial, 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."
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 gains
(losses).................. 77,380 64,031 258,012 217,624 187,830 171,705 169,318
Security gains (losses)..... (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......... 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
</TABLE>
9
<PAGE> 23
<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>
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>
- ---------------
(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 capital 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 FIRST COMMERCIAL
<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.............. $ 123,014 $ 122,930 $ 497,170 $ 456,002 $ 386,265 $ 301,908 $ 266,439
Total interest expense............. 52,617 54,158 214,202 204,096 175,991 120,715 104,767
Net interest income................ 70,397 68,772 282,968 251,906 210,274 181,193 161,672
Provisions for loan losses......... 2,051 2,842 28,332 13,269 4,368 (2,021) 5,018
Net interest income after loan loss
provision........................ 68,346 65,930 254,636 238,637 205,906 183,214 156,654
Total noninterest income excluding
security gains (losses).......... 29,398 27,915 114,889 110,593 79,656 67,346 61,090
Security gains (losses)............ 154 10 (87) (43) (418) 177 340
Total noninterest expense.......... 56,934 59,146 241,302 229,153 188,018 167,128 145,738
Income tax expense................. 13,656 12,148 43,502 41,480 31,892 26,766 20,415
Income before extraordinary item... 27,308 22,561 84,634 78,554 65,234 56,843 51,931
Extraordinary item, net of income
taxes............................ -- -- 15,425 -- -- -- --
Net income......................... 27,308 22,561 100,059 78,554 65,234 56,843 51,931
PER SHARE DATA:
Income before extraordinary item --
basic............................ $ .73 $ .60 $ 2.26 $ 2.20 $ 1.91 $ 1.69 $ 1.51
Income before extraordinary item --
diluted.......................... .72 .60 2.23 2.18 1.89 1.68 1.49
Net income -- basic................ .73 .60 2.67 2.20 1.91 1.69 1.51
Net income -- diluted.............. .72 .60 2.64 2.18 1.89 1.68 1.49
Cash dividends..................... .28 .23 .97 .80 .70 .57 .46
Book value......................... 16.91 15.79 17.33 15.68 14.30 12.07 11.43
</TABLE>
10
<PAGE> 24
<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>
OTHER INFORMATION:
Average number of shares
outstanding...................... 37,318 37,433 37,486 35,648 34,221 33,545 33,663
Average number of shares
outstanding, assuming dilution... 37,844 37,863 37,922 36,033 34,539 33,802 33,970
STATEMENT OF CONDITION DATA (PERIOD
END)
Total assets....................... $7,382,089 $6,848,605 $6,887,252 $6,611,218 $6,290,178 $5,137,283 $4,771,664
Securities......................... 1,752,048 1,691,712 1,718,638 1,662,203 1,537,143 1,521,371 1,648,214
Loans, net of unearned income...... 4,643,100 4,306,855 4,317,631 4,024,635 3,855,388 3,031,050 2,529,219
Total deposits..................... 6,329,571 5,946,256 5,947,690 5,760,278 5,443,468 4,493,540 4,264,558
Long-term debt..................... 23,394 22,689 5,103 28,751 25,737 22,438 28,758
Stockholders' equity............... 635,929 591,399 651,113 557,600 507,106 402,734 385,532
PERFORMANCE RATIOS:
Return on average assets(1)........ 1.62% 1.34% 1.48% 1.25% 1.19% 1.16% 1.21%
Return on average stockholders'
equity(1)........................ 17.04 15.49 16.15 14.71 14.67 14.48 14.68
Net interest margin................ 4.67 4.60 4.69 4.51 4.34 4.18 4.25
Efficiency(2)...................... 56.34 60.30 59.84 62.40 63.83 65.98 64.07
Dividend payout.................... 37.98 42.95 37.20 33.59 34.29 33.61 30.14
ASSET QUALITY RATIOS:
Net charge-offs to average loans
net of unearned income(1)........ .23% .20% .33% .18% .07% .04% .14%
Problem assets to net loans and
other real estate(3)............. .98 .87 .94 .87 .36 .35 .48
Nonperforming assets to net loans
and other real estate(4)......... 1.19 1.04 1.13 .74 .53 .47 .63
Allowance for loan losses to loans,
net of unearned income........... 1.87 1.63 1.85 1.55 1.46 1.62 2.01
Allowance for loan losses to
nonperforming assets(4).......... 157.31 156.57 158.50 199.67 264.81 346.87 323.10
LIQUIDITY AND CAPITAL RATIOS:
Average stockholders' equity to
average assets................... 9.52% 8.67% 9.17% 8.50% 8.09% 8.00% 8.23%
Average loans to average
deposits......................... 73.52 71.98 72.98 71.95 70.38 62.70 59.55
Tier 1 risk-based capital(5)....... 11.58 11.91 12.74 11.60 11.51 12.06 13.78
Total risk-based capital(5)........ 12.58 12.79 13.60 12.46 12.34 12.92 15.19
Tier 1 leverage(5)................. 8.13 8.13 9.01 7.99 7.31 7.52 7.71
</TABLE>
- ---------------
(1) Interim period ratios are annualized.
(2) Noninterest expense divided by the sum of net interest income
(taxable-equivalent basis) and noninterest income net of gains (losses) from
security transactions.
(3) Problem assets include loans on a nonaccrual basis, restructured loans, and
foreclosed properties.
(4) Nonperforming assets include loans on a nonaccrual basis, restructured
loans, loans 90 days or more past due, and foreclosed properties.
(5) The required minimum Tier 1 and total capital ratios are 4% and 8%,
respectively. The minimum leverage ratio of Tier 1 capital to total assets
is 3% to 5%.
11
<PAGE> 25
SELECTED PRO FORMA COMBINED DATA FOR REGIONS AND FIRST COMMERCIAL
The following unaudited pro forma combined data give effect to the merger
of First Commercial as of the date or at the beginning of the periods indicated,
assuming such merger is treated as a pooling of interests. The unaudited pro
forma financial data are presented for informational purposes only and are not
necessarily indicative of the combined financial position or results of
operations which actually would have occurred if the Merger had been consummated
at the date and for the periods indicated or which may be obtained in the
future. The pro forma financial data does not give effect to anticipated
enhancements in revenue and reductions in expenses at First Commercial in
connection with the Merger. The information should be read in conjunction with
the unaudited pro forma financial information appearing elsewhere in this Joint
Proxy Statement. See "-- Comparative Per Share Data" and "Pro Forma Financial
Information."
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1998
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C>
STATEMENT OF CONDITION DATA:
Total assets.............................................. $33,033,154
Loans, net of unearned income............................. 22,688,478
Total deposits............................................ 26,618,846
Other borrowed funds...................................... 1,688,196
Stockholders' equity...................................... 2,704,656
Book value per common share............................... 12.65
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ------------------------------------
1998 1997 1996 1995
--------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income...................... $608,730 $2,150,254 $1,842,124 $1,645,865
Total interest expense..................... 292,927 1,038,405 889,752 811,327
-------- ---------- ---------- ----------
Net interest income........................ 315,803 1,111,849 952,372 834,538
Provision for loan losses.................. 14,170 70,105 42,310 34,639
Net interest income after loan loss
provision............................... 301,633 1,041,744 910,062 799,899
Total noninterest income................... 106,863 373,355 331,289 266,644
Total noninterest expense.................. 235,571 841,643 782,954 675,479
Income tax expense......................... 59,414 189,130 150,157 128,001
-------- ---------- ---------- ----------
Income before extraordinary item........... $113,511 $ 384,326 $ 308,240 $ 263,063
======== ========== ========== ==========
Income before extraordinary item per
share................................... $ 0.53 $ 1.92 $ 1.67 $ 1.45
Income before extraordinary item per share
assuming dilution....................... $ 0.52 1.88 1.64 1.43
Average common shares outstanding.......... 212,997 200,239 184,874 181,516
Average common shares outstanding assuming
dilution................................ 216,905 203,888 188,034 184,005
</TABLE>
12
<PAGE> 26
RECENT DEVELOPMENTS
FIRST COMMERCIAL'S ACQUISITION OF KEMMONS WILSON, INC.
On March 25, 1998, First Commercial completed its acquisition of Kemmons
Wilson, Inc. On that date Kemmons Wilson operated 15 banking offices in Arkansas
and Tennessee and had total consolidated assets of approximately $395 million,
total consolidated deposits of approximately $334 million, and total
consolidated stockholders' equity of approximately $15 million.
REGIONS' ACQUISITIONS
Since December 31, 1997, and as of the date of this Joint Proxy Statement,
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:
<TABLE>
<CAPTION>
CONSIDERATION
----------------------------------------------
APPROXIMATE
------------------------ ACCOUNTING
INSTITUTION ASSET SIZE(1) VALUE(1) TYPE TREATMENT
- ----------- ------------- -------- ------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Recently Completed Acquisitions:
PALFED, Inc., located in Aiken, South Carolina.............. $665 $145 Regions Pooling
Common of
Stock Interests
Greenville Financial Corporation, located in Greenville,
South Carolina............................................ 134 34 Regions Pooling
Common of
Stock Interests
First United Bancorporation, located in Anderson, South
Carolina.................................................. 292 80 Regions Pooling
Common of
Stock Interests
St. Mary Holding Corporation, located in Franklin,
Louisiana................................................. 113 31 Regions Pooling
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:
Etowah Bank, located in Canton, Georgia..................... 432 117 Regions Pooling
Common of
Stock Interests
First Community Banking Services, Inc., located in Peachtree
City, Georgia............................................. 131 33 Regions Pooling
Common of
Stock Interests
Jacobs Bank, located in Scottsboro, Alabama................. 190 52 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
</TABLE>
- ---------------
(1) Calculated as of the date of consummation in the case of the completed
acquisitions and as of the date of announcement of the transaction in the
case of pending acquisitions.
13
<PAGE> 27
Consummation of the Other Pending Acquisitions is subject to the approval
of certain regulatory agencies and approval of the stockholders of the
institutions to be acquired. Moreover, the closing of each transaction is
subject to various contractual conditions precedent. No assurance can be given
that the conditions precedent to consummating the transactions will be satisfied
in a manner that will result in their consummation.
If the Other Pending Acquisitions and the Merger had been consummated on
March 31, 1998, as of that date Regions' total consolidated assets would have
been increased by approximately $8.4 billion to approximately $34.0 billion; its
total consolidated deposits would have increased by approximately $7.2 billion
to approximately $27.5 billion; and its total consolidated stockholders' equity
would have increased by approximately $659 million to approximately $2.8
billion.
IMPACT OF THE MERGER ON REGIONS' FINANCIAL PERFORMANCE
Merger Charges. It is expected that Regions will incur charges arising
from the Merger 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, payments 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.
The Merger 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 Merger. Substantially all of these charges are
expected to be recognized in the period in which the Merger closes. The
estimated restructuring and merger-related charges includes 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 other merger
related fees.............................................. 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 Merger 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 Merger 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 revenue
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 Merger 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
14
<PAGE> 28
(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.
Similarly with no assurance, Regions expects the combined company following
the Merger 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.
Possible cost savings and revenue enhancements are not reflected in the pro
forma financial information presented elsewhere in this Joint Proxy Statement.
Moreover, 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 Merger 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 Merger 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 Merger), and (vi) 1999 diluted earnings per share of Regions Common Stock
are $2.59 and 1999 diluted earnings per share of First Commercial Common Stock
are $3.35, each of which represents the First Call consensus earnings estimates,
the Merger 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 or First Commercial. The estimated effects of the Merger 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."
15
<PAGE> 29
MEETINGS OF STOCKHOLDERS
DATE, PLACE, TIME, AND PURPOSE
First Commercial. This Joint Proxy Statement is being furnished to the
holders of First Commercial Common Stock in connection with the solicitation by
the First Commercial Board of proxies for use at the First Commercial Special
Meeting, at which First Commercial stockholders will be asked to vote on a
proposal to approve the Agreement. The First Commercial Special Meeting will be
held at 2:00 p.m., local time, on July 28, 1998, at the DoubleTree Hotel, Grand
Ballroom, 424 West Markham Street, Little Rock, Arkansas 72201.
Regions. This Joint Proxy Statement is being furnished to the holders of
Regions Common Stock in connection with the solicitation by the Regions Board of
proxies for use at the Regions Annual Meeting at which Regions stockholders will
be asked to vote on (i) a proposal to adopt the Agreement and approve the
Merger, (ii) a proposal to elect three nominees as directors of Regions, and
(iii) a proposal to approve a proposed amendment to the Regions Certificate to
increase the number of authorized shares of Regions Common Stock from
240,000,000 shares to 500,000,000 shares. The Regions Annual Meeting will be
held at the Regions Training Center located at 298 West Valley Avenue,
Birmingham, Alabama, on July 29, 1998, at 10:00 a.m. local time.
RECORD DATES, VOTING RIGHTS, REQUIRED VOTES, AND REVOCABILITY OF PROXIES
First Commercial. The First Commercial Board has established the close of
business on June 12, 1998, as the record date for determining the First
Commercial stockholders entitled to notice of and to vote at the First
Commercial Special Meeting. Only First Commercial stockholders of record as of
the First Commercial Record Date will be entitled to vote at the First
Commercial Special Meeting. As of the First Commercial Record Date, there were
approximately 3,600 record holders of 37,688,971 shares of First Commercial
Common Stock outstanding and entitled to vote at the First Commercial Special
Meeting, with each share entitled to one vote.
Any First Commercial 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 First Commercial a signed proxy card bearing a later date,
provided that such notice or proxy card is actually received by First Commercial
before the vote of stockholders or in open meeting prior to the taking of the
stockholder vote at the First Commercial Special Meeting. Any notice of
revocation should be sent to First Commercial Corporation, 400 West Capitol
Avenue, Little Rock, Arkansas 72201, Attention: Donna Rogers, 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 Corporate Secretary. The shares of First Commercial
Common Stock represented by properly executed proxies received at or prior to
the First Commercial Special Meeting and not subsequently revoked will be voted
as directed in such proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED
BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE
DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME
BEFORE THE FIRST COMMERCIAL SPECIAL MEETING. IF NECESSARY, AND UNLESS CONTRARY
INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO
ADJOURN THE FIRST COMMERCIAL SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF
PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE THE AGREEMENT. PROXIES
REPRESENTING SHARES WHICH WERE VOTED TO DISAPPROVE THE AGREEMENT WILL NOT BE
VOTED IN FAVOR OF ANY PROPOSAL TO ADJOURN THE FIRST COMMERCIAL SPECIAL MEETING.
As of the date of this Joint Proxy Statement, First Commercial is unaware of any
other matter to be presented at the First Commercial Special Meeting.
Solicitation of proxies will be made by mail and also may be made by
telephone or telegram or in person by the directors, officers, and employees of
First Commercial, 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. Regions and First Commercial each will bear
its own
16
<PAGE> 30
expenses in connection with the solicitation of proxies, except that Regions and
First Commercial each will bear one-half of all printing and mailing costs and
filing fees associated with this Joint Proxy Statement.
FIRST COMMERCIAL STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
The presence, in person or by proxy, of a majority of the outstanding
shares of First Commercial Common Stock is necessary to constitute a quorum of
the stockholders in order to take action at the First Commercial Special
Meeting. For these purposes, shares of First Commercial Common Stock that are
present, or represented by proxy, at the First Commercial Special Meeting will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on the Agreement for any reason, including broker nonvotes.
Generally, a broker who holds shares of First Commercial Common Stock in
"street" name on behalf of a beneficial owner lacks authority to vote such
shares in the absence of specific voting instructions from the beneficial owner.
Once a quorum is established, approval of the Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of First
Commercial Common Stock entitled to vote at the First Commercial Special
Meeting. A failure to vote, in person or by proxy, for any reason, including
failure to return a properly executed proxy, an abstention, or a broker nonvote,
has the same effect as a vote against the Agreement.
The directors and executive officers of First Commercial and their
affiliates beneficially owned, as of the First Commercial Record Date, 6,077,465
shares (or approximately 16.13% of the outstanding shares) of First Commercial
Common Stock. Each member of the First Commercial Board has indicated such
director's intention to vote those First Commercial shares over which such
member has voting authority (other than in a fiduciary capacity) in favor of the
Agreement. The directors and executive officers of Regions and their affiliates
beneficially owned, as of the First Commercial Record Date, no shares of First
Commercial Common Stock. As of the First Commercial Record Date, various
subsidiaries of First Commercial, as fiduciaries, custodians, and agents, had
sole or shared voting power over 3,478,083 shares, or 9.23% of the issued and
outstanding shares of First Commercial Common Stock, under trust agreements and
other instruments and agreements, including shares held as trustee or agent of
various First Commercial employee benefit and stock purchase plans. It is the
policy of these subsidiaries not to vote such shares in the absence of
instructions from other appropriate parties having an interest in such stock,
such as co-fiduciaries and participants in such plans, unless the subsidiary has
sole authority with respect to shares thereto. Various subsidiaries of Regions
also held 6,310 shares, or .016% of the issued and outstanding shares of First
Commercial Common Stock as of the First Commercial Record Date.
No person or group is known by First Commercial to beneficially own more
than 5.0% of the outstanding shares of First Commercial Common Stock.
Regions. The Regions Board has established the close of business on June
1, 1998, as the record date for determining the Regions stockholders entitled to
notice of and to vote at the Regions Annual Meeting. Only Regions stockholders
of record as of the Regions Record Date will be entitled to vote at the Regions
Annual Meeting. As of the Regions Record Date, there were approximately 49,400
record holders of 149,910,562 shares of Regions Common Stock outstanding and
entitled to vote at the Regions Annual Meeting, with each share entitled to one
vote.
Stockholders are urged to sign and date the enclosed proxy card and return
it as promptly as possible in the envelope enclosed for that purpose.
Stockholders of record can also give proxies by calling a toll-free telephone
number or by using the Internet. The telephone and Internet voting procedures
are designed to authenticate Regions stockholders' identities, to allow Regions
stockholders to give their voting instructions, and to confirm that Regions
stockholders' instructions have been recorded properly. Regions has been advised
by counsel that the procedures that have been put in place for telephone and
Internet voting are consistent with the requirements of applicable law.
Stockholders who wish to vote over the Internet should be aware that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, and that there may be some risk a
stockholder's vote might not be properly recorded or counted because of an
unanticipated electronic malfunction.
17
<PAGE> 31
Any Regions stockholder of record desiring to vote by telephone or over the
Internet will be required to enter the unique control number imprinted on such
holder's Regions proxy card, and therefore should have the proxy card in hand
when initiating the session.
- -- To vote by telephone, dial 1-800-OK2-VOTE (1-800-652-8683) on a touch tone
telephone, and follow the simple menu instructions provided. There is no charge
for this call.
- -- To vote over the Internet, log on to the website http://www.vote-by-net.com
and follow the simple instructions provided.
Similar instructions are included on the enclosed Regions proxy card.
Any Regions stockholder who has delivered a proxy or voted by telephone or
the Internet may revoke it at any time before it is voted by giving notice of
revocation in writing or submitting to Regions a signed proxy card bearing a
later date, provided that such notice or proxy card is actually received by
Regions before the vote of stockholders or in open meeting prior to the taking
of stockholder vote at the Regions Annual Meeting. Any notice of revocation
should be sent to Regions Financial Corporation, 417 North 20th Street,
Birmingham, Alabama 35203; Attention: Samuel E. Upchurch, Jr., 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 Corporate Secretary. The shares of Regions Common
Stock represented by properly executed proxies received at or prior to the
Regions Annual 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 ADOPTION OF THE AGREEMENT, FOR THE ELECTION OF THE
THREE NOMINEES FOR DIRECTOR NAMED IN THIS JOINT PROXY STATEMENT, FOR THE
APPROVAL OF THE AMENDMENT TO THE REGIONS CERTIFICATE INCREASING THE NUMBER OF
AUTHORIZED SHARES OF REGIONS COMMON STOCK, AND IN THE DISCRETION OF THE PROXY
HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE REGIONS ANNUAL
MEETING. IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY
HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE REGIONS ANNUAL
MEETING TO PERMIT FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN SUFFICIENT
VOTES TO APPROVE THE AGREEMENT OR TO AMEND THE REGIONS CERTIFICATE TO AUTHORIZE
ADDITIONAL SHARES OF REGIONS COMMON STOCK, OR ANY OTHER MATTER THAT PROPERLY
COMES BEFORE THE REGIONS ANNUAL MEETING. PROXIES REPRESENTING SHARES WHICH WERE
VOTED TO DISAPPROVE THE AGREEMENT WILL NOT BE VOTED IN FAVOR OF ANY PROPOSAL TO
ADJOURN THE REGIONS ANNUAL MEETING.
Solicitation of proxies will be made by mail and also may be made by
telephone or telegram or in person by the directors, officers, and employees of
Regions, 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 out-of-pocket
expenses. Regions has retained D.F. King & Co., Inc. to assist in the
solicitation of proxies. It is anticipated that the fee of such firm will not
exceed $7,000 plus reasonable out-of-pocket costs and expenses authorized by
Regions.
The presence, in person or by proxy, of a majority of the outstanding
shares of Regions Common Stock is necessary to constitute a quorum of the
stockholders in order to take action at the Regions Annual Meeting. For these
purposes, shares of Regions Common Stock that are present, or represented by
proxy at the Regions Annual 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 Regions 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, adoption of the Agreement and approval of the
Merger requires the affirmative vote of the holders of a majority of the
outstanding shares of Regions Common Stock entitled to vote at the Regions
Annual Meeting. The election of the three nominees to the Regions Board requires
the only a plurality vote, with the three nominees receiving the highest number
of votes elected. The approval of the amendment to the Regions Certificate
requires the affirmative votes of at least 75% of the outstanding shares of
Regions Common Stock entitled to vote at the Regions Annual Meeting. A failure
to vote, in person or by proxy, for any reason, including failure to return a
properly executed proxy, an abstention, or a broker nonvote, has the same effect
as a vote against the Agreement and against the amendment to the Regions
18
<PAGE> 32
Certificate, as applicable. The amendment of the Regions Certificate is not a
condition to consummating the Merger.
The directors and executive officers of Regions and their affiliates
beneficially owned, as of the Regions Record Date, 5,374,792 shares (or
approximately 3.59% of the issued and outstanding shares) of Regions Common
Stock. Each member of the Regions Board has indicated such director's intention
to vote those Regions shares over which such member has voting authority (other
than in a fiduciary capacity) in favor of the Agreement. The directors and
executive officers of First Commercial and their affiliates beneficially owned,
as of the Regions Record Date, no shares of Regions Common Stock.
In addition, as of the Regions Record Date, various subsidiaries of
Regions, as fiduciaries, custodians, and agents, had sole or shared voting power
over 7,259,391 shares, or 4.84%, of the issued and outstanding shares of Regions
Common Stock, under trust agreements and other instruments and agreements,
including shares held as trustee or agent of various Regions employee benefit
and stock purchase plans. It is the policy of these subsidiaries not to vote
such shares in the absence of instructions from other appropriate parties having
an interest in such stock, such as co-fiduciaries and participants in such
plans, unless the subsidiary has sole authority with respect to shares thereto.
No other person or group is known by Regions to beneficially own more than 5.0%
of the outstanding shares of Regions Common Stock. Various subsidiaries of First
Commercial held 2,510 shares, or .0067%, of the issued and outstanding shares of
Regions Common Stock as of the Regions Record Date.
DESCRIPTION OF THE TRANSACTION
The following material describes the material aspects and terms of the
Merger, the Agreement, and the Option 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 included as Appendix A to
this Joint Proxy Statement 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 First Commercial by
Regions pursuant to the Merger of First Commercial with and into Regions, with
Regions as the surviving corporation resulting from the Merger. At the Effective
Time, each share of First Commercial Common Stock then issued and outstanding
(together with any associated Preferred Stock Purchase Rights (as defined in the
Agreement) but excluding any shares held by First Commercial, 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 shares
held by stockholders who perfect their dissenters' rights) will be converted
into 1.7 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 First Commercial
stockholder would otherwise receive multiplied by the last sale price of Regions
Common Stock on the Nasdaq NMS (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 1.7 SHARES OF REGIONS COMMON STOCK FOR
EACH SHARE OF FIRST COMMERCIAL COMMON STOCK. An adjustment could occur only if
the First Commercial 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.
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<PAGE> 33
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 NMS (as reported by The Wall
Street Journal, or, if not reported thereby, by another authoritative source
selected by Regions) for 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.
The "Determination Date" is the later of the date on which consent of the
Federal Reserve shall be received (without regard to any requisite waiting
period) and the date the Merger is approved by the stockholders of First
Commercial and Regions.
The "Regions Ratio" is the number obtained by dividing the Average Closing
Price by $40.50.
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 February 6, 1998, less 15%.
If both:
(i) the Average Closing Price is less than $32.40 (i.e., $40.50 (the
last sale price of Regions Common Stock on the last trading day before the
public announcement of the Merger) multiplied by .8); and
(ii) the Regions Ratio is less than the Index Ratio,
then First Commercial 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 First Commercial Common Stock has a
value (based on the Average Closing Price) equal to the lesser of (i) $55.08
(corresponding to an Average Closing Price of $32.40) 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 First Commercial 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 First Commercial stockholders, the First Commercial Board may
elect not to terminate the Agreement and to consummate the Merger without
resoliciting the First Commercial stockholders even if First Commercial's right
to terminate the Agreement 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 First Commercial Common Stock would
be less than the lesser of (i) $55.08 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 First Commercial 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 First Commercial's
stockholders will assume the risk of declines in the value of Regions Common
Stock to $32.40. Any adjustment of the Exchange Ratio reflecting a decline in
the price of Regions Common Stock to below $32.40 would be dependent on whether
the Average Closing Price of Regions Common Stock lags behind a market basket of
comparable bank holding company common stocks (the Index Group referenced above)
by more than 15%.
In making its determination of whether to terminate the Agreement, the
First Commercial 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 First Commercial 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
20
<PAGE> 34
Regions' pro forma earnings per share and whether Regions' assessment of First
Commercial'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, First Commercial 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 1.7, the Starting Price of Regions Common stock is $40.50, and
the Index Price, as of the Starting Date, is $100.)
(1) The first scenario occurs if the Average Closing Price is $32.40
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 First Commercial stockholders could have fallen from a pro
forma $68.85 per share, as of the Starting Date, to as little as a pro
forma $55.08 per share, as of the Determination Date.
(2) The second scenario occurs if the Average Closing Price is less
than $32.40, 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 First Commercial stockholders would have fallen from a pro
forma $68.85 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 $55.08 per share.
(3) The third scenario occurs if the Average Closing Price declines
below $32.40 and the Regions Ratio is below the Index Ratio. Under this
scenario, the adjustment in the Exchange Ratio is designed to ensure,
subject to the First Commercial Board exercising its right to terminate the
Agreement and the Regions Board electing to avoid such termination, that if
the Merger is consummated the First Commercial stockholders receive shares
of Regions Common Stock having a value (based on the Average Closing Price)
that corresponds to at least $32.40 per Regions 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 $30.00, and the
ending Index Price, as of the Determination Date, were $90, the Regions
Ratio (.7407) would be below the Index Ratio (.75, or .90 minus .15),
and First Commercial could terminate the Agreement unless Regions
elected within five days to increase the Exchange Ratio to equal 1.7213,
which represents the lesser of (a) 1.8360 [the result of dividing $55.08
(the product of .8, $40.50, and the 1.7 Exchange Ratio) by the Average
Closing Price ($30.00), rounded to the nearest ten-thousandth] and (b)
1.7213 [the result of dividing the Index Ratio (.75) times 1.7 by the
Regions Ratio (.7407), rounded to the nearest ten-thousandth]. Based on
the assumed $30.00 Average Closing Price, the new Exchange Ratio would
represent a value to the First Commercial stockholders of $51.64 per
share.
Example 2 -- If the Average Closing Price were $30.00, and the
ending Index Price, as of the Determination Date, were $100, the Regions
Ratio (.7407) would be below the Index Ratio (.85, or 1.00 minus .15),
and First Commercial could terminate the Agreement unless Regions
elected within five days to increase the Exchange Ratio to equal 1.8360,
which represents the lesser of (a) 1.8360 [the result of dividing $55.08
(the product of .8, $40.50, and the 1.7 Exchange Ratio) by the Average
Closing Price ($30.00), rounded to the nearest ten-thousandth] and (b)
1.9508 [the result of dividing the Index Ratio (.85) times 1.7 by the
Regions Ratio (.7407), rounded to the nearest ten-thousandth]. Based on
the assumed $30.00 Average Closing Price, the new Exchange Ratio would
represent a value to the First Commercial stockholders of pro forma
$55.08 per share.
However, it is possible that the First Commercial Board would not
elect to exercise its termination right even if the Average Closing
Price is below $32.40 and the Regions Ratio is below the Index Ratio.
Under these circumstances, the Exchange Ratio would remain at 1.7,
regardless of the fact that the Average Closing Price is below $32.40.
Conversely, it is possible that if the First
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Commercial Board does elect to exercise its termination right, the
Regions Board would not elect to increase the Exchange Ratio to prevent
such termination, and under these circumstances the Agreement would
terminate.
The actual market value of a share of Regions Common Stock at the Effective
Time and at the time certificates for those shares are delivered following
surrender and exchange of certificates for shares of First Commercial Common
Stock may be more or less than the Average Closing Price. First Commercial
stockholders are urged to obtain current market quotations for Regions Common
Stock. See "Comparative Market Prices and Dividends."
TREATMENT OF FIRST COMMERCIAL OPTIONS
The Agreement provides that all rights with respect to First Commercial
Common Stock pursuant to stock options or stock appreciation rights granted by
First Commercial under its stock option and other stock-based compensation plans
which are outstanding at the Effective Time (the "First Commercial Rights" and
individually a "First Commercial Right"), whether or not then exercisable, will
be converted into and will become rights with respect to Regions Common Stock,
and Regions will assume each of such options in accordance with the terms of the
plan under which it was issued and the agreement by which it is evidenced. After
the Effective Time, those options will become options to purchase Regions Common
Stock, with the exercise price and number of shares of Regions Common Stock
purchasable thereunder adjusted to reflect the Exchange Ratio. Each First
Commercial Right which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code, so as not to constitute a
modification, extension, or renewal of the option, within the meaning of section
424(h) of the Internal Revenue Code. Regions shall comply with the terms of
First Commercial's stock option and other stock-based compensation plans to
ensure, to the extent required by, and subject to the provisions of, such
plan(s), that First Commercial Rights which qualified as incentive stock options
prior to the Effective Time continue to qualify as incentive stock options after
the Effective Time.
All restrictions or limitations on transfer with respect to First
Commercial Common Stock awarded under such plan(s) or any other plan, program,
or arrangement of First Commercial or any of its subsidiaries, to the extent
that such restrictions or limitations shall not have already lapsed, and except
as otherwise expressly provided in such plan, program, or arrangement, shall
remain in full force and effect with respect to shares of Regions Common Stock
into which such restricted stock is converted pursuant to the Agreement.
The executive officers or directors of First Commercial, as of the date of
this Joint Proxy Statement, held in the aggregate First Commercial Rights to
purchase 445,899 shares of First Commercial Common Stock. As a result of the
Merger, all First Commercial Rights issued under First Commercial's stock based
compensation plans which are subject to vesting restrictions will accelerate and
become immediately exercisable.
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 technology
and the necessity to make significant investments in technology, 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.
Due to these developments, on at least an annual basis the First Commercial
Board with the assistance of its financial advisors has reviewed and analyzed
First Commercial's strategic alternatives, including prospects for First
Commercial continuing as an independent entity and possible business combination
transactions with other financial institutions of various sizes and the
potential effects of such transactions on First Commercial and its stockholders,
employees and customers and the communities it serves.
The bylaws of First Commercial specifically provide that the Executive
Committee of the First Commercial Board is required to devote itself at least
once a year to reviewing the progress of long range
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planning for First Commercial. Consequently, pursuant to this grant of
authority, the Executive Committee has over the years evaluated matters
concerning possible strategic business combinations with other banking and
financial institutions and has reported to and made recommendations to the First
Commercial Board regarding such matters. The First Commercial Executive
Committee consists of ten directors from the First Commercial Board. Two members
of the First Commercial Executive Committee, Barnett Grace and Edwin P. Henry,
are management directors and the remaining eight members are nonmanagement
directors. Each member of the First Commercial Executive Committee has
significant individual holdings of First Commercial Common Stock, and, together
with the Chairman Emeritus who participates in First Commercial Executive
Committee meetings as a nonvoting member, the members of the First Commercial
Executive Committee collectively own approximately 15% of the outstanding First
Commercial Common Stock.
For a number of years, First Commercial has pursued a business strategy of
continuing the company's long history of providing community banking services in
its market areas, diversifying and enlarging its customer and asset bases,
expanding its market share in existing markets and expanding its market areas to
surrounding areas, and building a profitable banking franchise and creating more
value for its stockholders. To a large extent, the First Commercial Board and
management of First Commercial have sought to implement this business strategy
by growth through acquisitions and mergers. Accordingly, First Commercial has
undertaken a comprehensive review of attractive acquisition and merger
candidates, based on size, market areas, asset quality, deposit base, funding
costs, earnings, product and service mix, opportunities for cost savings, and
other relevant considerations. This review has resulted in several bank
acquisitions by First Commercial in recent years.
Since its inception as a bank holding company in 1971, Regions has pursued
a growth strategy of supplementing internally generated growth in its existing
markets with strategic acquisitions of financial institutions. Until applicable
laws and regulations were changed in 1987, Regions' acquisition activities were
limited to Alabama. Beginning in 1988, Regions has pursued as part of its growth
strategy a program of acquiring financial institutions in other states in
addition to Alabama. In certain of such transactions Regions has expanded its
geographic market area into adjacent markets. Regions has effected other
acquisition transactions seeking to fill in a market area after initial entry,
by adding market share through subsequent acquisitions. As a result of its
acquisition program, Regions now has substantial banking operations not only in
Alabama but also in Florida, Georgia, Louisiana, South Carolina, and Tennessee.
During the Summer and Fall of 1997, the values paid by national and
regional banking institutions for banking franchises like that of First
Commercial in certain transactions increased substantially over previous levels.
Of particular note was the announcement of Deposit Guaranty Corp.'s acquisition
by First American Corporation. In response to these changes in the market values
for bank franchises, management of First Commercial consulted informally with a
number of financial advisors regarding their views on whether and for how long
the values indicated in these recent transactions would continue to be available
in bank merger transactions.
On January 14, 1998, the Executive Committee of the First Commercial Board
again met to discuss the strategic alternatives available to First Commercial.
At this meeting, the First Commercial Executive Committee determined that in
view of the increased difficulty of pursuing a strategy of growth through
acquisition due to the decreasing number of attractive acquisition candidates
combined with the increasing prices required to be paid to successfully acquire
desirable franchises and the increasing values being paid by regional and
national banking organizations for banking franchises such as First Commercial,
First Commercial should take steps to determine whether the value that could be
achieved for stockholders of First Commercial and the benefits that could be
derived by other constituencies of First Commercial through a business
combination transaction with a larger banking organization at this time were
sufficient to merit reconsideration of First Commercial's then existing strategy
of remaining independent. To facilitate this process, the First Commercial
Executive Committee authorized the retention of KBW as its financial advisor and
investment banker and Arnold & Porter as its special outside legal counsel.
Representatives of KBW and Arnold & Porter were in attendance at the meeting and
made presentations to the First Commercial Executive Committee regarding the
nature of the process that would be undertaken to explore the possibility of
First Commercial entering into a business combination transaction with a larger
banking organization. The First Commercial Executive Committee engaged in
extensive discussions regarding the nature and characteristics
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<PAGE> 37
of the financial institutions that the First Commercial Executive Committee
thought would be suitable merger partners for First Commercial, and the First
Commercial Executive Committee identified a number of financial institutions
that it directed KBW to contact.
Thereafter, KBW made a number of informal contacts with financial
institutions, including Regions, that had been identified by the First
Commercial Executive Committee and management as possibly being satisfactory
partners for a business combination transaction with First Commercial and that
would have an interest in such a business combination transaction.
Confidentiality Agreements were entered into with a number of financial
institutions which expressed an interest in exploring a business combination
transaction with First Commercial. KBW prepared a confidential information
memorandum (the "Confidential Memorandum") describing in detail First Commercial
and its business and circulated the Confidential Memorandum to these financial
institutions. Financial institutions which received the Confidential Memorandum
were given until February 2, 1998, to submit a formal indication of interest of
pursuing a business combination transaction with First Commercial. Such
indications of interest were received from four institutions, including Regions.
Upon receiving the informal inquiry from KBW, Regions executed the
requested Confidentiality Agreement, and Regions' management commenced an
internal evaluation, the results of which indicated preliminarily that a
combination between Regions and First Commercial could be in furtherance of
Regions' acquisition philosophy and could be advantageous to both institutions.
Regions' management determined to pursue the opportunity, and submitted a
preliminary indication of interest to First Commercial in accordance with the
procedure outlined by KBW.
On February 4, 1998, the First Commercial Executive Committee met to
discuss the developments since the January 14, 1998 meeting, and to review the
indications of interest and determine the appropriate response to each.
Representatives of KBW and Arnold & Porter also attended this meeting. KBW
representatives reviewed the results of the initial informal contacts made with
potential strategic partners for First Commercial. KBW also reviewed the
preliminary indications of interest received in response to the Confidential
Memorandum, as well as communications KBW had received from several institutions
which had not received the Confidential Memorandum, but had obviously seen
reports in the press that First Commercial might be considering a business
combination transaction. All of the preliminary indications of interest fell
within a 4% value range (based on the then most recently available stock prices)
and each proposed an all stock transaction which would be a pooling of interests
and a tax-free reorganization. The preliminary indication of interest submitted
by Regions did not have the highest indicated value within the 4% range.
However, because of the volatility of stock prices and particularly because of
the narrow range of current indicated values among all the preliminary
indications of interest, in evaluating the preliminary indications of interest
the First Commercial Executive Committee placed relatively little weight on the
current indicated value of the preliminary indications of interest and focused
primarily on evaluation of those factors which the First Commercial Executive
Committee believed to be indicative of long-term value. In particular, in
evaluating the indications of interest the First Commercial Executive Committee
considered carefully a variety of financial and other factors regarding the
future prospects of each potential partner, the compatibility of each potential
partner's operating philosophies with those of First Commercial, the potential
for future appreciation of the stock of each potential partner, the historic
effect on each potential partner's stock price as a result of its acquisition
practices, the likely impact on existing customers and employees, whether any
regulatory issues would be raised by a proposed transaction with each potential
partner, and the ability of each potential partner to successfully complete a
transaction without significant delay. After extensive discussion regarding the
preliminary indications of interest received as well as alternative courses of
action and consideration of the above-referenced factors, the First Commercial
Executive Committee authorized KBW to seek an increase in the exchange ratio
offered by Regions from 1.65 to 1.7 (which would result in Regions' preliminary
indication of interest having a slightly higher indicated value than any of the
other preliminary indications of interest) and improvements in certain other
aspects of the preliminary indication of interest received from Regions. Subject
to Regions agreeing to the requested improvements, the First Commercial
Executive Committee concluded that a transaction with Regions' would present the
best course of action for maximizing long-term value for First Commercial
stockholders, and the First Commercial Executive Committee authorized management
and First Commercial's advisors to commence due diligence and
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negotiation of a definitive agreement for a business combination with Regions.
In order to facilitate the continuation of the strategic planning process in the
event Regions was unwilling to make changes to its proposal which were
acceptable to the First Commercial Executive Committee, the First Commercial
Executive Committee also authorized KBW to hold further discussions with another
institution which had submitted an indication of interest regarding improvements
in such institution's proposal with the view that First Commercial might pursue
further discussions with this party regarding a possible business combination
transaction in the event that Regions was unwilling to agree to the requested
improvements to its proposal.
In discussions with KBW late on February 4, 1998, Regions agreed in
principle to the requests made by the First Commercial Executive Committee,
subject to, among other things, satisfactory due diligence reviews, receipt by
Regions of a fairness opinion from Regions' financial advisor, negotiation of a
satisfactory definitive agreement, and final adoption of a definitive agreement
and approval of the transaction by the Regions Board. On February 5, 1998,
Regions and First Commercial commenced their respective due diligence reviews
and began negotiating a definitive agreement for a business combination
transaction.
On February 6, 1998, the First Commercial Executive Committee met to
discuss further developments in the exploration of First Commercial's strategic
alternatives. Specifically, Mr. Grace outlined the results of First Commercial's
further discussions with Regions, including the improvement of the exchange
ratio offered by Regions, proposed arrangements relating to the Board of
Directors and management of the combined entity, and the results of Regions'
initial due diligence of First Commercial. Specifically, Mr. Grace reported that
Regions agreed to increase the exchange ratio from 1.65 to 1.7, to increase the
number of seats that would be occupied by First Commercial directors on the
Regions Board from three to four, had clarified the role that directors of First
Commercial who did not become directors of Regions would be asked to play on the
Boards of Regions subsidiaries or advisory boards in the Arkansas, Texas and
Oklahoma region, and had clarified the roles in the management of the combined
entity that current members of management of First Commercial would be asked to
play. Mr. Grace also reported that the issue of community investments had been
discussed with Regions, and that Regions was willing to commit to establish a
Small Business Investment Corporation funded with $5 million and a charitable
foundation in the amount of $7.5 million to make investments in the communities
served by First Commercial. Mr. Grace also discussed an unsolicited
communication KBW had received from another financial institution which had
placed a preliminary indication of interest in which such institution implied it
might be willing to increase the indicated value of its proposal modestly if
such action would clearly establish it as the preferred partner for First
Commercial in a business combination transaction. After extensive discussion of
these matters, the First Commercial Executive Committee authorized management,
its financial advisor and its outside counsel to continue the due diligence
process and to negotiate a definitive merger agreement with Regions and, in
light of the factors considered at its meeting on February 4, 1998, not to
pursue discussion with any other potential partners at that time.
On February 8, 1998, the First Commercial Executive Committee met again to
review the results of the negotiations with Regions and the respective parties'
due diligence reviews. Mr. Grace reported to the First Commercial Executive
Committee that Regions had conducted due diligence regarding First Commercial on
February 6 and February 7, and that First Commercial had conducted due diligence
regarding Regions on February 8. Mr. Grace reported that after such due
diligence, the management of each company was prepared to recommend a business
combination transaction to its Boards of Directors. After extensive discussion,
the First Commercial Executive Committee unanimously voted to recommend to the
full Board of Directors that it approve the proposed Merger.
The Regions Board held a special meeting on the afternoon of February 8,
1998, to consider the proposed transaction. Regions' management made a
presentation which included a review of the terms of the Agreement and the
Option Agreement as proposed, a summary of the financial aspects of the proposed
transaction, and a summary of Regions' due diligence review. J.P. Morgan, which
Regions had engaged as its financial advisor on February 4, rendered its opinion
to the Regions Board that the proposed Exchange Ratio was fair, from a financial
point of view, to Regions. The Regions Board, with all but two directors in
attendance, unanimously adopted the Agreement and the Option Agreement and
approved the transaction.
Later on February 8, 1998, the full Board of Directors of First Commercial
met and reviewed and discussed at length First Commercial's strategic
alternatives, including the proposed Merger with Regions.
