UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 20, 2005
REGIONS FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-6159 63-0589368
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
417 North 20th Street, Birmingham, Alabama 35203
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(Address of principal executive offices) (Zip code)
(205) 944-1300
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A DEFINITIVE MATERIAL AGREEMENT
Acceleration of Unvested Nonqualified Options
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Effective December 20, 2005, the compensation committee of the board of
directors of Regions Financial Corporation ("Regions" or the "Company") approved
the acceleration of vesting of unvested nonqualified stock options outstanding
as of such date, subject to possible exceptions. Absent the acceleration of
vesting, the unvested options would have become exercisable in 2006 through
2008, depending on the date of grant. Holders of the unvested nonqualified
options include the executive officers of the Company.
The number of shares and exercise prices of the options subject to the
acceleration are unchanged, and the remaining terms for each of such options
remain the same. Generally, options that were granted as incentive stock options
(ISOs) are not being accelerated, because of tax considerations applicable to
ISOs. A limited number of ISOs may be accelerated, with the consent of the
holder.
In the case of options held by certain executives or key employees of Regions,
generally those who were employed by Regions prior to the combination of Regions
and Union Planters Corporation and having a prior employment agreement or change
of control agreement with Regions, the accelerated vesting is contingent on the
holder entering into a career award agreement, as described below.
Regions will adopt Financial Accounting Standard Board Statement No. 123R
("Share-based Payment") effective on January 1, 2006. The decision to accelerate
the vesting of the unvested nonqualified options primarily was made to reduce
noncash compensation expense that would otherwise have been recorded in Regions'
financial statements in future periods, in accordance with Statement No. 123R.
Assuming all affected executives and key employees enter into career award
agreements, the expense that otherwise would have been recorded in future
periods, absent the accelerated vesting, is approximately $14.7 million
(pre-tax). Regions believes the decision to accelerate the unvested nonqualified
options is in the best interests of the Company, its shareholders, and the
option holders.
The acceleration of vesting affects 4,452,842 outstanding nonqualified stock
options, including 701,619 options held by the named executive officers listed
in the summary compensation table in Regions' 2005 proxy statement. The options
being accelerated have exercise prices ranging from $25.66 to $35.29, with a
weighted average exercise price of $31.96. The average of the high and low
prices for Regions common stock quoted on the New York Stock Exchange on
December 20, 2005 was $34.655.
Employment and Change of Control Arrangements
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Generally, the senior executive officers and other key officers of Regions who
were officers of Regions prior to its combination with Union Planters
Corporation ("legacy Regions officers") have had agreements that provided them
protections in the event of a change of control of Regions. The terms and
conditions of such agreements varied depending on the level of the officer's
title and responsibilities, and provided similar but not identical protection in
the event of a change of control.
Consistent with current trends in executive compensation and corporate
governance matters, Regions is modifying its approach to change of control
arrangements. To effect the transition from Regions' existing change of control
structure, and as consideration for the legacy Regions officers' agreement to
surrender certain of their existing contractual rights, Regions has initiated a
program that it has designated the "career award program." Accordingly, in
December, 2005, Regions and many of its officers revised and reworked the
existing change of control arrangements by entering into new agreements styled
"career award agreements", and, in the case of Regions' most senior executives,
including those who are not legacy Regions officers, new change of control
agreements.
The following discussion addresses the agreements and arrangements, and the
modifications to the prior agreements and arrangements, between Regions and its
affected "named executive officers," and other affected "executive officers,"
both as defined for purposes of Regions' periodic reporting requirements under
the Securities Exchange Act of 1934. A group of senior legacy Regions executive
officers had employment agreements with Regions that generally provided three
years of change of control protection and a multiplier of three applicable to
computing a change of control payment ("three year agreements"). Other of
Regions' executive officers had change of control agreements with two year
protection and a multiplier of two ("two year agreements").
Together, the form of career award agreement and the form of the new change of
control agreement implement the following with respect to the executive officers
who are legacy Regions officers and who enter into a career award agreement:
-- The new change of control agreement replaces and supersedes the existing
employment agreement or change of control agreement.
-- The executive officer has waived and surrendered the up-coming election
window period during which the executive could have terminated employment and
received the change of control payments due under his prior employment agreement
or change of control agreement by virtue of a termination for good reason. The
election window period had arisen because the combination of Regions with Union
Planters Corporation on July 1, 2004, was a change of control under the prior
agreement.