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Representatives of KBW reviewed in detail with the entire First Commercial Board
a number of matters relevant to the First Commercial Board's analysis of the
proposed transaction with Regions and other strategic alternatives available to
First Commercial, including the general status of the financial services
industry and the regional and local environments in which First Commercial
operates, valuation analyses of First Commercial and Regions, historical stock
price and other financial information for certain publicly-held banking
institutions, and statistical data concerning the terms of recent financial
institution merger and acquisition transactions. Representatives of KBW also
reviewed the financial terms of the proposed Agreement. KBW gave the First
Commercial Board its opinion that the Exchange Ratio was fair to First
Commercial's stockholders from a financial point of view. First Commercial's
legal advisor, Arnold & Porter, discussed with the First Commercial Board the
proposed structure of the Merger, the terms of the Agreement, and the Option
Agreement and the First Commercial Board's fiduciary obligations with respect to
First Commercial and its stockholders in evaluating the Merger proposal. The
Board was advised of Regions' agreement for the employment of certain members of
management following the Merger, the inclusion of four current directors of
First Commercial on the Regions Board following the Merger, and other interests
of management and the directors in the Merger. Material was provided to the
First Commercial Board describing that, as of the Effective Time, Regions
proposed to enter into three-year employment agreements with Barnett Grace, Jack
Fleischauer, Jr., Neil S. West and J. Lynn Wright with base annual salaries,
annual bonuses, stock option grants and termination and other employee benefits
comparable to the compensation each would have received as an executive of First
Commercial during fiscal year 1998 had First Commercial remained an independent
institution. Under the employment agreements with Regions, Messrs. Grace,
Fleischauer, West and Wright also would receive restricted Regions Common Stock
valued at approximately $6,000,000 in the aggregate. It was not anticipated that
awards comparable to the Regions restricted stock awards would have been given
to these individuals during fiscal year 1998 if First Commercial had remained an
independent institution. These restricted stock awards were offered by Regions
to Messrs. Grace, Fleischauer, West and Wright as an inducement for such
individuals to accept employment with Regions following the Merger because
Regions views the retention of these individuals as important to the operation
of the combined entity following the Merger, particularly in the Arkansas, Texas
and Oklahoma region and partially as consideration for these individuals
relinquishing their existing severance/change in control agreements. The
material provided to the First Commercial Board all described that Regions had
proposed to employ Edwin P. Henry, J. French Hill and Clarence E. Hoover for a
period of one year following the Merger. The financial and other terms relating
to the employment of management personnel of First Commercial with Regions
following the Merger were not negotiated until the Exchange Ratio of 1.7 had
been agreed upon. Material was also provided to the First Commercial Board the
community investments Regions proposed to make following the Merger in the
communities currently served by First Commercial.
Mr. Allison, the Chairman of the First Commercial Executive Committee,
reported on the process that the First Commercial Executive Committee had
followed in considering a business combination transaction involving First
Commercial. After such report, Mr. Allison advised the Board that the First
Commercial Executive Committee unanimously recommended that the full First
Commercial Board approve the Merger with Regions. The Board also heard reports
from members of management and its outside advisors regarding their due
diligence review of Regions.
After receiving these presentations and reports, the First Commercial Board
considered and discussed the proposed transaction with Regions and the other
strategic alternatives available to First Commercial, including remaining
independent and seeking a business combination transaction with a partner other
than Regions. Following such discussion, the First Commercial Board approved the
Merger, the Agreement and the Option Agreement as being in the best interests of
First Commercial and its stockholders and other constituencies, and directed
that the Merger be submitted for approval by the holders of First Commercial
Common Stock at a special meeting of the stockholders of First Commercial.
First Commercial's Reasons for the Merger. The First Commercial Board's
decision to approve and adopt the Agreement and the Option Agreement reflects
its belief that the terms of the Agreement and the Option Agreement will provide
significant value to all First Commercial stockholders and will also enable them
to participate in the opportunities for growth that the First Commercial Board
believes the Merger will make possible. In reaching its decision, the First
Commercial Board considered the current and prospective
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<PAGE> 40
economic, regulatory and competitive environment facing financial institutions
generally, the complementary nature of the companies' respective retail
franchises and market areas, the combined company's financial strengths and
earnings prospects and the similarity in First Commercial's and Regions'
respective business strategies and management philosophies and their commitments
to their respective employees and to the respective communities and customers
they serve.
In approving the Merger, the directors of First Commercial considered a
number of factors. Without assigning any relative or specific weights to the
factors, the First Commercial Board considered the following material factors:
(a) information concerning the business, operations, earnings, asset
quality, and financial condition of Regions (and other potential merger
partners) from which the First Commercial Board determined that Regions is
a high quality, well-managed institution with favorable prospects for
future growth in its business, earnings and share price;
(b) the similar community banking cultures and business philosophies
of Regions and First Commercial, particularly with respect to community
lending philosophy, customer satisfaction, efficiency and credit quality,
and the companies' compatible management teams;
(c) the projected market capitalization (approximately $9 billion) and
market position of the combined entity, the diversification of the
companies' asset and deposit bases, and the ability of the combined company
to compete more effectively in its market areas (see "Summary -- Selected
Financial Data" and "Pro Forma Financial Information");
(d) the likely impact of the proposed Merger on the employees and
customers of First Commercial and its subsidiaries, on the communities in
which First Commercial presently conducts its business, and on First
Commercial's other constituencies in view of Regions' commitment to
community banking, the limited geographic overlap of First Commercial and
Regions markets, and the investments to be made in communities served by
First Commercial through the $5 million Small Business Investment
Corporation and the $7.5 charitable foundation;
(e) the Exchange Ratio in the Merger from a number of valuation
perspectives, as presented by KBW, the current market value of
approximately $2.7 billion (based on the closing price of Regions Common
Stock on February 6, 1998) of the Merger to First Commercial's
stockholders, and the annual dividend increase of approximately 36% from
$1.12 per share to $1.52 per share or a pro forma basis that the First
Commercial stockholders would experience as a result of the Merger (see
"-- Opinion of First Commercial's Financial Advisor");
(f) the February 8, 1998 opinion of KBW that the Exchange Ratio of 1.7
shares of Regions Common Stock for each share of First Commercial Common
Stock is fair to First Commercial's stockholders from a financial point of
view (see "-- Opinion of First Commercial's Financial Advisor");
(g) the terms of the Agreement providing that four current members of
the First Commercial Board will become members of the Regions Board
following the Merger and that current members of senior management of First
Commercial will have significant roles in directing the operations of the
combined entity in the Arkansas, Oklahoma and Texas region, which
provisions the First Commercial Board considered important in terms of
providing for the stewardship of the investment of First Commercial's
stockholders in view of the significant stake of the combined company that
will be owned by the First Commercial stockholders following the Merger
(see "-- Management Following the Merger");
(h) the termination provisions of the Agreement applicable in the
event of a significant decline in the price of Regions Common Stock
relative to a market index prior to the consummation of the Merger (see
"-- Waiver, Amendment, and Termination of the Agreement");
(i) the terms of the Option Agreement, pursuant to which First
Commercial has granted to Regions, as an inducement to enter into the
Agreement, an option to purchase up to 7,480,450 shares (representing
approximately 19.9% of First Commercial Common Stock issued and outstanding
shares
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before giving effect to the issuance of additional shares of First
Commercial Common Stock pursuant to such option) upon the occurrence of
certain events defined in the Option Agreement at an exercise price of
$59.00 per share; (see "-- Option Agreement");
(j) the treatment of the Merger as a pooling of interests for
financial accounting purposes and as a tax-free reorganization for federal
income tax purposes (see "-- Certain Federal Income Tax Consequences of the
Merger" and "-- Accounting Treatment");
(k) the likelihood of the Merger being approved by applicable
regulatory authorities without undue conditions or delay in view of the
strong capital positions of both companies and the limited geographic
overlap of the companies' markets;
(l) the alternatives to the Merger, including remaining an independent
institution in light of the current economic conditions of First
Commercial's markets taking into account in particular both the difficulty
that the current high prices paid by national and regional banking
institutions in financial institution business combination transactions
would cause First Commercial in continuing to pursue its strategy of
expansion through acquisitions and mergers and the value that would be
realized in this environment by the First Commercial shareholders if a
business combination transaction were undertaken at this time; and
(m) the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of selected
combinations with the terms of the proposed transaction with Regions.
The terms of the Merger were the result of arms-length negotiations between
representatives of First Commercial and representatives of Regions. Based upon
the consideration of the foregoing factors, the First Commercial Board
unanimously approved the Merger as being in the best interests of First
Commercial, its stockholders and its other constituencies.
The First Commercial Board unanimously recommends that First Commercial
stockholders vote FOR approval of the Agreement.
For information regarding certain interests of directors and executive
officers of First Commercial in the Merger, see "-- Management Following the
Merger" and "-- Interests of Certain Persons in the Merger."
Regions' Reasons for the Merger. In approving the Agreement and the
Merger, the Regions Board considered a number of factors concerning the benefits
of the Merger, including the following:
(a) Information Concerning First Commercial: The Regions Board
considered information concerning the business, operations, earnings, asset
quality, and financial condition of First Commercial, and aspects of the
First Commercial franchise, including the market position of First
Commercial in each of the markets in which it operates and the
compatibility of the community bank orientation of the operations of First
Commercial to that of Regions. The Regions Board concluded that First
Commercial is a sound, well managed financial institution which is well
positioned in its market areas and which presents an attractive opportunity
for Regions to expand Regions' franchise into adjacent markets.
(b) Financial Terms of the Merger: The Regions Board considered
various financial aspects of the Merger as reported by Regions' management
and Regions' financial advisor J. P. Morgan, including (i) the relationship
of the value of the consideration issuable in the Merger to the market
value (which represented a premium to First Commercial's market price of
approximately 3.0% as of February 6, 1998), (ii) the anticipated effect of
the Merger on Regions' per share earnings (with the Merger anticipated to
dilute earnings per share by approximately $.06 or 2.5% for 1998 and
increase earnings per share by approximately $.06 or 2.5% for 1999, based
on the assumptions discussed under the caption "Recent Events -- Effect of
the Merger on Regions' Financial Performance"), (iii) the anticipated
effect of the Merger on Regions' book value per share (with the Merger
resulting in an estimated decrease in tangible book value per share of
approximately 9.4%), (iv) a comparison of First Commercial to selected peer
banks and comparing pricing aspects of the Merger to pricing
characteristics of other merger transactions involving financial
institutions and (v) the anticipated accounting treatment of the Merger as
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a pooling of interests. While the Regions Board recognized that the Merger
would result in an immediate decrease in the book value per share of
Regions Common Stock and dilution in Regions' earnings per share for 1998,
the Board also recognized the opportunity for enhancing revenues and
reducing the expenses of the operations of First Commercial, and the
anticipated accretive effect of the Merger on Regions' earnings per share
for 1999 and later years.
(c) Fairness of the Exchange Ratio to Regions Stockholders. The
Regions Board considered the opinion rendered by J. P. Morgan that the
Exchange Ratio is fair, from a financial point of view, to Regions
stockholders.
(d) Nonfinancial Terms of the Merger. The Regions Board considered
various nonfinancial aspects of the Merger, including the treatment of the
Merger as a tax-free exchange of First Commercial Common Stock for Regions
Common Stock for federal income tax purposes and the likelihood of the
Merger being approved by applicable regulatory authorities without undue
conditions or delay.
The foregoing discussion of the information and factors considered by the
Regions Board is not intended to be exhaustive but includes all material factors
considered by the Regions Board. In reaching its determination to approve the
Merger and the Agreement, the Regions Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. After deliberating with respect to
the Merger and the other transactions contemplated by the Agreement, and
considering, among other things, the matters discussed above and the opinion of
J. P. Morgan referred to above, the Regions Board determined that the Merger is
in the best interests of Regions and its stockholders and unanimously approved
the Agreement. THE REGIONS BOARD RECOMMENDS THAT REGIONS STOCKHOLDERS VOTE FOR
ADOPTION OF THE AGREEMENT AND APPROVAL OF THE MERGER.
OPINION OF FIRST COMMERCIAL'S FINANCIAL ADVISOR
At the February 8, 1998 meeting of the First Commercial Board, during which
the First Commercial Board approved the Agreement, KBW delivered to the First
Commercial Board an oral opinion (which opinion was subsequently confirmed by
delivery of a written opinion, dated February 8, 1998) that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the holders of the
First Commercial Common Stock. In connection with its opinion dated the date of
this Joint Proxy Statement, KBW updated certain analyses performed in connection
with its opinion and reviewed the assumptions on which such analyses were based
and the factors considered in connection therewith.
KBW has delivered to the First Commercial Board its updated written opinion
dated the date of this Joint Proxy Statement that as of such date the Exchange
Ratio is fair, from a financial point of view, to the holders of First
Commercial Common Stock. KBW's opinion is addressed to the First Commercial
Board and does not constitute a recommendation as to how any stockholder of
First Commercial should vote with respect to the Agreement.
The full text of the opinion of KBW, which sets forth a description of the
procedures followed, assumptions made, matters considered and limits on the
review undertaken, is attached to this Joint Proxy Statement as Appendix B and
is incorporated herein by reference. First Commercial stockholders are urged to
read the opinion in its entirety. The following summary of the opinion is
qualified in its entirety by reference to the full text of the opinion.
In rendering its opinion, KBW (i) reviewed, among other things, the
Agreement, Annual Reports to stockholders and Annual Reports on Form 10-K of
First Commercial and Annual Reports on Form 10-K of Regions, certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of First Commercial
and Quarterly Reports on Form 10-Q of Regions and certain internal financial
analyses and forecasts for First Commercial prepared by management; (ii) held
discussions with members of senior management of First Commercial and Regions
regarding past and current business operations, regulatory relationships,
financial condition and future prospects of the respective companies; (iii)
compared certain financial and stock market information for First Commercial and
Regions with similar information for certain other companies the
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securities of which are publicly traded; (iv) reviewed the financial terms of
certain recent business combinations in the banking industry; and (v) performed
such other studies and analyses as it considered appropriate.
In conducting its review and arriving at its opinion, KBW relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and KBW did not attempt to
verify such information independently. KBW relied upon the management of First
Commercial as to the reasonableness and achievability of the financial and
operating forecasts and projections (and assumptions and bases therefor)
provided to KBW and assumed that such forecasts and projections reflected the
best available estimates and judgments of such management and that such
forecasts and projections will be realized in the amounts and in the time
periods estimated by such management. KBW also assumed, without independent
verification, that the aggregate allowances for loan losses for First Commercial
and Regions are adequate to cover such losses. KBW did not make or obtain any
evaluations or appraisals of the property of First Commercial or Regions, nor
did KBW examine any individual credit files.
The following is a summary of the material financial analyses employed by
KBW in connection with providing its opinion:
(a) Financial Summary of the Regions Offer. KBW calculated multiples
which were based on the assumed per share purchase price of $68.85 (derived
by multiplying the Exchange Ratio of 1.7 times $40.50, the last reported
sale price for Regions Common Stock on February 8, 1998. First Commercial's
December 31, 1997 stated book value was $17.33 and tangible book value was
$16.30, and its 1998 earnings per share estimate (provided by First
Commercial) was $2.93 per share, and its trailing 12 months (December 31,
1996 to December 31, 1997) earnings per share was $2.23 (excluding a $.41
per share nonrecurring gain). Based on this data, the price to stated book
value was 4.0 times and price to tangible book value was 4.3 times, and the
price to the 1998 earnings estimates per share was 22.4 times and the
multiple of price to the trailing 12 months earnings was 30.9 times.
(b) Analysis of Selected Merger Transactions. KBW reviewed certain
financial data related to a set of recent comparable nationwide bank
holding company acquisitions with transaction values between $500 million
and $5 billion since January 1, 1997. These transactions were: the
Mercantile Bancorporation acquisition of Firstbank of Illinois Corp, the
National City Corporation acquisition of Fort Wayne National Corp., the
First American Corporation acquisition of Deposit Guaranty Corp., the First
Empire State acquisition of ONBANCorp Inc., the Banc One Corporation
acquisition of First Commerce Corp, the CNB Bancshares Inc. acquisition of
Pinnacle Financial, the First Union Corp acquisition of Signet Banking
Corp, the Wachovia Corp acquisition of Central Fidelity, the Wachovia Corp
acquisition of Jefferson Bankshares, the Huntington Bancshares acquisition
of First Michigan Bank Corp, and the Allied Irish Banks acquisition of
Dauphin Deposit Corp.
KBW calculated an average of the comparable group's multiple of price
to the targets' future and trailing 12 months earnings as 20.9 times and
23.2 times, respectively, compared to a multiple of price to future and
trailing 12 months earnings of 22.4 times and 30.9 times, respectively, for
the Merger; an average multiple of price to the targets' stated book value
of 3.2 times compared to a multiple of 4.0 times associated with the
Merger; and an average multiple of price to the targets' tangible book
value of 3.6 times compared to a multiple of 4.3 times associated with the
Merger.
KBW also reviewed the current values of the above mentioned comparable
transactions. For the acquiror's last stock price as of February 8, 1998,
KBW calculated an average of the comparable group's multiple of price to
the targets' future and trailing 12 months earnings as 23.0 times and 25.4
times, respectively, compared to a multiple of price to future and trailing
12 months earnings of 22.4 times and 30.9 times, respectively, for the
Merger; an average multiple of price to the targets' stated book value of
3.5 times compared to a multiple of 4.0 times associated with the Merger;
and an average multiple of price to the targets' tangible book value of 3.9
times compared to a multiple of 4.3 times associated with the Merger.
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No company or transaction used as a comparison in the above analysis
is identical to First Commercial, Regions or the Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors
that could affect the public trading value of the companies to which they
are being compared.
(c) Selected Peer Group Analysis. KBW compared the financial
performance and market performance of Regions based on various financial
measures of earnings performance, operating efficiency, capital adequacy
and asset quality and various measures of market performance, including
market/book values, price to earnings and dividend yields to those of a
group of comparable holding companies. For purposes of such analysis, the
financial information used by KBW was as of and for the quarter ended
December 31, 1997 and the market price information was as of February 8,
1998. The companies in the peer group were Southeastern banks which had
total assets ranging from approximately $10 billion to $30 billion. The
companies were: SouthTrust Corporation, BB&T Corporation, Crestar Financial
Corporation, AmSouth Bancorporation, Union Planters Corporation, First
Tennessee National Corp., Compass Bancshares, Inc., Hibernia Corporation,
and First American Corporation.
KBW's analysis showed the following concerning Regions and First
Commercial's financial performance: that the return on equity on an
annualized basis was 16.5% and 16.8%, respectively, compared with an
average of 17.9% for the peer group; that the return on assets on an
annualized basis was 1.4% and 1.6%, respectively, compared with an average
of 1.4% for the group; that the net interest margin on an annualized basis
was 4.2% and 4.7%, respectively, compared with an average of 4.3%; that the
efficiency ratio on an annualized basis was 55.2% and 55.6%, respectively,
compared with an average of 58.1%; that the equity to assets ratio was 8.3%
and 9.5%, respectively, compared to an average of 8.0%; that the ratio of
nonperforming assets to total loans and other real estate owned was .5% and
.9% respectively, compared to an average of 0.4%; that the ratio of loan
loss reserve to nonperforming loans was 187% and 240%, respectively,
compared to an average of 398%.
KBW's analysis further showed the following concerning Regions and
First Commercial's market performance: that Regions and First Commercial's
price to earnings multiple based on 1998 estimated earnings was 16.8 and
22.8 times, respectively, compared to an average for the group of 17.8
times; that their price to book value multiples were 2.9 and 3.9 times,
respectively, compared to a group average of 3.2 times; their dividend
yields were 2.3% and 1.7%, respectively, compared to an average for the
group of 1.9%. For purposes of the above calculations, all earnings
estimates are based upon the published estimates of KBW's equity research
department for Regions and management's estimates for First Commercial.
(d) Contribution Analysis. KBW analyzed the relative contribution of
each of Regions and First Commercial to the pro forma balance sheet and
income statement items of the combined entity. The contribution analysis
showed that First Commercial would contribute approximately 25% of the
combined common equity and 26% of the combined estimated 1998 net income.
KBW compared the relative contribution of such balance sheet and income
statement items with the estimated pro forma ownership of 33% for First
Commercial stockholders based on an Exchange Ratio of 1.7. Based on an
Exchange Ratio of 1.7, First Commercial stockholders would have an
estimated 33% pro forma ownership which represents a 25% premium to First
Commercial's contribution to pro forma estimated 1998 net income and a 30%
premium to First Commercial's contribution to pro forma common equity.
(e) Other Analysis. KBW also reviewed selected investment research
reports, earnings estimates, historical stock price performance relative to
the S&P 500 and to an index of bank and thrift stocks, and other financial
data for First Commercial and Regions.
The summary contained herein provides a description of the material
analyses prepared by KBW in connection with the rendering of its opinion. The
summary set forth above does not purport to be a complete description of the
analyses performed by KBW in connection with the rendering of its opinion. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. KBW believes that its analyses and the summary
set forth above must be considered as a whole and that
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selecting portions of its analyses without considering all analyses, or
selecting part of the above summary, without considering all factors and
analyses, would create an incomplete view of the processes underlying the
analyses set forth in KBW's presentations and opinion. The order in which the
analyses have been presented in this summary is not meant to indicate that any
specific analysis was given greater weight than any other analyses.
In performing its analyses, KBW made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of First Commercial and Regions.
The analyses performed by KBW are not necessarily indicative of actual values or
actual future results which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of KBW's
analysis of the fairness, from a financial point of view, of the Exchange Ratio
in the Merger. These analyses were provided to the First Commercial Board in
connection with the delivery of KBW's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company actually might be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, KBW's opinion, along with its
presentation to the First Commercial Board, was just one of many factors taken
into consideration by the First Commercial Board in unanimously approving the
Agreement.
KBW as part of its investment banking business, is continually engaged in
the valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies, KBW has experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of its business as a
broker-dealer, KBW may, from time to time, purchase securities from, and sell
securities to, First Commercial and Regions and as a market maker in securities
KBW may from time to time have a long or short position in, and buy or sell,
debt or equity securities of First Commercial and Regions for KBW's own account
and for the accounts of its customers.
First Commercial has agreed to pay KBW at the signing of the engagement
agreement between KBW and First Commercial, a cash fee of $500,000. An
additional cash fee of $1,000,000 will be paid at the mailing of this Joint
Proxy Statement. In addition, First Commercial has agree to pay KBW, at the time
of closing, a cash fee ("Contingent Fee") equal to .30% of the market value of
the aggregate consideration offered in exchange for the outstanding shares of
common stock of First Commercial in the transaction. Based on the closing price
of Regions Common Stock on June 16, 1998, the amount of the Contingent Fee would
have been $7,430,263. The fee paid prior to the Contingent Fee payment will be
credited against the Contingent Fee. Pursuant to the KBW engagement agreement,
First Commercial also agreed to reimburse KBW for reasonable out-of-pocket
expenses and disbursements incurred in connection with its retention and to
indemnify against certain liabilities, including liabilities under the federal
securities laws.
OPINION OF REGIONS' FINANCIAL ADVISOR
At the meeting of the Regions Board on February 8, 1998, J.P. Morgan
rendered its opinion to the Regions Board that, as of such date, the Exchange
Ratio in the proposed Merger was fair, from a financial point of view, to
Regions. J.P. Morgan has confirmed its February 8, 1998 opinion by delivering
its opinion to the Regions Board, dated the date of this Joint Proxy Statement,
that, as of such date, the Exchange Ratio in the proposed Merger was fair, from
a financial point of view, to Regions. No limitations were imposed by the
Regions Board upon J.P. Morgan with respect to the investigations made or
procedures followed by it in rendering its opinions.
The full text of the written opinion of J.P. Morgan dated the date of this
Joint Proxy Statement, which sets forth the assumptions made, matters considered
and limits on the review undertaken, is attached as Appendix C to this Joint
Proxy Statement and is incorporated herein by reference. Regions' common
stockholders are urged to read the opinion in its entirety. J.P. Morgan's
written opinion is addressed to the Regions Board, is directed only to the
fairness, from a financial point of view, of the Exchange Ratio in the proposed
Merger to Regions and does not constitute a recommendation to any stockholder of
Regions as to
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how such stockholder should vote at the Regions Annual Meeting. The summary of
the opinion of J.P. Morgan set forth in this Joint Proxy Statement is qualified
in its entirety by reference to the full text of such opinion.
In arriving at its opinions, J.P. Morgan reviewed, among other things: the
Agreement and, in the case of its opinion dated the date of this Joint Proxy
Statement, this Joint Proxy Statement; in the case of its February 8, 1998
opinion, the audited financial statements of Regions and First Commercial for
the fiscal year ended December 31, 1996, and the unaudited financial statements
of Regions and First Commercial for the period ended December 31, 1997, and in
the case of the opinion dated the date of this Joint Proxy Statement, the
audited financial statements of Regions and First Commercial for the fiscal year
ended December 31, 1997, and the unaudited financial statements of Regions and
First Commercial for the period ended March 31, 1998; current and historical
market prices of First Commercial's common stock; certain publicly available
information concerning the businesses of First Commercial and of certain other
companies engaged in businesses comparable to those of First Commercial, and the
reported market prices for certain other companies' securities deemed
comparable; publicly available terms of certain transactions involving companies
comparable to First Commercial and the consideration paid for such companies;
the terms of other business combinations deemed relevant by J.P. Morgan; and
certain internal financial analyses and forecasts prepared by Regions and First
Commercial and their respective managements. J.P. Morgan also held discussions
with certain members of the management of Regions and First Commercial with
respect to certain aspects of the Merger, the past and current business
operations of Regions and First Commercial, the financial condition and future
prospects and operations of Regions and First Commercial, and certain other
matters believed necessary or appropriate to J.P. Morgan's inquiry. In addition,
J.P. Morgan reviewed such other financial studies and analyses and considered
such other information as it deemed appropriate for the purposes of its
opinions.
In giving its opinions, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information that
was publicly available or that was furnished to it by Regions and First
Commercial or otherwise reviewed by J.P. Morgan, and J.P. Morgan did not assume
any responsibility or liability therefor. J.P. Morgan did not conduct any
valuation or appraisal of any assets or liabilities, nor were any such
valuations or appraisals provided to it. J.P. Morgan was not requested to review
individual credit files or to make any independent assessment as to the future
performance or nonperformance of Regions' or First Commercial's assets. J.P.
Morgan also assumed that, in the course of obtaining regulatory and third party
consents for the Merger and the other transactions contemplated by the
Agreement, no restriction will be imposed that will have a material adverse
effect on the future results of operations or financial condition of Regions or
First Commercial. In relying on financial analyses and forecasts provided to
J.P. Morgan, J.P. Morgan assumed that they have been reasonably prepared based
on assumptions reflecting the best currently available estimates and judgments
by management as to the expected future results of operations and financial
condition of Regions and First Commercial to which such analyses or forecasts
relate. J.P. Morgan also assumed that the Merger will have the tax consequences
described in this Joint Proxy Statement, and in discussions with, and materials
furnished to J.P. Morgan by, representatives of Regions, and that the other
transactions contemplated by the Agreement will be consummated as described in
the Agreement and this Joint Proxy Statement. J.P. Morgan relied as to all legal
matters relevant to rendering its opinions upon the advice of counsel.
The projections furnished to J.P. Morgan for Regions and First Commercial
were prepared by the management of Regions and First Commercial, respectively.
Regions and First Commercial do not publicly disclose internal management
projections of the type provided to J.P. Morgan in connection with J.P. Morgan's
analysis of the Merger, and such projections were not prepared with a view
toward public disclosure. These projections were based on numerous variables and
assumptions that are inherently uncertain and may be beyond the control of
management, including, without limitation, factors related to general economic
and competitive conditions and prevailing interest rates. Accordingly, actual
results could vary significantly from those set forth in such projections.
J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may
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affect J.P. Morgan's written opinion dated the date of this Joint Proxy
Statement, and J.P. Morgan does not have any obligation to update, revise, or
reaffirm such opinion. J.P. Morgan expressed no opinion as to the price at which
Regions' common stock will trade at any future time.
The following is a summary of the material analyses performed by J.P.
Morgan in connection with its opinions:
(a) Offer Valuation. J.P. Morgan reviewed the terms of the proposed
Merger, including the Exchange Ratio and the aggregate transaction value,
and also reviewed the implied value of the consideration offered based upon
the closing share price of Regions' common stock of $40.50 on February 6,
1998 (the last trading day prior to the February 8, 1998 meeting of the
Regions Board), which indicated that the implied value of the consideration
offered in the Regions proposal was $68.85 per share of First Commercial
Common Stock, representing a 3.0% premium to the February 6, 1998 First
Commercial Common Stock closing market price of $66.875 per share and a
19.1% premium to the January 22, 1998 (the day prior to market rumors that
First Commercial might be considering a business combination transaction)
First Commercial Common Stock closing market price of $56.5625. J.P. Morgan
further calculated the premiums implied by the Exchange Ratio to the market
price of First Commercial Common Stock for the periods five and thirty
trading days prior to February 6, 1998, based on the market price of
Regions Common Stock for the same periods, and determined that the implied
premiums were 8.0% and 16.7%, respectively. Additionally, J.P. Morgan
calculated the purchase price to last 12 months earnings per share for the
12 months ended December 31, 1997, forward 12 months earnings per share as
reported by IBES, forward 12 months earnings per share as reported by IBES
with synergies, book value, tangible book value and assets, which resulted
in multiples of 26.1x, 22.6x, 14.1x, 3.78x, 4.22x, and 36.6%, respectively.
(b) Pro Forma Merger Analysis. Based on earnings estimates as
reported by First Call, J.P. Morgan analyzed certain pro forma effects
expected to result from the Merger during the calendar years of 1998 and
1999. This analysis indicated that, relative to Regions on a stand-alone
basis, the Merger would be dilutive to Regions' estimated earnings per
share by 2.5% in 1998 and accretive to Regions' estimated earnings per
share by 2.5% in 1999. The analysis also indicated that the Merger would be
dilutive to Regions' tangible book value per share by 9.4% in 1998.
(c) Contribution Analysis. J.P. Morgan reviewed the relative
contribution to be made by First Commercial to the combined entity. The
financial and operating information reviewed in such analysis included,
among other things, total assets, common equity, and last quarter earnings
per share. This analysis showed that, based upon the Exchange Ratio, the
stockholders of First Commercial would own approximately 30.2% of the
fully-diluted outstanding shares of common stock of the combined company
immediately following the Merger and that First Commercial would be
contributing 22.6% of assets, 25.1% of common equity, and 24.1% of earnings
for the quarter ended December 31, 1997 which resulted in an ownership
premium to earnings of 25.3%. J.P. Morgan compared this ownership premium
to earnings to selected bank acquisitions, including First American
Corporation/Deposit Guaranty Corporation, National City Corporation/First
of America Bank Corporation, First Union Corporation/CoreStates Financial
Corp, Banc One Corporation/First Commerce Corp., NationsBank
Corporation/Barnett Banks, Inc., First Union Corporation/Signet Banking
Corporation, and First Union Corporation/First Fidelity Bancorporation.
These transactions had ownership premiums to earnings of 18.1%, 17.2%,
30.8%, 34.8%, 39.8%, 53.2%, and 23.5%.
(d) Discounted Cash Flow Analysis. Using a discounted cash flow
analysis, J.P. Morgan estimated the net present value of the future stream
of after-tax cash flows from 1998 through 2002 that First Commercial could
produce (assuming certain cost savings and revenue enhancements estimated
by Regions to result from the Merger) and distribute to First Commercial's
stockholders ("Dividendable Net Income"). In this analysis, J.P. Morgan
assumed that First Commercial performed in accordance with Regions'
estimates and projected the after-tax distributions to stockholders such
that First Commercial's tangible common equity ratio would be maintained at
a 7.0% level. J.P. Morgan calculated the sum of (i) the terminal values per
share of First Commercial Common Stock based on assumed
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multiples of First Commercial's projected 2002 earnings ranging from 16.0x
to 18.0x plus (ii) the projected 1998 through 2001 Dividendable Net Income
streams per share, in each case discounted to present values at assumed
discount rates ranging from 10% to 11%. This discounted cash flow analysis
indicated a reference range of $73.14 to $83.50 per share of First
Commercial Common Stock. In addition, J.P. Morgan tested the sensitivity of
these values by varying certain assumptions. The reference range was not
materially changed by reasonable variations of key assumptions. As
indicated above, this analysis did not purport to be indicative of actual
future results and did not purport to reflect the prices at which shares of
First Commercial Common Stock may trade. Discounted cash flow analysis was
included because it is a widely used valuation methodology, but the results
of such methodology are highly dependent upon the numerous assumptions that
must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
(e) Analysis of Selected Acquisition Transactions. J.P. Morgan
reviewed publicly available information regarding selected bank
acquisitions in the United States with a value greater than $1 billion
which had been announced since July 1, 1997 (including First American
Corporation/Deposit Guaranty Corporation, National City Corporation/First
of America Bank Corporation, First Union Corporation/CoreStates Financial
Corp, Banc One Corporation/First Commerce Corp., NationsBank
Corporation/Barnett Banks, Inc., and First Union Corporation/Signet Banking
Corporation). J.P. Morgan calculated the premium represented by the
purchase price paid in such acquisitions to the closing market price on the
day prior to the announcement, the closing price five days prior to
announcement, and the closing price thirty days prior to announcement, last
12 months' earnings per share, estimates of the next 12 months projected
earnings per share as reported by IBES and estimates of the next 12 months'
projected earnings per share as reported by IBES with synergies, book value
per share, and tangible book value per share, which J.P. Morgan determined
resulted in relevant ranges of premiums of (i) with respect to the market
price on the day prior to the announcement, the price five days prior to
announcement, and the price thirty days prior to announcement, 17.2% to
46.1%, 18.0% to 43.9%, and 18.7% to 75.8%, respectively, with medians of
31.6%, 36.5%, and 36.0%, respectively (resulting in imputed values per
share of First Commercial Common Stock based on the closing market price on
February 6, 1998 of $78.38 to $97.70 and a median of $88.02, based on the
price five days prior to February 6, 1998 of $75.23 to $91.74 and a median
of $87.02, and based on the price thirty days prior to February 6, 1998 of
$70.03 to $103.72 and a median of $80.21; and imputed values per share of
First Commercial Common Stock based on the closing market price on January
22, 1998 (the day prior to market rumors that First Commercial might be
considering a business combination transaction) of $67.24 to $83.82 and a
median of $75.52, based on the price five days prior to January 22, 1998 of
$68.44 to $83.46 and a median of $79.17, and based on the price thirty days
prior to January 22, 1998 of $64.69 to $95.81 and a median of $74.09); (ii)
with respect to last twelve-months' earnings per share, 22.2x to 29.8x,
with a median of 24.2x (resulting in imputed values per share of First
Commercial Common Stock of $58.71, $78.66, and $63.89, respectively); (iii)
with respect to estimates of the next 12 months' projected earning per
share as reported by IBES and to estimates of the next 12 months' projected
earnings per share as reported by IBES with synergies, 20.3x to 25.3x and
10.1x to 17.0x, respectively, with medians of 21.5x and 11.7x, respectively
(resulting in imputed values per share of First Commercial Common Stock of
$62.65, $78.00 and $66.08, respectively, based on estimates for the next 12
months and $49.32, $83.12 and $57.27, respectively, based on estimates with
synergies for the next 12 months); (iv) with respect to book value per
share, 3.46x to 5.39x, with a median of 3.92x (resulting in imputed values
per share of First Commercial Common Stock of $63.02, $98.21 and $71.31,
respectively); and (v) with respect to tangible book value per share, 3.57x
to 5.94x, with a median of 4.86x (resulting in imputed values per share of
First Commercial Common Stock of $58.25, $96.92 and $79.30, respectively).
In performing the above analysis, J.P. Morgan used results for First
Commercial as of or for the period ended December 31, 1997, except with
respect to the market price of First Commercial Common Stock and with
respect to estimates of the next 12 months' earnings per share, which were
as of February 6, 1998.
No company or transaction used in the above analysis as a comparison
is identical to First Commercial or the Merger. Accordingly, an analysis of
the results of the foregoing necessarily involves
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complex considerations and judgments concerning differences in financial
and operating characteristics of the companies and other factors that could
affect the value of the companies to which they are being compared.
Mathematical analysis (such as determining the median) is not, in itself, a
meaningful method of using comparable data.
(f) Comparison of Selected Companies. J.P. Morgan reviewed and
compared certain public market multiples relating to First Commercial to
the publicly available corresponding data for two peer groups of selected
banks which J.P. Morgan deemed to be relevant. The group of selected
Southeastern banks (the "First Commercial Selected Southeastern Banks")
consisted of AmSouth Bancorporation, BancorpSouth, Inc., CCB Financial
Corporation, Centura Banks, Inc., Compass Bancshares, Inc., First American
Corporation, First Tennessee National Corporation, First Virginia Banks,
Inc., Hibernia Corporation, Regions Financial Corporation, SouthTrust
Corporation, Trustmark Corporation, and Union Planters Corporation. The
group of selected banks located in all regions of the United States (the
"First Commercial Selected National Banks" and, together with First
Commercial Selected Southeastern Banks, the "First Commercial Selected
Banks") consisted of all of First Commercial Selected Southeastern Banks as
well as Associated Banc-Corp, Commerce Bancshares, Inc., First Empire State
Corporation, First Security Corporation, Mercantile Bankshares Corporation,
Old Kent Financial Corporation, Provident Financial Group Inc., and Zions
Bancorporation.
Based on a review of such information for First Commercial Selected
Banks, J.P. Morgan determined (in each case based on company data as of or
for the twelve months ended December 31, 1997, and closing stock prices as
of February 6, 1998): (i) that, with respect to the ratio of price to
earnings per share for the twelve-month period ended December 31, 1997,
First Commercial Selected Southeastern Banks and First Commercial Selected
National Banks had a median of 20.4x and 20.3x, respectively, compared to
25.3x for First Commercial; (ii) that, with respect to the multiple of
stock price to estimated earnings per share for 1998, First Commercial
Selected Southeastern Banks and First Commercial Selected National Banks
(based on projected earnings per share for 1998 as reported by IBES for
First Commercial Selected Banks and as reported by First Call for First
Commercial) had a median of 18.0x and 18.0x, respectively, compared to
22.5x for First Commercial; (iii) that, with respect to the multiple of
stock price to estimated earnings per share for 1999, First Commercial
Selected Southeastern Banks and First Commercial Selected National Banks
(based on earning per share for 1999 as reported by IBES for First
Commercial Selected Banks and as reported by First Call for First
Commercial) had a median of 16.4x and 16.4x, respectively, compared to
20.6x for First Commercial; (iv) that, with respect to the multiple of
stock price to book value, First Commercial Selected Southeastern Banks and
First Commercial Selected National Banks had a median of 3.05x and 3.06x,
respectively, compared to 3.79x for First Commercial; and (v) that, with
respect to the multiple of stock price to tangible book value, First
Commercial Selected Southeastern Banks and First Commercial Selected
National Banks had a median of 3.31x and 3.33x, respectively, compared to
4.11x for First Commercial.
J.P. Morgan also calculated a range of imputed values for a share of
First Commercial Common Stock based on a 35% equity control premium and
certain of the ratios for First Commercial Selected Southeastern Banks and
First Commercial Selected National Banks specified above, including the
ratio of closing price of the First Commercial Selected Southeastern Banks
and the First Commercial Selected National Banks on February 6, 1998, to
each of book value, tangible book value, earnings per share for the twelve
months ended December 31, 1997, and estimated earnings per share for 1998
and 1999, in each case as reported by IBES for First Commercial Selected
Banks, applied to the appropriate financial results and estimated earnings
for First Commercial as reported by First Call. This analysis, including a
35% equity control premium, resulted in a range of imputed values for First
Commercial Common Stock of between $72.47 and $75.21 per share.
J.P. Morgan also calculated a range of imputed values for a share of
First Commercial Common Stock based on the value of synergies assuming a
10% cost of equity and a 17x terminal value multiple and certain of the
ratios for First Commercial Selected Southeastern Banks and First
Commercial Selected National Banks specified above, including the ratio of
closing price of the First Commercial
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Selected Southeastern Banks and the First Commercial Selected National
Banks on February 6, 1998, to each of book value, tangible book value,
earnings per share for the twelve months ended December 31, 1997, and
estimated earnings per share for 1998 and 1999, in each case as reported by
IBES for First Commercial Selected Banks, applied to the appropriate
financial results and estimated earnings for First Commercial as reported
by First Call. This analysis, including the value of synergies, resulted in
a range of imputed values for First Commercial Common Stock of between
$72.24 and $74.27 per share.
In connection with its opinion dated the date of this Joint Proxy
Statement, J.P. Morgan reviewed the analyses used to render its February 8, 1998
opinion to the Regions Board by performing procedures to update certain of such
analyses and by reviewing the assumptions upon which such analyses were based
and the factors considered in connection therewith.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set forth
above and their analyses must be considered as a whole and that selecting
portions thereof, without considering all of its analyses, could create an
incomplete view of the processes underlying its analyses and opinion. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which J.P.
Morgan based its analyses are set forth above under the description of each such
analysis. J.P. Morgan's analyses are not necessarily indicative of actual values
or actual future results that might be achieved, which values may be higher or
lower than those indicated. Moreover, J.P. Morgan's analyses are not and do not
purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise Regions with
respect to the Merger on the basis of such experience and its familiarity with
Regions.
J.P. Morgan and its affiliates maintain banking and other business
relationships with Regions and First Commercial and their respective affiliates,
for which it receives customary fees. In the ordinary course of their
businesses, affiliates of J.P. Morgan may actively trade the debt and equity
securities of Regions or First Commercial for their own accounts or for the
accounts of customers and, accordingly, they may at any time hold long or short
positions in such securities.
For services rendered in connection with the Merger, Regions has agreed to
pay J.P. Morgan a success fee of $1,500,000, provided, that Regions may, in its
sole discretion, increase the success fee up to $2,000,000, payable upon
consummation of the Merger. Regions and J.P. Morgan provided for the
discretionary increase in the success fee to reflect the possibility that J.P.
Morgan's performance of its engagement might involve significantly more time,
effort, and expense than the parties contemplated at the time of the engagement.
Based on presently existing circumstances, Regions does not intend to increase
the success fee above $1,500,000. In addition, Regions has agreed to reimburse
J.P. Morgan for its expenses incurred in connection with its services, including
the fees and disbursements of counsel, and will indemnify J.P. Morgan against
certain liabilities, including liabilities arising under the Federal securities
laws.
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
Delaware Certificate of Merger and the Arkansas Articles of Merger relating to
the Merger are filed and declared effective with, respectively, the Delaware
Secretary of State and the Arkansas Secretary of State. Unless otherwise agreed
upon by Regions and First Commercial, 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 or before the 15th
business day following the last of
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the following events to 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 First Commercial and Regions stockholders.
First Commercial and Regions have agreed to cooperate in setting the Effective
Time to ensure that holders of First Commercial Common Stock, with respect to
the quarterly period in which the Effective Time occurs, will not receive
dividends on both First Commercial and Regions common stock, and will not fail
to receive any dividend.
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 First Commercial 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 First Commercial generally may
terminate the Agreement if the Merger is not consummated by December 31, 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."
DISTRIBUTION OF REGIONS STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
Promptly after the Effective Time, Regions will cause the Exchange Agent
selected by Regions to mail to the former stockholders of First Commercial a
form letter of transmittal, together with instructions for the exchange of such
stockholders' certificates representing shares of First Commercial Common Stock
for certificates representing shares of Regions Common Stock.
FIRST COMMERCIAL 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 First Commercial Common Stock, together
with a properly completed letter of transmittal, there will be issued and mailed
to each holder of First Commercial 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, First Commercial 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 First Commercial Common Stock has been converted,
regardless of whether such stockholders have surrendered their First Commercial
Common Stock certificates. Whenever any dividend or other distribution with
respect to Regions Common Stock is declared with a record date after the
Effective Time, such declaration will apply to all shares of Regions Common
Stock issuable upon consummation of the Merger. However, beginning 30 days after
the Effective Time, no dividend or distribution will be paid to the holder of
any unsurrendered First Commercial 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 First Commercial will be closed at the
Effective Time, and after the Effective Time, there will be no transfers of
shares of First Commercial Common Stock on First Commercial's stock transfer
books. If certificates representing shares of First Commercial 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 and the applicable state
regulatory authorities, and the expiration of all applicable waiting
periods associated with these approvals, without any conditions or
restrictions that would, in the reasonable good faith judgment of the
Regions Board, so materially
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adversely impact the economic or business benefits of the transactions
contemplated by the Agreement so as to render inadvisable the consummation
of the Merger;
(b) satisfaction of applicable requirements of stockholder action by
the requisite affirmative votes of First Commercial and Regions
stockholders;
(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 Alston & Bird LLP 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 Federal Income Tax Consequences of the Merger," including,
among others, that the exchange of First Commercial Common Stock for
Regions Common Stock will not give rise to recognition of gain or loss to
First Commercial stockholders, except to the extent of any cash received;
(e) the receipt by Regions and First Commercial of a letter from
Regions' independent auditors to the effect that the Merger will qualify
for pooling-of-interests accounting treatment;
(f) the preferred stock purchase rights issued by First Commercial
under its shareholder rights plan shall not have become nonredeemable and
shall not have become exercisable for shares of Regions capital stock; and
(g) 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) delivery of
certificates executed by Regions' and First Commercial's respective duly
authorized officers as to the satisfaction of certain conditions and obligations
set forth in the Agreement and (ii) as of the Effective Time, the accuracy of
certain representations and warranties and the compliance in all material
respects with the agreements and covenants of each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that pending 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 First Commercial 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
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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 bank regulatory
authorities in various states, including Arkansas, Texas, Louisiana , Tennessee,
and Oklahoma. In their evaluations, such state authorities may take into account
considerations similar to those applied by the Federal Reserve.
The Federal Reserve has granted its approval of the Merger, and each of the
state authorities has yet to issue its approval of the Merger.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to or at the Effective Time, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Regions and
First Commercial approved by their respective Boards of Directors; provided,
however, that after approval by the First Commercial stockholders, no amendment
that pursuant to the ABCA requires further approval of the First Commercial
stockholders, including decreasing the consideration to be received by First
Commercial 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 First Commercial
stockholders, or the Regions 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 nonappeable
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 First Commercial Common Stock and the holders
of the requisite number of shares of Regions Common Stock shall not have
approved the Agreement;
(c) by mutual consent of the Boards of Directors of Regions and First
Commercial;
(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 December 31, 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 First Commercial 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. Notwithstanding termination of the Agreement, the Option
Agreement will be governed by its terms.
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CONDUCT OF BUSINESS PENDING THE MERGER
Under the terms of the Agreement, both Regions and First Commercial have
agreed to use all reasonable efforts to obtain as soon as practicable all
consents and approvals of any person necessary or desirable for the consummation
of the Merger, including, but not limited to, obtaining the approval of their
respective stockholders and all requisite regulatory approvals. Each of First
Commercial 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 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 from continuing to implement its program of acquiring
unaffiliated depository and nondepository institutions, except as such would
affect the ability of either party to obtain consents required for the Merger.
In addition, the Agreement includes certain other restrictions applicable to the
conduct of the business of First Commercial prior to consummation of the Merger,
as described below.
First Commercial 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 the chief executive officer or chief financial officer of
Regions, which Regions has agreed shall not be unreasonably withheld. Generally,
First Commercial has agreed that it will not:
(a) amend the First Commercial Articles, Bylaws, or other governing
instruments of First Commercial or its subsidiaries, or the rights
agreement governing First Commercial's preferred stock purchase rights
(except as expressly contemplated by the Agreement in the case of the
rights agreement);
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money in excess
of an aggregate of $1,000,000 (for First Commercial and its subsidiaries on
a consolidated basis) except in the ordinary course of the business of
First Commercial 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 of, any lien (with certain
exceptions) on any assets of First Commercial or its subsidiaries, 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 First Commercial or its subsidiaries, or declare or
pay any dividend or make any other distribution in respect of First
Commercial Common Stock; provided that First Commercial may (to the extent
legally able to do so), but shall not be obligated to, declare and pay
regular quarterly cash dividends on the First Commercial Common Stock at a
rate not in excess of $.28 per quarter with regular record and payment
dates in accordance with past practice as previously disclosed to Regions,
provided that the parties have agreed to cooperate in selecting the
Effective Time such that, for the quarter in which the Effective Time
occurs, the stockholders of First Commercial do not receive both a dividend
with respect to First Commercial Common Stock and a dividend with respect
to Regions Common Stock, or fail to receive any dividend;
(d) except for the Agreement, or pursuant to the Option Agreement, or
pursuant to the exercise of stock options or other stock rights outstanding
as of the date of the Agreement and pursuant to the terms thereof in
existence on the date of the Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of First Commercial Common Stock or any
other capital stock of First Commercial 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 First
Commercial or its subsidiaries or issue or authorize the issuance of any
other securities in respect of or in substitution for shares of First
Commercial Common Stock or sell, lease, mortgage, or otherwise dispose of
or otherwise encumber any shares of capital stock of First Commercial's
subsidiaries or any assets other than in the ordinary course of business
for reasonable and adequate consideration;
(f) with certain exceptions and except for purchases of U.S. Treasury
Securities or U.S. government agency securities, in each case with
maturities of three years or less, purchase any securities or make any
material investments, or otherwise acquire direct or indirect control over
any unaffiliated entity;
(g) grant any increase in compensation or benefits to the employees or
officers of First Commercial or its subsidiaries except as previously
disclosed to Regions or as required by law; pay severance or termination
pay or any bonus except pursuant to the provisions of any applicable
program or plan adopted by the First Commercial Board prior to the date of
this Agreement; enter into or amend any severance agreements with officers
of First Commercial or its subsidiaries; grant any material increase in
fees or other increases in compensation or other benefits to directors of
First Commercial or its subsidiaries; or voluntarily accelerate the vesting
of any stock options or other stock-based compensation or employee
benefits;
(i) enter into or amend any employment contract between First
Commercial or its subsidiaries and any person (unless such amendment is
required by law) that First Commercial 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) adopt any new employee benefit plan or program of First Commercial
or its subsidiaries or make any material change in or to any existing
employee benefit plans or programs of First Commercial 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 tax or accounting methods,
principles, or practices or systems of internal accounting controls, except
as may be necessary to conform to changes in applicable tax laws,
regulatory accounting requirements, or generally accepted accounting
principles ("GAAP");
(l) commence or settle any litigation for material money damages or
involving restrictions upon the operations of First Commercial or any
subsidiary other than as necessary for the prudent operation of its
business; 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
or waive, release compromise or assign any material rights or claims.
First Commercial has also agreed that, except with respect to the Agreement
and the transactions contemplated thereby, neither First Commercial nor any
representative thereof, will, directly or indirectly, solicit or engage in
negotiations concerning any acquisition proposal, provide any confidential
information or assistance to, or have any discussions with, any person with
respect to an acquisition proposal. However, First Commercial may, and may
authorize and permit its representatives to, provide any person with
confidential information, have discussions or negotiations with, or otherwise
facilitate an effort or attempt by such person to make or implement an
acquisition proposal not solicited in violation of the Agreement, if the First
Commercial Board, after having consulted with, and based upon the advice of,
outside counsel, determines in good faith that the failure to take such actions
could constitute a breach of the fiduciary duties of the First Commercial Board
under applicable law, subject to the satisfaction of certain conditions. First
Commercial has agreed to promptly advise Regions following the receipt of any
such acquisition proposal, and to provide Regions with the material details of
such an acquisition proposal and, provided further, that prior to delivery of
any confidential information relating to First Commercial to any person making
an acquisition proposal, such person shall have entered into a confidentiality
agreement with First Commercial.
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MANAGEMENT FOLLOWING THE MERGER
Upon consummation of the Merger, the present officers and directors of
Regions will retain their respective positions with Regions. For information
pertaining to the directors and executive officers of Regions, executive
compensation, certain relationships and related transactions, and other related
matters, see "Additional Matters Pertaining to Regions' Annual Meeting."
Additional information concerning Regions' executive officers is set forth in
Regions' Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated herein by reference. See "Documents Incorporated by Reference."
At the first scheduled meeting of the Regions Board following the Effective
Time, Regions shall take all corporate action necessary to increase the number
of directors which the Regions Board comprises and shall elect John W. Allison,
Barnett Grace, Frank D. Hickingbotham, and Michael W. Murphy, each of whom is a
current director of First Commercial (the "First Commercial Nominees"), to the
Regions Board to serve as members of such classes of the Regions Board as
necessary so that each class of the Regions Board is nearly equal in number as
practicable. If, prior to the Effective Time, any of the First Commercial
Nominees to be elected to the Regions Board resigns, retires, or otherwise
ceases to serve as a director of First Commercial, or otherwise becomes unable
or unwilling, to serve as a director of Regions, First Commercial may suggest,
with Regions concurrence, a replacement to become a director of Regions. Each
First Commercial Nominee shall also be named to the committees of the Regions
Board of Directors so that First Commercial Nominees are represented on such
committees in at least the proportion that they are represented on the Regions
Board. The First Commercial Nominees elected to the Regions Board shall serve on
(i) the Regions Board and (ii) appropriate committees of the Regions Board, all
in accordance with the policies and procedures of Regions applicable to all
directors.
All members of the of First Commercial Board (other than the First
Commercial Nominees), shall be offered positions as directors of a current First
Commercial subsidiary with operations in Arkansas, Texas, or Oklahoma, as
appropriate, consistent with First Commercial's current practice and shall be
entitled to such compensation as is consistent with First Commercial's current
practices for such board service. To the extent that any of the current
subsidiary banks of First Commercial are consolidated with a Regions subsidiary
bank following the Merger, the members of the Board of Directors of such banks
shall be offered positions as advisory directors of Regions with respect to
Regions' operations in the market area of the consolidated bank and shall be
entitled to such compensation as is consistent with Regions' normal practices
for such advisory board service.
At the Effective Time, Barnett Grace, Chairman, President, and Chief
Executive Officer of First Commercial, shall be appointed Regional President of
Regions' operations in Arkansas, Texas, and Oklahoma and become a member of
Regions' Executive Council.
Regions will be the surviving corporation resulting from the Merger and
shall continue to be governed by the laws of the state of Delaware and operate
in accordance with the Regions Certificate and Bylaws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. Certain members of First Commercial's management and the First
Commercial Board have interests in the Merger in addition to their interests as
stockholders of First Commercial generally. As more fully described below, those
interests relate to, among other things, the agreement by Regions to enter into
employment agreements with certain executive officers of First Commercial at the
Effective Time in exchange for such executive officers terminating their
existing employment agreements with First Commercial, the election of certain
individuals to the Regions Board, the agreement by Regions to make various
community investments through the establishment of a small business investment
corporation ("SBIC") and charitable foundation, the continued indemnification by
Regions of the former directors, officers, employees, and agents of First
Commercial and its subsidiaries following consummation of the Merger, and the
assumption by Regions of the outstanding stock options of First Commercial.
The First Commercial Board was aware of these factors and considered them,
among other matters, in approving the Agreement and the transactions
contemplated thereby.
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Post-Merger Management Matters. At the first scheduled meeting of the
Regions Board following the Effective Time, Regions shall take all corporate
action necessary to increase the number of directors comprising the Regions
Board and shall elect John W. Allison, Barnett Grace, Frank D. Hickingbotham,
and Michael W. Murphy, each of whom is a current director of First Commercial,
to the Regions Board. All other current First Commercial directors shall be
offered positions as directors of a current First Commercial subsidiary with
operations in Arkansas, Texas and Oklahoma, and shall be compensated for such
service consistent with First Commercial's current practices for such board
service. If following the Merger, First Commercial subsidiaries on which current
First Commercial directors serve as directors are eliminated, such First
Commercial directors shall be offered positions on Regions' advisory boards for
Arkansas, Texas, or Oklahoma and shall be compensated for such service
consistent with First Commercial's current practices for advisory board service.
At the Effective Time, Barnett Grace, Chairman, President, and Chief Executive
Officer of First Commercial, shall be appointed Regional President of Regions'
operations in Arkansas, Texas, and Oklahoma and become a member of Regions'
Executive Council. See "-- Management Following the Merger." Regions will also
enter into employment agreements with six other executive officers of First
Commercial at the Effective Time. See "-- New Employment Agreements."
Indemnification. The Agreement generally provides that, from and after the
Effective Time, Regions will indemnify each person who is or prior to the
Effective Time becomes a director or officer of First Commercial or any
subsidiary, against any claim or liability made or threatened against such
person based on or pertaining to the fact that such person is or was a director,
officer, or employee of First Commercial or any subsidiary or predecessor, or
based on or pertaining to the Agreement and the transactions contemplated
thereby, to the full extent permitted by law, for a period of six years from the
Effective Time. Moreover, all rights to indemnification asserted during such
period shall continue until final disposition of such underlying claim.
Under the Agreement, Regions further agrees that all rights to
indemnification and all limitations on liability existing in favor of the
directors, officers, and employees of First Commercial and its subsidiaries, as
provided in their respective articles of incorporation, bylaws, or similar
governing instruments as in effect as of the date of the Agreement, with respect
to matters occurring prior to the Effective Time, shall survive the Merger and
continue in full force and effect for a period of six years following the
Effective Time, to be honored by such entities and their successors as if they
were the indemnifying party thereunder.
The Agreement provides that Regions will cause each person who served as a
director or officer of First Commercial at or prior to the Effective Time to be
covered under First Commercial's existing directors' and officers' liability
insurance policy (or substitute policies of at least the same coverage and
amounts with terms and conditions no less advantageous than such existing
policy), for a period of three years after the Effective Time.
New Employment Agreements. As of the Effective Time, Regions will enter
into a three-year employment agreement with Barnett Grace, Chairman, Chief
Executive Officer and President of First Commercial, providing that Mr. Grace
will be appointed Regional President of Regions' operations in Arkansas, Texas,
and Oklahoma and a member of Regions' Executive Council. Under the terms of his
employment agreement, Mr. Grace will be guaranteed a minimum annual salary of
$435,000 and a minimum annual bonus of $400,900 for fiscal year 1999 and
$340,000 in each year thereafter. As of the Effective Time, Regions will also
enter into three year employment agreements with Jack Fleischauer, Jr., Neil S.
West and J. Lynn Wright which will provide for minimum annual salaries, in the
aggregate, of $692,000, minimum annual bonuses, in the aggregate, of $379,880
for fiscal year 1999 and $283,000 in each year thereafter. As a condition to
entry in to these employment agreements with Regions, Messrs. Grace,
Fleischauer, West and Wright (the "Executives") current change in
control/severance agreements with First Commercial shall terminate at the
Effective Time and be of no further force and effect.
The base salary for each of these First Commercial executives will be
increased as of January 1 of each calendar year during the term of the new
employment agreement by an amount at least equal to the average percentage
increase in annual base salary paid to the top three Regions executive officers
(excluding Carl E. Jones, Jr. and Mr. Grace), calculated for each year on a
compounded basis. During each of such years, the
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Executives will participate fully in all executive incentive compensation and
bonus programs of Regions (including stock option, performance share and
restricted stock grants) in amounts and on a basis that are at least as
favorable as other Regions senior executives holding comparable positions.
The employment agreements will also provide that, if during the one-year
period following the Effective Time, a First Commercial's executive's employment
is terminated for any reason, such First Commercial executive will (i) be
provided by Regions a lump sum severance payment, in cash, without discount,
equal to three times the sum of (A) the Executive's annual base salary at the
rate in effect immediately prior to the date of termination and (B) the
Executive's average bonus for the two fiscal years (or such shorter period
(which shall be annualized) during which the Executive has been employed by
Regions or First Commercial) immediately preceding the fiscal year in which the
termination date occurs, and (ii) be provided by Regions group term life
insurance, health insurance, accident and long-term disability insurance
benefits substantially similar in all respects to those that Executive was
receiving immediately prior to the termination date for a period of three years
(the "Severance Benefits"). In the event that an Executive becomes entitled to
receive the Severance Benefits or any other benefits or payments in connection
with the Merger or this Agreement (collectively, the "Total Benefits") and the
Total Benefits will be subject to the excise tax under Section 4999 of the Code,
Regions shall pay such Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by such Executive, after deduction of any
excise tax on the Total Benefits and any federal, state and local income taxes,
excise tax, and FICA and Medicare withholding taxes upon the Gross-Up Payment
will equal the Total Benefits. Gross-Up Payments are not deductible by an
employer corporation such as Regions for federal income tax purposes. If during
the two-year period following the first anniversary of the Effective Time, (i) a
First Commercial executive's employment is terminated by Regions without "cause"
or (ii) the executive terminates his or her employment for "good reason" the
Executive will be entitled to receive the Total Benefits. If during the two-year
period following the first anniversary of the Effective Date, the executive
voluntarily terminates his or her employment under circumstances pursuant to
which the benefits payable in the preceding sentence are not payable, the
Executive will be entitled to receive in a lump sum payment an amount equal to
the base salary and bonus that would otherwise be payable to the Executive
during the remaining term of the employment agreement.
If the Executives were entitled to receive Severance Benefits under their
existing change of control/ severance agreements as a result of the Merger as of
July 15, 1998, the amount of Severance Benefits that would be received by Mr.
Grace would be approximately $2.7 million and the amount of Severance Benefits
that would be received collectively by Messrs. Fleischauer, West and Wright
would be approximately $3.3 million.
Regions has agreed to employ Edwin P. Henry, J. French Hill and Clarence E.
Hoover for a period of one year following the Merger during which period these
individuals will be paid (i) minimum annual salaries, in the aggregate, of
$561,000, and (ii) minimum annual bonuses, in the aggregate, of $332,000. In
addition, Regions has agreed to pay Mr. Hoover a special retention bonus of
$100,000 if he continues to be employed by Regions for the entire one year
period following the Merger. Messrs. Henry, Hill and Hoover are also parties to
change in control/severance agreements with First Commercial similar to those
described above. If Messrs. Henry, Hill and Hoover were entitled to receive
Severance Benefits under their existing change of control/severance agreements
as a result of the Merger as of July 15, 1998, the amount of Severance Benefits
that would be received by these individuals collectively would be approximately
$2.5 million.
Restricted Stock Awards. At the Effective Time, Mr. Grace will receive a
restricted stock award covering $2,750,000, and Messrs. Fleischauer, West and
Wright will receive restricted stock awards covering the aggregate $3,250,000,
worth of Regions Common Stock based on the then current market value of Regions
Common Stock. The restricted shares will vest in equal installments over three
years (immediately in the event of a change of control of Regions), and in all
events the awards will have terms and conditions that are no less favorable than
those applicable to awards made to other senior executives of Regions. If during
the three-year period following the Effective Time, (i) an Executive's
employment is terminated by Regions without "cause" or (ii) such Executive
terminates his or her employment for "good reason" the executive's restricted
stock award will automatically vest to the extent such awards shall not have
already vested. Regions has offered these restricted stock awards to Messrs.
Grace, Fleishchauer, West, and Wright as an inducement
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to accept employment with Regions following the Merger because Regions views the
retention of these individuals as important to the operation of the combined
entity following the Merger, particularly in the Arkansas, Texas and Oklahoma
region, and partially as consideration for these individuals relinquishing their
severance/change in control agreements.
Regions Stock Option Grants. At the Effective Time, Mr. Grace will be
granted options to purchase 35,000 shares, and Messrs. Fleischauer, West and
Wright will be granted in the aggregate options to purchase 45,000 shares,
respectively, of Regions Common Stock at an exercise price equal to the
then-current market price of Regions Common Stock. All options will have an
exercise price equal to the fair market value of Regions stock on the date of
grant, a ten year term, vest after one year and will, in all events, have terms
and conditions that are no less favorable than those applicable to grants made
to other Regions senior executives. In the event of a change of control of
Regions, the options will vest automatically on the later of (i) six months
after issuance or (ii) the date of such change of control. Moreover, if during
the three-year period following the Effective Time, (i) an Executive's
employment is terminated by Regions without "cause" or (ii) such Executive
terminates his or her employment for "good reason" the Executive's stock option
grant will automatically vest to the extent such grant shall not have already
vested.
First Commercial Stock Options and Employee Benefits. The Agreement also
provides that, after the Effective Time, Regions will provide generally to
officers and employees of First Commercial 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 First Commercial 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 honor all
employment, severance, consulting, and other compensation contracts previously
disclosed to Regions between First Commercial 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 First Commercial's
benefit plans.
As described above under "-- Treatment of First Commercial Options," the
Agreement also provides that all rights with respect to First Commercial Common
Stock pursuant to stock options or similar stock based compensation rights
granted by First Commercial under its stock option and other stock-based
compensation plans which are outstanding at the Effective Time, whether or not
then exercisable, will be converted into and will become rights with respect to
Regions Common Stock, and Regions will assume each of such options or rights in
accordance with its terms.
As a result of the Merger, all First Commercial Rights issued under First
Commercial's stock based compensation plans which are subject to vesting
restrictions will accelerate and become immediately exercisable. Assuming a
market price of $39.25 per share for Regions Common Stock at the Effective Time,
the value of unvested options to purchase shares of First Commercial Common
Stock and unvested performance units under the First Commercial bonus plan that
will be accelerated as a result of the Merger held by Mr. Grace are equal to
$1.55 million and $700,613, respectively, and those held by the other six
executive officers of First Commercial with whom Regions is entering employment
arrangements are equal to $3.85 million and $2.10 million, respectively.
Community Investments. To demonstrate its desire to make an ongoing
commitment to the communities served by First Commercial, following the Merger
Regions intends to make certain investment capital available to those
communities through establishing (i) a SBIC to be initially funded with capital
of $5 million and (ii) a charitable foundation qualified under Section 501
(c)(3) of the Code with an initial commitment of $7.5 million. The Board of
Directors of the foundation will be selected by First Commercial. The First
Commercial Board sought the commitment from Regions to make these community
investments because the Board believed it was important to demonstrate in
connection with the Merger a commitment to the communities served by First
Commercial. Community investments of this type are typical in transactions like
the Merger involving financial institutions.
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DISSENTING STOCKHOLDERS
First Commercial Common Stock. Pursuant to the provisions of Subchapter 13
of the ABCA, if the Merger is consummated, any holder of First Commercial Common
Stock who (i) gives to First Commercial, prior to the vote at the First
Commercial 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, excluding any appreciation or
depreciation in anticipation of the Merger.
A stockholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial stockholder and
such holder notifies First Commercial in writing of the name and address of each
person on whose behalf such holder asserts dissenters' rights. The rights of
such a partial dissenter are determined as if the shares as to which such holder
dissents and such holder's other shares were registered in the names of
different stockholders. A beneficial stockholder may assert dissenters' rights
as to shares held on his behalf only if he dissents with respect to all shares
of which he is the beneficial stockholder or over which he has power to direct
the vote. A beneficial stockholder asserting dissenters' rights to shares held
on such holder's behalf must submit to First Commercial such record holder's
consent to the dissent not later than the time at which the beneficial
stockholder exercises dissenters' rights.
The written notice requirement referred to above will not be satisfied
under the Arkansas statutory provisions by merely voting against approval of the
Agreement by proxy or in person at the First Commercial Special Meeting. 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.
Any written notice of intent to demand payment pursuant to Subchapter 13 of
the ABCA should be addressed as follows: First Commercial Corporation, 400 West
Capitol Avenue, Little Rock, Arkansas 72201, Attention: Corporate Secretary.
If the Merger is authorized at the First Commercial Special Meeting, First
Commercial must deliver a written dissenters' notice (the "Dissenters' Notice")
to all holders of First Commercial Common Stock who 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 certificates for shares of First Commercial Common Stock must be
deposited, (ii) inform holders of uncertificated shares to what extent transfer
of these shares will be restricted after the demand for payment is received,
(iii) supply a form for demanding payment that includes the date of the first
announcement to news media or to stockholders of the terms of the Merger and
requires that the person asserting dissenters' rights certify whether or not
such person, or if a nominee asserting dissenters' rights on behalf of a
beneficial stockholder, the beneficial stockholder acquired beneficial ownership
of the shares before that date, (iv) set a date by which First Commercial must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered), and (v) be accompanied
by a copy of Subchapter 13 of the ABCA.
A stockholder of record who receives the Dissenters' Notice must demand
payment, certify whether such holder (or the beneficial stockholder on whose
behalf such holder is asserting dissenters' rights) acquired beneficial
ownership of the shares before the date set forth in the Dissenters' Notice, and
deposit such holder's certificates in accordance with the Dissenters' Notice.
Such stockholder will retain all other rights of a stockholder until those
rights are canceled or modified by the consummation of the Merger. A stockholder
who does not demand payment and deposit such holder's share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for such holder's shares under Subchapter 13.
Except as described below, as soon as the Merger is consummated, or upon
receipt of a payment demand, Regions as the surviving corporation resulting from
the Merger must pay to each dissenting stockholder who complied with the payment
demand and deposit requirements described above, the amount the surviving
corporation estimates to be the fair value of such holder's shares, plus accrued
interest from the Effective
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Time. Such payment must be accompanied by (i) certain recent First Commercial
financial statements, (ii) the surviving corporation's estimate of the fair
value of the shares and an explanation how the fair value was calculated, (iii)
an explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand additional payment under Section 4-27-1328 of the
ABCA, and (v) a copy of Subchapter 13 of the ABCA.
The surviving corporation may elect to withhold such payment from a
dissenter as to any shares of which such dissenter (or the beneficial owner on
whose behalf such dissenter is asserting dissenters' rights) was not the
beneficial owner on the date set forth in the Dissenters' Notice as the date of
the first announcement to news media or to stockholders of the terms of the
proposed Merger, unless the beneficial ownership of the shares devolved upon him
by operation of law from a person who was the beneficial owner on the date of
the first announcement. To the extent the surviving corporation elects so to
withhold payment, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to accept it in
full satisfaction of such dissenter's demand. The surviving corporation shall
send with its offer a statement of its estimate of the fair value of the shares,
an explanation of how the fair value and interest were calculated, and a
statement of the dissenter's right to demand additional payment under Section
4-27-1328.
Section 4-27-1328 of the ABCA provides that a dissenting stockholder may
notify the surviving corporation in writing of such holder's own estimate of the
fair value of such holder's shares and the interest due, and may demand payment
of such holder's estimate (less any payment already received), if (i) such
holder believes that the amount offered by the surviving corporation is less
than the fair value of such holder's shares or that the interest due has been
calculated incorrectly, (ii) the surviving corporation fails to make payment
under Section 4-27-1325 or to offer payment under Section 4-27-1327 within sixty
days after the date set for demanding payment; or (iii) the corporation has
failed to effect the Merger and does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares within sixty
days after the date set for demanding payment. A dissenting stockholder waives
such holder's right to demand payment under Section 4-27-1328 unless such holder
notifies the surviving corporation of such holder's demand in writing within 30
days after the surviving corporation makes or offers payment for such holder's
shares.
If a demand for payment under Section 4-27-1328 remains unsettled, the
surviving corporation must commence a proceeding in the Circuit Court of Pulaski
County, Arkansas, within 60 days after receiving the demand for additional
payment and must petition the court to determine the fair value of the shares
and accrued interest. If the surviving corporation does not commence the
proceeding within those 60 days, it is required to pay each dissenting
stockholder whose demand remains unsettled the amount demanded. The surviving
corporation is required to make all dissenting stockholders whose demands remain
unsettled, parties to the proceeding and to serve a copy of the petition upon
all such parties. The court may appoint appraisers to receive evidence and to
recommend a decision on fair value. Each dissenter made a party to the
proceeding is entitled to judgment for the amount, if any, by which the court
finds the fair value of such dissenter's shares,
plus interest, exceeds the amount paid by the surviving corporation.
The court in an appraisal proceeding commenced under the foregoing
provision must determine the costs of the proceeding, excluding fees and
expenses of attorneys and experts for the respective parties, and must assess
those costs against the surviving corporation, except that the court may assess
the costs against all or some of the dissenting stockholders to the extent the
court finds they acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 4-27-1328. The court also may assess the fees
and expenses of attorneys and experts for the respective parties against the
surviving corporation if the court finds the surviving corporation did not
substantially comply with the requirements of specified provisions of Subchapter
13 of the ABCA, or against either the surviving corporation or a dissenting
stockholder if the court finds that such party acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by Subchapter 13 of the
ABCA.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the surviving
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corporation, the court may award to such counsel reasonable fees to be paid out
of the amounts awarded the dissenters who were benefitted.
In a proceeding commenced by dissenters to enforce the liability under
Section 4-27-1328 of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
surviving corporation and in favor of the dissenters.
The foregoing is a summary of the material rights of a dissenting
stockholder of First Commercial, but is qualified in its entirety by reference
to Subchapter 13 of the ABCA, included in Appendix D to this Joint Proxy
Statement. It is not intended to grant or enlarge any right of dissent or
payment to any stockholder and should not be so read. Stockholders' rights of
dissent and payment are limited to those provided by law. Any First Commercial
stockholder who intends to exercise the right to dissent from consummation of
the Merger should carefully review the text of such provisions and should also
consult with such holder's attorney. No further notice of the events giving rise
to dissenters' rights or any steps associated therewith will be furnished to
First Commercial stockholders, except as indicated above or otherwise required
by law.
Any dissenting First Commercial stockholder who perfects such holder's
right to be paid the value of such holder's shares will recognize taxable gain
or loss upon receipt of cash for such shares for federal income tax purposes.
See "Certain Federal Income Tax Consequences of the Merger."
Regions Common Stock. Holders of Regions Common Stock do not have
dissenters' rights with respect to 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 FIRST COMMERCIAL COMMON STOCK. THE
DISCUSSION MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS FIRST COMMERCIAL
STOCKHOLDERS, IF ANY, WHO RECEIVED FIRST COMMERCIAL COMMON STOCK UPON THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, THAT HOLD FIRST
COMMERCIAL COMMON STOCK AS PART OF A "STRADDLE" OR "CONVERSION TRANSACTION," OR
THAT 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.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, consummation of the Merger
is conditioned upon receipt by Regions and First Commercial of an opinion from
Alston & Bird LLP, special counsel to Regions, concerning the material federal
income tax consequences of the proposed Merger under federal income tax law.
Based upon representations made by Regions and First Commercial, it is such
firm's opinion that:
(a) The Merger will be a reorganization within the meaning of Section
368(a) of the Code.
(b) The stockholders of First Commercial will recognize no gain or
loss upon the exchange in the Merger of all of their First Commercial
Common Stock solely for shares of Regions Common Stock.
(c) The aggregate tax basis of the Regions Common Stock received by
the First Commercial stockholders in the Merger will, in each instance, be
the same as the aggregate tax basis of the First Commercial Common Stock
surrendered in exchange therefor, less the basis of any fractional share of
Regions Common Stock settled by cash payment.
(d) The holding period of the Regions Common Stock received by the
First Commercial stockholders will, in each instance, include the period
during which the First Commercial Common Stock surrendered in exchange
therefor was held, provided that the First Commercial Common Stock was held
as a capital asset at the Effective Time.
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(e) The payment of cash to First Commercial 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 First Commercial stockholder in
exchange for First Commercial Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of such holder's First Commercial 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. FIRST COMMERCIAL STOCKHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED
TRANSACTION TO THEM INDIVIDUALLY, INCLUDING TAX REPORTING REQUIREMENTS AND TAX
CONSEQUENCES UNDER STATE, LOCAL, 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, and it is a condition to the parties' obligations to
consummate the Merger that Regions and First Commercial receive a letter dated
the Effective Time from Regions' independent auditors to the effect that the
Merger qualifies for such accounting treatment. See "-- Conditions to
Consummation of the Merger." 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, and prior period
financial statements will be restated for all periods as though First Commercial
and Regions had been combined at the beginning of the earliest period presented.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding First Commercial
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 each of
the parties will bear and pay one-half the filing fees and printing costs in
connection with this Joint Proxy Statement.
RESALES OF REGIONS COMMON STOCK
The Regions Common Stock to be issued to First Commercial stockholders in
the Merger has been registered under the Securities Act, but that registration
does not cover resales of those shares by persons who control, are controlled
by, or are under common control with, First Commercial (such persons are
referred to hereinafter as "affiliates" and generally include executive
officers, directors, and 10% stockholders) at the time of the First Commercial
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 First Commercial 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
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Regions' periodic reporting obligations under the Exchange Act. After the
one-year period and within two years following the Effective Time, affiliates of
First Commercial 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 First Commercial 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 First Commercial or Regions.
First Commercial has agreed to use its reasonable efforts to cause each
person who may be deemed to be an affiliate of First Commercial to execute and
deliver to Regions not later than 30 days prior to the Effective Time, an
agreement (each, an "Affiliate Agreement") providing that such affiliate will
not sell, pledge, transfer, or otherwise dispose of any First Commercial Common
Stock held by such affiliate except as contemplated by the Agreement or the
Affiliate Agreement, and will not sell, pledge, transfer or otherwise dispose of
any Regions Common Stock received by such affiliate upon consummation of the
Merger (i) except in compliance with the Securities Act and the rules and
regulations thereunder and (ii) until such time as financial results covering 30
days of combined operations of Regions and First Commercial have been published.
Shares of Regions Common Stock issued to such affiliates of First Commercial in
exchange for shares of First Commercial Common Stock will not be transferable
until such time as financial results covering at least 30 days of combined
operations of Regions and First Commercial have been published, regardless of
whether each such affiliate has provided an Affiliate Agreement (and Regions
shall be entitled to place restrictive legends on certificates for shares of
Regions Common Stock issued to affiliates of First Commercial). Certificates
representing shares of First Commercial Common Stock surrendered for exchange by
any person who is an affiliate of First Commercial for purposes of Rule 145(c)
under the Securities Act shall not be exchanged for certificates representing
shares of Regions Common Stock until such time as financial results covering at
least 30 days of combined operations of Regions and First Commercial have been
published, regardless of whether Regions has received such a written agreement
from such person. Prior to publication of such results, Regions will not
transfer on its books any shares of Regions Common Stock received by an
affiliate pursuant to the Merger. The stock certificates representing Regions
Common Stock issued to affiliates in the Merger may bear a legend summarizing
the foregoing restrictions. See "-- Conditions to Consummation of the Merger."
OPTION AGREEMENT
As an inducement and a condition to Regions entering into the Agreement,
First Commercial and Regions entered into the Option Agreement, pursuant to
which First Commercial granted Regions an option (the "Option") entitling it to
purchase up to 7,480,450 shares (representing approximately 19.9% of the shares
of First Commercial Common Stock issued and outstanding before giving effect to
the issuance of additional shares of First Commercial Common Stock pursuant to
the exercise of such Option) of First Commercial Common Stock under the
circumstances described below, at a cash price per share equal to $59.00,
subject to possible adjustment in certain circumstances (the "Purchase Price").
In no event, however, shall Regions' total profit (defined in the Option
Agreement generally as the net amount realizable by Regions upon transfer of the
Option, including, without limitation, transfer of the Option back to First
Commercial, or upon the sale of First Commercial Common Stock acquired by
exercise of the Option) exceed $130 million. This description of the Option
Agreement and the Option does not purport to be complete and is qualified in its
entirety by reference to the Option Agreement, which is filed as an exhibit to
the Registration Statement of which this Joint Proxy Statement forms a part.
51
<PAGE> 65
Provided no preliminary or permanent injunction or other order against the
delivery of the shares of First Commercial Common Stock covered by the Option
issued by any court of competent jurisdiction shall be in effect, Regions may
exercise the Option, in whole or in part, at any time, from time to time, if,
but only if, a Purchase Event (as defined below) occurs prior to the Option's
termination; provided that Regions, at the time, is not in material breach of
the Option Agreement or the Agreement. As defined in the Option Agreement,
"Purchase Event" means either of the following events:
(a) without Regions' prior written consent, First Commercial
authorizing, recommending, publicly proposing, or publicly announcing an
intention to authorize, recommend or propose or entering into an agreement
with any third party to effect (i) a merger, consolidation, or similar
transaction involving First Commercial or any of its subsidiaries (other
than transactions solely between First Commercial's subsidiaries and
transactions involving First Commercial or any of First Commercial's
subsidiaries in which the voting securities outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into securities of the surviving entity or the parent thereof) at
least 75% of the combined voting power of the voting securities of First
Commercial or the surviving entity or the parent thereof outstanding
immediately after the consummation of the transaction)), (ii) the
disposition, by sale, lease, exchange, or otherwise, of 20% or more of the
consolidated assets of First Commercial and its subsidiaries or (iii) the
issuance, sale, or other disposition (including by way of merger,
consolidation, share exchange, or any similar transaction) of securities
representing 20% or more of the voting power of First Commercial or any of
its subsidiaries; or
(b) any person (other than Regions or any subsidiary of Regions)
acquiring beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), or the right to acquire beneficial
ownership of, or the formation of any "group" (as defined under the
Exchange Act), other than a group of which Regions or any Regions
subsidiary is a member, that beneficially owns or has the right to acquire
beneficial ownership of 20% or more of the outstanding shares of First
Commercial Common Stock.
The Option will terminate upon the earliest of the following: (i) the
Effective Time; (ii) termination of the Agreement in accordance with the terms
thereof prior to the occurrence of a Purchase Event or a Preliminary Purchase
Event (as defined below) (other than a termination of the Agreement under
certain circumstances involving generally a willful breach by First Commercial
of a representation or warranty contained in the Agreement or a breach by First
Commercial of a covenant contained in the Agreement) (a "Default Termination");
(iii) 12 months after termination of the Agreement by Regions pursuant to a
Default Termination; and (iv) 12 months after termination of the Agreement
following the occurrence of a Purchase Event or a Preliminary Purchase Event.
As defined in the Option Agreement, "Preliminary Purchase Event" includes
either of the following events:
(a) commencement or filing of a registration statement under the
Securities Act by any third party of a tender offer or exchange offer to
purchase any shares of First Commercial Common Stock such that, upon
consummation of such offer, such person would own or control 15% or more of
the then-outstanding shares of First Commercial Common Stock (a "Tender
Offer" or an "Exchange Offer," respectively); or
(b) failure of the stockholders of First Commercial Common Stock to
approve the Agreement and the Plan of Merger at the First Commercial
Special Meeting, the failure to have the First Commercial Special Meeting
or another such meeting held for the purpose of voting on the Agreement, or
the cancellation of such meeting prior to termination of the Agreement, or
the withdrawal or modification by the First Commercial Board in a manner
adverse to Regions of the recommendation of the First Commercial Board with
respect to the Agreement, in each case, after public announcement that a
third party (i) made a proposal to engage in an acquisition transaction,
(ii) commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (iii) filed an
application or gave a notice under any federal or state statute or
regulation for approval or consent to engage in an acquisition transaction.
In the event of any change in First Commercial Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, or similar transaction, the type and number of securities subject to
the Option, and the purchase price therefor shall be adjusted appropriately. In
the event that any additional shares of First Commercial Common Stock are issued
after February 8, 1998 (other than
52
<PAGE> 66
pursuant to an event described in the preceding sentence), the number of shares
of First Commercial Common Stock subject to the Option will be adjusted so that,
after such issuance, it, together with any shares of First Commercial Common
Stock previously issued pursuant to the Option Agreement, equals the lesser of
(i) 19.9% of the number of shares then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option, and (ii) that
minimum number of shares of First Commercial Common Stock which, when aggregated
with any other shares of First Commercial Common Stock, beneficially owned by
Regions or any affiliate of Regions, would cause the provisions of any Arkansas
takeover laws to be applicable to the Merger.
Upon the occurrence of a Repurchase Event (as defined below) that occurs
prior to the exercise or termination of the Option, at the request of Regions,
delivered within 18 months of the Repurchase Event, First Commercial will,
subject to regulatory restrictions, be obligated to repurchase the Option and
any shares of First Commercial Common Stock therefor purchased pursuant to the
Option Agreement at a specified price.
As defined in the Option Agreement, "Repurchase Event" shall occur if (i)
any person (other than Regions or any Regions subsidiary) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of First Commercial Common Stock, or (ii)
any of the following transactions is consummated: (a) First Commercial
consolidates with or merges into any person, other than Regions or one of
Regions' subsidiaries, and is not the continuing or surviving corporation of
such consolidation or merger; (b) First Commercial permits any person, other
than Regions or one of Regions' subsidiaries, to merge into First Commercial and
First Commercial shall be the continuing or surviving corporation, but, in
connection with such merger, the then-outstanding shares of First Commercial
Common Stock shall be changed into or exchanged for stock or other securities of
First Commercial or any other person or cash or any other property or the
outstanding shares of First Commercial Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company; or (c) First Commercial sells or
otherwise transfers all or substantially all of its assets to any person, other
than Regions or one of Regions' subsidiaries.
In the event that prior to the exercise or termination of the Option, First
Commercial enters into an agreement to engage in any of the transactions
described in clause (ii) of the definition of Repurchase Event above, the
agreement governing such transaction must make proper provision so that Regions
will receive for each share of First Commercial Common Stock subject to the
option an amount of consideration that would be received by a holder of First
Commercial Common Stock in such transaction less the Purchase Price.
After the occurrence of a Purchase Event, Regions may assign the Option
Agreement and its rights thereunder in whole or in part.
Upon the occurrence of certain events, First Commercial has agreed to file
with the SEC and to cause to become effective certain registration statements
under the Securities Act with respect to dispositions by Regions and its assigns
of all or part of the Option and/or any shares of First Commercial Common Stock
into which the Option is exercisable.
The Option Agreement is intended to have the effect of discouraging persons
who might now or at any other time prior to the Effective Time be interested in
acquiring all or a significant interest in First Commercial from considering or
proposing such an acquisition, even if such persons were prepared to offer or
pay consideration to the First Commercial stockholders which had a current
higher market price than the shares of Regions Common Stock to be received per
share of First Commercial Common Stock pursuant to the Agreement. The existence
of the Option Agreement could significantly increase the cost to a potential
acquiror of acquiring First Commercial compared to its cost had First Commercial
not entered into the Option Agreement. Such increased cost might discourage a
potential acquiror from considering or proposing an acquisition or might result
in a potential acquiror proposing to pay a lower per share price to acquire
First Commercial Common Stock than it might otherwise have proposed to pay.
53
<PAGE> 67
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
(UNAUDITED)
The following unaudited pro forma combined condensed statement of condition
presents (i) the historical unaudited consolidated statements of condition of
Regions and First Commercial at March 31, 1998, and (ii) the pro forma combined
condensed statement of condition of Regions at March 31, 1998, giving effect to
the Merger, assuming the Merger is accounted for as a pooling of interests. The
unaudited pro forma combined condensed statement of condition should be read in
conjunction with the historical consolidated financial statements of Regions and
the historical consolidated financial statements of First Commercial, including
the respective notes thereto, which are incorporated by reference in this Joint
Proxy Statement, and the unaudited pro forma financial information appearing
elsewhere in this Joint Proxy Statement. See "Documents Incorporated by
Reference," "Summary -- Comparative Per Share Data," and "-- Selected Financial
Data." The effect of an anticipated restructuring charge (estimated for purposes
of the pro forma financial statements at $63 million net of taxes) to be taken
by Regions in connection with the Merger has been reflected in the pro forma
combined condensed statement of condition; however, since the anticipated
restructuring charge is nonrecurring, it has not been reflected in the pro forma
combined condensed statements of income. The pro forma financial data does not
give effect to anticipated enhancements in revenue and reductions in expenses at
First Commercial in connection with the Merger. The pro forma combined condensed
statement of condition is not necessarily indicative of the combined condensed
financial position that actually would have occurred if the Merger had been
consummated at the date indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
ADJUSTMENTS REGIONS AND
FIRST INCREASE FIRST COMMERCIAL
REGIONS COMMERCIAL (DECREASE) PRO FORMA COMBINED
----------- ---------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......................... $ 879,877 $ 447,245 $ 1,327,122
Interest-bearing deposits in other banks......... 75,347 75,347
Investment securities............................ 2,652,718 338,877 2,991,595
Securities available for sale.................... 2,379,360 1,413,171 3,792,531
Trading account assets........................... 24,213 516 24,729
Mortgage loans held for sale..................... 427,088 427,088
Federal funds sold and securities purchased under
agreements to resell........................... 180,796 237,220 418,016
Loans, net of unearned income.................... 18,045,378 4,643,100 22,688,478
Allowance for loan losses........................ (221,998) (86,879) (308,877)
Premises and equipment, net...................... 351,229 136,015 487,244
Other real estate................................ 15,034 6,917 21,951
Excess purchase price............................ 209,154 79,988 289,142
Due from customers on acceptances................ 141,948 141,948
Other assets..................................... 468,921 165,919 $22,000(a) 656,840
----------- ---------- ------- -----------
TOTAL ASSETS............................ $25,629,065 $7,382,089 $22,000 $33,033,154
=========== ========== ======= ===========
LIABILITIES
Non-interest bearing deposits.................... $ 2,657,245 $1,110,616 $ 3,767,861
Interest-bearing deposits........................ 17,632,030 5,218,955 22,850,985
Federal funds purchased and securities sold under
agreements to repurchase....................... 1,454,417 1,454,417
Other borrowed funds............................. 1,352,595 335,601 1,688,196
Bank acceptances outstanding..................... 141,948 141,948
Other liabilities................................ 259,103 80,988 $85,000(a) 425,091
----------- ---------- ------- -----------
Total Liabilities....................... 23,497,338 6,746,160 85,000 30,238,498
STOCKHOLDERS' EQUITY
Common stock..................................... 93,624 112,839 (72,885)(b) 133,578
Surplus.......................................... 681,703 330,135 72,259 (b) 1,084,097
Undivided profits................................ 1,356,314 191,359 (63,000)(a) 1,484,673
Less: Treasury and unearned restricted stock..... (8,548) (626) 626(b) (8,548)
Accumulated other comprehensive income........... 8,634 2,222 10,856
----------- ---------- ------- -----------
Total Stockholders' Equity.............. 2,131,727 635,929 (63,000) 2,704,656
----------- ---------- ------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................ $25,629,065 $7,382,089 $22,000 $33,033,154
=========== ========== ======= ===========
</TABLE>
54
<PAGE> 68
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
(a) To reflect the estimated restructuring and merger-related charge to be
taken in connection with the First Commercial transaction. Components of the
merger charge are 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 other merger
related fees.............................................. 28,500
--------
77,500
Charitable trust............................................ 7,500
--------
Gross charges............................................... 85,000
Taxes....................................................... (22,000)
--------
$ 63,000
========
</TABLE>
(b) To reflect the issuance of 63,926,276 shares of Regions Common Stock to
effect the First Commercial transaction. The First Commercial transaction will
be accounted for as a pooling of interests, therefore the effect upon
stockholders' equity will be to increase Regions stockholders' equity by the
total equity of First Commercial. The unaudited pro forma financial statements
have been prepared assuming Regions will issue 63,926,276 shares of Regions
Common Stock in exchange for all the outstanding shares of First Commercial. A
reclassification from common stock to surplus results from the issuance of the
shares.