-- Regions has agreed to grant to the executive officer a specified number of
shares of restricted stock under a long term incentive plan. The restricted
stock will have 5-year cliff vesting, with accelerated vesting in the event of
death, disability, retirement at or after a specified age or retirement with
written consent of Regions, or involuntary termination without cause. Dividends
will be payable on the restricted stock during the restriction period so long as
the executive remains employed by Regions.
-- If executive's employment is terminated by Regions without cause, and if
the executive is not otherwise entitled to payment under his change of control
agreement, Regions will pay a lump sum severance payment equal to the
executive's annual base salary in effect on the date of termination, or equal to
two times such amount, depending on whether the executive had a two year
agreement or a three year agreement.
Each of the new change of control agreements provides certain protections in the
event a "change of control" of Regions occurs. For this purpose, the agreement
defines "change of control" to include, generally, the acquisition by any person
or group of beneficial ownership of more than 50% of the combined voting power
of Regions; a change in composition of the board of directors such that
incumbent directors make up less than a majority of the board; completion of a
merger, consolidation or reorganization (subject to exceptions for certain
noncontrol transactions); and a liquidation or dissolution of Regions or sale of
all or substantially all of its assets.
Commencing on the date of a change of control and for the two year period
following, Regions may terminate the employment of the executive officer
signatory with or without "cause," which is defined generally as willfully
failing to perform reasonably assigned duties, breach of fiduciary duty
involving personal profit, commission of a felony or a crime involving fraud or
moral turpitude, or engaging in illegal conduct or gross misconduct that
materially injures Regions. The executive officer may terminate employment with
or without "good reason," which includes a reduction of the officer's
compensation, benefits, duties or status, a forced relocation of more than 35
miles, or other material breach of the agreement by Regions.
During such period, if Regions terminates the executive officer's employment
other than for cause, or if the officer resigns for good reason, Regions must
pay him accrued compensation and benefits plus an amount equal to two times the
sum of his base salary and highest annual bonus during the three years preceding
the year in which the change of control occurred or the year preceding the year
in which the termination occurs. If the executive officer's employment is
terminated by Regions for cause, or by reason of the officer's death,
disability, or resignation other than for good reason, Regions' liability is
limited to accrued compensation and benefits.
If the executive officer disputes the existence of cause, he is entitled to have
the determination reviewed by Regions' compensation committee or a review panel
appointed by the committee. Likewise, Regions is entitled to a thirty day period
to cure any claimed event of good reason.
If any payment under the agreement causes the signatory executive officer to
become subject to the excise tax imposed under section 4999 of the Internal
Revenue Code, then Regions must make an additional payment sufficient to cover
such excise tax plus all income and excise tax imposed on such additional
payment.
The new form of change of control agreement modified the prior change of control
protections contractually afforded to the legacy Regions executive officers who
were party to a three year agreement principally in the following respects:
-- The new form of agreement protects for a period of two years following a
change of control, compared to three years under the prior agreement.
-- The new form of agreement, in case of termination following change of
control by Regions for cause or by the executive officer for good reason,
provides for a payment of two times the sum of annual base salary and bonus,
compared to a multiple of three under the prior agreement.
-- Under the new form of agreement, the definition of good reason does not
include any election window period during which the executive officer can elect
to terminate employment and recover the multiple change of control payment.
-- The new form of agreement has a definition of good cause that is less
expansive in certain other respects.
In addition to legacy Regions executive officers, Regions has entered into the
new form of change of control agreement with other of its senior executives.
Four executive officers of Regions have entered into particularized agreements.
The individualized aspects of their agreements are described immediately
following.
Richard D. Horsley is retaining his existing employment agreement instead of
entering into the new form of change of control agreement. However, Regions and
Mr. Horsley have agreed that for purposes of the employment agreement, with
reference to the change of control event occasioned by the combination of
Regions and Union Planters Corporation, he has waived the provisions of the
agreement applicable to termination of employment for good reason, except
reduction of annual base salary and bonus and forced relocation. Further,
Regions and Mr. Horsley have agreed that he is presently eligible for full
retirement, and if Mr. Horsley retires at or after age 65, his career share
restricted stock award and any other unvested equity awards will vest upon
retirement, and the term of unexercised stock options will be extended beyond
their normal 90 day exercise period following retirement to their original term.
Peter D. Miller has agreed with the Company that he will be eligible for
retirement on or after December 31, 2008, and if he retires on or after such
date, his career share restricted stock award will vest upon retirement.