55
<PAGE> 69
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR
REGIONS AND FIRST COMMERCIAL
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
have been prepared for the three months ended March 31, 1998 and for each of the
three years in the period ended December 31, 1997, and give effect to the
Merger, assuming the Merger is accounted for as a pooling of interests. The
unaudited pro forma combined condensed statements of income should be read in
conjunction with the historical consolidated financial statements of Regions and
the historical consolidated financial statements of First Commercial, including
the respective notes thereto, which are incorporated by reference in this Joint
Proxy Statement, and the unaudited pro forma financial information, including
the notes thereto, appearing elsewhere in this Joint Proxy Statement. See
"Documents Incorporated by Reference," "Summary -- Comparative Per Share Data,"
and "-- Selected Financial Data." The effect of an anticipated restructuring and
merger-related charge (estimated for purposes of the pro forma financial
statements at $63 million net of taxes) to be taken by Regions in connection
with the Merger has been reflected in the pro forma combined condensed statement
of condition; however, since the anticipated restructuring and merger-related
charge is nonrecurring, it has not been reflected in the pro forma combined
condensed statements of income. The pro forma financial data does not give
effect to anticipated enhancements in revenue and reductions in expenses at
First Commercial in connection with the Merger. The pro forma combined condensed
statements of income are not necessarily indicative of the results that actually
would have occurred if the Merger had been consummated at the dates indicated or
which may be obtained in the future.
REGIONS FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REGIONS AND
ADJUSTMENTS FIRST COMMERCIAL
FIRST INCREASE PRO FORMA
REGIONS COMMERCIAL (DECREASE) COMBINED
-------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income................................ $485,716 $123,014 $608,730
Interest expense............................... 240,310 52,617 292,927
-------- -------- --------
Net interest income............................ 245,406 70,397 315,803
Provision for loan losses...................... 12,119 2,051 14,170
Non-interest income............................ 77,311 29,552 106,863
Non-interest expense........................... 178,637 56,934 235,571
-------- -------- --------
Income before income taxes..................... 131,961 40,964 172,925
Applicable income taxes........................ 45,758 13,656 59,414
-------- -------- --------
Net income..................................... $ 86,203 $ 27,308 $113,511
======== ======== ========
Earnings per common share...................... $ .58 $ .73 $ .53
======== ======== ========
Earnings per common share assuming dilution.... $ .57 $ .72 $ .52
======== ======== ========
Average common shares outstanding(a)........... 149,556 37,318 212,997
Average common shares outstanding assuming
dilution(a).................................. 152,571 37,844 216,905
</TABLE>
56
<PAGE> 70
REGIONS FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
REGIONS AND
ADJUSTMENTS FIRST COMMERCIAL
FIRST INCREASE PRO FORMA
REGIONS COMMERCIAL (DECREASE) COMBINED
---------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income............................... $1,653,084 $497,170 $2,150,254
Interest expense.............................. 824,203 214,202 1,038,405
---------- -------- ----------
Net interest income........................... 828,881 282,968 1,111,849
Provision for loan losses..................... 41,773 28,332 70,105
Non-interest income........................... 258,553 114,802 373,355
Non-interest expense.......................... 600,341 241,302 841,643
---------- -------- ----------
Income before income taxes.................... 445,320 128,136 573,456
Applicable income taxes....................... 145,628 43,502 189,130
---------- -------- ----------
Income before extraordinary item.............. $ 299,692 $ 84,634 $ 384,326
========== ======== ==========
Income before extraordinary item per common
share....................................... $ 2.20 $ 2.26 $ 1.92
========== ======== ==========
Income before extraordinary item per common
share assuming dilution..................... $ 2.15 $ 2.23 $ 1.88
========== ======== ==========
Average common shares outstanding(a).......... 136,512 37,486 200,239
Average common shares outstanding assuming
dilution(a)................................. 139,421 37,922 203,888
</TABLE>
REGIONS FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
REGIONS AND
ADJUSTMENTS FIRST COMMERCIAL
FIRST INCREASE PRO FORMA
REGIONS COMMERCIAL (DECREASE) COMBINED
---------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income............................... $1,386,122 $456,002 $1,842,124
Interest expense.............................. 685,656 204,096 889,752
---------- -------- ----------
Net interest income......................... 700,466 251,906 952,372
Provision for loan losses..................... 29,041 13,269 42,310
Non-interest income........................... 220,739 110,550 331,289
Non-interest expense.......................... 553,801 229,153 782,954
---------- -------- ----------
Income before income taxes.................. 338,363 120,034 458,397
Applicable income taxes....................... 108,677 41,480 150,157
---------- -------- ----------
Net Income.................................. $ 229,686 $ 78,554 $ 308,240
========== ======== ==========
Earnings per common share..................... $ 1.85 $ 2.20 $ 1.67
========== ======== ==========
Earnings per common share assuming dilution... $ 1.81 $ 2.18 $ 1.64
========== ======== ==========
Average common shares outstanding(a).......... 124,272 35,648 184,874
Average common shares outstanding assuming
dilution(a)................................. 126,777 36,033 188,034
</TABLE>
57
<PAGE> 71
REGIONS FINANCIAL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
REGIONS AND
ADJUSTMENTS FIRST COMMERCIAL
FIRST INCREASE PRO FORMA
REGIONS COMMERCIAL (DECREASE) COMBINED
---------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income............................... $1,259,600 $386,265 $1,645,865
Interest expense.............................. 635,336 175,991 811,327
---------- -------- ----------
Net interest income................. 624,264 210,274 834,538
Provision for loan losses..................... 30,271 4,368 34,639
Non-interest income........................... 187,406 79,238 266,644
Non-interest expense.......................... 487,461 188,018 675,479
---------- -------- ----------
Income before income taxes.................... 293,938 97,126 391,064
Applicable income taxes....................... 96,109 31,892 128,001
---------- -------- ----------
Net Income.......................... $ 197,829 $ 65,234 $ 263,063
========== ======== ==========
Earnings per common share..................... $ 1.60 $ 1.91 $ 1.45
========== ======== ==========
Earnings per common share assuming dilution... $ 1.58 $ 1.89 $ 1.43
========== ======== ==========
Average common shares outstanding(a).......... 123,340 34,221 181,516
Average common shares outstanding assuming
dilution(a)................................. 125,289 34,539 184,005
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(a) Pro forma earnings per share are based on the historical weighted
average number of shares outstanding for Regions, and the historical weighted
average number of shares outstanding for First Commercial, adjusted for
equivalent shares of Regions Common Stock.
58
<PAGE> 72
COMPARATIVE MARKET PRICES AND DIVIDENDS
Regions Common Stock and First Commercial Common Stock are listed for
quotation on the Nasdaq NMS under the symbols "RGBK" and "FCLR," respectively.
The following table sets forth, for the indicated periods, the high and low
closing sale prices for Regions Common Stock and First Commercial Common Stock
as reported on the Nasdaq NMS, and the cash dividends declared per share of
Regions Common Stock and First Commercial Common Stock for the indicated
periods. The amounts indicated for Regions have been adjusted to reflect a
2-for-1 stock split effected by Regions on June 13, 1997. The amounts indicated
for First Commercial have been adjusted to reflect a 5% stock dividend declared
in October 1996 and a 5% stock dividend declared in November 1997.
<TABLE>
<CAPTION>
REGIONS FIRST COMMERCIAL
-------------------------------- --------------------------------
PRICE RANGE CASH DIVIDENDS PRICE RANGE CASH DIVIDENDS
--------------- DECLARED --------------- DECLARED
HIGH LOW PER SHARE HIGH LOW PER SHARE
------ ------ -------------- ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter............... $24.00 $20.38 $.175 $30.39 $28.34 $.19
Second Quarter.............. 24.19 21.13 .175 28.92 26.98 .19
Third Quarter............... 24.32 21.82 .175 31.52 26.53 .19
Fourth Quarter.............. 26.88 24.38 .175 36.08 30.61 .23
1997
First Quarter............... 30.94 25.69 .20 40.00 35.00 .23
Second Quarter.............. 33.25 27.38 .20 40.12 35.95 .23
Third Quarter............... 39.13 32.06 .20 46.43 38.93 .23
Fourth Quarter.............. 44.75 36.56 .20 59.69 42.98 .28
1998
First Quarter............... 43.50 37.94 .23 69.94 55.75 .28
Second Quarter (through June
19, 1998)................ 45.25 38.66 .23 76.63 64.75 .28
</TABLE>
On June 19, 1998, the last reported sale prices of Regions Common Stock and
First Commercial Common Stock, as reported on the Nasdaq NMS, were $39.75 and
$67.03, respectively. At the close on February 6, 1998, the last trading day
prior to public announcement of the proposed Merger, the last reported sale
prices of Regions Common Stock and First Commercial Common Stock, as reported on
the Nasdaq NMS, were $40.50 and $66.88, respectively.
The holders of Regions Common Stock are entitled to receive dividends when
and if declared by the Regions Board 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 Regions Board's 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 Agreement provides that prior to the Merger or the termination of the
Agreement, without the prior written consent of Regions, First Commercial may
not declare and pay cash dividends, other than regular quarterly cash dividends
on the shares of First Commercial Common Stock in an amount not to exceed $0.28
per share with regular record and payment dates in accordance with past practice
as previously disclosed to Regions. There is no assurance that First Commercial
will pay any dividends at any time, or if it does, the amount of the dividends
it would declare. The parties have agreed to cooperate in selecting the
Effective Time such that, for the quarter in which the Effective Time occurs,
the stockholders of First Commercial do not receive both a dividend with respect
to First Commercial Common Stock and a dividend with respect to Regions Common
Stock, or fail to receive any dividend.
59
<PAGE> 73
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 First Commercial. 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 and First Commercial are both bank holding companies registered
with the Federal Reserve under the BHC Act. As such, Regions and First
Commercial and their non-bank subsidiaries are subject to the supervision,
examination, and reporting requirements of the BHC Act and the regulations of
the Federal Reserve.
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 or First Commercial are located has "opted out,"
other than Texas, in which First Commercial has banking operations. Accordingly,
Regions has the ability to consolidate all of its bank subsidiaries into a
single bank with interstate branches.
The BHC Act generally prohibits Regions and First Commercial from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is permissible, the Federal Reserve must consider
whether the performance of such an activity reasonably can be expected to
produce benefits to the public, such as greater convenience, increased
competition, or gains in efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices.
Each of the subsidiary depository institutions of Regions and First
Commercial is a member of the Federal Deposit Insurance Corporation (the
"FDIC"), and as such, its deposits are insured by the FDIC to the extent
provided by law. Each such subsidiary is also subject to numerous state and
federal statutes and regulations that affect its business, activities, and
operations, and each is supervised and examined by one or more state or federal
bank regulatory agencies.
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The regulatory agencies having supervisory jurisdiction over the respective
subsidiary institutions of Regions and First Commercial (the FDIC and the
applicable state authority in the case of state-chartered nonmember banks and
the OTS in the case of federally chartered thrift institutions) regularly
examine the operations of such institutions and have authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The federal and state banking regulators also have the power
to prevent the continuance or development of unsafe or unsound banking practices
or other violations of law.
PAYMENT OF DIVIDENDS
Regions and First Commercial are legal entities separate and distinct from
their banking, thrift, and other subsidiaries. The principal sources of cash
flow of both Regions and First Commercial, including cash flow to pay dividends
to their respective stockholders, are dividends from their subsidiary depository
institutions. There are statutory and regulatory limitations on the payment of
dividends by these subsidiary depository institutions to Regions and First
Commercial, as well as by Regions and First Commercial to their stockholders.
As to the payment of dividends, the Bank and all of Regions'
state-chartered banking subsidiaries are subject to the respective laws and
regulations of the state in which the bank is located, and to the regulations of
the bank's primary federal regulator. Regions' 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 and First
Commercial, without obtaining governmental approvals, could declare aggregate
dividends to Regions and First Commercial of approximately $172 million and $43
million respectively.
The payment of dividends by Regions and First Commercial and their
subsidiary depository institutions may also be affected or limited by other
factors, such as the requirement to maintain adequate capital above regulatory
guidelines.
CAPITAL ADEQUACY
Regions, First Commercial, and their respective subsidiary depository
institutions are required to comply with the capital adequacy standards
established by the Federal Reserve in the case of Regions and First Commercial
and the appropriate federal banking regulator in the case of each of their
subsidiary depository institutions. There are two basic measures of capital
adequacy for bank holding companies that have been promulgated by the Federal
Reserve: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for a bank holding company to be considered in
compliance.
The 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
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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 First Commercial's consolidated Total Capital and Tier 1 Capital Ratios were
12.58% and 11.58%, 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 First Commercial's respective
Leverage Ratios at March 31, 1998 were 7.62% and 8.13%.
Each of Regions' and First Commercial's subsidiary depository institutions
is subject to risk-based and leverage capital requirements adopted by its
federal banking regulator, which are substantially similar to those adopted by
the Federal Reserve. Each of the subsidiary depository institutions was in
compliance with applicable minimum capital requirements as of March 31, 1998.
Neither Regions, First Commercial, nor any of their subsidiary depository
institutions has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank or thrift
institution to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a
prohibition on the taking of brokered deposits, and to certain other
restrictions on its business. As described below, substantial additional
restrictions can be imposed upon FDIC-insured depository institutions that fail
to meet applicable capital requirements. See "-- Prompt Corrective Action."
The Federal Reserve, the OCC, and the FDIC also have recently adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. The bank regulatory agencies'
methodology for evaluating interest rate risk requires banks with excessive
interest rate risk exposure to hold additional amounts of capital against such
exposures. 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
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has a Total Capital Ratio of less than 8.0%, a Tier 1 Capital Ratio of less than
4.0%, or a Leverage Ratio of less than 4.0% is considered to be
"undercapitalized." A depository institution that has a Total Capital Ratio of
less than 6.0%, a Tier 1 Capital Ratio of less than 3.0%, or a Leverage Ratio of
less than 3.0% is considered to be "significantly undercapitalized," and an
institution that has a tangible equity capital to assets ratio equal to or less
than 2.0% is deemed to be "critically undercapitalized." For purposes of the
regulation, the term "tangible equity" includes core capital elements counted as
Tier 1 Capital for purposes of the risk-based capital standards plus the amount
of outstanding cumulative perpetual preferred stock (including related surplus),
minus all intangible assets with certain exceptions. A depository institution
may be deemed to be in a capitalization category that is lower than is indicated
by its actual capital position if it receives an unsatisfactory examination
rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meet its capital restoration plan, subject to certain limitations. The
obligation of a controlling bank holding company to fund a capital restoration
plan is limited to the lesser of 5.0% of an undercapitalized subsidiary's assets
or the amount required to meet regulatory capital requirements. An
undercapitalized institution is also generally prohibited from increasing its
average total assets, making acquisitions, establishing any branches, or
engaging in any new line of business, except in accordance with an accepted
capital restoration plan or with the approval of the FDIC. In addition, the
appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of the law.
At March 31, 1998, all of the subsidiary depository institutions of Regions
and First Commercial 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 and
First Commercial each recorded a charge against earnings for the special
assessment in 1996 in the pre-tax amounts of approximately $21.0 million and
$3.3 million, respectively.
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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.
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of First Commercial Common Stock will be
exchanging their shares of an Arkansas corporation governed by the ABCA and the
First Commercial Articles and Bylaws, for shares of Regions, a Delaware
corporation governed by the DGCL and the Regions Certificate and Bylaws. Certain
significant differences exist between the rights of First Commercial
stockholders and those of Regions stockholders. The material differences between
the rights of First Commercial stockholders and the rights of Regions
stockholders are summarized below. In particular, the 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 the Regions
Board. 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 ABCA and the DGCL as well as to the Regions Certificate and Bylaws and the
First Commercial Articles and Bylaws.
ANTITAKEOVER PROVISIONS GENERALLY
The provisions of the 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 DGCL
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 the Regions Board in playing a role in
connection with attempts to acquire control of Regions, so that the Board can
further and protect the interests of Regions and its stockholders as appropriate
under the circumstances, including if the Board determines that a sale of
control is in their best interests, by enhancing the Board's ability to maximize
the value to be received by the stockholders upon such a sale.
Although Regions' management believes the Protective Provisions are
beneficial to Regions' stockholders, the Protective Provisions also may tend to
discourage some takeover bids. As a result, Regions' stockholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over prevailing market prices. On the other hand, defeating
undesirable acquisition offers can be a very expensive and time-consuming
process. To the extent that the Protective Provisions discourage undesirable
proposals, Regions may be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Regions
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Regions Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Regions through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Regions' stockholders to replace the Board of Directors or management, even
if a majority of the stockholders believes such replacement is in the best
interests of Regions. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Regions. The Regions Certificate authorizes the issuance of up to
240,000,000 shares of Regions Common Stock, of which 149,910,562 shares were
issued and outstanding as of the Regions Record Date,
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none of which were held as treasury shares, and 5,000,000 shares of preferred
stock, none of which are outstanding. The stockholder of Regions will be asked
to vote at the Regions Annual Meeting on a proposed amendment to the Regions
Certificate increasing the number of authorized shares of Regions Common Stock
to 500,000,000. The Regions Board may authorize the issuance of additional
shares of Regions Common Stock without further action by Regions' stockholders,
unless such action is required in a particular case by applicable laws or
regulations or by any stock exchange on which Regions' capital stock may be
listed. The Regions Certificate does not provide preemptive rights to Regions
stockholders.
The authority to issue additional shares of Regions Common Stock provides
Regions with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of Regions Common Stock will be issuable from time to time for any
corporate purpose, including, without limitation, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions, and public or private
sales for cash as a means of raising capital. Such shares could be used to
dilute the stock ownership of persons seeking to obtain control of Regions. In
addition, the sale of a substantial number of shares of Regions Common Stock to
persons who have an understanding with Regions concerning the voting of such
shares, or the distribution or declaration of a dividend of shares of Regions
Common Stock (or the right to receive Regions Common Stock) to Regions
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of Regions.
First Commercial. First Commercial's authorized capital stock consists of
50,000,000 shares of First Commercial Common Stock, of which 37,688,971 shares
were issued and outstanding as of the Record Date, and 400,000 shares of
preferred stock, $1.00 par value per share, none of which is outstanding.
Pursuant to the ABCA, the First Commercial Board may authorize the issuance
of additional shares of First Commercial Common Stock without further action by
First Commercial's stockholders. The First Commercial Articles do not provide
the stockholders of First Commercial with preemptive rights to purchase or
subscribe to any unissued authorized shares of First Commercial Common Stock or
any option or warrant for the purchase thereof.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
Regions. The DGCL 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 Regions 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 Regions Certificate and Bylaws may be amended or repealed only by the
affirmative vote of the holders of at least 75% of the outstanding shares of
Regions Common Stock.
The Regions Certificate also provides that the Regions Board 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.
First Commercial. The ABCA generally provides that an Arkansas
corporation's articles of incorporation may be amended if the number of votes
cast in favor of the amendment exceeds the number of votes cast against the
amendment, provided a quorum is present at the meeting; provided, however, if
the amendment creates dissenters' rights for a voting group, the amendment must
be approved by a majority of the votes entitled to be cast by such voting group.
The First Commercial Articles require, however, the approval of at least 80% of
the shares entitled to vote with regard to the amendment, modification or repeal
of provisions dealing with a classified board of directors, advance notice from
stockholders of nominations for election of First Commercial directors, the
filling of vacancies on the First Commercial Board, removal of First Commercial
directors, and action of stockholders without a meeting. Additionally, the First
Commercial Articles require the affirmative vote of 80% of the votes entitled to
be cast to amend certain provisions therein pertaining to business combination
transactions.
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First Commercial's Bylaws provide that the Bylaws may be altered, amended
or repealed by a majority vote of all of the directors or by the vote of the
holders of a majority of the outstanding shares, with the exception that bylaw
provisions relating to the nomination of directors by stockholders, notice from
stockholders of matters to be brought by stockholders before an annual meeting,
special meetings, the taking of action by stockholders without a meeting, the
number, election and terms of directors, the removal of directors, and the
filling of vacancies may be amended or repealed only with the consent of the
holders of at
least 80% of the shares entitled to be voted.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
Regions. The Regions Certificate provides that the Regions Board is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office.
The effect of Regions having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year;
consequently, two annual meetings are effectively required for Regions'
stockholders to change a majority of the members of the Board.
Pursuant to the Regions Certificate, each stockholder generally is entitled
to one vote for each share of Regions stock held and is not entitled to
cumulative voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total number of
such holder's shares multiplied by the number of directors to be elected. The
stockholder has the right to cast all of such holder's votes in favor of one
candidate or to distribute such holder's votes in any manner among any number of
candidates. Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible for minority
stockholders to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of Regions Common
Stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining Regions Common Stock effectively may not be able to
elect any person to the Regions Board. 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 the
Regions Board.
First Commercial. Like the Regions Certificate, the First Commercial
Articles also provide that the First Commercial Board is divided into three
classes with the directors in each class serving a three-year term of office.
Also like the Regions Certificate, the First Commercial Articles do not provide
for cumulative voting rights in the election of directors.
REMOVAL OF DIRECTORS
Regions. Under the Regions Certificate, any director or the entire Regions
Board may be removed only for cause and only by the affirmative vote of the
holders of at least 75% of Regions' voting stock.
First Commercial. Pursuant to First Commercial's Bylaws, any director may
be removed only for cause if the number of votes cast to remove him exceeds the
number of votes cast not to remove him, provided a quorum is present at the
meeting.
LIMITATIONS ON DIRECTOR LIABILITY
Regions. The Regions 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
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limited. This provision may reduce the likelihood of stockholder derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duties,
even though such action, if successful, might have benefitted Regions and its
stockholders. The SEC has taken the position that similar provisions added to
other corporations' certificates of incorporation would not protect those
corporations' directors from liability for violations of the federal securities
laws.
First Commercial. The ABCA permits a corporation's articles of
incorporation to relieve the directors from liability for money damages for good
faith conduct. The First Commercial Articles provide that First Commercial
directors shall not be liable for money damages for breach of duty as a director
except for (i) any breach of the director's duty of loyalty, (ii) actions not
taken in good faith or that involve intentional misconduct, (iii) certain
unlawful transactions, including distributions in violation of the ABCA, or (iv)
any action, omission, transaction or breach of a director's duty creating any
third-party liability to any person or entity other than the corporation or
stockholder. Such limitations on director liability are substantially similar to
those applicable to Regions.
INDEMNIFICATION
Regions. The Regions Certificate provides that Regions will indemnify its
officers, directors, employees, and agents to the full extent permitted by the
DGCL. Under Section 145 of the DGCL 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.
First Commercial. The First Commercial Articles provide that any person,
the person's heirs, executors or administrators, shall be indemnified or
reimbursed by First Commercial for expenses, judgments, fines, and amounts paid
in settlement reasonably and actually incurred in connection with any action,
suit or proceeding, civil or criminal, to which the person shall be made a party
by reason of the fact that the person is or was a director, or executive officer
of First Commercial, or that the person is or was serving at the request of
First Commercial in such position with a trust or other organization or
enterprise, in substantially the same manner and with substantially the same
effect as provided by the Regions Certificate.
SPECIAL MEETINGS OF STOCKHOLDERS
Regions. The 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 Regions Board. Regions stockholders do not have
the right to call a special meeting or to require that the Regions Board call
such a meeting. This provision, combined with other provisions of the Regions
Certificate and the restriction on the removal of directors, would prevent a
substantial stockholder from compelling stockholder consideration of any
proposal (such as a proposal for a business combination) over the opposition of
the Regions Board 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.
First Commercial. First Commercial's Bylaws provide that special meetings
of stockholders shall be called by First Commercial upon written request by the
holders of 10% or more of all the shares of First
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Commercial which are entitled to vote in an election of directors. The Bylaws
also provide that special meetings of the stockholders may be called at any time
by the First Commercial Board or a Committee of the First Commercial Board so
empowered.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Regions. The Regions 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 Regions Board, chief executive officer, or
secretary, even if a majority of the stockholders were in favor of such action.
First Commercial. Under the First Commercial Articles, any action
requiring stockholder approval may be approved by the unanimous written consent
of stockholders.
STOCKHOLDER NOMINATIONS
Regions. The Regions Certificate and Bylaws provide that any nomination by
stockholders of individuals for election to the Regions Board 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 Regions Board 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.
First Commercial. First Commercial's Bylaws contain procedures for the
nomination by stockholders of individuals for election to the First Commercial
Board substantially similar to those of Regions.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Regions. The Regions 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 the Regions Board before
the other party became a 5.0% beneficial owner or is approved by 75% or more of
the Regions Board after the party becomes such a 5.0% beneficial owner. In
addition, the DGCL 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 DGCL, 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 the
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.
68
<PAGE> 82
First Commercial. The ABCA generally provides that such transactions
require the approval by the corporation's board of directors and by a majority
of the corporation's outstanding shares. Neither the First Commercial Articles
nor Bylaws contain provisions that operate to alter the vote required to approve
the Merger. With respect to certain transactions, the First Commercial Articles
provide higher voting requirements, as described below under the caption
"-- Business Combinations with Certain Persons."
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Regions. Section 203 of the DGCL ("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, the Regions
Board 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 the Regions Board and by the holders of at least
two-thirds of the outstanding Regions voting stock, excluding shares owned by
the interested stockholder.
First Commercial. The First Commercial Articles provide that certain
business combination transactions involving an "interested stockholder" (as
defined, a person or group holding 5% or more of First Commercial Common Stock)
may not be consummated unless approved by the affirmative vote of either (i) 80%
of the outstanding voting stock or (ii) a majority of the voting power of
outstanding voting stock in the case of a transaction either (x) approved by a
majority of the "disinterested directors" of First Commercial then in office
(defined generally as directors who are unaffiliated with an interested
stockholder and were directors prior to the time an interested stockholder
became an interested stockholder), or (y) meeting certain pricing conditions.
Absent such provision, the ABCA would require approval of a majority of the
voting power of a corporation's stock. Such provision does not apply to the
Merger.
Certain preferred share purchase rights ("Rights") are attached to shares
of First Commercial Common Stock pursuant to a Rights Agreement (the "Rights
Agreement"). In the event a person acquires a beneficial ownership of 20% or
more of the First Commercial Common Stock, holders of Rights (other than the
acquiring person or group) may purchase First Commercial Common Stock having a
market value of twice the then current exercise price of each Right or, under
certain circumstances, holders of Rights may purchase stock of the acquiring
company having a market value of twice the current exercise price of each Right.
The Rights Agreement provides that an acquisition of 20% or more of the First
Commercial Common Stock shall not trigger the Rights if such event is an
acquisition of shares pursuant to an offer for all of First Commercial's
outstanding shares at a price and on terms determined by at least a majority of
the members of the First Commercial Board who are not officers of First
Commercial and who are not affiliates of the acquiring person to be at a price
which is fair to the stockholders. Accordingly, the Rights Agreement does not
apply to the Merger.
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<PAGE> 83
DISSENTERS' RIGHTS OF APPRAISAL
Regions. The rights of appraisal of dissenting stockholders of Regions are
governed by the DGCL. 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 NMS, 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 NMS, 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 NMS and is held of record by more than 2,000 stockholders, unless the
exception described immediately above applies, holders of Regions Common Stock
do not have dissenters' rights of appraisal.
First Commercial. The rights of dissenting stockholders under Arkansas law
are summarized under the caption "Description of the Transaction -- Dissenting
Stockholders," and the pertinent provisions of the ABCA pertaining to
dissenters' rights are included as Appendix D.
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Regions. The DGCL 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.
First Commercial. Pursuant to the ABCA, upon written notice of a demand to
inspect corporate records, a stockholder is entitled to inspect specified
corporate records, including articles of incorporation and bylaws, minutes of
stockholder meetings and certain resolutions adopted at director meetings, a
list of directors and officers, and all stockholder communications for the
preceding three years, including financial statements. Upon demonstration of a
proper purpose, a stockholder may be entitled to inspect other corporate
records.
DIVIDENDS
Regions. The DGCL 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."
First Commercial. Pursuant to the ABCA, a board of directors may from time
to time make distributions to its stockholders, subject to restrictions in its
articles of incorporation, provided that no distribution may be made if, after
giving it effect, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of stockholders whose preferential
rights are superior to those receiving the distribution. As with Regions,
substantially all of the funds available for the payment of dividends by First
Commercial are also derived from its subsidiary depository institutions, and
there are various statutory limitations on the ability of such subsidiaries to
pay dividends to First Commercial.
70
<PAGE> 84
ADDITIONAL MATTERS RELATING TO REGIONS' ANNUAL MEETING
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the Regions Record Date, Regions had issued and outstanding
149,910,562 shares of Regions Common Stock, none of which were held as treasury
stock. Stockholders are entitled to one vote for each share on all matters to
come before the meeting. Only stockholders of record at the close of business on
the Regions Record Date will be entitled to vote at the meeting or any
adjournment thereof.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Regions Record Date, all Regions' affiliate banks beneficially
held in a fiduciary capacity for others under numerous trust relationships,
7,646,768 shares or 5.10% of the outstanding Regions Common Stock. Regions'
affiliate bank trust departments have sole voting power with respect to
7,239,101 of these shares or 4.83% shared voting power with respect to 20,290 of
these shares, sole dispositive power with respect to 3,880,460 of these shares
and shared dispositive power with respect to 1,700,047 of these shares. No other
entity is known to Regions to be the beneficial owner of more than five percent
of any class of voting securities.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
No director or nominee for director is deemed to own beneficially 1% or
more of Regions Common Stock as of the Regions Record Date. All directors and
executive officers of Regions, as a group, own beneficially a total of 5,374,792
shares (which includes 1,768,105 shares that are the subject of presently
exercisable options) or 3.59% of the outstanding Regions Common Stock.
Information with respect to beneficial ownership is based upon information
furnished by each officer, director or nominee, or contained in filings made
with the SEC.
The following table presents information concerning the beneficial
ownership of Regions Common Stock by certain of its executive officers at the
Regions Record Date. For beneficial ownership information of each director, see
"-- Election of Directors."
<TABLE>
<CAPTION>
REGIONS STOCK
BENEFICIALLY OWNED
-------------------
NUMBER OF % OF
NAME AND ADDRESS TITLE OF CLASS SHARES(1) CLASS
- ---------------- -------------- ---------- ------
<S> <C> <C> <C>
J. Stanley Mackin........................................... Common 1,125,809 .75
Birmingham, Alabama
Carl E. Jones, Jr........................................... Common 490,562 .33
Mobile, Alabama
Richard D. Horsley.......................................... Common 375,794 .25
Birmingham, Alabama
Sam P. Faucett.............................................. Common 357,644 .24
Tuscaloosa, Alabama
William E. Jordan........................................... Common 309,220 .21
Birmingham, Alabama
</TABLE>
- ---------------
(1) The amounts shown represent the total shares beneficially owned by such
individuals, restricted shares (160,000 for Mr. Mackin, 5,641 for Mr. Jones,
and 2,820 for each of the other individuals) and shares which are issuable
upon the exercise of all stock options which are currently exercisable and
exercisable within 60 days. Specifically, the following individuals have the
right to acquire the shares indicated after their names, upon the exercise
of such stock options: Mr. Mackin, 649,650; Mr. Jones, 144,986; Mr. Horsley,
113,624; Mr. Faucett, 152,360; and Mr. Jordan, 119,744.
No change in control of Regions has occurred since January 1, 1997, and no
arrangements are known to Regions which may at a later date result in a change
in control of Regions.
71
<PAGE> 85
ELECTION OF DIRECTORS
Regions recommends that the board of directors for the ensuing year shall
consist of twelve directors, and further recommends the election of Carl E.
Jones, Jr., Henry E. Simpson, and Robert J. Williams, as directors, to hold
office for a term of three years expiring with the annual meeting of
stockholders to be held in 2001 or until their successors are elected and
qualified. The terms of office of eight directors continue after the meeting.
The proxy will be voted FOR the nominees, unless otherwise directed. If any
nominee is not available for election, the proxies will be voted for such
substitute nominee as the Regions Board may designate. Regions has no reason to
believe that any substitute nominee or nominees will be required. The proxies
will not be voted for more than three nominees.
INFORMATION ON DIRECTORS
The following table indicates the age, residence, principal occupation or
employment for the last five years of each nominee and director whose term of
office continues after the Regions Annual Meeting, position and offices held
with Regions or its subsidiaries, the year the director was first elected, and
the number of shares of Regions Common Stock beneficially owned at the Regions
Record Date.
<TABLE>
<CAPTION>
YEAR
PRESENT OCCUPATION POSITION AND YEAR TERM OF
NAME OF NOMINEE AND PRINCIPAL OFFICES HELD WITH FIRST OFFICE
OR DIRECTOR, OCCUPATION FOR LAST REGIONS AND ELECTED WILL
RESIDENCE, AND AGE FIVE YEARS SUBSIDIARIES AS DIRECTOR EXPIRE
- ------------------ ------------------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
Sheila S. Blair............ Executive Director, Director, Regions 1989 1999
Birmingham, Alabama The Greater
63 Birmingham
Foundation
(Community
Foundation)
James B. Boone, Jr......... Chairman of the Director, Regions; 1985 2000
Tuscaloosa, Alabama Board, Boone Director, Regions
62 Newspapers, Inc. Bank -- Tuscaloosa(3)
(Newspaper
Publishing,
Management and
Ownership)
Albert P. Brewer........... Professor of Law Director, Regions; 1986 2000
Birmingham, Alabama and Government, Director, Regions
69 Samford University Bank -- Decatur/
Hartselle(3)
James S.M. French.......... Chairman and Director, Regions; 1986 2000
Birmingham, Alabama President, Dunn Director, Regions
58 Investment Co. Bank --
(Construction, Birmingham(3)
Construction
Materials,
Investments)
Richard D. Horsley......... Vice Chairman of Director, Regions; 1982 2000
Birmingham, Alabama the Board and Director, Regions
55 Executive Financial Bank, Regions
Officer, Regions Agency, Inc.,
and Regions
Regions Bank Mortgage, Inc.,
Regions Life
Insurance Company,
Regions Financial
Building Corp.;
Regions Asset
Management Co.,
Ramco-FL Holding,
Inc., and
Ramco-FL, Inc.
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT , 1998
NAME OF NOMINEE ------------------------------------
OR DIRECTOR, PERCENT
RESIDENCE, AND AGE DIRECTLY INDIRECTLY(2) OF CLASS
- ------------------ --------- ------------- --------
<S> <C> <C> <C>
Sheila S. Blair............ 99,087 17,048 .08%
Birmingham, Alabama
63
James B. Boone, Jr......... 29,153 5,906 .02
Tuscaloosa, Alabama
62
Albert P. Brewer........... 112,664 44,755 .11
Birmingham, Alabama
69
James S.M. French.......... 21,944 104,514 .08
Birmingham, Alabama
58
Richard D. Horsley......... 375,795(4) .25%
Birmingham, Alabama
55
</TABLE>
72
<PAGE> 86
<TABLE>
<CAPTION>
YEAR
PRESENT OCCUPATION POSITION AND YEAR TERM OF
NAME OF NOMINEE AND PRINCIPAL OFFICES HELD WITH FIRST OFFICE
OR DIRECTOR, OCCUPATION FOR LAST REGIONS AND ELECTED WILL
RESIDENCE, AND AGE FIVE YEARS SUBSIDIARIES AS DIRECTOR EXPIRE
- ------------------ ------------------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
Carl E. Jones, Jr.(1)...... President and Chief Director, Regions 1997 2001
Birmingham, Alabama Operating Officer,
57 Regions and Regions
Bank; Regional
President, Regions
Olin B. King............... Chairman and CEO, Director, Regions; 1984 1999
Huntsville, Alabama SCI Systems, Inc. Director,
64 (Diversified Regions Bank --
Electronics Huntsville(3)
Manufacturer)
J. Stanley Mackin.......... Chairman and Chief Director, Regions; 1990 2000
Birmingham, Alabama Executive Officer, Director, Regions
65 Regions and Regions Bank, Regions
Bank Agency, Inc.,
Regions
Mortgage, Inc., and
Regions Life
Insurance Company
Henry E. Simpson(1)........ Attorney, Lange, Director, Regions; 1973 2001
Birmingham, Alabama Simpson, Robinson Director,
63 & Somerville LLP Regions Bank --
Birmingham(3)
Lee J. Styslinger, Jr...... Chairman, ALTEC Director, Regions; 1985 1999
Birmingham, Alabama Industries, Inc. Director,
65 (Manufacturer of Regions Bank --
Mobile Utility Birmingham(3)
Equipment)
Robert J. Williams(1)(5)... Chairman and Chief Director, Regions; 1996 2001
Mobile, Alabama Executive Officer, Director,
68 Terminix Services, Regions Bank --
Inc. (Pest Control Mobile(3)
Company)
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
OWNED AT , 1998
NAME OF NOMINEE ------------------------------------
OR DIRECTOR, PERCENT
RESIDENCE, AND AGE DIRECTLY INDIRECTLY(2) OF CLASS
- ------------------ --------- ------------- --------
<S> <C> <C> <C>
Carl E. Jones, Jr.(1)...... 462,687(4) 27,874 .33
Birmingham, Alabama
57
Olin B. King............... 20,316 .01
Huntsville, Alabama
64
J. Stanley Mackin.......... 1,117,065(4) 8,744 .75
Birmingham, Alabama
65
Henry E. Simpson(1)........ 142,479 50,644 .13
Birmingham, Alabama
63
Lee J. Styslinger, Jr...... 18,245 91,059 .07
Birmingham, Alabama
65
Robert J. Williams(1)(5)... 80,771 .05
Mobile, Alabama
68
</TABLE>
- ---------------
(1) Nominee for election at 1998 stockholders' meeting.
(2) Indirect beneficial ownership includes shares, if any, (a) owned as trustee
in which the director or any member of his/her immediate family has a
beneficial interest, or (b) held in a trust in which the director has a
beneficial interest, or (c) owned and traded in the name of the spouse,
minor children or other relative of the director living in his/her home, or
(d) owned by a corporation, partnership or other legal organization in which
the director has a substantial beneficial interest.
(3) As a consequence of the merger of all of Regions' subsidiary banks into one
bank (Regions Bank) and the resulting cessation of their separate corporate
existence, Regions has established bodies of local advisory directors
corresponding to the former boards of directors of the subsidiary banks.
Service on such a body is denoted in the tables as, for example, "Director,
Regions Bank -- Birmingham."
(4) Includes 113,624 shares for Mr. Horsley, 144,986 shares for Mr. Jones and
649,650 shares for Mr. Mackin that are the subject of presently exercisable
options.
(5) Mr. Williams will reach mandatory retirement age and retire prior to the
normal expiration of his term.
Of the directors or nominees for director, none is a "control person" of
the Company by virtue of stock ownership. The only persons who might be
considered "control persons" of the Company are J. Stanley Mackin, Chairman,
Carl E. Jones, Jr., Chief Executive Officer, and Richard D. Horsley, Vice
Chairman and Executive Financial Officer, who gain any control they may exercise
by virtue of office.
Of the nominees and directors listed above, three also serve as directors
of other companies with a class of securities registered under the Exchange Act.
James S. M. French serves as a director of Energen
73
<PAGE> 87
Corporation, and as a director of Hilb, Rogal and Hamilton Company; Olin B. King
serves as a director of SCI Systems, Inc.; and Lee J. Styslinger, Jr. serves as
a director of The Mead Corporation.
THE BOARD AND COMMITTEES OF THE BOARD
Regions held six directors' meetings during 1997. All directors attended at
least 75% of the aggregate of the meetings held by the board and by its
committees of which they were members, except Mr. King, who attended 50% of
Regions' directors' meetings and Mr. Boles, who attended 66.6% of committee
meetings. Among other board committees, Regions has an audit committee and a
compensation committee that meet as needed. Regions has no nominating or similar
committee.
Audit Committee. The members of the audit committee in 1997 were Albert P.
Brewer (Chairman), Sheila S. Blair, Richard D. Horsley (ex officio member), and
J. Stanley Mackin (ex officio member). The principal functions of the audit
committee, which held four meetings during 1997, include selecting independent
auditors, approving proposed independent audit fees, reviewing with the
independent auditors the planning for and results of the audit, approving
professional services provided by the independent auditors, establishing goals
and plans for the nature and extent of internal audit work, determining the
effectiveness and adequacy of accounting and internal controls and the adequacy
of the audit staff, and reviewing major internal audit findings. The corporate
loan review staff submits periodic loan examination reports to the audit
committee for its review.
Compensation Committee. The compensation committee, which held four
meetings during 1997, consisted of Albert P. Brewer and Lee J. Styslinger, Jr.
The duties of the compensation committee include approving compensation
arrangements for executive management and senior company officers, and approving
all grants and awards under Regions' stock option plans and incentive
compensation plans. In discharging its responsibilities, the compensation
committee has, from time to time, used the services of compensation consultants
for guidance with respect to competitive data and practices of other financial
institutions.
SECTION 16 TRANSACTIONS
Section 16(a) of the Exchange Act requires Regions' executive officers and
directors to file reports of ownership and changes in ownership of Regions'
stock with the SEC. Executive officers and directors are required by SEC
regulations to furnish Regions with copies of all Section 16(a) forms they file.
Based on a review of the forms filed during 1997, Regions believes that its
executive officers and directors complied with all applicable filing
requirements.
74
<PAGE> 88
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS
The following table is a summary of certain information concerning the
compensation earned by Regions' chief executive officer and each of the other
four most highly compensated executive officers during the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ---------------------------------
AWARDS PAYOUTS
OTHER -------------------- ---------- ALL
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK LTIP OTHER
POSITION YEAR SALARY BONUS COMPENSATION STOCK(1) OPTIONS PAYOUTS COMPENSATION
- ------------------ ---- -------- -------- ------------ ---------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Stanley Mackin.... 1997 $735,000 $661,500 $ 0 $2,132,500 150,000 $1,420,778 $532,470(2)
Chairman and 1996 700,000 630,000 0 1,720,000 150,000 743,985 441,961
Chief Executive 1995 600,000 553,200 0 1,280,000 150,000 0 319,658
Officer
Carl E. Jones,
Jr. ............... 1997 350,000 200,556 0 218,589 14,359 607,553 67,847(3)
President and 1996 242,000 147,969 0 0 30,000 349,030 61,103
Chief Operating 1995 232,000 146,030 0 0 30,000 0 49,897
Officer
Richard D. Horsley... 1997 275,000 173,250 0 109,275 7,180 598,433 82,405(4)
Vice Chairman 1996 262,500 165,375 0 0 30,000 349,030 72,944
and Executive 1995 250,000 161,350 0 0 30,000 0 57,334
Financial Officer
Sam P. Faucett....... 1997 245,000 153,881 0 109,275 7,180 598,433 121,227(5)
Regional President 1996 232,000 146,282 0 0 30,000 349,030 104,338
1995 222,000 142,579 0 0 30,000 0 79,961
William E. Jordan.... 1997 248,000 155,953 0 109,275 7,180 598,433 131,505(6)
Regional President 1996 233,000 147,017 0 0 30,000 349,030 112,616
1995 218,000 137,721 0 0 30,000 0 84,929
</TABLE>
- ---------------
(1) The Terms of the Restricted Stock awards are determined by the compensation
committee. Under the terms of the currently outstanding Restricted Stock
awards, the named executives must remain employed with Regions for five
years from the date of the grant at the same or higher level in order for
the shares to be released. During the five year period, the named executive
is eligible to receive dividends and exercise voting privileges on such
restricted shares. If any of the restrictions are removed at the discretion
of the compensation committee, the named executive officer will receive a
stock certificate for some percentage or all of the awarded restricted
shares. The restricted shares are not transferable by the named executive
during the restriction period. The compensation committee has the discretion
to modify the terms of the Restricted Stock awards. Mr. Mackin had 160,000
shares of Restricted Stock with a fair market value of $6,790,000 at
December 31, 1997. Mr. Jones had 5,641 shares of Restricted Stock with a
fair market value of $239,390 at December 31, 1997. Messrs. Horsley, Faucett
and Jordan each had 2,820 shares of Restricted Stock with a fair market
value of $119,674 at December 31, 1997.
(2) Includes $2,922 allocated to Mr. Mackin in 1997 under the Employee Stock
Ownership Plan; $17,878 allocated to Mr. Mackin in 1997 under the profit
sharing plan; and $511,670 representing the estimated term component of the
premium paid and the estimated interest cost to Regions in 1997 resulting
from premium payments for a life insurance benefit plan for Mr. Mackin. This
plan serves as an offset to an existing supplemental retirement plan.
(3) Includes $2,922 allocated to Mr. Jones in 1997 under the Employee Stock
Ownership Plan; $17,878 allocated to Mr. Jones in 1997 under the profit
sharing plan; and $47,047 representing the estimated term component of the
premium paid and the estimated interest cost to Regions in 1997 resulting
from premium payments for a life insurance benefit plan for Mr. Jones. This
plan serves as an offset to an existing supplemental retirement plan.
(4) Includes $2,922 allocated to Mr. Horsley in 1997 under the Employee Stock
Ownership Plan; $17,878 allocated to Mr. Horsley in 1997 under the profit
sharing plan; and $61,605 representing the estimated
75
<PAGE> 89
term component of the premium paid and the estimated interest cost to
Regions in 1997 resulting from premium payments for a life insurance benefit
plan for Mr. Horsley. This plan serves as an offset to an existing
supplemental retirement plan.
(5) Includes $2,922 allocated to Mr. Faucett in 1997 under the Employee Stock
Ownership Plan; $17,878 allocated to Mr. Faucett in 1997 under the profit
sharing plan; and $100,427 representing the estimated term component of the
premium paid and the estimated interest cost to Regions in 1997 resulting
from premium payments for a life insurance benefit plan for Mr. Faucett.
This plan serves as an offset to an existing supplemental retirement plan.
(6) Includes $2,922 allocated to Mr. Jordan in 1997 under the Employee Stock
Ownership Plan; $17,878 allocated to Mr. Jordan in 1997 under the profit
sharing plan; and $110,705 representing the estimated term component of the
premium paid and the estimated interest cost to Regions in 1997 resulting
from premium payments for a life insurance benefit plan for Mr. Jordan. This
plan serves as an offset to an existing supplemental retirement plan.
STOCK OPTIONS
The following table presents information concerning individual grants of
options to purchase Regions Common Stock made during 1997 to the named executive
officers.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL EXERCISE
SECURITIES UNDERLYING OPTIONS GRANTED PRICE GRANT DATE
NAME OPTIONS GRANTED TO EMPLOYEES IN 1997 (PER SHARE) EXPIRATION DATE PRESENT VALUE(1)
- ---- --------------------- -------------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
J. Stanley Mackin.... 150,000 25.5% $26.66 Jan. 15, 2007 $881,206
Carl E. Jones, Jr.... 14,359 2.4 38.75 Oct. 9, 2007 124,400
Richard D. Horsley... 7,180 1.2 38.75 Oct. 9, 2007 63,235
Sam P. Faucett....... 7,180 1.2 38.75 Oct. 9, 2007 63,235
William E. Jordan.... 7,180 1.2 38.75 Oct. 9, 2007 63,235
</TABLE>
- ---------------
(1) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
depends on the excess of the stock price over the exercise price on the date
the option is exercised, so there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
The estimated values under that model are based on the assumptions of
expected stock price volatility of .1468, risk-free rate of return of
6.284%, dividend yield of 2.2% and expected time to exercise of 5.7 years.
All options become exercisable 12 months after the date of grant, except
that exercisability is delayed for an additional 12 months to the extent the
value of incentive stock options (determined as of the date of grant) first
exercisable in a calendar year exceeds $100,000 as to any recipient.
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<PAGE> 90
The following table presents information concerning exercises of stock
options to purchase Regions Common Stock during 1997 and the number and value of
unexercised options and stock appreciation rights (SAR) held by the named
executive officers.
AGGREGATED OPTION/SAR EXERCISES IN 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12-31-97 AT 12-31-97
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ---------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
J. Stanley Mackin........ 0 $ 0 498,750/154,650(1) $12,550,366/2,464,547
Carl E. Jones, Jr........ 8,274 188,626 140,530/ 18,815(2) 3,647,857/ 142,069
Richard D. Horsley....... 70,676 1,520,011 109,168/ 11,636(3) 2,722,061/ 115,596
Sam P. Faucett........... 12,376 281,167 160,428/ 11,636(4) 4,367,963/ 115,596
William E. Jordan........ 18,650 389,453 125,994/ 11,636(5) 3,232,262/ 115,596
</TABLE>
- ---------------
(1) Of Mr. Mackin's currently exercisable options, none were granted with tandem
SARs.
(2) Of Mr. Jones' currently exercisable options, 4,160 were granted with tandem
SARs.
(3) Of Mr. Horsley's currently exercisable options, none were granted with
tandem SARs.
(4) Of Mr. Faucett's currently exercisable options, 14,080 were granted with
tandem SARs.
(5) Of Mr. Jordan's currently exercisable options, none were granted with tandem
SARs.
LONG-TERM INCENTIVE PLAN AWARDS IN 1997
The following table presents information concerning the long-term
incentives awarded to Regions' named executive officers.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OR OTHER PERIOD NON-STOCK PRICE-BASED PLANS(1)
OTHER UNTIL MATURATION -------------------------------
NAME RIGHTS(1) OR PAYOUT(2) THRESHOLD TARGET MAXIMUM
- ---- ---------------- ---------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
J. Stanley Mackin...................... 20,000 3 Years 10,000 20,000 20,000
Carl E. Jones, Jr...................... 5,000 3 Years 2,500 5,000 5,000
Richard D. Horsley..................... 5,000 3 Years 2,500 5,000 5,000
Sam P. Faucett......................... 5,000 3 Years 2,500 5,000 5,000
William E. Jordan...................... 5,000 3 Years 2,500 5,000 5,000
</TABLE>
- ---------------
(1) Each share or right represents performance share awards under Regions'
Long-Term Incentive Plan which are equal in value to the market price of one
share of Regions Common Stock at the maturation date.
(2) The performance objectives may relate to the specific performance of the
named executive, or the performance of Regions overall or the region,
subsidiary, unit bank, department or function within which the named
executive is employed. The performance objectives established for the
current awards relate to the achievement of specific levels of return on
equity by Regions. If at the end of the performance period the performance
objectives have been satisfied, the named executive will have earned the
award, or, at the discretion of the compensation committee, some percentage
or fraction thereof, if the specified performance objectives are exceeded or
satisfied in part. The performance period generally will be not less than
one year or more than five years. The compensation committee has the
discretion to modify the terms of the Long-term Incentive Plan awards.
RETIREMENT PLANS
The named executive officers are covered by the Regions Financial
Corporation Retirement Plan, a qualified defined benefit retirement plan, as
complimented by retirement compensation agreements pursuant to its supplemental
executive retirement program.
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<PAGE> 91
The following table shows estimated annual benefits payable at retirement,
including both qualified plan benefits and supplemental benefits, based on
combinations of final compensation and age at retirement.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AGE AT RETIREMENT
---------------------------------------------------------------
COMPENSATION 55 60 62 63 64 65
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000........................... $ 50,000 $ 62,500 $ 67,500 $ 70,000 $ 72,500 $ 75,000
150,000........................... 60,000 75,000 81,000 84,000 87,000 90,000
175,000........................... 70,000 87,500 94,500 98,000 101,500 105,000
200,000........................... 80,000 100,000 108,000 112,000 116,000 120,000
250,000........................... 100,000 125,000 135,000 140,000 145,000 150,000
300,000........................... 120,000 150,000 162,000 168,000 174,000 180,000
350,000........................... 140,000 175,000 189,000 196,000 203,000 210,000
400,000........................... 160,000 200,000 216,000 224,000 232,000 240,000
450,000........................... 180,000 225,000 243,000 252,000 261,000 270,000
500,000........................... 200,000 250,000 270,000 280,000 290,000 300,000
550,000........................... 220,000 275,000 297,000 308,000 319,000 330,000
600,000........................... 240,000 300,000 324,000 36,000 348,000 360,000
650,000........................... 260,000 325,000 351,000 364,000 377,000 390,000
700,000........................... 280,000 350,000 378,000 392,000 406,000 420,000
750,000........................... 300,000 75,000 405,000 420,000 435,000 450,000
</TABLE>
In 1997, compensation covered by the plans for the five highest paid
executive officers was as follows: Mr. Mackin, $735,000; Mr. Jones, $350,000;
Mr. Horsley, $275,000; Mr. Faucett, $245,000; and Mr. Jordan, $248,000.
Benefits are based on average compensation (limited to base salary) over
the three years prior to retirement, and are payable as a single life annuity
for single participants and a joint and 50% survivor annuity for married
participants. Other forms of payment are available on an actuarially equivalent
basis. Amounts shown are subject to offset for company-sponsored long-term
disability payments and executive life insurance program cash values exceeding
premiums paid. Benefits are not offset by Social Security benefits. Benefits
will be reduced or eliminated if the participant terminates employment
voluntarily before age 55.
EMPLOYMENT AGREEMENTS
Regions has no employment agreements with any of the named executive
officers.
DIRECTORS' COMPENSATION
In 1997, directors of Regions were paid an annual retainer of $10,000. In
addition, directors are paid a fee of $1,000 for each board meeting attended.
Directors who are chairman of board committees receive $750 and other directors
who are members of board committees receive $600 for each board committee
meeting attended, and half of those amounts for regularly scheduled telephonic
committee meetings. Directors who are employees of Regions receive no fees for
Regions board membership or attendance at Regions Board or board committee
meetings.
In January 1984, the Regions Board adopted the Directors' Stock Investment
Plan, a plan designed to provide added incentive to the non-employee directors
of Regions and its subsidiaries and local divisions. As amended in 1991, the
plan provides that each participant may contribute to the plan all or part of
the fees payable by Regions. Regions will contribute 25% of the amount
contributed by each director. Both director and Regions contributions will be
applied to the purchase of Regions Common Stock for the account of the director.
Directors are immediately vested in all amounts held in the plan on their
behalf. Nonemployee directors of Regions have the option to participate in a
nonqualified deferred plan which operates in a similar
78
<PAGE> 92
manner, except that receipt and taxability of benefits is deferred until the
participant reaches age 65 or terminates as a director.
COMPENSATION AND STOCK OPTION DETERMINATIONS
The determination of executive compensation and the award of stock options
is delegated to the compensation committee of the Regions Board. Regions'
directors believe that executive compensation decisions must consider aggregate
compensation, since executive compensation in the financial services industry
typically consists of a variety of elements, tied to an assortment of long-term
and short-term performance objectives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the Regions Board consisted in 1997 of Mr.
Brewer and Mr. Styslinger. In reaching compensation decisions concerning
executive officers other than Mr. Mackin, the chief executive officer, the
committee took into account discussions with and recommendations by Mr. Mackin
and Regions' senior personnel officer. There is no other involvement by Regions'
executive personnel in the committee's deliberations. Mr. Mackin did not
participate in deliberations and decisions regarding his own compensation.
COMPENSATION COMMITTEE EXECUTIVE COMPENSATION REPORT
Set forth below is the Executive Compensation Committee Report of the
Compensation Committee.
EXECUTIVE COMPENSATION REPORT
General. Under the direct control of the compensation committee of the
Regions Board, Regions has developed and installed compensation policies, plans,
and procedures that seek to enhance the profitability of Regions. Stockholder
value is aligned with the financial interests of Regions' senior managers as
financial goals are set for each year. Regions recognizes the importance of
annual and long-term incentive compensation plans to attract and retain
corporate officers and other key employees who are accordingly motivated to
perform to the best of their abilities. Both forms of incentive compensation are
variable and accordingly reflect corporate, strategic business unit, and
individual performance levels that encourage an explicit and continuing focus on
increasing profitability and stockholder value.
The committee's methodology and approach incorporate both qualitative and
quantitative considerations, which are reflected in the committee's
determinations concerning executive compensation and the specific components
thereof. In particular, the total compensation of the executive officers of
Regions can be divided into the categories of (i) annual base salary, (ii)
annual incentive compensation, and (iii) long-term incentive compensation. In
general, and as set forth in greater detail below, annual base salary is
intended to be comparable with executive base compensation paid by other similar
financial institutions; annual incentive compensation is intended to be tied
quantitatively to the achievement by Regions of pre-determined, objective
financial performance goals; and share-based grants for long-term incentive
compensation are intended to reward the executive recipients with incremental
value commensurate with long-term increases in value of Regions Common Stock.
The compensation decisions of the committee relative to Regions' principal
executive officers, including the five officers named above in the compensation
tables, are described below as to each of the three categories.
Base Salary. Annual base salaries are generally set at competitive levels
with similar financial institutions. Specifically the committee considers peer
group comparisons from survey data for other financial companies,
recommendations from an independent compensation consultant, and individual
performance assessments. For executives other than the chief executive officer,
the committee also considers the chief executive officer's recommendations.
While these factors are fully considered and discussed by the committee, the
committee members are not required to express or record the weight they assign
to any particular factor. In each instance the committee members reach a
consensus and the committee sets a base salary level for each executive.
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<PAGE> 93
In evaluating and establishing the base salaries of the executive officers,
the committee, in conjunction with its independent compensation consultant,
surveys the base salaries of the corresponding officers of other bank holding
companies in a survey group consisting of approximately 20 companies closest to
Regions in asset size and deposit size, and also including the three other
largest bank holding companies headquartered in Alabama. The committee attempts
to establish the base salaries of the named executive officers such that the
aggregate of their base salaries is targeted to the median point of the
aggregate of the base salaries of the corresponding executive officers of the
companies in the survey group, based on the most recent information available.
Based on year end 1995 information, the information most recently available, the
aggregate of the actual base salaries of Regions named executive officers group
approximated such survey median point.
It should be noted that the survey comparison group is not the same as the
group of companies which make up the NASDAQ Banks Index presented in the
Comparison of Five-year Cumulative Total Return graph included in this Joint
Proxy Statement. The committee believes the use of a smaller survey group
tailored by asset and deposit size is more valid for salary evaluation purposes,
even though not all the survey companies are included in the NASDAQ Banks Index,
and even though numerous companies included in the NASDAQ Banks Index are not
included in the survey group.
Based on the survey comparison, advice of an independent compensation
consultant, recommendations from the chief executive officer, and an inherently
subjective assessment of the comparative contributions of the executive
personnel to Regions' continued financial and operating success, the 1997 base
salaries for the other named officers were determined by the committee.
Annual Incentive Compensation. In the first quarter of 1997, the
compensation committee approved Regions' 1997 annual performance goals, as
prepared by Regions' comptroller, and as used for the purpose of determining
potential annual incentive compensation for the executive officers. The
performance goals were quantitative in nature, resulting in an incentive plan
formula that was weighted towards their overall importance in attaining Regions'
annual profit plan, and focused on the accomplishment of financial objectives,
before certain nonrecurring items, in the areas of: Net Income Before Securities
Transactions, Return on Assets, Return on Equity, Efficiency Ratio; and,
exclusive of acquisition related growth, Average Loan Growth, and Average Core
Deposit Growth. With record earnings in 1997, Regions exceeded maximum levels in
all company-wide performance goals except the Average Core Deposit goal, as to
which the threshold level was not achieved, and exceeded threshold levels in the
large majority of business unit performance goals. Based on the various levels
of goal achievement, the chief executive and the other named officers received
cash incentive awards as a formula driven percentage of 1997 base salary levels.
Long Term Incentive Compensation. During 1997, the compensation committee
evaluated the merits of granting the chief executive officer, the named officers
and other key employees, further awards under Regions' 1991 Long-Term Incentive
Plan (LTIP). The 1991 LTIP provides the flexibility to grant long-term
incentives in a variety of forms, including stock options, performance shares
and restricted stock. With respect to stock-based compensation, the compensation
committee placed relatively more reliance on the advice of Regions' independent
consultant than in the cases of base salary and non stock-based compensation. As
intended with the establishment of the 1991 LTIP, the committee believes that it
is highly desirable to increase management's equity ownership interest in
Regions. The committee further believes that its initial 1991 awards under the
LTIP successfully focused and committed Regions' management on building
profitability and stockholder value. The primary purpose of LTIP awards is to
encourage management members to take long-term steps to achieve and sustain
Return on Equity objectives. Accordingly, the committee further awarded LTIP
grants during 1997.
In establishing the LTIP awards for the named officers, senior management
and other key employees, the committee reviewed with the chief executive officer
the recommended individual awards, considering the scope of accountability,
financial goals, and anticipated performance requirements and contributions
expected of each participant. The committee also took into account the number
and size of LTIP awards and stock options already held by executive officers
considered for additional awards.
Compensation of Chief Executive Officer. In deliberating the compensation
of the Chief Executive Officer, the committee adheres to the same basic
methodology and approach applied to executive compensa-
80
<PAGE> 94
tion generally. Accordingly, the base salary determination reflects the peer
group survey comparison described above, the annual incentive compensation is
based on an objective formula and tied to Regions' achievement of
pre-determined, quantitative financial goals, and the realization of long-term
incentive compensation, by its nature, is aligned with the realization of
long-term stockholder value.
In addition, the committee, in deliberating the chief executive officer's
compensation, takes into account other factors. For example, special
consideration was given to Regions' superior earnings record since his
appointment, and the consistent successes of Regions' acquisition program,
including the assimilation of the institutions acquired. Consideration was also
given to the chief executive officer's personal job performance and Regions'
profitable growth record. The weight and significance accorded to these special
factors in the committee's deliberations are intrinsically subjective, and thus
their bearing on the committee's ultimate compensation determinations cannot be
quantified.
LTIP awards for the chief executive officer were set separately and
independently of his participation, based on ownership and total compensation
objectives that reflected data from selected peer companies, his total
compensation, and the committee's recognition of his contributions to Regions'
attainment of its long-term performance goals.
Summary. The compensation committee of the board of directors remains
dedicated to ensuring that Regions' overall compensation program for its
executive officers, senior management and other key employees is properly
designed to:
- Attract, motivate, and retain outstanding contributors;
- Maintain a base salary structure that is competitive in Regions'
marketplace;
- Link annual incentive awards with specific performance targets that yield
superior results; and
- Provide long-term incentive awards that couple management ownership with
stockholder value.
Section 162(m) of the Code imposes certain limitations on the deductibility
by Regions for federal income tax purposes of compensation amounts paid to
highly paid executives. The committee is aware of the potential effects of
Section 162(m) of the Code. The committee has concluded that ensuring
deductibility under Section 162(m) is not as important as structuring incentive
compensation based on methodology and factors it deems appropriate. The
committee has chosen not to distort its methodology and application of the
factors it believes pertinent so as to ensure that all executive compensation is
deductible under Section 162(m). While the committee intends that Regions'
compensation plans will meet, to the extent practical, the prerequisites for
deductibility under Section 162(m), if it develops that a portion of the
compensation of one or more executive officers is not deductible under Section
162(m), then the committee expects that Regions would honor its obligations to
the executive officers under the compensation arrangements approved by the
committee.
The compensation committee will continue to review and evaluate
compensation programs at least annually. When and where appropriate, the
committee will consult with independent compensation consultants, legal
advisors, and Regions' public accounting firm with respect to the proper design
of the program toward achieving Regions' objectives as set forth by the chief
executive officer and the Regions Board.
This report furnished by:
Albert P. Brewer
Lee J. Styslinger, Jr.
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<PAGE> 95
FINANCIAL PERFORMANCE
Set forth below is a graph comparing the yearly percentage change in the
cumulative total return of Regions Common Stock against the cumulative total
return of the S & P 500 Index and the NASDAQ Banks Index for the past five
years. This presentation assumes that the value of the investment in Regions
Common Stock and in each index was $100 and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period NASDAQ
(Fiscal Year Covered) Regions Bank Index S & P 500
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 101.40 114.04 110.08
12/31/94 100.73 113.63 111.53
12/31/95 144.53 169.22 153.44
12/31/96 178.85 223.41 188.52
12/31/97 298.80 377.44 251.44
</TABLE>
82
<PAGE> 96
AMENDMENT OF REGIONS' CERTIFICATE OF INCORPORATION
The Regions Board has proposed an amendment to Item Fourth of the Regions
Certificate to increase the number of authorized shares of Regions Common Stock
from 240,000,000 shares to 500,000,000 shares.
The newly authorized but unissued shares, along with the presently
authorized and unissued shares, will be available for issuance at the discretion
of the Regions Board. No stockholder approval is required for the issuance of
authorized but unissued shares of Regions Common Stock. Stockholders have no
preemptive rights to subscribe for any of the shares which may be issued by
Regions from time to time. Unissued shares of Regions Common Stock will be
available at the discretion of the Regions Board for future stock dividends, for
acquisition of banks or bank related companies, for issuance upon exercise of
stock options, or to raise additional capital in public or private sales. 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.
On the Regions Record Date, there were 149,910,562 shares issued and
outstanding of the 240,000,000 shares of Regions Common Stock currently
authorized, and no shares held in treasury.
Including the Merger, Regions has pending six acquisitions which call for
the issuance of Regions Common Stock upon consummation, as follows:
<TABLE>
<CAPTION>
PROJECTED MAXIMUM
INSTITUTION TO BE ACQUIRED NUMBER OF SHARES
- -------------------------- -----------------
<S> <C>
First Commercial Corporation, located in Little Rock,
Arkansas.................................................. 65,496,769
Etowah Bank, located in Canton, Georgia..................... 2,915,200
First Community Banking Services, Inc., located in Peachtree
City, Georgia............................................. 990,059
Jacobs Bank, located in Scottsboro, Alabama................. 1,350,000
Village Bankshares, Inc., located in Tampa, Florida......... 1,338,953
VB&T Bancshares Corporation, located in Valdosta, Georgia... 485,456
</TABLE>
Other than these pending transactions, the Regions Board has no present
plans, agreements, or commitments to issue authorized but unissued Regions
Common Stock.
The Regions Board believes that the amendment to increase the number of
authorized shares is advisable in order to give Regions additional flexibility
in the acquisition of financial institutions and related businesses, and in
consideration of transactions such as stock splits and stock dividends. The
affirmative vote of holders of 75% of the outstanding shares of Regions Common
Stock is necessary to adopt this amendment to Item Fourth of the Regions
Certificate. The amendment of the Regions Certificate is not a condition to the
consummation of the Merger.
The text of the proposed amendment to the Regions Certificate is set forth
in Appendix E to this Joint Proxy Statement.
The Regions Board recommends a vote "FOR" the amendment to Item Fourth of
the Regions Certificate under "Item 3" on the proxy card.
DESCRIPTION OF REGIONS CAPITAL STOCK
Regions is authorized to issue 240,000,000 shares of Regions Common Stock,
of which 149,910,562 shares were issued and outstanding as of the Regions Record
Date, and 5,000,000 shares of preferred stock, none of which are outstanding. No
other class of stock is authorized. The stockholders of Regions have been asked
to approve the amendment to the Regions Certificate increasing the number of
authorized shares of Regions Common Stock from 240,000,000 shares to 500,000,000
shares.
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<PAGE> 97
Holders of Regions Common Stock are entitled to receive such dividends as
may be declared by the Regions Board 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."
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.
In the case of First Commercial, the deadline set forth in Rule 14a-8 under
the Exchange Act for the submission of proposals of stockholders for inclusion
in the proxy statement and form of proxy to be used by First Commercial in
connection with its 1998 annual meeting of stockholders has passed. Unless the
Merger is not consummated, First Commercial does not intend to hold a 1998
annual meeting of stockholders.
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 Regions' 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 First Commercial at December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, included in First Commercial's Annual Report (Form 10-K), which is
incorporated by reference in the Joint Proxy Statement of First Commercial and
Regions, which is referred to and made a part of this Joint Proxy Statement and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report included therein and incorporated by
reference herein which, as to the years 1996 and 1995, are based in part on the
reports of Kemp & Company, independent auditors. The consolidated financial
statements referred to above are incorporated by reference in reliance upon such
report given upon the authority of such firms 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 Regions Board. As of June
19, 1998, attorneys in the law firm of Lange, Simpson, Robinson & Somerville LLP
owned an aggregate of 238,386 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> 98
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FIRST COMMERCIAL CORPORATION
AND
REGIONS FINANCIAL CORPORATION
DATED AS OF FEBRUARY 8, 1998
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties............................................................... A-1
Preamble.............................................................. A-1
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER......................... A-1
1.1 Merger...................................................... A-1
1.2 Time and Place of Closing................................... A-1
1.3 Effective Time.............................................. A-1
1.4 Execution of Stock Option Agreement......................... A-2
ARTICLE 2 -- TERMS OF MERGER.......................................... A-2
2.1 Certificate of Incorporation................................ A-2
2.2 Bylaws...................................................... A-2
2.3 Directors and Officers...................................... A-2
ARTICLE 3 -- MANNER OF CONVERTING SHARES.............................. A-2
3.1 Conversion of Shares........................................ A-2
3.2 Anti-Dilution Provisions.................................... A-2
3.3 Shares Held by FCC or Regions............................... A-3
3.4 Dissenting Stockholders..................................... A-3
3.5 Fractional Shares........................................... A-3
3.6 Conversion of Stock Rights.................................. A-3
ARTICLE 4 -- EXCHANGE OF SHARES....................................... A-4
4.1 Exchange Procedures......................................... A-4
4.2 Rights of Former FCC Stockholders........................... A-5
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF FCC.................... A-5
5.1 Organization, Standing, and Power........................... A-5
5.2 Authority; No Breach By Agreement........................... A-5
5.3 Capital Stock............................................... A-6
5.4 FCC Subsidiaries............................................ A-6
5.5 SEC Filings; Financial Statements........................... A-7
5.6 Absence of Undisclosed Liabilities.......................... A-7
5.7 Absence of Certain Changes or Events........................ A-7
5.8 Tax Matters................................................. A-7
5.9 Assets...................................................... A-8
5.10 Environmental Matters....................................... A-8
5.11 Compliance with Laws........................................ A-9
5.12 Labor Relations............................................. A-10
5.13 Employee Benefit Plans...................................... A-10
5.14 Material Contracts.......................................... A-11
5.15 Legal Proceedings........................................... A-12
5.16 Reports..................................................... A-12
5.17 Statements True and Correct................................. A-12
5.18 Accounting, Tax, and Regulatory Matters..................... A-13
5.19 State Takeover Laws......................................... A-13
5.20 Charter Provisions.......................................... A-13
5.21 Rights Agreement............................................ A-13
5.22 Derivatives................................................. A-13
5.23 Year 2000................................................... A-13
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF REGIONS................ A-13
6.1 Organization, Standing, and Power........................... A-13
6.2 Authority; No Breach By Agreement........................... A-13
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
6.3 Capital Stock............................................... A-14
6.4 Regions Subsidiaries........................................ A-14
6.5 SEC Filings; Financial Statements........................... A-15
6.6 Absence of Undisclosed Liabilities.......................... A-15
6.7 Absence of Certain Changes or Events........................ A-15
6.8 Tax Matters................................................. A-15
6.9 Assets...................................................... A-16
6.10 Environmental Matters....................................... A-16
6.11 Compliance with Laws........................................ A-17
6.12 Labor Relations............................................. A-18
6.13 Legal Proceedings........................................... A-18
6.14 Reports..................................................... A-18
6.15 Statements True and Correct................................. A-18
6.16 Accounting, Tax, and Regulatory Matters..................... A-18
6.17 Employee Benefit Plans...................................... A-18
6.18 Derivatives................................................. A-19
6.19 Year 2000................................................... A-19
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION................. A-19
7.1 Affirmative Covenants of Both Parties....................... A-19
7.2 Negative Covenants of FCC................................... A-19
7.3 Adverse Changes in Condition................................ A-21
7.4 Reports..................................................... A-21
ARTICLE 8 -- ADDITIONAL AGREEMENTS.................................... A-21
8.1 Registration Statement; Joint Proxy Statement; Stockholder
Approvals................................................... A-21
8.2 Exchange Listing............................................ A-22
8.3 Applications................................................ A-22
8.4 Filings with State Offices.................................. A-22
8.5 Agreement as to Efforts to Consummate....................... A-22
8.6 Investigation and Confidentiality........................... A-22
8.7 Press Releases.............................................. A-23
8.8 Certain Actions............................................. A-23
8.9 Accounting and Tax Treatment................................ A-23
8.10 State Takeover Laws......................................... A-23
8.11 Charter Provisions.......................................... A-23
8.12 Rights Agreement............................................ A-24
8.13 Agreement of Affiliates..................................... A-24
8.14 Employee Benefits and Contracts............................. A-24
8.15 Indemnification............................................. A-25
8.16 Certain Modifications....................................... A-26
8.17 Pending FCC Acquisition..................................... A-26
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........ A-26
9.1 Conditions to Obligations of Each Party..................... A-26
9.2 Conditions to Obligations of Regions........................ A-27
9.3 Conditions to Obligations of FCC............................ A-28
ARTICLE 10 -- TERMINATION............................................. A-29
10.1 Termination................................................. A-29
10.2 Effect of Termination....................................... A-31
10.3 Non-Survival of Representations and Covenants............... A-31
ARTICLE 11 -- MISCELLANEOUS........................................... A-31
11.1 Definitions................................................. A-31
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
11.2 Expenses.................................................... A-37
11.3 Brokers and Finders......................................... A-37
11.4 Entire Agreement............................................ A-38
11.5 Amendments.................................................. A-38
11.6 Waivers..................................................... A-38
11.7 Assignment.................................................. A-38
11.8 Notices..................................................... A-38
11.9 Governing Law............................................... A-39
11.10 Counterparts................................................ A-39
11.11 Captions.................................................... A-39
11.12 Interpretations............................................. A-39
11.13 Enforcement of Agreement.................................... A-39
11.14 Severability................................................ A-40
Signatures............................................................ A-40
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
A-1. -- Form of Stock Option Agreement. (sec. 1.4).
A-2. -- Form of Affiliate Agreement. (sec.sec. 8.13, 9.2(d)).
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of February 8, 1998, by and between FIRST COMMERCIAL CORPORATION
("FCC"), a corporation organized and existing under the Laws of the State of
Arkansas, with its principal office located in Little Rock, Arkansas; and
REGIONS FINANCIAL CORPORATION ("Regions"), a corporation organized and existing
under the Laws of the State of Delaware, with its principal office located in
Birmingham, Alabama.
PREAMBLE
The Boards of Directors of FCC and Regions are of the opinion that the
transactions described herein are in the best interests of the parties to this
Agreement and their respective stockholders. This Agreement provides for the
acquisition of FCC by Regions pursuant to the merger (the "Merger") of FCC with
and into Regions. At the effective time of the Merger, the outstanding shares of
the capital stock of FCC shall be converted into shares of the common stock of
Regions (except as provided herein). As a result, stockholders of FCC shall
become stockholders of Regions, and each of the subsidiaries of FCC shall
continue to conduct its business and operations as a subsidiary of Regions. The
transactions described in this Agreement are subject to the approvals of the
stockholders of FCC, the stockholders of Regions, the Board of Governors of the
Federal Reserve System, and certain state regulatory authorities, and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger (i) for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and (ii) for accounting purposes
shall qualify for treatment as a pooling of interests.
Immediately after the execution and delivery of this Agreement, as a
condition and inducement to Regions' willingness to enter into this Agreement,
FCC and Regions are entering into a stock option agreement (the "Stock Option
Agreement"), in substantially the form of Exhibit 1, pursuant to which FCC is
granting to Regions an option to purchase shares of FCC Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, FCC shall be merged with and into Regions in accordance with the
provisions of Section 4-27-1107 of the ABCA and with the effect provided in
Section 4-27-1106 of the ABCA and Section 252 of the DGCL and with the effect
provided in Section 259 of the DGCL (the "Merger"). Regions shall be the
Surviving Corporation resulting from the Merger and shall continue to be
governed by the Laws of the State of Delaware. The Merger shall be consummated
pursuant to the terms of this Agreement, which has been approved and adopted by
the respective Boards of Directors of FCC and Regions.
1.2 Time and Place of Closing. The consummation of the Merger (the
"Closing") shall take place at 9:00 A.M. on the date that the Effective Time
occurs (or the immediately preceding day if the Effective Time is earlier than
9:00 A.M.), or at such other time as the Parties, acting through their duly
authorized officers, may mutually agree. The place of Closing shall be at such
location as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and the other transactions contemplated by
this Agreement shall become effective on the date and at the time the Arkansas
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Arkansas and the Delaware Certificate of
Merger shall become effective with the Secretary of State of the State of
Delaware (the "Effective Time"). Subject to
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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 or before the
15th business day (as designated by Regions) following 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 Regions and FCC approve the matters relating to this Agreement required to be
approved by such stockholders by applicable Law.
1.4 Execution of Stock Option Agreement. Immediately after the execution
of this Agreement and as a condition hereto, FCC is executing and delivering to
Regions the Stock Option Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Regions in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Regions in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation after the
Effective Time until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Regions in office immediately
prior to the Effective Time, together with such additional individuals elected
in accordance with the terms of the Supplemental Letter, shall serve as the
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. The officers of Regions
in office immediately prior to the Effective Time, together with such additional
officers of FCC as thereafter elected, shall serve as the officers of the
Surviving Corporation from and after the Effective Time in accordance with the
Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Regions or FCC, or the stockholders of either of the foregoing, the shares of
the constituent corporations shall be converted as follows:
(a) Each share of Regions Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of FCC Common Stock (including any associated Preferred
Stock Purchase Rights, but excluding shares held by any FCC Company or any
Regions Company, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at the
Effective Time shall be converted into 1.7 shares of Regions Common Stock
(subject to adjustment pursuant to Section 10.1(g) of this Agreement, the
"Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event FCC changes the number of
shares of FCC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, recapitalization, or similar
transaction with respect to such stock, the Exchange Ratio shall be
proportionately adjusted. In the event Regions changes the number of shares of
Regions Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, recapitalization, or similar
transaction with respect to such stock and the record date therefor (in the case
of a stock dividend) or the effective date thereof (in the case of a stock split
or similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted.
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3.3 Shares Held by FCC or Regions. Each of the shares of FCC Common Stock
held by any FCC Company or by any Regions Company, in each case other than in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.4 Dissenting Stockholders. Any holder of shares of FCC Common Stock who
perfects such holder's dissenters' rights of appraisal in accordance with and as
contemplated by Sections 4-27-1301 et seq. of the ABCA shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, however, that no such payment shall be made to any
dissenting stockholder unless and until such dissenting stockholder has complied
with the applicable provisions of the ABCA and surrendered to FCC 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 FCC
fails to perfect, or effectively withdraws or loses, such holder's right to
appraisal of and payment for such holder's shares, Regions shall issue and
deliver the consideration to which such holder of shares of FCC Common Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of FCC Common Stock held
by such holder. FCC will establish an escrow account with an amount sufficient
to satisfy the maximum aggregate payment that may be required to be paid to
dissenting stockholders. Upon satisfaction of all claims of dissenting
stockholders, the remaining escrowed amount, reduced by payment of the fees and
expenses of the escrow agent, will be returned to the Surviving Corporation.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of FCC Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Regions Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Regions Common Stock
multiplied by the market value of one share of Regions Common Stock at the
Effective Time. The market value of one share of Regions Common Stock at the
Effective Time shall be the last sale price of Regions Common Stock on the
Nasdaq NMS (as reported by The Wall Street Journal or, if not reported thereby,
any other authoritative source selected by Regions) on the last trading day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a stockholder in respect of any fractional
shares.
3.6 Conversion of Stock Rights. (a) At the Effective Time, each award,
option, or other right to purchase or acquire shares of FCC Common Stock
pursuant to stock options, stock appreciation rights, or stock awards ("FCC
Rights") granted by FCC under the FCC Stock Plans, which are outstanding at the
Effective Time, whether or not exercisable, shall be converted into and become
rights with respect to Regions Common Stock, and Regions shall assume each FCC
Right, in accordance with the terms of the FCC Stock Plan and stock option
agreement by which it is evidenced, except that from and after the Effective
Time, (i) Regions and its Compensation Committee shall be substituted for FCC
and the Committee of FCC's Board of Directors (including, if applicable, the
entire Board of Directors of FCC) administering such FCC Stock Plan, (ii) each
FCC Right assumed by Regions may be exercised solely for shares of Regions
Common Stock (or cash in the case of stock appreciation rights), (iii) the
number of shares of Regions Common Stock subject to such FCC Right shall be
equal to the number of shares of FCC Common Stock subject to such FCC Right
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price (or similar threshold price, in the case of
stock awards) under each such FCC Right shall be adjusted by dividing the per
share exercise (or threshold) price under each such FCC Right by the Exchange
Ratio and rounding up to the nearest cent. Notwithstanding the provisions of
clause (iii) of the preceding sentence, Regions shall not be obligated to issue
any fraction of a share of Regions Common Stock upon exercise of FCC Rights and
any fraction of a share of Regions Common Stock that otherwise would be subject
to a converted FCC Right shall represent the right to receive a cash payment
equal to the product of such fraction and the difference between the market
value of one share of Regions Common Stock and the per share exercise price of
such Right. The market value of one share of Regions Common Stock shall be the
last sale price of Regions Common Stock on the Nasdaq NMS (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative source
selected by Regions) on the last trading day preceding the Effective Time. In
addition, notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence of this
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Section 3.6, each FCC Right which is an "incentive stock option" shall be
adjusted as required by Section 424 of the Internal Revenue Code, so as not to
constitute a modification, extension, or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Regions agrees to take
all necessary steps to effectuate the foregoing provisions of this Section 3.6.
(b) As soon as reasonably practicable after the Effective Time, Regions
shall deliver to the participants in each FCC Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants pursuant
to such FCC Stock Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 3.6(a) after giving effect to
the Merger), and Regions shall comply with the terms of each FCC Stock Plan to
ensure, to the extent required by, and subject to the provisions of, such FCC
Stock Plan, that FCC Rights which qualified as incentive stock options prior to
the Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, Regions shall take all
corporate action necessary to reserve for issuance sufficient shares of Regions
Common Stock for delivery upon exercise of FCC Rights assumed by it in
accordance with this Section 3.6. As soon as reasonably practicable after the
Effective Time, Regions shall file a registration statement on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of Regions Common Stock subject to such options and shall
use its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding. With respect
to those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the 1934 Act, where applicable,
Regions shall administer the FCC Stock Plan assumed pursuant to this Section 3.6
in a manner that complies with Rule 16b-3 promulgated under the 1934 Act.
(c) All restrictions or limitations on transfer with respect to FCC Common
Stock awarded under the FCC Stock Plans or any other plan, program, or
arrangement of any FCC Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Regions Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Regions and
FCC shall cause the exchange agent selected by Regions (the "Exchange Agent") to
mail to the former stockholders of FCC appropriate transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of FCC Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of FCC Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement or as to which the holder
thereof has perfected dissenters' rights of appraisal as contemplated by Section
3.4 of this Agreement) issued and outstanding at the Effective Time shall
surrender the certificate or certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. To the
extent required by Section 3.5 of this Agreement, each holder of shares of FCC
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 FCC Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of FCC Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of FCC
Common Stock so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of FCC
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law.
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4.2 Rights of Former FCC Stockholders. At the Effective Time, the stock
transfer books of FCC shall be closed as to holders of FCC Common Stock
immediately prior to the Effective Time and no transfer of FCC 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 FCC Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement or as to which
the holder thereof has perfected dissenters' rights of appraisal as contemplated
by Section 3.4 of this Agreement) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Sections 3.1 and 3.5 of this Agreement in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by FCC in respect of such shares of FCC Common Stock
in accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by Law, former stockholders of record of
FCC 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 FCC Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing FCC 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 issuable pursuant to this Agreement, but beginning
30 days after the Effective Time 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 FCC 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 FCC Common Stock certificate,
both the Regions Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered dividends
and cash payments to be paid for fractional share interests (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FCC
FCC hereby represents and warrants to Regions as follows:
5.1 Organization, Standing, and Power. FCC is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Arkansas, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Material Assets. FCC 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 FCC.
5.2 Authority; No Breach By Agreement. (a) FCC 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 FCC, subject to the approval of this Agreement by the holders of a
majority of the outstanding shares of FCC Common Stock entitled to be cast
thereon, which is the only stockholder vote required for approval of this
Agreement and consummation of the Merger by FCC. Subject to such requisite
stockholder approval, this Agreement represents a legal, valid, and binding
obligation of FCC, enforceable against FCC 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
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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 FCC, nor the
consummation by FCC of the transactions contemplated hereby, nor compliance by
FCC with any of the provisions hereof or thereof, will (i) conflict with or
result in a breach of any provision of FCC's Second Amended and Restated
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 FCC Company under, any Contract or Permit of any FCC
Company, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, or (iii) subject to receipt of the requisite Consents referred to
in Section 9.1(b) of this Agreement, violate any Law or Order applicable to any
FCC Company or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FCC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FCC of the Merger and the other transactions contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of FCC consists, as of
the date of this Agreement, of (i) 50,000,000 shares of FCC Common Stock, of
which 37,590,428 shares are issued and outstanding as of the date of this
Agreement and, except for shares of FCC Common Stock issuable in connection with
the transaction referenced in Section 8.17 of this Agreement, not more than
38,527,511 shares will be issued and outstanding at the Effective Time, and (ii)
400,000 shares of FCC Preferred Stock, of which no shares are issued and
outstanding as of the date of this Agreement and no shares will be issued and
outstanding as of the Effective Time. All of the issued and outstanding shares
of FCC Common Stock are duly and validly issued and outstanding and are fully
paid and nonassessable under the ABCA. None of the outstanding shares of FCC
Common Stock has been issued in violation of any preemptive rights of the
current or past stockholders of FCC.
(b) Except as set forth in Section 5.3(a) of this Agreement or Section
5.3(b) of the FCC Disclosure Memorandum, or as provided pursuant to the Stock
Option Agreement or the FCC Rights Agreement, there are no shares of capital
stock or other equity securities of FCC outstanding and no outstanding Rights
relating to the capital stock of FCC.
5.4 FCC Subsidiaries. FCC has disclosed in Section 5.4 of the FCC
Disclosure Memorandum all of the FCC Subsidiaries as of the date of this
Agreement. Except as set forth in Section 5.4 of the FCC Disclosure Memorandum,
FCC or one of its Subsidiaries owns all of the issued and outstanding shares of
capital stock of each FCC Subsidiary. No equity securities of any FCC Subsidiary
are or may become required to be issued (other than to another FCC Company) by
reason of any Rights, and there are no Contracts by which any FCC Subsidiary is
bound to issue (other than to another FCC Company) additional shares of its
capital stock or Rights or by which any FCC Company is or may be bound to
transfer any shares of the capital stock of any FCC Subsidiary (other than to
another FCC Company). There are no Contracts relating to the rights of any FCC
Company to vote or to dispose of any shares of the capital stock of any FCC
Subsidiary. All of the shares of capital stock of each FCC Subsidiary held by a
FCC Company are duly authorized, validly issued, and fully paid and, except as
provided in statutes pursuant to which depository institution Subsidiaries are
organized, nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the FCC Company free and clear of any Lien. Except as set forth in Section
5.4 of the FCC Disclosure Memorandum, each FCC Subsidiary is either a bank or a
corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each FCC Subsidiary is
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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 FCC. Each FCC Subsidiary that is
a depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits in
which are insured by the Bank Insurance Fund or Savings Association Insurance
Fund.
5.5 SEC Filings; Financial Statements. (a) FCC has filed and made
available to Regions all forms, reports, and documents required to be filed by
FCC with the SEC since December 31, 1993 (collectively, the "FCC SEC Reports").
The FCC SEC Reports (i) at the time filed, complied in all Material respects
with the applicable requirements of the 1933 Act and the 1934 Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such FCC SEC Reports or necessary in
order to make the statements in such FCC SEC Reports, in light of the
circumstances under which they were made, not misleading. Except for FCC
Subsidiaries that are registered as a broker, dealer, or investment advisor or
filings required due to fiduciary holdings of the FCC Subsidiaries, none of
FCC's Subsidiaries is required to file any forms, reports, or other documents
with the SEC.
(b) Each of the FCC Financial Statements (including, in each case, any
related notes) contained in the FCC SEC Reports, including any FCC 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 prepared 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 FCC 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.
5.6 Absence of Undisclosed Liabilities. No FCC Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC, except Liabilities which are accrued or reserved against
in the consolidated balance sheets of FCC as of September 30, 1997, included in
the FCC Financial Statements or reflected in the notes thereto and except for
Liabilities incurred in the ordinary course of business subsequent to September
30, 1997. No FCC 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
FCC.
5.7 Absence of Certain Changes or Events. Since September 30, 1997, except
as disclosed in the FCC Financial Statements, (i) there have been no events,
changes, or occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC, and (ii) the
FCC Companies have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby).
5.8 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of any of the FCC 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, to the Knowledge of FCC, all Tax Returns filed
are complete and accurate in all Material respects. All Tax Returns for periods
ending on or before the date of the most recent fiscal year end immediately
preceding the Effective Time will be timely filed or requests for extensions
will be timely filed. All Taxes shown on filed Tax Returns have been paid. There
is no audit examination, deficiency, or refund Litigation with respect to any
Taxes, that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on FCC, except to
the extent reserved against in the FCC Financial Statements dated prior to the
date of this
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Agreement. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) Except as set forth in Section 5.8(b) of the FCC Disclosure Memorandum,
none of the FCC Companies has executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) Adequate provision for any Taxes due or to become due for any of the
FCC Companies for the period or periods through and including the date of the
respective FCC Financial Statements has been made and is reflected on such FCC
Financial Statements.
(d) Each of the FCC 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 FCC.
(e) Except as set forth in Section 5.8(e) of the FCC Disclosure Memorandum,
none of the FCC Companies has made any payments, is obligated to make any
payments, or is a party to any contract, agreement, or other arrangement that
could obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the FCC Companies.
(g) Except as set forth in Section 5.8(g) of the FCC Disclosure Memorandum,
there has not been an ownership change, as defined in Internal Revenue Code
Section 382(g), of the FCC Companies that occurred during or after any Taxable
Period in which the FCC Companies incurred a net operating loss that carries
over to any Taxable Period ending after December 31, 1996.
(h) No FCC Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of Regions, which consent will not
be unreasonably withheld.
(j) No FCC Company has or has had a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Assets. The FCC Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the FCC Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with FCC's past practices. All Assets which are Material to FCC's
business on a consolidated basis, held under leases or subleases by any of the
FCC Companies, are held under valid Contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect. The FCC Companies currently
maintain insurance in amounts, scope, and coverage reasonably necessary for
their operations. None of the FCC Companies has received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. The Assets of the
FCC Companies include all Assets required to operate the business of the FCC
Companies as presently conducted.
5.10 Environmental Matters. (a) To the Knowledge of FCC, each FCC Company,
its Participation Facilities, and its Loan Properties are, and have been, in
compliance with all Environmental Laws, except
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those violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FCC.
(b) There is no Litigation pending or, to the Knowledge of FCC, threatened
before any court, governmental agency, or authority, or other forum in which any
FCC Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may reasonably be expected to be named as a defendant (i)
for alleged noncompliance (including by any predecessor) with any Environmental
Law or (ii) relating to the release into the environment of any Hazardous
Material, whether or not occurring at, on, under, or involving a site owned,
leased, or operated by any FCC Company or any of its Participation Facilities,
except for such Litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FCC.
(c) There is no Litigation pending, or to the Knowledge of FCC, threatened
before any court, governmental agency, or board, or other forum in which any of
its Loan Properties (or FCC in respect of such Loan Property) has been or, with
respect to threatened Litigation, may reasonably be expected to be named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material, whether or not
occurring at, on, under, or involving a Loan Property, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FCC.
(d) To the Knowledge of FCC, 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 FCC.
(e) To the Knowledge of FCC, during the period of (i) any FCC Company's
ownership or operation of any of their respective current properties, (ii) any
FCC Company's participation in the management of any Participation Facility, or
(iii) any FCC Company's holding of a security interest in a Loan Property, there
have been no releases of Hazardous Material in, on, under, or affecting (or
potentially affecting) such properties, except such as are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FCC.
Prior to the period of (i) any FCC Company's ownership or operation of any of
their respective current properties, (ii) any FCC Company's participation in the
management of any Participation Facility, or (iii) any FCC Company's holding of
a security interest in a Loan Property, to the Knowledge of FCC, there were no
releases of Hazardous Material in, on, under, or affecting any such property,
Participation Facility, or Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FCC.
5.11 Compliance with Laws. FCC is duly registered as a bank holding
company under the BHC Act. Each FCC 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 FCC, 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 FCC. None of the FCC Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FCC; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any FCC Company is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FCC, (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 FCC, or (iii) requiring any FCC 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
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resolution or similar undertaking, which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or the payment of dividends.
5.12 Labor Relations. Except as set forth in Section 5.12 of the FCC
Disclosure Memorandum, no FCC Company is the subject of any Litigation asserting
that it or any other FCC 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 FCC Company to bargain with any labor
organization as to wages or conditions of employment, nor is any FCC Company a
party to or bound by any collective bargaining agreement, Contract, or other
agreement or understanding with a labor union or labor organization, nor is
there any strike or other labor dispute involving any FCC Company, pending or
threatened, or to the Knowledge of FCC, is there any activity involving any FCC
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans. (a) FCC has disclosed to Regions in writing
prior to the execution of the Agreement and in Section 5.13 of the FCC
Disclosure Memorandum, and has delivered or made available to Regions prior to
the execution of this Agreement correct and complete copies in each case of, all
Material FCC Benefits Plans. For purposes of this Agreement, "FCC Benefit Plans"
means all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs or agreements, all medical,
vision, dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including, without limitation,
"employee benefit plans" as that term is defined in Section 3(3) of ERISA
maintained by, sponsored in whole or in part by, or contributed to by, any FCC
Company for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate. Any of the FCC 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 "FCC ERISA Plan." Any FCC 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 "FCC
Pension Plan." Neither FCC nor any FCC Company has an "obligation to contribute"
(as defined in ERISA Section 4212) to a "multiemployer plan" (as defined in
ERISA Sections 4001(a)(3) and 3(37)(A)). Each "employee pension benefit plan,"
as defined in Section 3(2) of ERISA, ever maintained by any FCC Company that was
intended to qualify under Section 401(a) of the Internal Revenue Code and with
respect to which any FCC Company has any Liability, is disclosed as such in
Section 5.13 of the FCC Disclosure Memorandum.
(b) FCC 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 FCC Benefit Plans
(including insurance contracts), and all amendments thereto, (ii) with respect
to any such FCC Benefit Plans or amendments, all determination letters, Material
rulings, Material opinion letters, Material information letters, or Material
advisory opinions issued by the Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after December
31, 1994, (iii) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any FCC Benefit Plan with respect to the most recent plan year, and
(iv) the most recent summary plan descriptions and any Material modifications
thereto.
(c) All FCC Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws, the breach or
violation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FCC. Each FCC 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
FCC is not aware of any circumstances which will or could reasonably result in
revocation of any such favorable determination letter. Each trust created under
any FCC ERISA Plan has been determined to be exempt from Tax under Section
501(a) of the Internal Revenue Code and FCC is not aware of any circumstance
which will or could reasonably result in revocation of such exemption. With
respect to each FCC Benefit Plan to the Knowledge of FCC, no event has occurred
which will or could reasonably give rise to a loss of any intended Tax
consequences under the Internal Revenue Code or to any
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Tax under Section 511 of the Internal Revenue Code that is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on FCC.
There is no Material pending or, to the Knowledge of FCC, threatened Litigation
relating to any FCC ERISA Plan.
(d) No FCC Company has engaged in a transaction with respect to any FCC
Benefit Plan that, assuming the Taxable Period of such transaction expired as of
the date of this Agreement, would subject any FCC Company to a Material tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FCC. Neither FCC nor any
administrator or fiduciary of any FCC Benefit Plan (or any agent of any of the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner which could subject FCC to any direct or indirect Liability (by indemnity
or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under
ERISA, where such Liability, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on FCC. No oral or written
representation or communication with respect to any aspect of the FCC Benefit
Plans has been made to employees of any FCC Company which is not in accordance
with the written or otherwise preexisting terms and provisions of such plans,
where any Liability with respect to such representation or disclosure is
reasonably likely to have a Material Adverse Effect on FCC.
(e) Since the date of the most recent actuarial valuation, there has been
(i) no Material change in the financial position or funded status of any FCC
Pension Plan, (ii) no change in the actuarial assumptions with respect to any
FCC Pension Plan, and (iii) no increase in benefits under any FCC Pension Plan
as a result of plan amendments or changes in applicable Law, any of which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC. Neither any FCC Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(5) of ERISA, currently or formerly
maintained by any FCC Company, or the single-employer plan of any entity which
is considered one employer with FCC under Section 4001 of ERISA or Section 414
of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (a
"FCC ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. All
contributions with respect to a FCC Pension Plan or any single-employer plan of
a FCC ERISA Affiliate have or will be timely made and there is no lien or
expected to be a lien under Internal Revenue Code Section 412(n) or ERISA
Section 302(f) or Tax under Internal Revenue Code Section 4971. No FCC Company
has provided, or is required to provide, security to a FCC Pension Plan or to
any single-employer plan of a FCC ERISA Affiliate pursuant to Section 401(a)(29)
of the Internal Revenue Code. All premiums required to be paid under ERISA
Section 4006 have been timely paid by FCC, except to the extent any failure
would not have a Material Adverse Effect on FCC.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any FCC Company with respect to any defined benefit plan currently
or formerly maintained by any of them or by any FCC ERISA Affiliate that has not
been satisfied in full (other than Liability for Pension Benefit Guaranty
Corporation premiums, which have been paid when due, except to the extent any
failure would not have a Material Adverse Effect on FCC).
(g) Except as set forth in Section 5.13 of the FCC Disclosure Memorandum,
no FCC Company has any obligations for retiree health and retiree life benefits
under any of the FCC Benefit Plans other than with respect to benefit coverage
mandated by applicable Law.
(h) Except as set forth in Section 5.13 of the FCC Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, by themselves, (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of any FCC
Company from any FCC Company under any FCC Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any FCC Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
5.14 Material Contracts. Except as set forth in Section 5.14 of the FCC
Disclosure Memorandum, none of the FCC Companies, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or
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retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $100,000, (ii) any Contract relating to the borrowing
of money by any FCC Company or the guarantee by any FCC Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
and (iii) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by FCC with the SEC as of the date of
this Agreement that has not been filed as an exhibit to FCC's Form 10-K filed
for the fiscal year ended December 31, 1996, or in another SEC Document and
identified to Regions (together with all Contracts referred to in Sections 5.9
and 5.13(a) of this Agreement, the "FCC Contracts"). With respect to each FCC
Contract: (i) the Contract is in full force and effect; (ii) no FCC Company is
in Default thereunder, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FCC; (iii)
no FCC Company has repudiated or waived any Material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
FCC, in Default in any respect, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
FCC, or has repudiated or waived any Material provision thereunder. Except for
Federal Home Loan Bank advances, all of the indebtedness of any FCC Company for
money borrowed is prepayable at any time by such FCC Company without penalty or
premium.
5.15 Legal Proceedings. (a) There is no Litigation instituted or pending,
or, to the Knowledge of FCC, threatened against any FCC Company, or against any
Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any FCC Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FCC.
(b) Section 5.15(b) of the FCC Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any FCC
Company is a party and which names a FCC Company as a defendant or
cross-defendant and where the maximum exposure is estimated to be $250,000 or
more.
5.16 Reports. Since January 1, 1994, or the date of organization if later,
each FCC Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FCC. As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all Material respects with all applicable Laws.
5.17 Statements True and Correct. None of the information supplied or to
be supplied by any FCC Company or any Affiliate thereof regarding FCC or such
Affiliate for inclusion in the Registration Statement to be filed by Regions
with the SEC will, when the Registration Statement becomes effective, be false
or misleading with respect to any Material fact, or contain any untrue statement
of a Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any FCC Company or any Affiliate
thereof for inclusion in the Joint Proxy Statement to be mailed to Regions' and
FCC's stockholders in connection with the Stockholders' Meetings will, when
first mailed to the stockholders of Regions and FCC, 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 Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Stockholders'
Meetings, 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' Meetings. All documents that any
FCC Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all Material respects with the provisions of
applicable Law.
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5.18 Accounting, Tax, and Regulatory Matters. No FCC Company or any
Affiliate thereof has taken or agreed to take any action, and FCC has no
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.19 State Takeover Laws. Each FCC Company has taken all necessary action
to exempt the transactions contemplated by this Agreement from any applicable
"moratorium," "control share," "fair price," "business combination," or other
anti-takeover laws and regulations of the State of Arkansas (collectively,
"Takeover Laws").
5.20 Charter Provisions. Each FCC Company has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws,
or other governing instruments of any FCC 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 FCC Company that may
be directly or indirectly acquired or controlled by it.
5.21 Rights Agreement. FCC has taken all necessary action (including, if
required, redeeming all of the outstanding Preferred Stock Purchase Rights or
amending or terminating the FCC Rights Agreement) so that the entering into of
this Agreement, the acquisition of shares pursuant to, or other exercise of
rights under, the Stock Option Agreement and consummation of the Merger and the
other transactions contemplated hereby do not and will not result in any Person
becoming able to exercise any Preferred Stock Purchase Rights under the FCC
Rights Agreement or enabling or requiring the Preferred Stock Purchase Rights to
be separated from the shares of FCC Common Stock to which they are attached or
to be triggered or to become exercisable.
5.22 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for FCC's own account, or for the account of
one or more the FCC Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable Laws, and (ii)
with counterparties believed to be financially responsible.
5.23 Year 2000. FCC has disclosed to Regions a complete and accurate copy
of FCC's plan, including an estimate of the anticipated associated costs, for
implementing modifications to FCC's hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, FCC shall
endeavor to continue its efforts to implement such plan.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF REGIONS
Regions hereby represents and warrants to FCC 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
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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, subject to the approval of this Agreement and the issuance of
the shares of Regions Common Stock pursuant to the Merger by the holders of a
majority of the outstanding shares of Regions Common Stock entitled to vote
thereon, which is the only stockholder vote required for the consummation of the
Merger by Regions. Subject to such requisite stockholder approval, this
Agreement represents a legal, valid, and binding obligation of Regions,
enforceable against Regions in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by Regions, nor
the consummation by Regions of the transactions contemplated hereby, nor
compliance by Regions with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Regions' Certificate of Incorporation
or Bylaws, (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Regions
Company under, any Contract or Permit of any Regions Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions, or (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any Regions Company or
any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation by
Regions of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Regions consists, as of
the date of this Agreement, of 240,000,000 shares of Regions Common Stock, of
which 136,696,150 shares were issued and outstanding and 322,221 shares were
held as treasury shares as of December 31, 1997. All of the issued and
outstanding shares of Regions Common Stock are, and all of the shares of Regions
Common Stock to be issued in exchange for shares of FCC 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 FCC Common Stock upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past stockholders
of Regions.
6.4 Regions Subsidiaries. Regions or one of its Subsidiaries owns all of
the issued and outstanding shares of capital stock of each Regions Subsidiary.
No equity securities of any Regions Subsidiary are or may become required to be
issued (other than to another Regions Company) by reason of any Rights, and
there are no Contracts by which any Regions Subsidiary is bound to issue (other
than to another Regions Company) additional shares of its capital stock or
Rights or by which any Regions Company is or may be bound to transfer any shares
of the capital stock of any Regions Subsidiary (other than to another Regions
Company). There are no Contracts relating to the rights of any Regions Company
to vote or to dispose of any shares of the capital stock of any Regions
Subsidiary. All of the shares of capital stock of each Regions Subsidiary held
by a Regions Company are fully paid and, except as provided in statutes pursuant
to which depository institution Subsidiaries are organized, nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Regions Company free and clear of
any Lien. Each Regions Subsidiary is either a bank or a corporation, and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is incorporated or organized, and has the
corporate power and authority necessary for it to own, lease, and
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operate its Assets and to carry on its business as now conducted. Each Regions
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. Each Regions Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund or Savings Association Insurance Fund.
6.5 SEC Filings; Financial Statements. (a) Regions has filed and made
available to FCC all forms, reports, and documents required to be filed by
Regions with the SEC since December 31, 1993 (collectively, the "Regions SEC
Reports"). The Regions SEC Reports (i) at the time filed, complied in all
Material respects with the applicable requirements of the 1933 Act and the 1934
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a Material fact or omit
to state a Material fact required to be stated in such Regions SEC Reports or
necessary in order to make the statements in such Regions SEC Reports, in light
of the circumstances under which they were made, not misleading. Except for
Regions Subsidiaries that are registered as a broker, dealer, or investment
advisor or filings required due to fiduciary holdings of the Regions
Subsidiaries, none of Regions Subsidiaries is required to file any forms,
reports, or other documents with the SEC.
(b) Each of the Regions Financial Statements (including, in each case, any
related notes) contained in the Regions SEC Reports, including any Regions SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented or will fairly present the consolidated financial
position of Regions and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be Material in amount or effect.
6.6 Absence of Undisclosed Liabilities. No Regions Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Regions as of
September 30, 1997, included in the Regions Financial Statements or reflected in
the notes thereto and except for Liabilities incurred in the ordinary course of
business subsequent to September 30, 1997. 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.
6.7 Absence of Certain Changes or Events. Since September 30, 1997, except
as disclosed in the Regions Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions, and (ii) the Regions Companies have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby).
6.8 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of any of the Regions 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, to the Knowledge of Regions, all Tax
Returns filed are complete and accurate in all Material respects. All Tax
Returns for periods ending on or before the date of the most recent fiscal year
end immediately preceding the Effective Time will be timely filed or requests
for extensions will be timely filed. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes, that is reasonably likely to result
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in a determination that would have, individually or in the aggregate, a Material
Adverse Effect on Regions, except to the extent reserved against in the Regions
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 Regions Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Regions Companies for the period or periods through and including the date of
the respective Regions Financial Statements has been made and is reflected on
such Regions Financial Statements.
(d) Each of the Regions 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 Regions.
(e) None of the Regions Companies has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the Regions Companies.
(g) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Regions Companies that occurred during or after any
Taxable Period in which the Regions Companies incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1996.
(h) No Regions Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporations.
(i) After the date of this Agreement, no Material election with respect to
Taxes will be made without the prior consent of FCC, which consent will not be
unreasonably withheld.
(j) No Regions 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.
6.9 Assets. The Regions Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the Regions Companies are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Regions' past practices. All Assets which are Material
to Regions' business on a consolidated basis, held under leases or subleases by
any of the Regions Companies, are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The Regions
Companies currently maintain insurance similar in amounts, scope, and coverage
reasonably necessary for their operations. None of the Regions Companies has
received notice from any insurance carrier that (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. The Assets of the Regions Companies include all Assets required to
operate the business of the Regions Companies as presently conducted.
6.10 Environmental Matters. (a) To the Knowledge of Regions, each Regions
Company, its Participation Facilities, and its Loan Properties are, and have
been, in compliance with all Environmental Laws, except
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those violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions.
(b) There is no Litigation pending or, to the Knowledge of Regions,
threatened before any court, governmental agency, or authority, or other forum
in which any Regions Company or any of its Participation Facilities has been or,
with respect to threatened Litigation, may reasonably be expected to be named as
a defendant (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the environment of
any Hazardous Material, whether or not occurring at, on, under, or involving a
site owned, leased, or operated by any Regions Company or any of its
Participation Facilities, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions.
(c) There is no Litigation pending or, to the Knowledge of Regions,
threatened before any court, governmental agency, or board, or other forum in
which any of its Loan Properties (or Regions in respect of such Loan Property)
has been or, with respect to threatened Litigation, may reasonably be expected
to be named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on, under, or involving a Loan Property, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions.
(d) To the Knowledge of Regions, 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 Regions.
(e) To the Knowledge of Regions, during the period of (i) any Regions
Company's ownership or operation of any of their respective current properties,
(ii) any Regions Company's participation in the management of any Participation
Facility, or (iii) any Regions Company's holding of a security interest in a
Loan Property, there have been no releases of Hazardous Material in, on, under,
or affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. Prior to the period of (i) any Regions Company's ownership or
operation of any of their respective current properties, (ii) any Regions
Company's participation in the management of any Participation Facility, or
(iii) any Regions Company's holding of a security interest in a Loan Property,
to the Knowledge of Regions, there were no releases of Hazardous Material in,
on, under, or affecting any such property, Participation Facility, or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Regions.
6.11 Compliance with Laws. Regions is duly registered as a bank holding
company under the BHC Act. Each Regions Company has in effect all Permits
necessary for it to own, lease, or operate its Material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Regions. None of
the Regions Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Regions Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Regions, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Regions, or (iii) requiring any
Regions Company (x) to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or
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(y) to adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit or reserve policies, its management, or the
payment of dividends.
6.12 Labor Relations. No Regions Company is the subject of any Litigation
asserting that it or any other Regions 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 Regions Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Regions Company a party to or bound by any collective bargaining agreement,
Contract, or other agreement or understanding with a labor union or labor
organization, nor is there any strike or other labor dispute involving any
Regions Company, pending or threatened, or to the Knowledge of Regions, is there
any activity involving any Regions Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
6.13 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Regions, threatened against any Regions Company, or against
any Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Regions
Company, that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Regions.
6.14 Reports. Since January 1, 1994, or the date of organization if later,
each Regions Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with any Regulatory Authorities, except failures to file which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Regions. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all Material respects with all applicable Laws.
6.15 Statements True and Correct. None of the information supplied or to
be supplied by any Regions Company or any Affiliate thereof regarding Regions or
such Affiliate for inclusion in the Registration Statement to be filed by
Regions with the SEC will, when the Registration Statement becomes effective, be
false or misleading with respect to any Material fact, or contain any untrue
statement of a Material fact, or omit to state any Material fact required to be
stated thereunder or necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any Regions Company or any
Affiliate thereof for inclusion in the Joint Proxy Statement to be mailed to
FCC's and Regions' stockholders in connection with the Stockholders' Meetings,
will, when first mailed to the stockholders of FCC and Regions, 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
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Stockholders' Meetings, 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' Meetings. 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.
6.16 Accounting, Tax, and Regulatory Matters. No Regions Company or any
Affiliate thereof has taken or agreed to take any action, and Regions has no
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
6.17 Employee Benefit Plans. All Regions Plans have complied 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 Regions. For
purposes of this
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Agreement, the term "Regions Plan" means each bonus, incentive compensation,
severance pay, medical or other insurance program, retirement plan, or other
employee benefit plan program, agreement, or arrangement sponsored, maintained,
or contributed to by Regions or any trade or business, whether or not
incorporated, that together with Regions or any of its Subsidiaries would be
deemed a "single employer" under Section 414 of the Internal Revenue Code (a
"Regions ERISA Affiliate") or under which Regions or any Regions ERISA Affiliate
has any Liability or obligation. No Liability under Title IV of ERISA has been
incurred by Regions or any Regions ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a Material risk to Regions or any
Regions ERISA Affiliate of incurring any such Liability. With respect to any
Regions Plan that is subject to Title IV of ERISA, full payment has been made,
or will be made in accordance with Section 404(a)(6) of the Internal Revenue
Code, of all amounts that Regions or any Regions ERISA Affiliate is required to
pay under Section 412 of the Internal Revenue Code or under the terms of the
Regions Plans, and no accumulated funding deficiency (within the meaning of
Section 412 of the Internal Revenue Code) exists with respect to any Regions
Plan. There are no Material actions, suits, or claims pending, or, to the
Knowledge of Regions, threatened or anticipated relating to any Regions Plan.
There has been no Material adverse change in the financial position or funded
status of any Regions Plan that is subject to Title IV of ERISA since the date
of the information relating to the financial position and funded status of each
such plan contained in the most recent Regions Form 10-K filed with the SEC.
6.18 Derivatives. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts, and other similar risk management
arrangements, whether entered into for Regions' own account, or for the account
of one or more the Regions Subsidiaries or their customers, were entered into
(i) in accordance with prudent business practices and all applicable Laws, and
(ii) with counterparties believed to be financially responsible.
6.19 Year 2000. Regions has disclosed to FCC a complete and accurate copy
of Regions' plan, including an estimate of the anticipated associated costs, for
implementing modifications to Regions' hardware, software, and computer systems,
chips, and microprocessors, to ensure proper execution and accurate processing
of all date-related data, whether from years in the same century or in different
centuries. Between the date of this Agreement and the Effective Time, Regions
shall endeavor to continue its efforts to implement such plan.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Both Parties. Unless the prior written
consent of the other Party shall have been obtained, and except as otherwise
expressly contemplated herein, each Party shall and shall cause each of its
Subsidiaries to (i) operate its business only in the usual, regular, and
ordinary course, (ii) preserve intact its business organization and Assets and
maintain its rights and franchises, (iii) use its reasonable efforts to maintain
its current employee relationships, and (iv) take no action which would (a)
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) of
this Agreement, or (b) adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement; provided that in the case of
Regions, the provisions of this Section 7.1 (other than the provisions of clause
(iv) above) shall not be deemed to preclude Regions from continuing to implement
its program of acquiring unaffiliated depository and nondepository institutions.
7.2 Negative Covenants of FCC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, FCC
covenants and agrees that it will not do or agree or commit to do, or permit any
of its Subsidiaries to do or agree or commit to do, any of the following without
the prior written consent of the chief executive officer or chief financial
officer of Regions, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any FCC Company or, except as expressly contemplated by this
Agreement, the FCC Rights Agreement, or
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(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a FCC Company to another FCC Company) in excess of an
aggregate of $1,000,000 (for the FCC Companies on a consolidated basis),
except in the ordinary course of the business consistent with past
practices (which shall include, for FCC Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry
into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any FCC
Company of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of
business, the satisfaction of legal requirements in the exercise of trust
powers, and Liens in effect as of the date hereof that are disclosed in the
FCC Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any FCC Company, or declare or pay any dividend or
make any other distribution in respect of FCC's capital stock, provided
that FCC may (to the extent legally and contractually permitted to do so),
but shall not be obligated to, declare and pay regular quarterly cash
dividends on the shares of FCC Common Stock at a rate of $0.28 per share
with usual and regular record and payment dates in accordance with past
practice as disclosed in Section 7.2(c) of the FCC Disclosure Memorandum
and such dates may not be changed without the prior written consent of
Regions; provided, that, notwithstanding the provisions of Section 1.3 of
this Agreement, the Parties shall cooperate in selecting the Effective Time
to ensure that, with respect to the quarterly period in which the Effective
Time occurs, the holders of FCC Common Stock do not receive both a dividend
in respect of their FCC Common Stock and a dividend in respect of Regions
Common Stock or fail to receive any dividend; or
(d) except for this Agreement, or pursuant to the Stock Option
Agreement or pursuant to the exercise of Rights outstanding as of the date
of this Agreement and pursuant to the terms thereof in existence on the
date of this Agreement, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of FCC Common Stock or any other capital stock of any FCC
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 FCC
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of FCC Common Stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any FCC Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another FCC Company) or (ii) any
Asset other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any Material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a
wholly-owned FCC Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures in
the ordinary course of business, (ii) acquisitions of control by a
depository institution Subsidiary in its fiduciary capacity, (iii) the
creation of new wholly-owned Subsidiaries organized to conduct or continue
activities otherwise permitted by this Agreement, or (iv), subject to the
provisions of Section 8.17 of this Agreement, that certain Plan and
Agreement of Merger, dated as of April 15, 1997, by and between FCC and
Kemmons Wilson, Inc. ("KW") (the "KW Agreement"); or
(g) grant any increase in compensation or benefits to the employees or
officers of any FCC Company, except in accordance with past practice and
consistent with budget data previously provided to Regions or as required
by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of
this Agreement; enter into or amend any
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severance agreements with officers of any FCC Company; grant any Material
increase in fees or other increases in compensation or other benefits to
directors of any FCC Company except in accordance with past practice; or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any FCC
Company and any Person (unless such amendment is required by Law) that the
FCC Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time; or
(i) adopt any new employee benefit plan of any FCC Company or make any
Material change in or to any existing employee benefit plans of any FCC
Company other than any such change that is required by Law or that, in the
opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than as necessary for the prudent
operation of its business or settle any Litigation involving any Liability
of any FCC Company for Material money damages or restrictions upon the
operations of any FCC Company; or
(l) except in the ordinary course of business, modify, amend, or
terminate any Material Contract or waive, release, compromise, or assign
any Material rights or claims.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not Material). As of their
respective dates, such reports filed with the SEC will comply in all Material
respects with the Securities Laws and will not contain any untrue statement of a
Material fact or omit to state a Material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Joint Proxy Statement; Stockholder
Approvals. As soon as reasonably practicable after execution of this Agreement,
Regions shall file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of
Regions Common Stock upon consummation of the Merger. FCC shall furnish all
information concerning it and the holders of its capital stock as Regions may
reasonably request in connection with such action. FCC shall call a
Stockholders' Meeting, to be held as soon as reasonably
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practicable after the Registration Statement is declared effective by the SEC,
for the purpose of voting upon approval of this Agreement and such other related
matters as it deems appropriate. Regions shall call a Stockholders' Meeting, to
be held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement and the issuance of shares of Regions Common Stock pursuant to the
Merger and such other related matters as it deems appropriate. In connection
with the Stockholders' Meetings, (i) Regions and FCC shall prepare and file with
the SEC a Joint Proxy Statement and mail such Joint Proxy Statement to their
respective stockholders, (ii) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Joint Proxy Statement, (iii) the Boards of Directors of Regions and FCC
shall recommend to their respective stockholders the approval of the matters
submitted for approval, and (iv) the Boards of Directors and officers of Regions
and FCC shall use their reasonable efforts to obtain such stockholders'
approvals, provided that each of Regions and FCC may withdraw, modify, or change
in an adverse manner to the other Party its recommendations if the Board of
Directors of such Party, after having consulted with and based upon the advice
of outside counsel, determines in good faith that the failure to so withdraw,
modify, or change its recommendation could constitute a breach of the fiduciary
duties of such Party's Board of Directors under applicable Law. In addition,
nothing in this Section 8.1 or elsewhere in this Agreement shall prohibit
accurate disclosure by either Party of information that is required to be
disclosed in the Registration Statement or the Joint Proxy Statement or in any
other document required to be filed with the SEC (including, without limitation,
a Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be publicly disclosed by applicable Law or regulations or rules of the NASD.
8.2 Exchange Listing. Regions shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq NMS, subject to official notice of
issuance, the shares of Regions Common Stock to be issued to the holders of FCC
Common Stock pursuant to the Merger.
8.3 Applications. Regions shall promptly prepare and file, and FCC shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Regions shall execute and file the Delaware
Certificate of Merger with the Secretary of State of the State of Delaware and
the Arkansas Articles of Merger with the Secretary of State of the State of
Arkansas in connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each Party shall keep the other Party advised of all Material developments
relevant to its business and to consummation of the Merger and shall permit the
other Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses,
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operations, and financial positions and shall not use such information for any
purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Effective Time, each
Party shall promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information received
from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a Material breach of
any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
(d) Neither Party nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any Law, rule, regulation, Order, judgment, decree, fiduciary duty,
or agreement entered into prior to the date of this Agreement. The Parties will
use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.7 Press Releases. Prior to the Effective Time, Regions and FCC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no FCC Company nor any Affiliate thereof nor
any Representatives thereof retained by any FCC Company shall directly or
indirectly solicit or engage in negotiations concerning any Acquisition
Proposal, or provide any confidential information or assistance to, or have any
discussions with, any Person with respect to an Acquisition Proposal.
Notwithstanding the foregoing, FCC may, and may authorize and permit its
Representatives to, provide Persons with confidential information, have
discussions or negotiations with, or otherwise facilitate an effort or attempt
by such Person to make or implement an Acquisition Proposal not solicited in
violation of this Agreement if FCC's Board of Directors, after having consulted
with, and based upon the advice of, outside counsel, determines in good faith
that the failure to take such actions could constitute a breach of the fiduciary
duties of FCC's Board of Directors under applicable Law; provided, that FCC
shall promptly advise Regions following the receipt of any Acquisition Proposal
and the Material details thereof; and, provided further, that prior to delivery
of confidential information relating to FCC or access to FCC's books, records,
or properties in connection therewith, the other Person shall have entered into
a confidentiality agreement substantially similar to the Confidentiality
Agreement previously entered into between FCC and Regions. Nothing contained in
this Section 8.8 shall prohibit the Board of Directors of FCC from complying
with Rule 14e-2, promulgated under the 1934 Act. FCC shall (i) immediately cease
and cause to be terminated any existing activities, discussions, or negotiations
with any Persons conducted heretofore with respect to any of the foregoing, and
(ii) direct and use its reasonable efforts to cause of all its Representatives
not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each FCC Company shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.11 Charter Provisions. Each FCC Company shall take all necessary action
to ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws,
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or other governing instruments of any FCC 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 FCC Company that may
be directly or indirectly acquired or controlled by it.
8.12 Rights Agreement. FCC shall take all necessary action (including, if
required, redeeming all of the outstanding Preferred Stock Purchase Rights or
amending or terminating the FCC Rights Agreement) so that the entering into of
this Agreement, the acquisition of shares pursuant to the Stock Option
Agreement, and consummation of the Merger and the other transactions
contemplated hereby do not and will not result in any Person becoming able to
exercise any Preferred Stock Purchase Rights under the FCC Rights Agreement or
enabling or requiring the Preferred Stock Purchase Rights to be separated from
the shares of FCC Common Stock to which they are attached or to be triggered or
to become exercisable.
8.13 Agreement of Affiliates. FCC has disclosed in Section 8.13 of the FCC
Disclosure Memorandum each Person whom it reasonably believes may be deemed an
"affiliate" of FCC for purposes of Rule 145 under the 1933 Act. FCC shall use
its reasonable efforts to cause each such Person to deliver to Regions not later
than 30 days prior to the Effective Time, a written agreement, in substantially
the form of Exhibit 2, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of FCC Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of Regions Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder and until such time as financial results covering at
least 30 days of combined operations of Regions and FCC 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
FCC in exchange for shares of FCC Common Stock shall not be transferable until
such time as financial results covering at least 30 days of combined operations
of Regions and FCC 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 8.13 (and Regions shall be entitled to place restrictive legends upon
certificates for shares of Regions Common Stock issued to affiliates of FCC
pursuant to this Agreement to enforce the provisions of this Section 8.13).
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.
8.14 Employee Benefits and Contracts. Following the Effective Time, but in
no event earlier than the consolidation of FCC's depository institution
Subsidiaries with Regions' depository institution Subsidiaries, Regions shall
provide generally to officers and employees of the FCC Companies, who at or
after the Effective Time become employees of a Regions Company (the "Continuing
Employees"), employee benefits under employee benefit plans 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 FCC shall be treated as service under Regions'
qualified defined benefit plans, (ii) service under any qualified defined
contribution plans of FCC shall be treated as service under Regions' qualified
defined contribution plans, and (iii) service under any other employee benefit
plans of FCC shall be treated as service under any similar employee benefit
plans maintained by Regions. Regions shall cause the Regions welfare benefit
plans that cover the Continuing Employees after the Effective Time to (i) waive
any waiting period and restrictions and limitations for preexisting conditions
or insurability, and (ii) cause any deductible, co-insurance, or maximum
out-of-pocket payments made by the Continuing Employees under FCC's welfare
benefit plans to be credited to such Continuing Employees under the Regions
welfare benefit plans, so as to reduce the amount of any deductible,
co-insurance, or maximum out-of-pocket payments payable by the Continuing
Employees under the Regions welfare benefit plans. The continued coverage of the
Continuing Employees under the employee benefits plans maintained by FCC and/or
any FCC Subsidiary immediately prior to the Effective Time during a transition
period shall be deemed to provide the Continuing Employees with benefits that
are no less favorable than those offered to other employees of Regions and its
Subsidiaries, provided that after the Effective Time there is no Material
reduction (determined on an overall basis) in the benefits provided under the
FCC employee benefit plans. Except as
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expressly provided in the Supplemental Letter, Regions also shall cause FCC and
its Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Section 8.14 of the FCC Disclosure
Memorandum to Regions between any FCC Company and any current or former
director, officer, or employee thereof, and all provisions of the FCC Benefit
Plans. To the extent that Regions has agreed to cause FCC or the appropriate FCC
Subsidiary to honor the Contracts as set forth in the preceding sentence (the
"FCC Compensation Contracts"), Regions acknowledges that the Merger constitutes
a "Change of Control" for all purposes pursuant to any such FCC Compensation
Contracts. In addition, Regions acknowledges that each employee who is a party
to any such FCC Compensation Contract will, during the first year following
consummation of the Merger, have "Good Reason" to terminate employment
thereunder.
8.15 Indemnification. (a) From and after the Effective Time, in the event
of any threatened or actual claim, action, suit, proceeding, or investigation,
whether civil, criminal, or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who is
now, or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director or officer of FCC or any FCC Subsidiary
(the "Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director, officer, or employee of FCC, any of the
FCC Subsidiaries, or any of their respective predecessors or (ii) this Agreement
or any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, Regions shall indemnify and hold
harmless, as and to the fullest extent permitted by Law, each such Indemnified
Party against any Liability (including reasonable attorneys' fees and expenses
in advance of the final disposition of any claim, suit, proceeding, or
investigation to each Indemnified Party to the fullest extent permitted by Law
upon receipt of any undertaking required by applicable Law), judgments, fines,
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding, or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding, or investigation (whether
asserted or arising before or after the Effective Time), the Indemnified Parties
may retain counsel reasonably satisfactory to them; provided, however, that (a)
Regions shall have the right to assume the defense thereof and upon such
assumption Regions shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Regions
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest between Regions and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them, and
Regions shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (b) Regions shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld), and (c) Regions shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law. Regions' obligations under this Section 8.15(a)
continue in full force and effect for a period of six years after the Effective
Time; provided, however, that all rights to indemnification in respect of any
claim (a "Claim") asserted or made within such period shall continue until the
final disposition of such Claim.
(b) Regions agrees that all rights to indemnification and all limitations
on Liability existing in favor of the directors, officers, and employees of FCC
and its Subsidiaries (the "Covered Parties") as provided in their respective
Articles of Incorporation, Bylaws, or similar governing instruments as in effect
as of the date of this Agreement with respect to matters occurring prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect, and shall be honored by such entities or their respective successors as
if they were the indemnifying party thereunder, without any amendment thereto,
for a period of six years after the Effective Time; provided, however, that all
rights to indemnification in respect of any Claim asserted or made within such
period shall continue until the final disposition of such Claim; provided,
further, however, that nothing contained in this Section 8.15(b) shall be deemed
to preclude the liquidation, consolidation, or merger of FCC or any FCC
Subsidiary, in which case all of such rights to indemnification and limitations
on Liability shall be deemed to so survive and continue notwithstanding any such
liquidation, consolidation, or merger. Without limiting the foregoing, in any
case in which approval by Regions is required to effectuate any indemnification,
Regions shall direct, at the election of the Indemnified Party, that the
determination of any
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such approval shall be made by independent counsel mutually agreed upon between
Regions and the Indemnified Party.
(c) Regions, from and after the Effective Time, will directly or indirectly
cause the persons who served as directors or officers of FCC at or before the
Effective Time to be covered by FCC's existing directors' and officers'
liability insurance policy (provided that Regions may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy). Such insurance
coverage, shall commence at the Effective Time and will be provided for a period
of no less than three years after the Effective Time.
(d) If Regions or any of its successors or assigns shall consolidate with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or substantially
all of its Assets to any Person, then and in each case, proper provision shall
be made so that the successors and assigns of Regions shall assume the
obligations set forth in this Section 8.15.
(e) The provisions of this Section 8.15 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives.
8.16 Certain Modifications. Regions and FCC shall consult with respect to
their loan, litigation, and real estate valuation policies and practices
(including loan classifications and levels of reserves) and FCC shall make such
modifications or changes to its policies and practices, if any, prior to the
Effective Time, as may be mutually agreed upon. Regions and FCC also shall
consult with respect to the character, amount, and timing of restructuring and
Merger-related expense charges to be taken by each of the Parties in connection
with the transactions contemplated by this Agreement and shall take such charges
in accordance with GAAP as may be mutually agreed upon by the Parties. Neither
Party's representations, warranties, and covenants contained in this Agreement
shall be deemed to be inaccurate or breached in any respect as a consequence of
any modifications or charges undertaken solely on account of this Section 8.16.
8.17 Pending FCC Acquisition. Each of Regions and FCC shall use its
reasonable efforts to modify or amend (or cause to be modified or amended) this
Agreement or the KW Agreement as necessary or appropriate to ensure that each of
the acquisition of FCC by Regions and the acquisition of KW by FCC shall qualify
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Any such amendments or modifications shall be made as soon as reasonably
practicable after the date of this Agreement. In determining whether the
condition precedent set forth in Section 5.01(m) of the KW Agreement has been
satisfied, FCC shall take into account the advice and counsel of Regions and its
professional advisors, and shall not agree to the final form of Exhibits C-1 and
C-2 without the prior consent of Regions (which consent of Regions shall not be
unreasonably withheld).
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approvals. The stockholders of FCC shall have approved
this Agreement, and the consummation of the transactions contemplated hereby,
including the Merger, as and to the extent required by Law, by the provisions of
any governing instruments, and by the rules of the NASD. The stockholders of
Regions shall have approved this Agreement and the consummation of the
transaction contemplated hereby, including the Merger and the issuance of shares
of Regions Common Stock pursuant to the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, and by the rules of the
NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations with,
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained
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from any Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner (excluding
requirements relating to the raising of additional capital or the disposition of
Assets or deposits) which in the reasonable good faith judgment of the Board of
Directors of Regions would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b) of this Agreement) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable good faith judgment of the Board of Directors of Regions
would so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(d) Legal Proceedings. No court or governmental or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced, or
entered any Law or Order (whether temporary, preliminary, or permanent) or taken
any other action which prohibits, restricts, or makes illegal consummation of
the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding, or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Regions Common Stock issuable pursuant to the Merger shall have been
received.
(f) Exchange Listing. The shares of Regions Common Stock issuable pursuant
to the Merger shall have been approved for listing on the Nasdaq NMS, subject to
official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion or
opinions from Alston & Bird LLP, in a form reasonably satisfactory to such Party
(the "Tax Opinion"), 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 FCC Common Stock for Regions Common
Stock will not give rise to gain or loss to the stockholders of FCC with respect
to such exchange (except to the extent of any cash received), (iii) the tax
basis of the Regions Common Stock received by holders of FCC Common Stock in the
Merger will be the same as the tax basis of the FCC Common Stock surrendered in
exchange for the Regions Common Stock (reduced by an amount allocable to a
fractional share for which cash is received), and (iv) the holding period of the
Regions Common Stock received by holders who exchange their FCC Common Stock for
Regions Common Stock in the Merger will be the same as the holding period of the
FCC Common Stock surrendered in exchange therefor. In rendering such Tax
Opinion, such counsel shall be entitled to rely upon representations of officers
of FCC and Regions reasonably satisfactory in form and substance to such
counsel.
(h) Pooling Letter. Each Party shall have received a letter, dated as of
the Effective Time, in a form reasonably acceptable to such Party, from Ernst &
Young LLP to the effect that the Merger will qualify for pooling-of-interests
accounting treatment.
9.2 Conditions to Obligations of Regions. The obligations of Regions to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Regions pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of FCC 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 FCC set forth in Section 5.3 of this Agreement shall be true
and correct (except for
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inaccuracies which are de minimis in amount). The representations and
warranties of FCC set forth in Sections 5.18, 5.19, 5.20, and 5.21 of this
Agreement shall be true and correct in all Material respects. There shall
not exist inaccuracies in the representations and warranties of FCC set
forth in this Agreement (including the representations and warranties set
forth in Sections 5.3, 5.18, 5.19, 5.20, and 5.21) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on FCC; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material," "Material," "Material Adverse Effect," or
variations thereof, or to the "Knowledge" of FCC or to a matter being
"known" by FCC shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of FCC 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. FCC shall have delivered to Regions (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that the conditions of its
obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
FCC's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Regions and its
counsel shall request.
(d) Affiliate Agreements. Regions shall have received from each
affiliate of FCC the affiliates agreement referred to in Section 8.12 of
this Agreement, to the extent necessary to assure in the reasonable
judgment of Regions that the transactions contemplated hereby will qualify
for pooling-of-interests accounting treatment.
(e) Rights Agreement. None of the events described in Sections
11(a)(ii) or 13 of the FCC Rights Agreement shall have occurred, and the
Preferred Stock Purchase Rights shall not have become non-redeemable or
exercisable for capital stock of Regions upon consummation of the Merger.
9.3 Conditions to Obligations of FCC. The obligations of FCC 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 FCC pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Regions set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Regions set forth in Section 6.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimis in amount).
The representations and warranties of Regions set forth in Section 6.16 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 6.16) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on Regions; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material," "Material," "Material Adverse Effect," or
variations thereof, or to the "Knowledge" of Regions or to a matter being
"known" by Regions shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Regions to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
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(c) Certificates. Regions shall have delivered to FCC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
duly authorized officers, to the effect that the conditions of its
obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Regions' Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as FCC and its counsel
shall request.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of FCC or
Regions, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Regions and the
Board of Directors of FCC; 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 FCC and Section 9.3(a) of
this Agreement in the case of Regions or in Material breach of any covenant
or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of FCC 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 FCC and Section 9.3(a) in
the case of Regions) in the event of a Material breach by the other Party
of any covenant or agreement contained in this Agreement which cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Regions or FCC fail to vote their approval of the matters
submitted for the approval by such stockholders at the Stockholders'
Meetings where the transactions were presented to such stockholders for
approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by December 31, 1998, 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 FCC and Section 9.3(a) of
this Agreement in the case of Regions or in Material breach of any covenant
or other agreement contained in this Agreement) in the event that any of
the conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e) of this Agreement; or
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(g) By the Board of Directors of FCC, 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 FCC refuses to consummate
the Merger pursuant to this Section 10.1(g), it shall give prompt written notice
thereof to Regions; provided, that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period. During the
five-day period commencing with its receipt of such notice, Regions shall have
the option to elect to increase the Exchange Ratio to equal the lesser of (i)
the quotient (rounded to the nearest one-ten-thousandth) obtained by dividing
(1) the product of 0.80, the Starting Price, and the Exchange Ratio (as then in
effect) by (2) the Average Closing Price, and (ii) the quotient (rounded to the
nearest one-ten-thousandth) obtained by dividing (1) the product of the Index
Ratio and the Exchange Ratio (as then in effect) by (2) the Regions Ratio. If
Regions makes an election contemplated by the preceding sentence, within such
five-day period, it shall give prompt written notice to FCC 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 ten consecutive full
trading days in which such shares are traded on the Nasdaq NMS ending at
the close of trading on the Determination Date.
"Determination Date" shall mean the later of the date on which (i) the
Consent of the Board of Governors of the Federal Reserve System (without
regard to any requisite waiting period thereof) to the Merger shall be
received and (ii) the FCC and Regions stockholders approve the Merger at
the Stockholders' Meetings.
"Index Group" shall mean the 17 bank holding companies listed below,
the common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company or companies
in transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company or companies are removed
from the Index Group, the weights (which shall be determined based upon the
number of outstanding shares of common stock) shall be redistributed
proportionately for purposes of determining the Index Price. The 17 bank
holding companies and the weights attributed to them are as follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
- ---------------------- ---------
<S> <C>
AmSouth Bancorporation...................................... 4.07%
BB&T Corporation............................................ 6.78
Compass Bancshares, Inc..................................... 3.34
Fifth Third Bancorp......................................... 7.84
First American Corporation.................................. 2.96
</TABLE>
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<PAGE> 133
<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
- ---------------------- ---------
<S> <C>
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 sales
prices of the companies composing the Index Group.
"Starting Date" shall mean the last full trading day preceding the
announcement by press release of the Merger.
"Starting Price" shall mean the last sale price per share of Regions
Common Stock as reported on the Nasdaq NMS (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source as chosen
by Regions) on the Starting Date.
If any company belonging to the Index Group or Regions declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the date of this Agreement
and the Determination Date, the prices for the common stock of such company or
Regions shall be appropriately adjusted for the purposes of applying this
Section 10.1(g).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement and the Supplemental Letter shall become void and have no effect,
except that (i) the provisions of this Section 10.2 and Article 11 and Section
8.6(b) of this Agreement shall survive any such termination and abandonment, and
(ii) a termination pursuant to Sections 10.1(b), 10.1(c), or 10.1(f) of this
Agreement shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination. The Stock Option Agreement shall be governed by its own
terms.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 2, 3, 4, and 11 and Sections 8.13 and 8.15 of this Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions. (a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"ABCA" shall mean the Arkansas Business Corporation Act of 1987, Title
4, Chapter 27 of the Arkansas Code of 1987 Annotated, as amended.
"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.
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"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
Exhibit 2 (and excepting the Stock Option Agreement) delivered pursuant
hereto and incorporated herein by reference.
"Arkansas Articles of Merger" shall mean the Articles of Merger to be
executed by Regions and filed with the Secretary of State of the State of
Arkansas relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Confidentiality Agreements" shall mean those certain Confidentiality
Agreements, entered into prior to the date of this Agreement, between FCC
and Regions.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit, where, in any
such event, such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"Delaware Certificate of Merger" shall mean the certificate of merger
to be executed by Regions and filed with the Secretary of State of the
State of Delaware, relating to the Merger as contemplated by Section 1.1 of
this Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"Exhibits" 1 and 2, 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.
"FCC Common Stock" shall mean the $3.00 par value common stock of FCC.
"FCC Companies" shall mean, collectively, FCC and all FCC
Subsidiaries.
"FCC Disclosure Memorandum" shall mean the written information
entitled "FCC Disclosure Memorandum" delivered prior to the execution of
this Agreement to Regions describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section or subsection of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section or subsection shall be deemed to be disclosed for all purposes
hereunder. The inclusion of any matter in this document shall not be deemed
an admission or otherwise to imply that any such matter is Material for
purposes of this Agreement.
"FCC Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of FCC 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 FCC in SEC Documents, and (ii) the
consolidated statements of condition of FCC (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.
"FCC Preferred Stock" shall mean the $1.00 par value preferred stock
of FCC.
"FCC Rights Agreement" shall mean that certain Rights Agreement, dated
September 18, 1990, between FCC and First Commercial Trust Company, N.A.
(as successor to First Commercial Bank, N.A.), as Rights Agent.
"FCC Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of FCC.
"FCC Subsidiaries" shall mean the Subsidiaries of FCC, which shall
include the FCC Subsidiaries described in Section 5.4 of this Agreement and
any corporation, bank, savings association, or other organization acquired
as a Subsidiary of FCC in the future and owned by FCC at the Effective
Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"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.
"Joint Proxy Statement" shall mean the joint proxy statement used by
Regions and FCC to solicit the approval of their respective stockholders of
the transactions contemplated by this Agreement, which
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<PAGE> 136
shall include the prospectus of Regions relating to the issuance of the
Regions Common Stock to holders of FCC Common Stock.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, chief financial officer, chief
accounting officer, chief credit officer, general counsel, or any executive
vice president of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for property Taxes not
yet due and payable, and (ii) for depository institution Subsidiaries of a
Party, pledges to secure deposits, and other Liens incurred in the ordinary
course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"Loan Property" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, and (d) the Merger
and compliance with the provisions of this Agreement on the operating
performance of the Parties.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq NMS" shall mean the National Market System of The Nasdaq Stock
Market.
"1933 Act" shall mean the Securities Act of 1933, as amended.
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"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management (including, but not limited to, participating in a fiduciary
capacity) and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"Party" shall mean either FCC or Regions, and "Parties" shall mean
both FCC 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.
"Preferred Stock Purchase Rights" shall mean the preferred stock
purchase rights issued pursuant to the FCC Rights Agreement.
"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 Subsidiaries" shall mean the Subsidiaries of Regions and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Regions in the future and owned by Regions at the Effective
Time.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Regions under the 1933 Act with respect to the shares of Regions Common
Stock to be issued to the stockholders of FCC in connection with the
transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or
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<PAGE> 138
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Stock Option Agreement" shall mean the stock option agreement by and
between FCC and Regions, in substantially the form of Exhibit 1.
"Stockholders' Meetings" shall mean the respective meetings of the
stockholders of Regions and FCC to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"Supplemental Letter" shall mean the supplemental letter of even date
herewith between the Parties relating to certain understandings and
agreements in addition to those included in this Agreement.
"Surviving Corporation" shall mean Regions as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
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(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Average Closing Price.................................... Section 10.1(g)
Claim.................................................... Section 8.15(a)
Closing.................................................. Section 1.2
Covered Party............................................ Section 8.15(b)
Determination Date....................................... Section 10.1(g)
Effective Time........................................... Section 1.3
Exchange Agent........................................... Section 4.1
Exchange Ratio........................................... Section 3.1(b)
FCC Benefit Plans........................................ Section 5.13(a)
FCC Contracts............................................ Section 5.14
FCC ERISA Affiliate...................................... Section 5.13(e)
FCC ERISA Plan........................................... Section 5.13(a)
FCC Rights............................................... Section 3.6(a)
FCC Pension Plan......................................... Section 5.13(a)
FCC SEC Reports.......................................... Section 5.5(a)
Indemnified Party........................................ Section 8.15
Index Group.............................................. Section 10.1(g)
Index Price.............................................. Section 10.1(g)
Index Ratio.............................................. Section 10.1(g)
KW....................................................... Section 7.2(f)
KW Agreement............................................. Section 7.2(f)
Merger................................................... Section 1.1
Regions ERISA Affiliate.................................. Section 6.17
Regions Ratio............................................ Section 10.1(g)
Regions SEC Reports...................................... Section 6.5(a)
Starting Date............................................ Section 10.1(g)
Starting Price........................................... Section 10.1(g)
Takeover Laws............................................ Section 5.19
Tax Opinion.............................................. Section 9.1(g)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses. (a) Except as otherwise provided in this Section 11.2, each
of the Parties shall bear and pay all direct costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including filing, registration, and application fees, printing fees, and fees
and expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of the Parties shall bear and pay
one-half of the printing costs incurred in connection with the printing of the
Registration Statement and the Joint Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Except for Keefe, Bruyette & Woods, Inc. as to
FCC and except for J. P. Morgan Securities, Inc. as to Regions, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his, her, or its representing or being retained
by or allegedly representing or being retained by FCC or Regions, each of FCC
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 (including any provision of
the Confidentiality Agreements which would act to preclude Regions (or any
Holder as defined in the Stock Option Agreement from exercising its rights under
the Stock Option Agreement) to the extent that the Stock Option Agreement is in
force and effect, but excluding the Supplemental Letter). Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 8.13 and 8.15 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
stockholder approval of this Agreement has been obtained; provided, that the
provisions of this Agreement relating to the manner or basis in which shares of
FCC Common Stock will be exchanged for Regions Common Stock shall not be amended
(except in accordance with Section 10.1(g) of this Agreement) after the
Stockholders' Meetings without the requisite approval of the holders of the
issued and outstanding shares of Regions Common Stock and FCC Common Stock, as
the case may be, entitled to vote thereon.
11.6 Waivers. (a) Prior to or at the Effective Time, Regions, acting
through its Board of Directors, chief executive officer, chief financial
officer, or other authorized officer, shall have the right to waive any Default
in the performance of any term of this Agreement by FCC, to waive or extend the
time for the compliance or fulfillment by FCC 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, FCC, acting through its Board of
Directors, chief executive officer, chief financial officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Regions, to waive or extend the time for the
compliance or fulfillment by Regions of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of FCC 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 FCC.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other
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address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
FCC: First Commercial Corporation
400 West Capital Avenue
Second Floor
Little Rock, Arkansas 72201
Telecopy Number: (501) 371-6525
Attention: C. Barnett Grace
Chairman, President, and
Chief Executive Officer
Copy to Counsel: Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Telecopy Number: (202) 942-5999
Attention: Steven Kaplan
Regions: Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7571
Attention: Richard D. Horsley
Vice Chairman and Executive
Financial Officer
Copy to Counsel: Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 326-7751
Attention: Samuel E. Upchurch, Jr.
General Counsel
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws, except to the extent that the Laws of the State of
Arkansas relate to the consummation of the Merger.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
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11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: FIRST COMMERCIAL CORPORATION
By: /s/ Donna Rogers By: /s/ C. Barnett Grace
-----------------------------------------------
- ----------------------------------------------- C. Barnett Grace
Donna Rogers Chairman, President, and Chief
Secretary Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: /s/ Samuel E. Upchurch, Jr. By: /s/ Carl E. Jones, Jr.
-----------------------------------------------
- ----------------------------------------------- Carl E. Jones, Jr.
Samuel E. Upchurch, Jr. President and Chief Executive Officer
Corporate Secretary
[CORPORATE SEAL]
</TABLE>
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APPENDIX B
June 23, 1998
The Board of Directors
First Commercial Corporation
400 West Capitol Avenue
Little Rock, AR 72203
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of First Commercial Corporation ("First
Commercial") of the exchange ratio in the proposed merger (the "Merger") of
First Commercial with and into Regions Financial Corporation ("Regions")
pursuant to the Agreement and Plan of Merger (the "Agreement") dated as of
February 8, 1998 between First Commercial and Regions. It is our understanding
that the Merger will be structured as a pooling-of-interests transaction under
generally accepted accounting principles.
As is more specifically set forth in the Agreement, upon consummation of
the Merger, each outstanding share of the common stock of First Commercial
("First Commercial Common Stock"), except for any dissenting shares and certain
other shares held by First Commercial and Regions, will be exchanged for 1.70
shares (the "Exchange Ratio") of Regions ("Regions Common Stock").
Keefe, Bruyette & Woods, Inc. ("KBW"), as part of its investment banking
business, is continually engaged in the valuation of bank holding companies and
banks, thrift holding companies and thrifts and their securities in connection
with mergers and acquisitions, underwriting, private placements, competitive
bidding processes, market making as a NASD market maker, and valuations for
various other purposes. As specialists in the securities of banking companies we
have experience in, and knowledge of, the valuation of banking enterprises. In
the ordinary course of our business as a broker-dealer, we may, from time to
time, trade the securities of First Commercial or Regions, for our own account,
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities. To the extent we have any such
positions as of the date of this opinion it has been disclosed to First
Commercial. KBW has served as financial advisor to First Commercial in the
negotiation of the Agreement and in rendering this fairness opinion and will
receive a fee from First Commercial for those services.
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of First Commercial
and Regions and the merger, including among other things, the following:
(i) Reviewed the Agreement;
(ii) Reviewed certain historical financial and other information
concerning First Commercial for the three months ended March 31, 1998 and
the three years ended December 31, 1997, including First Commercial's
Annual Report to Stockholders and Annual Reports on Forms 10-K, and interim
quarterly reports on Form 10-Q;
(iii) Reviewed certain historical financial and other information
concerning Regions for the three months ended March 31, 1998 and the three
years ended December 31, 1997, including Regions's Annual Report to
Stockholders and Annual Reports on Forms 10-K, and interim quarterly
reports on Form 10-Q;
(iv) Reviewed and studied the historical stock prices and trading
volumes of the common stock of both First Commercial and Regions;
(v) Held discussions with senior management of First Commercial and
Regions with respect to their past and current financial performance,
financial condition and future prospects;
(vi) Reviewed certain internal financial data, projections and other
information of First Commercial and Regions, including financial
projections prepared by management;
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(vii) Analyzed certain publicly available information of other
financial institutions that we deemed comparable or otherwise relevant to
our inquiry, and compared First Commercial and Regions from a financial
point of view with certain of these institutions;
(viii) Reviewed the financial terms of certain recent business
combinations in the banking that we deemed comparable or otherwise relevant
to our inquiry; and
(ix) Conducted such other financial studies, analyses and
investigations and reviewed such other information as we deemed appropriate
to enable us to render our opinion.
In conducting our review and arriving at our opinion, we have relied upon
the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We have relied upon the management of First Commercial and Regions
as to the reasonableness and achievability of the financial and operating
forecasts and projections (and the assumptions and bases therefor) provided to
us, and we have assumed that such forecasts and projections reflect the best
currently available estimates and judgments of such managements and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. We are not experts in the
independent verification of the adequacy of allowances for loan and lease losses
and we have assumed that the current and projected aggregate reserves for loan
and lease losses for First Commercial and Regions are adequate to cover such
losses. We did not make or obtain any independent evaluations or appraisals of
any assets or liabilities of First Commercial, Regions, or any of their
respective subsidiaries nor did we verify any of First Commercial's or Regions's
books or records or review any individual loan or credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following: (i)
the historical and financial position and results of operations of First
Commercial and Regions; (ii) the assets and liabilities of First Commercial and
Regions; and (iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We also have taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and knowledge of the banking industry generally. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the holders of the First Commercial Common Stock.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
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APPENDIX C
(LOGO JP MORGAN)
June 23, 1998
The Board of Directors
Regions Financial Corporation
417 North 20th Street
Birmingham, AL 35203
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to Regions Financial Corporation (together with its subsidiaries and
affiliates, the "Company") of the Exchange Ratio (as defined below) in the
proposed merger (the "Merger") of First Commercial Corporation ("First
Commercial" or the "Seller") with and into the Company. Pursuant to the
Agreement and Plan of Merger, dated as of February 8, 1998 (the "Agreement"),
between the Company and First Commercial, First Commercial will merge with and
into the Company and each share of common stock, par value $3.00 per share, of
the Seller (other than certain shares held by the Seller or the Company or their
respective subsidiaries) shall be converted into 1.70 shares of common stock,
$.625 par value per share, of the Company (the "Exchange Ratio").
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) the
joint proxy statement-prospectus of the Company and the Seller relating to the
Merger (the "Proxy Statement"); (iii) certain publicly available information
concerning the business of the Seller and of certain other companies engaged in
businesses comparable to those of the Seller, and the reported market prices for
certain other companies' securities deemed comparable; (iv) publicly available
terms of certain transactions involving companies comparable to the Seller and
the consideration received for such companies; (v) current and historical market
prices of the common stock of the Seller; (vi) the audited financial statements
of the Company and the Seller for the fiscal year ended December 31, 1997, and
the unaudited financial statements of the Company and the Seller for the period
ended March 31, 1998; and (vii) certain internal financial analyses and
forecasts prepared by the Company and the Seller and their respective
managements.
In addition, we have held discussions with certain members of the
management of the Company and the Seller with respect to certain aspects of the
Merger, the past and current business operations of the Company and the Seller,
the financial condition and future prospects and operations of the Company and
the Seller, the effects of the Merger on the financial condition and future
prospects of the Company and the Seller, and certain other matters we believed
necessary or appropriate to our inquiry. We have reviewed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and the Seller or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us. We
have not been requested to review individual credit files or make any
independent assessment as to the future performance or non-performance of the
Company's or First Commercial's assets. In relying on financial analyses and
forecasts provided to us, we have assumed that they have been reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial condition of the Company and the Seller to which such analyses or
forecasts relate. We have also assumed that, in the course of obtaining
regulatory and third party consents for the Merger and the other transactions
contemplated by the Agreement, no restriction will be imposed that will have a
material adverse effect on the future results of operations or financial
condition of the Company or First Commercial. We have also assumed that the
Merger will have the tax consequences described in the Proxy Statement and in
discussions with, and materials furnished to us by, representatives of the
Company, and that the other transactions contemplated by the Agreement will be
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consummated as described in the Agreement and the Proxy Statement. We have
relied as to all legal matters relevant to rendering our opinion upon the advice
of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. We are expressing no opinion herein as to the price at which the
Company's stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services if the
proposed Merger is consummated. We maintain customary banking relationships with
the Company and First Commercial. In the ordinary course of their businesses,
our affiliates may actively trade the debt and equity securities of the Company
or the Seller for their own account or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the Company.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. This opinion
may be reproduced in full in any proxy or information statement mailed to
stockholders of the Company.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ GAIL M. ROGERS
------------------------------------
Gail M. Rogers
Managing Director
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<PAGE> 147
APPENDIX D
ARKANSAS CODE OF 1987 ANNOTATED
TITLE 4. BUSINESS AND COMMERCIAL LAW
SUBTITLE 3. CORPORATIONS AND ASSOCIATIONS
CHAPTER 27. BUSINESS CORPORATION ACT OF 1987
SUBCHAPTER 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
4-27-1301 DEFINITIONS.
In this subchapter:
1. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;
2. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under sec. 4-27-1302 and who exercises that right when and
in the manner required by sec.sec. 4-27-1320 -- 4-27-1328;
3. "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable;
4. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances;
5. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation;
6. "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder;
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
4-27-1302 RIGHT OF DISSENT.
A. A shareholder is entitled to dissent from and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a
party:
(i) If shareholder approval is required for the merger by
sec. 4-27-1103 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its
parent under sec. 4-27-1104;
2. Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;
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4. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under sec. 4-27-604; or
5. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this subchapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
4-27-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A. A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
4-27-1320 NOTICE OF DISSENTERS' RIGHTS.
A. If proposed corporate action creating dissenters' rights under
sec. 4-27-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this chapter.
B. If corporate action creating dissenters' rights under sec. 4-27-1302 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in sec. 4-27-1322.
4-27-1321 NOTICE OF INTENT TO DEMAND PAYMENT.
A. If proposed corporate action creating dissenters' rights under
sec. 4-27-1302 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
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B. A shareholder who does not satisfy the requirements of subsection A. of
this section is not entitled to payment for his shares under this subchapter.
4-27-1322 DISSENTERS' NOTICE.
A. If proposed corporate action creating dissenters' rights under
sec. 4-27-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of sec. 4-27-1321.
B. The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the notice required by subsection A. of this
section is delivered; and
(5) Be accompanied by a copy of this subchapter.
4-27-1323 DUTY TO DEMAND PAYMENT.
A. A shareholder sent a dissenters' notice described in sec. 4-27-1322 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
sec. 4-27-1322B.3., and deposit his certificates in accordance with the terms of
the notice.
B. The shareholder who demands payment and deposits his share certificates
under subsection A. of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
C. A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subchapter.
4-27-1324 SHARE RESTRICTIONS.
A. The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under sec. 4-27-1326.
B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
4-27-1325 PAYMENT.
A. Except as provided in sec. 4-27-1327, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with sec. 4-27-1323 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
D-3
<PAGE> 150
B. The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under sec.
4-27-1328; and
(5) A copy of this subchapter.
4-27-1326 FAILURE TO TAKE ACTION.
A. If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under sec. 4-27-1322 and repeat the payment demand procedure.
4-27-1327 AFTER-ACQUIRED SHARES.
A. A corporation may elect to withhold payment required by sec. 4-27-1325
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
B. To the extent the corporation elects to withhold payment under
subsection A. of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
sec. 4-27-1328.
4-27-1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
A. A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under sec. 4-27-1325), or reject the
corporation's offer under sec. 4-27-1327 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under sec. 4-27-1325
or offered under sec. 4-27-1327 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under sec. 4-27-1325 within
sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
B. A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection A. of this
section within thirty (30) days after the corporation made or offered payment
for his shares.
D-4
<PAGE> 151
4-27-1330 COURT ACTION.
A. If a demand for payment under sec. 4-27-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
B. The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
C. The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
D. The jurisdiction of the court in which the proceeding is commenced under
subsection B. of this section is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under sec.
4-27-1327.
4-27-1331 COURT COSTS AND COUNSEL FEES.
A. The court in an appraisal proceeding commenced under sec. 4-27-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under sec. 4-27-1328.
B. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of sec.sec. 4-27-1320 -- 4-27-1328; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
C. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
D-5
<PAGE> 152
APPENDIX E
PROPOSED AMENDMENT TO ARTICLE FOURTH
OF REGIONS' CERTIFICATE OF INCORPORATION
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is Five Hundred Five million
(505,000,000) of which Five Hundred Million (500,000,000) shares are to be
common stock (hereinafter called the "Common Stock"), of a par value of
sixty-two and one half cents ($.625) each, and Five Million (5,000,000) shares
are to be Preferred Stock (hereinafter called the "Preferred Stock") of the par
value of one dollar ($1) each.
1. Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock, for such consideration and on such
terms as it may determine, as Preferred Stock of one or more series and in
connection with the creation of any such series to fix by the resolution or
resolutions providing for the issue of shares thereof the designation, powers
and relative participating, optional, or other special rights of such series,
and the qualifications, limitations, or restrictions thereof. Such authority of
the Board of Directors with respect to each such series shall include, but not
be limited to, the determination of the following:
(a) the distinctive designation of, and the number of shares
comprising, such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding)
from time to time by like action of the Board of Directors;
(b) the dividend rate or amount for such series, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes
or any other series of any class or classes of stock, and whether such
dividends shall be cumulative, and if so, from which date or dates for such
series;
(c) whether or not the shares of such series shall be subject to
redemption by the Corporation and the time, prices, and other terms and
conditions of such redemption;
(d) whether or not the shares of such series shall be subject to the
operation of a sinking fund or purchase fund to be applied to the
redemption or purchase of such shares and if such a fund be established,
the amount thereof and the terms and provisions relative to the application
thereof;
(e) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes, or of any other
series of any class or classes, of stock of the Corporation and if
provision be made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange;
(f) whether or not the shares of such series shall have voting rights,
in addition to the voting rights provided by law, and if they are to have
such additional voting rights, the extent thereof, provided that the
holders of shares of the Preferred Stock will not be entitled to more than
the lesser of: (i) one vote per $100 liquidation value or (ii) one vote per
share, when voting as a class with the holders of the shares of Common
Stock, and will not be entitled to vote separately as a class except where
the Preferred Stock is adversely affected or for the election of directors
after default in the payment of dividends on Preferred Stock;
(g) the rights of the shares of such series in the event of any
liquidation, dissolution, or winding up of the Corporation or upon any
distribution of its assets; and
(h) any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof, to the full extent now
or hereafter permitted by law and not inconsistent with the provisions
hereof.
E-1
<PAGE> 153
2. Authority is hereby expressly granted to the Board of Directors from
time to time to issue any authorized but unissued shares of Common Stock for
such consideration and on such terms as it may determine.
3. All shares of any one series of Preferred Stock shall be identical in
all respects except as to the dates from which dividends thereon may be
cumulative. All series of the Preferred Stock shall rank equally and be
identical in all respects except as otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock.
4. Whenever dividends upon the Preferred Stock at the time outstanding, to
the extent of the preference to which such stock is entitled, shall have been
paid in full or declared and set apart for payment for all past dividend
periods, and after the provisions for any sinking or purchase fund or funds for
any series of Preferred Stock shall have been complied with, the Board of
Directors may declare and pay dividends on the Common Stock, payable in cash,
stock or otherwise, and the holders of shares of Preferred Stock shall not be
entitled to share therein, subject to the provisions of the resolution or
resolutions creating any series of Preferred Stock.
5. In the event of any liquidation, dissolution, or winding up of the
Corporation or upon the distribution of the assets of the Corporation or upon
the distribution of the assets of the Corporation remaining, after the payment
to the holders of the Preferred Stock of the full preferential amounts to which
they shall be entitled as provided in the resolution or resolutions creating any
series thereof, the remaining assets of the Corporation shall be divided and
distributed among the holders of the Common Stock ratably, except as may
otherwise be provided in any such resolution or resolutions. Neither the merger
or consolidation of the Corporation with another corporation nor the sale or
lease of all or substantially all the assets of the Corporation shall be deemed
to be a liquidation, dissolution, or winding up of the Corporation or a
distribution of its assets.
6. Except as otherwise required by law or provided by a resolution or
resolutions of the Board of Directors creating any series of Preferred Stock,
the holders of Common Stock shall have the exclusive power to vote and shall
have one vote in respect of each share of such stock held by them and the
holders of Preferred Stock shall have no voting power whatsoever. Except as
otherwise provided in such a resolution or resolutions, the number of authorized
shares of the Preferred Stock may be increased or decreased by the affirmative
vote of the holders of a majority of the outstanding shares of capital stock of
the Corporation entitled to vote.
7. No holder of Preferred Stock or Common Stock of the Corporation shall
have any preemptive right as such holder (other than such right, if any, as the
Board of Directors in its discretion may by resolution, determine pursuant to
this Article Fourth) to purchase, subscribe for or otherwise acquire any shares
of stock of the Corporation of any class now or hereafter authorized, or any
securities convertible into or exchangeable for any such shares, or any warrants
or any instruments evidencing rights or options to subscribe for, purchase or
otherwise acquire any such shares, whether such shares, securities, warrants or
other instruments are now, or shall hereafter be, authorized, unissued or issued
and thereafter acquired by the Corporation.
E-2
<PAGE> 154
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
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
<PAGE> 155
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.
"(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.
<PAGE> 156
"(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
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.
<PAGE> 157
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of February 8, 1998, by
and between First Commercial Corporation and Regions Financial
Corporation -- included as Appendix A to the Joint Proxy Statement.
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. -- Opinion re: tax matters.
10.1 -- Form of Employment Agreement to be entered into between Regions
Financial Corporation and Barnett Grace, Jack Fleischauer, Jr., Neil
S. West, and J. Lynn Wright.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in
Exhibit 5.
23.4 -- Consent of Alston & Bird LLP-- included in Exhibit 8.
23.5 -- Consent of Keefe, Bruyette & Woods, Inc.
23.6 -- Consent of J.P. Morgan Securities Inc.
23.7 -- Consent of Barnett Grace
23.8 -- Consent of John W. Allison
23.9 -- Consent of Frank D. Hickingbotham
23.10 -- Consent of Michael W. Murphy
23.11 -- Consent of Kemp & Company
24. -- Power of Attorney -- the manually signed power of attorney is set
forth in the signature page of the registration statement.
99.1 -- Option Agreement between Regions Financial Corporation and First
Commercial Corporation dated as of February 8, 1998.
99.2 -- Form of proxy of First Commercial Corporation.
99.3 -- Form of proxy of Regions Financial Corporation.
99.4 -- Telephone and Internet voting instructions.
</TABLE>
<PAGE> 158
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 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.
<PAGE> 159
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 22nd day of June, 1998.
REGISTRANT:
REGIONS FINANCIAL CORPORATION
BY: /s/ Richard D. Horsley
-----------------------------------------
Richard D. Horsley
Vice Chairman of the Board and
Executive Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard D. Horsley and Samuel E. Upchurch, Jr.
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney- in-fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ Carl E. Jones, Jr.
- -------------------------- President and Chief Executive June 22, 1998
Carl E. Jones, Jr. Officer and Director
(principal executive officer)
/s/ Richard D. Horsley
- -------------------------- Vice Chairman of the Board and June 22, 1998
Richard D. Horsley Executive Financial Officer
and Director
(principal financial officer)
/s/ Robert P. Houston
- -------------------------- Executive Vice President and June 22, 1998
Robert P. Houston Comptroller
(principal accounting officer)
</TABLE>
<PAGE> 160
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------- ------------------
<S> <C> <C>
/s/ Sheila S. Blair
- -------------------------- Director June 22, 1998
Sheila S. Blair
/s/ William R. Boles, Sr.
- -------------------------- Director June 22, 1998
William R. Boles, Sr.
/s/ James B. Boone, Jr.
- -------------------------- Director June 22, 1998
James B. Boone, Jr.
/s/ Albert P. Brewer
- -------------------------- Director June 22, 1998
Albert P. Brewer
/s/ James S.M. French
- -------------------------- Director June 22, 1998
James S.M. French
/s/ Olin B. King
- -------------------------- Director June 22, 1998
Olin B. King
/s/ J. Stanley Mackin
- -------------------------- Chairman of the Board June 22, 1998
J. Stanley Mackin and Director
/s/ Henry E. Simpson
- -------------------------- Director June 22, 1998
Henry E. Simpson
/s/ Lee J. Styslinger, Jr.
- -------------------------- Director June 22, 1998
Lee J. Styslinger, Jr.
- -------------------------- Director
Robert J. Williams
</TABLE>
<PAGE> 161
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of February 8, 1998, by
and between First Commercial Corporation and Regions Financial
Corporation -- included as Appendix A to the Joint Proxy Statement.
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. -- Opinion re: tax matters.
10.1 -- Form of Employment Agreement to be entered into between Regions
Financial Corporation and Barnett Grace, Jack Fleischauer, Jr., Neil
S. West, and J. Lynn Wright.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Lange, Simpson, Robinson & Somerville LLP -- included in
Exhibit 5.
23.4 -- Consent of Alston & Bird LLP-- included in Exhibit 8.
23.5 -- Consent of Keefe, Bruyette & Woods, Inc.
23.6 -- Consent of J.P. Morgan Securities Inc.
23.7 -- Consent of Barnett Grace
23.8 -- Consent of John W. Allison
23.9 -- Consent of Frank D. Hickingbotham
23.10 -- Consent of Michael W. Murphy
23.11 -- Consent of Kemp & Company
24. -- Power of Attorney -- the manually signed power of attorney is set
forth in the signature page of the registration statement.
99.1 -- Option Agreement between Regions Financial Corporation and First
Commercial Corporation dated as of February 8, 1998.
99.2 -- Form of proxy of First Commercial Corporation.
99.3 -- Form of proxy of Regions Financial Corporation.
99.4 -- Telephone and Internet Voting Instructions.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Lange, Simpson, Robinson & Somerville LLP]
June 22, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
Re: Regions Financial Corporation
S-4 Registration Statement
Combination with First Commercial Corporation
Ladies and Gentlemen:
We have acted as counsel for Regions Financial Corporation, a Delaware
corporation ("Regions") in connection with the merger of First Commercial
Corporation ("First Commercial") with and into Regions (the "Merger") and in
connection with the registration of shares of common stock of Regions, par value
$.625 per share ("Regions Common Stock"), on Form S-4 under the Securities Act
of 1933. The Merger provides for issuance of shares of Regions Common Stock to
the stockholders of First Commercial upon consummation of the Merger. The
maximum number of shares of Regions to be issued in the Merger is estimated to
be 64,764,991.
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]
June 23, 1998
Regions Financial Corporation
417 North 20th Street
Birmingham, Alabama 35203
First Commercial Corporation
400 West Capital Avenue
Second Floor
Little Rock, Arkansas 72201
Re: AGREEMENT AND PLAN OF MERGER INVOLVING REGIONS FINANCIAL
CORPORATION AND FIRST COMMERCIAL CORPORATION
Ladies and Gentlemen:
We have served as counsel to Regions Financial Corporation ("Regions")
in connection with the proposed reorganization of Regions and First Commercial
Corporation ("First Commercial") pursuant to the Agreement and Plan of Merger
dated as of February 8, 1998 (the "Agreement") which provides for the merger of
First Commercial with and into Regions (the "Merger"). 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 this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code"), and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain assumptions as more fully described below. All terms used
herein without definition shall have the respective meanings specified in Joint
Proxy Statement/Prospectus or the annexes thereto (including the Agreement), and
unless otherwise specified, all section references herein are to the Code.
<PAGE> 2
Regions Financial Corporation
First Commercial Corporation
June 23, 1998
Page 2
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) The Agreement; and
(2) The Registration Statement on Form S-4 filed by Regions with
the Securities and Exchange Commission under the Securities Act of 1933, on June
23, 1998, as amended, and the Joint Proxy Statement/Prospectus for the Special
Meeting of stockholders of First Commercial and the Annual Meeting of the
stockholders of Regions.
In our examination of the documents, we have assumed with your consent
that all documents submitted to us as photocopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, that all statements
set forth in such documents are accurate, that the transactions contemplated by
the Agreement will be consummated in accordance therewith and as described in
the Joint Proxy Statement/Prospectus.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of First Commercial and Regions and through
certificates (the "Certificates") provided by the management of First Commercial
and the management of Regions and attached hereto as Exhibits A and B.
You have advised us that the Boards of Directors of First Commercial
and Regions believe that, among other things, the Merger will result in a
company with expanded opportunities for profitable growth and that the combined
resources and capital of First Commercial and Regions will provide an enhanced
ability to compete in the changing and competitive financial services industry.
OPINIONS
Based on the representations contained in the Certificates, the
foregoing assumptions and subject to the assumptions and qualifications set
forth in the Joint Proxy Statement/Prospectus 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:
<PAGE> 3
Regions Financial Corporation
First Commercial Corporation
June 23, 1998
Page 3
1. The Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code.
2. The stockholders of First Commercial will recognize no gain or
loss upon the exchange in the Merger of all of their First Commercial 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 First Commercial Common Stock who exchange all of their First
Commercial Common Stock solely for Regions Common Stock in the Merger will be
the same as the tax basis of the First Commercial 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 First Commercial Common Stock solely for
Regions Common Stock in the Merger will be the same as the holding period of the
First Commercial Common Stock surrendered in exchange therefor, provided that
such First Commercial Common Stock is held as a capital asset at the Effective
Time.
5. The payment of cash to First Commercial 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 Regions Common Stock redeemed, as provided in Section 302(a) of the Code.
6. Where solely cash is received by a First Commercial
stockholder in exchange for First Commercial Common Stock pursuant to the
exercise of dissenters' rights, such cash will be treated as having been
received in redemption of such holder's First Commercial 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, the additional information that we have
obtained, and the statements 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 in
such additional information is, or later becomes, inaccurate, or if any of the
statements set out in the Certificates are, or later become, inaccurate. Our
opinions are limited to the tax matters specifically covered thereby, and we
have not been
<PAGE> 4
Regions Financial Corporation
First Commercial Corporation
June 23, 1998
Page 4
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.
We hereby consent to the use of this opinion and to our
references made to the firm under the captions "Summary--The Merger",
"Description of the Transaction--Federal Income Tax Consequences of the Merger"
and "Opinions" in the Joint Proxy Statement/Prospectus constituting part of the
Registration Statement on Form S-4 of Regions.
Very truly yours,
ALSTON & BIRD
By: /s/ Philip C. Cook
--------------------------------
Philip C. Cook
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this ___ day of ___________, 1998 by and between Regions Financial Corporation,
a Delaware corporation (hereinafter, "Regions"), and Barnett Grace (hereinafter,
"Executive"), to be effective as of the Effective Date, as defined in Section 1.
BACKGROUND
Executive is the Chairman, President, and Chief Executive Officer of
First Commercial Corporation, an Arkansas corporation ("First Commercial").
Pursuant to an Agreement and Plan of Merger, dated as of February 8, 1998 (the
"Merger Agreement"), First Commercial will be acquired by Regions (the
"Merger").
Regions desires to retain Executive from and after the Merger as an
officer of Regions or its affiliates, and Executive is willing to serve as such,
all in accordance with the terms and conditions of this Agreement.
Executive and First Commercial are parties to that certain Agreement,
dated as of December 23, 1996, which provides certain benefits to Executive in
the event of his termination of employment following a change of control of
First Commercial (the "Prior Agreement"). The Prior Agreement will be superseded
in its entirety by this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective date of this Agreement (the "Effective
Date") will be the date on which the effective time of the Merger occurs.
2. Employment. As of the Effective Date, Executive will be employed in
the capacity of Regional President of Regions' operations in Arkansas, Texas,
Oklahoma and the Memphis area of Tennessee, and will serve as a member of
Regions' Executive Council. Executive's responsibilities under this Agreement
shall be in accordance with the policies and objectives established by the Board
of Directors of Regions (the "Board") and Executive will report directly to the
Chief Executive Officer of Regions.
3. Employment Period. This Agreement will begin on the Effective Date
and, unless earlier terminated in accordance with Section 6 hereof, will expire
on the third anniversary of the Effective Date (the "Employment Period").
4. Extent of Service. During the Employment Period, and excluding any
periods of vacation and sick leave to which Executive is entitled, Executive
agrees to devote reasonable attention and time during normal business hours to
the business and affairs of Regions and, to
<PAGE> 2
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it will not be a
violation of this Agreement for Executive to (i) serve on corporate, civic or
charitable boards or committees, and (ii) manage personal investments, so long
as such activities do not significantly interfere with the performance of
Executive's responsibilities as an employee of Regions in accordance with this
Agreement.
5. Compensation and Benefits.
(a) Base Salary. During the Employment Period, Regions will pay
to Executive a base salary in the amount of $435,000 per year ("Base Salary"),
less normal withholdings, payable in equal monthly or more frequent installments
as are customary under Regions' payroll practices from time to time. The Base
Salary will be increased as of January 1 of each calendar year during the term
of this Agreement by a percentage at least equal to the average percentage
increase in annual base salary paid to Regions' top three executive officers
(other than Executive and Carl E. Jones, Jr.), calculated for each year on a
compounded basis.
(b) Incentive, Savings and Retirement Plans. During the
Employment Period, Executive will be entitled to participate in all executive
incentive compensation and bonus programs (including stock option, performance
share and restricted stock grants), and savings and retirement plans (except the
Regions Profit Sharing Plan during 1999), practices, policies and programs,
applicable generally to senior executive officers of Regions holding comparable
positions ("Peer Executives"), and on the same basis as Peer Executives. Without
limiting the foregoing, the following shall apply:
(i) during the Employment Period, Executive will be
entitled to an annual bonus of not less than $340,000, provided, however, that
for 1999 the annual bonus shall be not less than $400,900;
(ii) effective as of the Effective Date, Executive shall be
granted under the Regions 1991 Long-Term Incentive Plan, as amended (the
"Incentive Plan"), a restricted stock award (having terms and conditions that
are no less favorable than those applicable to grants made to Peer Executives)
covering a number of shares of Regions common stock (rounded to the nearest
whole number of shares), having a fair market value on the Effective Date of
$2,750,000 (the "Restricted Stock"), which shares will vest in equal
installments on the first, second and third anniversaries of the Effective Date,
or upon a Change of Control of Regions (as defined in the Incentive Plan) or the
death or Disability of Executive, if earlier;
(iii) on the Effective Date, Executive shall be granted under
the Incentive Plan options to acquire 35,000 shares of Regions common \ stock
(the "Options"), which Options will have a per-share exercise price equal to the
fair market value of Regions common stock on the date of grant, a term of ten
years and terms and conditions that are no less favorable than those applicable
to grants made to Peer Executives. The Options will vest and become exercisable
in full on the first anniversary of the Effective Date or, if a Change of
Control of Regions (as defined in the Incentive Plan) shall have occurred before
the first
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<PAGE> 3
anniversary of the Effective Date or, in the event of Executive's death or
Disability before such date, the Options will vest and become exercisable in
full on the date of such Change of Control or death or Disability; and
(iv) during the Employment Period, Executive will be granted
under the Incentive Plan performance share awards in amounts and having terms
that are comparable to performance shares awards to Peer Executives.
(c) Welfare Benefit Plans. During the Employment Period,
Executive and/or Executive's family, as the case may be, will be eligible for
participation in and will receive all benefits under welfare benefit plans,
practices, policies and programs provided by Regions and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) ("Regions Welfare Plans") to the extent applicable
generally to Peer Executives.
(d) Expenses. During the Employment Period, Executive will be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of Regions
and its affiliated companies to the extent applicable generally to Peer
Executives.
(e) Fringe Benefits. During the Employment Period, Executive will
be entitled to fringe benefits in accordance with the plans, practices, programs
and policies of Regions and its affiliated companies in effect for Peer
Executives.
(f) Vacation. During the Employment Period, Executive will be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of Regions and its affiliated companies as in effect generally with
respect to Peer Executives.
(g) Change of Control Agreement. If, on or after the Effective
Date, Regions has or enters into an agreement (or agreements) with one or more
members of Region's Executive Council that provides for the payment of severance
benefits in the event of a termination of employment in connection with a
"change of control" of Regions, Regions shall, at the election of Executive,
enter into a substantially identical agreement with Executive (the "Change of
Control Agreement"); provided, however, that (a) severance benefits provided to
Executive under any such Change of Control Agreement shall be reduced by any
severance benefits paid under this Agreement, and (b) no Gross-Up Payment under
the provisions of Section 8 hereof shall be made with respect to the benefits
provided under any such agreement.
(h) Past Service Credit. Executive shall be given full credit for
Executive's years of service with First Commercial for all purposes (other than
for benefit accrual purposes) under the plans, programs, policies, agreements
and practices covering Executive pursuant to this Section 5 to the extent of
Executive's service credit under comparable programs, policies, agreements and
practices of First Commercial. Regions shall cause the Regions Welfare Plans to
(i) waive, with respect to Executive, any waiting period and
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<PAGE> 4
restrictions and limitations for preexisting conditions or insurability, and
(ii) credit Executive with any deductible, co-payment, co-insurance, or maximum
out-of-pocket payments made by Executive under First Commercial's welfare plans
so as to reduce the amount of any deductible, co-payment, co-insurance or
maximum out-of-pocket payments payable by Executive under the Regions Welfare
Plans.
6. Termination of Employment.
(a) Death or Disability. Executive's employment will terminate
automatically upon Executive's death during the Employment Period. If Regions
determines in good faith that the Disability of Executive has occurred during
the Employment Period (pursuant to the definition of Disability set forth
below), it may give to Executive written notice in accordance with Section 12(d)
of this Agreement of its intention to terminate Executive's employment. In such
event, Executive's employment will terminate effective on the 30th day after
receipt by Executive of such written notice (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, Executive shall not have
returned to full-time performance of Executive's duties. For purposes of this
Agreement, "Disability" means the existence of any physical or mental condition
of Executive that results in his receipt of long-term disability benefits under
Regions' long term disability plan.
(b) Termination for Cause. Regions may terminate Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" means:
(i) the willful and continued failure of Executive to
substantially perform Executive's duties with Regions (other than any such
failure resulting from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to Executive by the
Board that specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties;
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to Regions;
(iii) personal dishonesty or breach of fiduciary duty to
Regions that in either case results or was intended to result in personal
profit\ to Executive at the expense of Regions; or
(iv) willful violation of any law, rule or regulation
(other than traffic violations, misdemeanors or similar offenses) or
cease-and-desist order, court order, judgment or supervisory agreement, which
violation is materially and demonstrably injurious to Regions.
For purposes of the preceding clauses, no act or failure to act, on
the part of Executive, shall be considered "willful" unless it is done, or
omitted to be done, by Executive in bad faith and without reasonable belief that
Executive's action or omission was in the best interests of Regions. Any act, or
failure to act, based upon prior approval given by the Board or upon the
instructions or with the approval of Executive's superior or based upon the
advice
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<PAGE> 5
of counsel for Regions, shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of Regions. The
cessation of employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive, as part of the Notice of
Termination, a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board at a meeting of the
Board called and held for the purpose of considering such termination (after
reasonable notice is provided to Executive and Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, Executive is guilty of the conduct
described in clause (i), (ii), (iii), or (iv) above, and specifying the
particulars there of in detail.
(c) Termination for Good Reason. Executive's employment may be
terminated by Executive for Good Reason. For purposes of this Agreement, "Good
Reason" means the occurrence during the Employment Period of any of the
following events:
(i) the assignment to Executive, without his written
consent, of any duties inconsistent in any material respect with Executive's
position, authority, duties or responsibilities on the Effective Date or any
other action by Regions that results in a diminution in any material respect in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated and inadvertent action not taken in bad faith that is remedied by
Regions promptly after receipt of notice thereof given by Executive;
(ii) a reduction by Regions in Executive's annual Base
Salary at the rate in effect on the Effective Date or as the same may be
increased from time to time;
(iii) Region's requiring Executive to be based at any
office or location that is more than fifty (50) miles from Executive's office
or location on the Effective Date;
(iv) the failure by Regions (a) to continue in effect any
compensation plan in which Executive participates as of the Effective Date that
is material to Executive's total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or (b) to continue Executive's participation therein (or
in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level of
Executive's participation relative to other participants;
(v) the failure by Regions to continue to provide
Executive with benefits substantially similar to those enjoyed by Executive
under any of Regions' pension, life insurance, medical, health and accident,
disability or other welfare plans in which Executive was participating on the
Effective Date;
(vi) the failure by Regions to pay to Executive any
deferred compensation when due under any deferred compensation plan or agreement
applicable to Executive; or
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<PAGE> 6
(vii) the failure by Regions to honor all the terms and
provisions of this Agreement, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by Regions promptly after receipt of notice thereof given by Executive.
(d) Notice of Termination. Any termination of Executive's
employment for Cause, or by Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
12(d) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice that (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated, and (iii) specifies the termination date (which date shall be not
less than 60 days after the giving of such notice). If a dispute exists
concerning the provisions of this Agreement that apply to Executive's
termination of employment, the parties shall pursue the resolution of such
dispute with reasonable diligence. Within five (5) days of such a resolution,
any party owing any payments pursuant to the provisions of this Agreement shall
make all such payments together with interest accrued thereon at the rate
provided in Section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as
amended (the "Code"). Termination of Executive's employment shall occur on the
specified Date of Termination even if there is a dispute between the parties
relating to the provisions of this Agreement that apply to such termination. The
failure by Executive or Regions to set forth in the Notice of Termination any
fact or circumstance that contributes to a showing of Good Reason or Cause will
not waive any right of Executive or Regions, respectively, hereunder or preclude
Executive or Regions, respectively, from asserting such fact or circumstance in
enforcing Executive's or Regions' rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by Regions other than by reason of death or
Disability, the date specified in the Notice of Termination, or (ii) if
Executive's employment is terminated by reason of death or Disability, the Date
of Termination will be the date of death or the Disability Effective Date, as
the case may be.
7. Obligations of Regions upon Termination.
(a) Termination During First Year of Employment Period. If, prior
to the first anniversary of the Effective Date, Executive's employment is
terminated by Regions without Cause or by Executive with or without Good Reason
(and in either case, other than by reason of Executive's death or Disability),
then in consideration of Executive's services rendered prior to such
termination:
(i) Lump-Sum Severance Payment. In lieu of any further
salary payments to Executive for periods subsequent to the Date of Termination,
Regions shall pay to Executive a lump sum severance payment, in cash, without
discount, equal to three (3) times the sum of (A) Executive's annual Base Salary
at the rate in effect immediately prior to the Date of Termination (not taking
into account any reduction in Base Salary that would
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<PAGE> 7
constitute "Good Reason"), and (B) Executive's Average Bonus as defined below.
For purposes of this Agreement, Executive's "Average Bonus" means the average of
Executive's annual bonuses paid prior to the Effective Date and/or hereunder for
the two fiscal years during which Executive has been employed by Regions or
First Commercial immediately preceding the fiscal year in which the Date of
Termination occurs;
(ii) Vesting of Options. Any and all options to purchase
common stock of Regions then held by Executive will, to the extent not already
vested, become vested and exercisable in full as of the Date of Termination, and
any provision contained in the agreement(s) under which such options were
granted that is inconsistent with such acceleration is hereby modified to the
extent necessary to provide for such acceleration; provided, however, that no
such accelerated vesting shall apply to options that were not converted from
First Commercial options in connection with the Merger if, prior to the first
anniversary of the Effective Date, Executive is terminated for Cause or
Executive voluntarily terminates employment hereunder without Good Reason;
(iii) Vesting of Restricted Stock. Any and all
restrictions applicable to awards of restricted stock of Regions then held by
Executive shall lapse upon the Date of Termination, and any provision contained
in the agreement(s) under which such restricted stock awards were granted that
is inconsistent with such acceleration is hereby modified to the extent
necessary to provide for such acceleration of vesting; provided, however, that
such accelerated lapse of restrictions shall not apply if, prior to the first
anniversary of the Effective Date, Executive is terminated for Cause or
Executive voluntarily terminates employment hereunder without Good Reason;
(iv) Continued Benefits. For a thirty-six (36) month period
(or, if less, the number of months from the Date of Termination until the date
Executive will reach age sixty-five (65)) after the Date of Termination (the
"Benefits Period"), Regions shall provide Executive with group term life
insurance, health insurance, accident and long-term disability insurance
benefits (collectively, "Welfare Benefits") substantially similar in all
respects to those that Executive was receiving immediately prior to the Date of
Termination (not taking into account any reduction in such Welfare Benefits that
would constitute "Good Reason"). During the Benefits Period, Executive will be
entitled to elect to change his level of coverage and/or his choice of coverage
options (such as Executive only or family medical coverage) with respect to the
Welfare Benefits to be provided by Regions to Executive to the same extent that
actively employed senior executives of Regions are permitted to make such
changes; provided, however, that in the event of any such changes Executive
shall pay the amount of any cost increase that would actually be paid by an
actively employed senior executive of Regions by reason of making the same
changes in his level of coverage or coverage options;
(v) Retirement Benefits. In addition to the retirement
benefits to which Executive is entitled under the First Commercial Corporation
Retirement Plan and any successor plans thereto (the "FCC Pension Plan") and the
First Commercial Corporation Supplemental Executive Retirement Plan for
Executive (the "FCC Supplemental Plan"),
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<PAGE> 8
Regions shall pay Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (x) the total retirement pension (determined as a
straight life annuity commencing at the earliest age at which Executive may
commence retirement and become entitled to an unreduced pension under the FCC
Pension Plan ("normal retirement age") or, if later, the first day of the first
month after the Date of Termination) that Executive would have accrued under the
terms of the FCC Pension Plan and the FCC Supplemental Plan, determined as if
Executive were fully vested thereunder and had accumulated (after the Date of
Termination) thirty-six (36) additional months (or such lesser number of months
until Executive will attain age sixty-five (65)) of service credit thereunder at
Executive's annual Base Salary in effect at the Date of Termination, and (y) the
retirement pension (determined as a straight life annuity commencing at normal
retirement age) that Executive had accrued pursuant to the provisions of the FCC
Pension Plan and the FCC Supplemental Plan as of the Date of Termination. For
purposes of this Section 7(a)(v), (A) "actuarial equivalent" shall be determined
using the same methods and assumptions utilized under the FCC Pension Plan
immediately prior to the Effective Date; and (B) the lump-sum payment provided
for by the foregoing provisions of this Section 7(a)(v) shall be calculated, for
purposes of this Section 7(a)(v), as if the FCC Pension Plan and the FCC
Supplemental Plan continued in effect during the thirty-six (36) month period
referred to in the preceding sentence under the same terms as in effect
immediately prior to the Effective Date notwithstanding any amendment or
termination of such plans on or after the Effective Date; and
(v) Other Benefits. To the extent not theretofore paid or
provided, Regions shall timely pay or provide to Executive any other amounts or
benefits required to be paid or provided or that Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
Regions and its affiliated companies (such other amounts and benefits will be
hereinafter referred to as the "Other Benefits").
(b) Termination During Second or Third Year of Employment Period.
(i) Good Reason; Other than for Cause. If, on or after the
first anniversary of the Effective Date and during the Employment Period,
Executive's employment is terminated by Regions without Cause or by Executive
for Good Reason, then in consideration of Executive's services rendered prior to
such termination, (A) Executive will be entitled to each of the benefits
described in Section 7(a) above, (B) any and all options to purchase common
stock of Regions then held by Executive will, to the extent not already vested,
become vested and exercisable in full as of the Date of Termination, and any
provision contained in the agreement(s) under which such options were granted
that is inconsistent with such acceleration is hereby modified to the extent
necessary to provide for such acceleration, and (C) any and all restrictions
applicable to awards of restricted stock of Regions then held by Executive will
lapse upon the Date of Termination, and any provision contained in the
agreement(s) under which such restricted stock awards were granted that is
inconsistent with such acceleration is hereby modified to the extent necessary
to provide for such acceleration of vesting.
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<PAGE> 9
(ii) Voluntary Resignation other than for Good Reason. If,
during the two-year period immediately following the first anniversary of the
Effective Date, Executive's employment is terminated by Executive other than for
Good Reason, then in consideration of Executive's services rendered prior to
such termination, Regions shall pay to Executive a lump sum severance payment,
in cash, without discount, equal to the sum of (A) the product of (w) the number
of days remaining in the Employment Period from and after the Date of
Termination (the "Remaining Employment Period"), and (x) Executive's Base Salary
at the rate in effect immediately prior to the Date of Termination divided by
365; plus (B) the product of (y) the number of days in the Remaining Employment
Period, and (z) Executive's Average Annual Bonus divided by 365.
(c) Death. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement will terminate
without further obligations to Executive's legal representatives under this
Agreement, other than for payment of the sum of (i) Accrued Compensation (as
defined below), the vesting of stock options and restricted stock, and the
timely payment or provision of Other Benefits, including without limitation any
death benefits to which Executive is then entitled. For purposes of the
Agreement, "Accrued Compensation" means all amounts of compensation for services
rendered by Executive to Regions or any affiliate that have been earned or
accrued through the Date of Termination but that have not been paid as of the
Date of Termination, including (i) Base Salary, (ii) reimbursement (in
accordance with Regions' expense reimbursement policy) for reasonable and
necessary business expenses incurred by Executive on behalf of Regions during
the period ending on the Date of Termination, (iii) vacation pay, and (iv)
bonuses and incentive compensation. Accrued Compensation shall be paid to
Executive in a lump sum in cash within 30 days of the Date of Termination or in
accordance with any deferral election theretofore elected by Executive.
(d) Disability. If Executive's employment is terminated by reason
of Executive's Disability during the Employment Period, this Agreement will
terminate without further obligations to Executive, other than for payment of
Accrued Compensation, the vesting of stock options and restricted stock, and the
timely payment or provision of Other Benefits, including without limitation any
disability benefits to which Executive is then entitled. Accrued Compensation
shall be paid to Executive in a lump sum in cash within 30 days of the Date of
Termination or in accordance with any deferral election theretofore elected by
Executive.
(e) Cause. If Executive's employment is terminated for Cause
during the Employment Period, this Agreement will terminate without further
obligations to Executive, other than for payment of Accrued Compensation and the
timely payment or provision of Other Benefits. In such case, all Accrued
Compensation shall be paid to Executive in a lump sum in cash within 30 days of
the Date of Termination or in accordance with any deferral election theretofore
elected by Executive.
8. Certain Additional Payments by Regions. In the event that, (i)
Executive becomes entitled to severance benefits or any other benefits or
payments in connection with the
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<PAGE> 10
Merger, whether pursuant to the terms of this Agreement or otherwise
(collectively, the "Total Benefits") and (ii) any of the Total Benefits will be
subject to the excise tax imposed pursuant to Section 4999 of the Internal
Revenue Code ("Excise Tax"), Regions shall pay to Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the Total Benefits and any federal, state and
local income taxes, Excise Tax, and FICA and Medicare withholding taxes upon the
payment provided for by this Section, will be equal to the Total Benefits. For
purposes of determining whether any of the Total Benefits will be subject to the
Excise Tax and the amount of such Excise Tax, the amount of the Total Benefits
that will be treated as subject to the Excise Tax shall be equal to the amount
of the Total Benefits reduced by the amount of such Total Benefits that, in the
opinion of tax counsel selected by Regions ("Tax Counsel") and reasonably
acceptable to Executive are not excess parachute payments (within the meaning of
Section 280G(b)(1) of the Internal Revenue Code) with respect to the Merger.
Notwithstanding anything herein, if and to the extent that the severance
benefits or any other payments and benefits paid or provided pursuant to this
Agreement (including but not limited to the accelerated vesting of options and
shares of restricted stock as provided for hereunder) are treated as being in
connection with a change of control, such payment and benefits shall be treated
as being paid or provided in connection with the Merger and not with any
subsequent change of control of Regions.
For purposes of this Section, Executive will be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Excise Tax is (or would be) payable and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Executive's residence on the Date of Termination, net of the
reduction in federal income taxes that could be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under Section
68 of the Internal Revenue Code in the amount of itemized deductions allowable
to Executive applies first to reduce the amount of such state and local income
taxes that would otherwise be deductible by Executive). Except as otherwise
provided herein, all determinations required to be made under this Section shall
be made by Tax Counsel.
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
Executive's employment, Executive shall repay to Regions, at the time the amount
of such reduction in Excise Tax is fully determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax, federal, state and local income taxes
and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being
repaid by Executive to the extent that such repayment results in a reduction in
Excise Tax, FICA and Medicare withholding taxes and/or a federal, state or local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Internal Revenue Code. In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's employment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), Regions shall make an additional Gross-Up
Payment to Executive in respect of such excess (plus any interest,
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<PAGE> 11
penalties or additions payable by Executive with respect to such excess) at the
time that the amount of such excess is finally determined.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy or practice provided by Regions or any of its affiliated companies and
for which Executive may qualify, nor, subject to Section 12(j), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with Regions or any of its affiliated companies. Amounts
that are vested benefits or that Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
Regions or any of its affiliated companies at or subsequent to the Date of
Termination will be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
10. Full Settlement; Certain Legal Expenses.
(a) Regions' obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action that Regions may have against Executive or others. In no event shall
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or not Executive
obtains other employment.
(b) Regions shall pay to Executive all reasonable legal fees and
expenses incurred by Executive as a result of a termination that entitles
Executive to any payments under this Agreement including all such fees and
expenses, if any, incurred in contesting or disputing any Notice of Termination
given hereunder or in seeking to obtain or enforce any right or benefit provided
by this Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999 of the Internal Revenue
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of Executive's respective written
requests for payment accompanied with such evidence of fees and expenses
incurred as Regions reasonably may require.
11. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of Regions shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) Regions. This Agreement shall inure to the benefit of and be
binding upon Regions and its successors and assigns.
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<PAGE> 12
(c) Assumption by Successors. Regions will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Regions to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that Regions would be required to perform it if no such succession had
taken place. As used in this Agreement, "Regions" means Regions as herein before
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.
12. Miscellaneous.
(a) Governing Law. Except to the extent preempted by federal law
and without reference to principles of conflict of laws, the laws of the State
of Arkansas will govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
(b) Captions. The captions in this Agreement are not part of the
provisions hereof and shall have no force or effect.
(c) Amendments and Modifications. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives, which
writing makes specific reference to this Agreement.
(d) Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Regions: Regions Financial Corporation
417 N. 20th Street
Birmingham, Alabama 35203
Attention: General Counsel
If to Executive: Barnett Grace
--------------------------
--------------------------
--------------------------
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications will be effective when
actually received by the addressee.
(e) Other Agents. Nothing in this Agreement is to be interpreted
as limiting Regions from employing other personnel on such terms and conditions
as may be satisfactory to it.
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<PAGE> 13
(f) Severability. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which will remain in full force and effect.
(g) Withholding. Regions may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(h) Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(i) Reduction of Benefits By Legally Required Benefits.
Notwithstanding any other provision of this Agreement to the contrary, if
Regions is obligated by law to pay severance pay, a termination indemnity,
notice pay, or the like, or if Regions is obligated by law to provide advance
notice of separation ("Notice Period"), then any severance benefits hereunder
shall be reduced by the amount of any such severance pay, termination indemnity,
notice pay or the like, as applicable, and by the amount of any pay received
with respect to any Notice Period.
(j) Timing of Payments. The payments provided for in Sections 7
and 8 shall be made within 30 days after the Date of Termination, provided,
however, that if the amounts of such payments cannot be finally determined on or
before such date, Regions shall pay to Executive on such day an estimate, as
determined in good faith by Regions, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B)of the Code from the Date of Termination to the
payment of such remainder) as soon as the amount thereof can be determined but
in no event later than the 45th day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by Regions to
Executive, payable on the fifth (5th) business day after demand by Regions
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code from the Date of Termination to the repayment of such excess).
(k) Entire Agreement; Termination of Prior Agreement. Except as
provided herein, this Agreement contains the entire agreement between Regions
and Executive with respect to the subject matter hereof (other than the Regions
Change of Control Agreement) and it supersedes and invalidates any previous
employment or severance agreements or contracts between them, including, without
limitation, the Prior Agreement. No representations, inducements, promises or
agreements, oral or otherwise, that are not
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<PAGE> 14
embodied herein shall be of any force or effect. In the event that the Effective
Date does not occur, the Prior Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment Agreement as of the date first above written.
REGIONS FINANCIAL CORPORATION
By:
-------------------------------
Title:
----------------------------
EXECUTIVE:
------------------------------
Barnett Grace
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<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 64,764,991 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.
ERNST & YOUNG LLP
Birmingham, Alabama /s/ ERNST & YOUNG LLP
June 17, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement/Prospectus of First Commercial Corporation that is made a part
of the Registration Statement (Form S-4)of Regions Financial Corporation for the
registration of approximately 65,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated January 20, 1998 except
for Note 18 as to which the date is February 8, 1998, with respect to the
consolidated financial statements of First Commercial Corporation included 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
Little Rock, Arkansas
June 23, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the use in this Registration Statement on Form S-4 of our
letter to the Board of Directors of First Commercial Corporation included as
Appendix B in the Joint Proxy Statement forming a part of this Registration
Statement on Form S-4 and to all references to our firm in such Joint Proxy
Statement. In giving such consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ KEEFE, BRUYETTE & WOODS, INC.
KEEFE, BRUYETTE & WOODS, INC.
New York, New York
June 18, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter to be dated as of the
date of the Joint Proxy Statement/Prospectus to the Board of Directors of
Regions (the "Company") included in Appendix C to the Joint Proxy
Statement/Prospectus relating to the proposed merger of the Company and First
Commercial, and (ii) the references to such opinion in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ Gail M. Rogers
-------------------------------------
Name: Gail M. Rogers
Title: Managing Director
June 19, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT
I hereby consent to being named as a person chosen to become a director of
Regions Financial Corporation ("Regions") in the Registration Statement on Form
S-4 relating to the merger of First Commercial Corporation into Regions filed
with the Securities and Exchange Commission on or about June 23, 1998.
/s/ Barnett Grace
Barnett Grace
<PAGE> 1
EXHIBIT 23.8
CONSENT
I hereby consent to being named as a person chosen to become a director of
Regions Financial Corporation ("Regions") in the Registration Statement on Form
S-4 relating to the merger of First Commercial Corporation into Regions filed
with the Securities and Exchange Commission on or about June 23, 1998.
/s/ John W. Allison
John W. Allison
<PAGE> 1
EXHIBIT 23.9
CONSENT
I hereby consent to being named as a person chosen to become a director of
Regions Financial Corporation ("Regions") in the Registration Statement on Form
S-4 relating to the merger of First Commercial Corporation into Regions filed
with the Securities and Exchange Commission on or about June 23, 1998.
/s/ Frank D. Hickingbotham
Frank D. Hickingbotham
<PAGE> 1
EXHIBIT 23.10
CONSENT
I hereby consent to being named as a person chosen to become a director of
Regions Financial Corporation ("Regions") in the Registration Statement on Form
S-4 relating to the merger of First Commercial Corporation into Regions filed
with the Securities and Exchange Commission on or about June 23, 1998.
/s/ Michael W. Murphy
Michael W. Murphy
<PAGE> 1
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Joint
Proxy Statement of First Commercial Corporation and Regions Financial
Corporation and the related Registration Statement on Form S-4 of Regions
Financial Corporation and to the incorporation by reference therein of our
report dated January 31, 1997, with respect to the consolidated balance sheet
of Southwest Bancshares, Inc. and subsidiaries as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the two years in the period ended December 31, 1996, which report
is included in the Annual Report on Form 10-K of First Commercial Corporation
for the year ended December 31, 1997, filed with the Securities and Exchange
Commission.
/s/ KEMP & COMPANY
Little Rock, Arkansas
June 16, 1998
<PAGE> 1
EXHIBIT 99.1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered
into as of February 8, 1998, by and between First Commercial Corporation, an
Arkansas corporation ("Issuer"), and Regions Financial Corporation, a Delaware
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Merger, dated as of February 8, 1998 (the "Merger Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee,
with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 7,480,450 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $3.00 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $59.00; provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed the lesser of (i) 19.9% of the Issuer's
issued and outstanding shares of Issuer Common Stock without giving effect to
any shares subject to or issued pursuant to the Option and (ii) that minimum
number of shares of Issuer Common Stock which when aggregated with any other
shares of Issuer Common Stock beneficially owned by Grantee or any Affiliate
thereof would cause the provisions of any Takeover Laws of the ABCA to be
applicable to the Merger. Each Option Share to be issued upon exercise of the
Option shall be accompanied by and be deemed to represent a Preferred Stock
Purchase Right.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event and
prior to the termination of the Option. The Option shall terminate and be of
no further force and effect upon the earliest
<PAGE> 2
to occur of (A) the Effective Time, (B) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event
or a Preliminary Purchase Event (other than a termination of the Merger
Agreement by Grantee pursuant to (i) Section 10.1(b) thereof (but only if such
termination was a result of a willful breach by Issuer) or (ii) Section 10.1(c)
thereof (each a "Default Termination")), (C) 12 months after a Default
Termination, and (D) 12 months after any termination of the Merger Agreement
following the occurrence of a Purchase Event or a Preliminary Purchase Event.
Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 shall terminate when the right
to exercise the Option terminates (other than as a result of a complete
exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer
shall have authorized, recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose, or entered
into an agreement with any person (other than Grantee or any Subsidiary
of Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and transactions involving Issuer or any Subsidiary in which
the voting securities of Issuer outstanding immediately prior thereto
continue to represent (by either remaining outstanding or being converted
into securities of the surviving entity or the parent thereof) at least
75% of the combined voting power of the voting securities of the Issuer
or the surviving entity or the parent thereof outstanding immediately
after the consummation of the transaction), (B) except as permitted
pursuant to Section 7.1 of the Merger Agreement, the disposition, by
sale, lease, exchange or otherwise, of Assets of Issuer or any of its
Subsidiaries representing in either case 20% or more of the consolidated
assets of Issuer and its Subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 20% or more of the
voting power of Issuer or any of its Subsidiaries (any of the foregoing,
an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
the Exchange Act), other than a group of which Grantee or any of its
Subsidiaries is a member, shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 20% or more of the
then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
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<PAGE> 3
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act of 1933, as amended (the "Securities Act") with
respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such
person would own or control 15% or more of the then-outstanding shares of
Issuer Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than
Grantee or any Subsidiary of Grantee) shall have (A) made a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or
filed a registration statement under the Securities Act with respect to
an Exchange Offer, or (C) filed an application (or given a notice),
whether in draft or final form, under any federal or state statute or
regulation (including a notice filed under the HSR Act and an application
or notice filed under the BHC Act, the Bank Merger Act, or the Change in
Bank Control Act of 1978) seeking the Consent to an Acquisition
Transaction from any federal or state governmental or regulatory
authority or agency.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 30 business days from the Notice Date
for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
in connection with such purchase, Issuer shall cooperate with Holder in the
filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total
Profit (as defined below) exceed $130 million and, if it otherwise would
exceed such amount, Holder, at its sole election, shall either (A) reduce
the number of shares of Issuer Common Stock subject to the Option, (B)
deliver to Issuer for cancellation without consideration Option Shares
previously purchased by Holder, (C) pay cash to Issuer, or (D) any
combination of the
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<PAGE> 4
foregoing, so that Holder's actually realized Total Profit (together with
the Total Profit realized by all other Holders) shall not exceed $130
million after taking into account the foregoing actions; and
(ii) the Option be exercised for a number of shares of
Issuer Common Stock as would, as of the date of exercise, result in
Holder's (taking into account all other Holders) Notional Total Profit
(as defined below) of more than $130 million; provided, that nothing in
this clause (ii) shall restrict any exercise of the Option permitted
hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the aggregate sum
(prior to the payment of taxes) of the following: (i) the amount received by
Holder pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 8; (ii) (x) the amount received by Holder pursuant to
Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with respect to any
number of shares of Issuer Common Stock as to which Holder may propose to
exercise the Option shall be the Total Profit determined as of the date of such
proposed exercise, assuming that the Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Holder and its affiliates as of such date, were sold for
cash at the closing sale price per share of Issuer Common Stock as quoted on
the Nasdaq National Market (or, if Issuer Common Stock is not then quoted on
the Nasdaq National Market, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Holder) as of the close of
business on the preceding trading day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any Substitute
Option (as defined below).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of
Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer specified
in Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
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<PAGE> 5
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of
the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF FEBRUARY 8,
1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act; (ii) the references in the above legend to the provisions of
this Agreement shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Issuer. This Agreement has
been duly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and, at all times from the date
hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common Stock
necessary for
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<PAGE> 6
Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities which may be issued
pursuant to Section 7 upon exercise of the Option. The shares of Issuer
Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable pursuant to Section 7, upon issuance pursuant hereto, shall be
duly and validly issued, fully paid, and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and encumbrances
of any kind or nature whatsoever, including any preemptive rights of any
shareholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason
of a stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, if any, so that Holder shall receive, upon exercise
of the Option, the number and class of shares or other securities or property
that Holder would have received in respect of Issuer Common Stock if the Option
had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a) or pursuant to this
Option), the number of shares of Issuer Common Stock subject to the Option
shall be adjusted so that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, shall not exceed the
lesser of (i) 19.9% of the number of shares of Issuer Common Stock then issued
and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option and (ii) that minimum number of shares of Issuer Common
Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the ABCA to be applicable to the Merger.
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<PAGE> 7
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one
of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to
sell or otherwise transfer all or substantially all of its Assets to any
person, other than Grantee or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of Grantee, of either (x)
the Acquiring Corporation (as defined below) or (y) any person that controls
the Acquiring Corporation (in each case, such person being referred to as the
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee. The Substitute Option Issuer
shall also enter into an agreement with the then-holder or holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as hereinafter defined) as is equal
to the Assigned Value (as hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable and
the denominator is the number of shares for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing
or surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (y) Issuer in a merger in which Issuer is the
continuing or surviving person, and (z) the transferee of all or any
substantial part of the Issuer's assets (or the assets of its
Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
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<PAGE> 8
(iii) "Assigned Value" shall mean the highest of (x) the
price per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person (other than Grantee),
(y) the price per share of the Issuer Common Stock to be paid by any
person (other than the Grantee) pursuant to an agreement with Issuer, and
(z) the highest last sale price per share of Issuer Common Stock quoted
on the Nasdaq NMS (or if Issuer Common Stock is not quoted on the Nasdaq
NMS, the highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee) within the
six-month period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by Grantee
(or by a majority in interest of the Grantees if there shall be more than
one Grantee (a "Grantee Majority")) and reasonably acceptable to Issuer,
divided by the number of shares of the Issuer Common Stock outstanding at
the time of such sale. In the event that an exchange offer is made for
the Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized
investment banking firm selected by Grantee and reasonably acceptable to
Issuer (or if applicable, Acquiring Corporation). (If there shall be
more than one Grantee, any such selection shall be made by a Grantee
Majority.)
(iv) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the last sale price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by
Issuer, the person merging into Issuer or by any company which controls
or is controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make
a cash payment to Grantee equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (f)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (f). This difference in value shall be determined by
a nationally recognized investment banking firm selected by Grantee (or a
Grantee Majority) and reasonably acceptable to the Acquiring Corporation.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions
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<PAGE> 9
that may be necessary so that the provisions of this Section 7 are given full
force and effect (including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock are in no way
distinguishable from or have lesser economic value than other shares of common
stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10, and 11 shall apply,
with appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option," "Substitute Purchase Price" and "Substitute Common Stock,"
respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to Section 3(e) and to the last sentence of Section
3(a), at the request of Holder at any time commencing upon the first occurrence
of a Repurchase Event (as defined in Section 8(d)) and ending 18 months
immediately thereafter, Issuer shall repurchase from Holder the Option and all
shares of Issuer Common Stock purchased by Holder pursuant hereto with respect
to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Request Date."
Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any
shares of Issuer Common Stock acquired by Holder pursuant to the Option
with respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
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<PAGE> 10
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If any
governmental or regulatory agency or authority prohibits the repurchase in part
but not in whole, then Holder shall have the right (i) to revoke the repurchase
request or (ii) to the extent permitted by such agency or authority, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at the Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest last
sale price per share of Issuer Common Stock quoted on the Nasdaq NMS (or if
Issuer Common Stock is not quoted on the Nasdaq NMS, the highest bid price per
share as quoted on the principal trading market or securities exchange on which
such shares are traded as reported by a recognized source chosen by Holder)
during the 60 business days preceding the Request Date; provided, however, that
in the event of a sale of less than all of Issuer's Assets, the Applicable
Price shall be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by an
independent nationally recognized investment banking firm selected by Holder
and reasonably acceptable to Issuer (which determination shall be conclusive
for all purposes of this Agreement), divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. If the consideration
to be offered, paid or received pursuant to either of the foregoing clauses (i)
or (ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial
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<PAGE> 11
ownership, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 50% or more of the then-outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
7(b)(ii), or 7(iii) shall be consummated.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of subparagraph (c)
below, if requested by any Holder, including Grantee and any permitted
transferee ("Selling Holder"), as expeditiously as possible prepare and file a
registration statement under the Securities Laws if necessary in order to
permit the sale or other disposition of any or all shares of Issuer Common
Stock or other securities that have been acquired by or are issuable to Selling
Holder upon exercise of the Option in accordance with the intended method of
sale or other disposition stated by Holder in such request (it being understood
and agreed that any such sale or other disposition shall be effected on a
widely distributed basis so that, upon consummation thereof, no purchaser or
transferee shall beneficially own more than 5% of the shares of Issuer Common
Stock then outstanding), including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other
securities for sale under any applicable state securities laws. Each such
Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the Option, but
prior to the termination of the Option, proposes to register any shares of
Issuer Common Stock under the Securities Laws in connection with an
underwritten public offering of such Issuer Common Stock, Issuer will promptly
give written notice to Holder of its intention to do so and, upon the written
request of Holder given within 30 days after receipt of any such notice (which
request shall specify the number of shares of Issuer Common Stock intended to
be included in such underwritten public offering by Selling Holder), Issuer
will use all reasonable efforts to cause all such shares, the holders of which
shall have requested participation in such registration, to be so registered
and included in such underwritten public offering; provided, that Issuer may
elect to not cause any such shares to be so registered (i) if the underwriters
in good faith determine that the inclusion of such shares would interfere with
the successful marketing of the shares of Issuer Common Stock for the account
of Issuer, or (ii) in the case of a registration solely to implement a dividend
reinvestment or similar plan, an employee benefit plan or a registration filed
on Form S-4 or any successor form, or a registration filed on a form which does
not permit registrations of resales; provided, further, that such election
pursuant to clause (i) may only be made once. If some but not all the shares
of Issuer Common Stock, with respect to which Issuer shall have received
requests for registration pursuant to this subparagraph (b), shall be excluded
from such registration, Issuer shall make appropriate allocation of shares to
be registered among Selling Holders and any other person (other than Issuer or
any person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock
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<PAGE> 12
registered for sale (other than Issuer or any person exercising demand
registration rights in connection with such registration).
(c) Issuer shall use all reasonable efforts to cause the
registration statement referred to in subparagraph (a) above to become
effective and to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement effective, provided,
that Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days, provided Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer.
Notwithstanding anything to the contrary contained herein, Issuer shall not be
required to register Option Shares under the Securities Laws pursuant to
subparagraph (a) above:
(i) prior to the occurrence of a Purchase Event and
following the termination of the Option;
(ii) more than twice;
(iii) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which the
Selling Holders concerned were afforded the opportunity to register such
shares under the Securities Laws and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by
Selling Holders holding at least 15% or more of the aggregate number of
Option Shares then outstanding or the right to acquire at least 15% of
the Option Shares.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after the
expiration of 120 days from the effective date of such registration statement.
Issuer shall use all reasonable efforts to make any filings, and take all
steps, under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares, provided,
that Issuer shall not be required to consent to general jurisdiction or qualify
to do business in any state where it is not otherwise required to so consent to
such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses
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<PAGE> 13
incurred by such Selling Holders in connection with any such registration
(including expenses of Selling Holders' counsel) shall be borne by such
Selling Holders.
(e) In connection with any registration under subparagraph (a)
or (b) above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
prospectus (including any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission to state therein a 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, except insofar as
such expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement or any omission
or alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement or omission made in reliance
upon, and in conformity with, information furnished in writing to Issuer by
such holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of
such action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this subparagraph (e), except to the extent such failure to notify
materially prejudices the indemnifying party. In case notice of commencement
of any such action shall be given to the indemnifying party as above provided,
the indemnifying party shall be entitled to participate in and, to the extent
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense of such action at its own expense, with counsel chosen by it
and reasonably satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
(other than reasonable costs of investigation) shall be paid by the indemnified
party unless (i) the indemnifying party either agrees to pay the same, (ii) the
indemnifying party falls to assume the defense of such action with counsel
satisfactory to the indemnified party, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and expenses
of such counsel; provided, however, that the indemnifying party shall not be
liable for the expenses of more than one firm of counsel for all indemnified
parties in any jurisdiction. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
- 13 -
<PAGE> 14
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein, then
the indemnifying party, in lieu of indemnifying such party otherwise entitled
to be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all Selling Holders and the underwriters from the
offering of the securities and also the relative fault of Issuer, all Selling
Holders and the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The amount paid or
payable by a party as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess
of the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall use its best efforts to comply with all
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by Holder in
accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rules
144 and 144A.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq NMS or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq NMS or any other securities exchange or any
automated quotations system maintained by a self-regulatory organization and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of
- 14 -
<PAGE> 15
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h) and other than
as provided in the Merger Agreement) any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or a federal or state governmental or regulatory
agency or authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Holder to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and
8 (as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard
to any applicable conflicts of law rules.
- 15 -
<PAGE> 16
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the addresses set forth in the
Merger Agreement(or at such other address for a party as shall be specified by
like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
(k) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that
this Agreement supersedes any provision of the Confidentiality Agreements that
could be interpreted to preclude the exercise of any rights or the fulfillment
of any obligations under this Agreement, and that none of the provisions
included in the Confidentiality Agreements will act to preclude Holder from
exercising the Option or exercising any other rights under this Agreement or
act to preclude Issuer from fulfilling any of its obligations under this
Agreement.
- 16 -
<PAGE> 17
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
<TABLE>
<S> <C>
ATTEST: FIRST COMMERCIAL CORPORATION
By: /s/ Donna Rogers By: /s/ C. Barnett Grace
------------------------------------------ ----------------------------------------------
Donna Rogers C. Barnett Grace
Secretary Chairman, President, and
Chief Executive Officer
[CORPORATE SEAL]
ATTEST: REGIONS FINANCIAL CORPORATION
By: /s/ Samuel E. Upchurch, Jr. By: /s/ Carl E. Jones, Jr.
------------------------------------------ ----------------------------------------
Samuel E. Upchurch, Jr. Carl E. Jones, Jr.
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
- 17 -
<PAGE> 1
FIRST COMMERCIAL CORPORATION
400 WEST CAPITOL AVENUE
LITTLE ROCK, ARKANSAS 72201
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Guy Amsler, Jr. and James H Rice, Jr., and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each to represent and to vote, as designated on the reverse
side, all the shares of common stock of First Commercial Corporation ("First
Commercial") held of record by the undersigned, at the Special Meeting of
Stockholders to be held at the DoubleTree Hotel, Grand Ballroom, 424 West
Markham Street, Little Rock, Arkansas 72201 at 2:00 p.m., local time on July 28,
1998, or any adjournment thereof.
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
1. To approve the Agreement and Plan of Merger, dated as of February 8, 1998
(the "Agreement"), by and between First Commercial and Regions Financial
Corporation ("Regions"), pursuant to which (a) First Commercial will merge
with and into Regions (the "Merger") and (ii) each share of common stock of
First Commercial, par value $3.00 per share, issued and outstanding
immediately prior to the effective time of the Merger (with certain
exceptions) will be converted into 1.7 shares of common stock of Regions,
par value $0.625 per share, subject to possible adjustment, and cash in lieu
of any fractional share interests, all as described more fully in the Joint
Proxy Statement/ Prospectus date , 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion on such other business as may properly come before the
meeting or any adjournment thereof.
(Continued and to be signed on other side)
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and after notification to the Corporate Secretary
of First Commercial at the meeting of the stockholder's decision to terminate
this proxy, then this proxy shall be deemed terminated and of no further force
and effect. This proxy may also be revoked by submission of a properly executed
subsequently dated proxy or by written notice to First Commercial for receipt
prior to the Special Meeting.
Dated: , 1988
------------------
------------------------------
(Signature)
------------------------------
(Signature if held jointly)
Please sign exactly as your
name appears on this card.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If shares are
held jointly, each holder must
sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
<PAGE> 1
REGIONS FINANCIAL CORPORATION
P.O. BOX 10247
BIRMINGHAM, ALABAMA 35202-0247
Regions stockholders can now vote their shares over either the telephone or the
internet. This eliminates the need to return the proxy card. To vote your shares
over the telephone or the internet you must have your proxy card and SSN
available. The series of numbers that appear in the box above must be used to
access the system.
1. To vote over the telephone: On a touch-tone telephone call 1-800-OK2-VOTE
(1-800-652-8683), 24 hours a day, seven days a week.
2. To vote over the internet: Log on to the internet and go to the website
http://www.vote-by-net.com.
Your vote over the telephone or the internet authorizes the named proxies in
the same manner as if you marked, signed, dated and returned your proxy card. If
you choose to vote your shares over the telephone or the internet, there is no
need for you to mail back the proxy card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Stanley Mackin and Richard D. Horsley, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each to represent and to vote, as designated on the reverse
side, all the shares of common stock of Regions Financial Corporation
("Regions") held of record by the undersigned, at the Annual Meeting of
stockholders to be held , 1998, or any adjournment thereof. This card
also constitutes voting instructions for all shares beneficially owned and
votable, if any, by the undersigned as a participant in the Regions Financial
Corporation Dividend Reinvestment Plan, Employee Stock Purchase Plan, Employee
Profit Sharing Plan and/or Directors Stock Investment Plan and held of record by
the administrators and trustees of such Plans. IF NO DIRECTION IS MADE AS TO THE
MANNER OF VOTING, THE PROXY WILL BE VOTED FOR ITEMS ONE AND THREE AND FOR THE
ELECTION OF DIRECTORS.
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEM 1, THE NOMINEES LISTED IN ITEM 2, AND FOR ITEM 3.
1. Proposal to approve the Agreement and Plan of Merger, dated as of February 8,
1998 (the "Agreement"), by and between Regions and First Commercial
Corporation ("First Commercial") pursuant to First Commercial will merge with
and into Regions and each share of First Commercial's common stock (except
for certain shares held by First Commercial, Regions, or their respective
subsidiaries, and shares held by stockholders of First Commercial who perfect
their dissenters' rights) will be converted into 1.7 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
(Continued and to be signed on reverse side)
(Continued from other side)
2. Election of Directors
To elect the three nominees for director of Regions listed below:
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
------------------------------------------------------------------------------
Carl E. Jones, Jr., Henry E. Simpson, and Robert J. Williams
3. Proposal to approve the proposed amendment to the Certificate of
Incorporation increasing the number of authorized shares of common stock, par
value $.625, from 240,000,000 to 500,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion on such other business as may properly come before the
meeting or any adjournments thereof.
Should the undersigned be present and elect to vote at the Annual Meeting or
at any adjournment thereof and after notification to the Secretary of Regions at
the meeting of the stockholder's decision to terminate this proxy, then this
proxy shall be deemed terminated and of no further force and effect. This proxy
may also be revoked by submission of a properly executed subsequently dated
proxy or by written notice to Regions for receipt prior to the Annual Meeting.
Please sign exactly as your
name appears on this card.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If shares are
held jointly, each holder must
sign.
Please complete, date, sign
and mail this proxy promptly
in the enclosed
postage-prepaid envelope.
Date , 1998
-------------------
------------------------------
------------------------------
Signature(s)
<PAGE> 1
EXHIBIT 99.4
Telephone and Internet Voting Instructions
Holders of record of Regions common stock now have the option to vote by
telephone or over the Internet. Any such holder desiring to vote by telephone or
over the Internet will be required to enter the unique control number imprinted
on such holder's Regions proxy card, and therefore should have the proxy card in
hand before initiating the telephonic or Internet session.
- -- To vote by telephone, dial 1-800-OK2-VOTE (1-800-652-8683) on a touch
tone telephone, and follow the simple menu instructions provided. There is no
charge for this call.
- -- To vote by Internet, log on to the website http://www.vote-by-net.com and
follow the instructions provided.
The telephone and Internet voting procedures are designed to authenticate
Regions stockholders' identities, to allow Regions stockholders to give their
voting instructions, and to confirm that Regions stockholders' instructions have
been recorded properly. Regions has been advised by counsel that the procedures
that have been put in place for telephone and Internet voting are consistent
with the requirements of applicable law. Stockholders who wish to vote over the
Internet should be aware that there may be costs associated with electronic
access, such as usage charges by Internet access providers or telephone
companies, and that there may be some risk a stockholder's vote may not be
properly recorded or counted because of an unanticipated electronic malfunction.