David C. Gordon has agreed with the Company that he will be eligible for
retirement at or after age 60, and if he retires at or after age 60, his career
share restricted stock award and any other unvested equity awards will vest upon
retirement, and the term of unexercised stock options will be extended beyond
their normal 90 day exercise period following retirement to their original term.
John M. Daniel's change of control agreement provides for three years of change
of control protection and provides for a change of control payment of three
times the sum of annual base salary and bonus.
Included as exhibits to this Form 8-K are the forms of the listed agreements
entered into between Regions and the following executive officers:
William E. Askew, career award agreement and change of control agreement.
John M. Daniel, change of control agreement.
Robert A. Goethe, career award agreement and change of control agreement.
David C. Gordon, career award agreement and change of control agreement.
Richard D. Horsley, career award agreement.
D. Bryan Jordan, career award agreement and change of control agreement.
Peter D. Miller, career award agreement and change of control agreement.
Andrew W. Stein, career award agreement and change of control agreement
Samuel E. Upchurch, Jr., career award agreement and change of control agreement.
Steve R. Vinson, career award agreement and change of control agreement.
Long Term Incentive Plan Awards
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The compensation committee approved long term incentive plan awards with a grant
date of December 20, 2005, to a number of officers and key employees of Regions,
including senior executive officers. The awards took the form of stock options,
shares of restricted stock, and performance restricted stock awards.
In the case of awards approved for a legacy Regions officer who is offered the
career award opportunity as described above, the award is contingent on the
recipient entering into a career award agreement.
The stock options were granted with a term of seven years and an exercise price
of $34.655. The options become exercisable over a three year period, with 1/3
exercisable after 12 months, 1/3 exercisable after 24 months, and 1/3
exercisable after 36 months, 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.
The restricted stock awards will vest ratably at the end of each year in a three
year period, conditioned on the recipient's continued service. Dividends are
payable during the restriction period on the restricted stock awarded.
The performance restricted stock awards provide for the granting of restricted
stock in 2007 and 2008 based on the Company's achievement of company-wide
performance goals, which relate to earnings per share for 2006 and earnings per
share growth relative to peers in 2007. There is designated for each recipient a
maximum award expressed in number of shares. The restricted stock will be
granted only if the Company attains the threshold level of the performance
goals, and, if awarded, could vary from 25% to 100% of the maximum award
depending on the level of goal attainment. If awarded, the restricted stock will
vest ratably at the end of each year in a three year period.
Listed below are the long term incentive awards that were granted to "executive
officers" of Regions and that are not contingent, either because the recipient
was not in the group subject to the career award initiative or because the
recipient has entered into a career award agreement.
William E. Askew -- 45,147 stock options; 5,914 shares of restricted stock;
7,394 performance restricted shares.
John M. Daniel -- 39,504 stock options; 5,175 shares of restricted stock; 5,546
performance restricted shares.
Robert A. Goethe -- 39,504 stock options; 5,175 shares of restricted stock;
5,546 performance restricted shares.
David C. Gordon -- 53,612 stock options; 7,023 shares of restricted stock; 8,318
performance restricted shares.
H. Lynn Harton -- 50,791 stock options; 6,653 shares of restricted stock; 7,394
performance restricted shares.
Richard D. Horsley --112,867 stock options; 14,785 shares of restricted stock;
18,485 performance restricted shares.
D. Bryan Jordan -- 79,007 stock options; 10,349 shares of restricted stock;
12,940 performance restricted shares.
Peter D. Miller -- 56,434 stock options; 7,393 shares of restricted stock; 9,243
performance restricted shares.
Steve J. Schenck -- 56,434 stock options; 7,393 shares of restricted stock;
9,243 performance restricted shares.
Andrew W. Stein -- 45,147 stock options; 5,914 shares of restricted stock; 9,243
performance restricted shares.
Samuel E. Upchurch, Jr. -- 79,007 stock options; 10,349 shares of restricted
stock; 12,940 performance restricted shares.
Steve R. Vinson -- 39,504 stock options; 5,175 shares of restricted stock; 5,546
performance restricted shares.
John V. White, Jr. -- 56,434 stock options; 7,393 shares of restricted stock;
9,243 performance restricted shares.
Recipients of the long term incentive plan awards must enter into an appropriate
award agreement in the form approved by the compensation committee. Included as
exhibits to this Form 8-K are the current forms of the following agreements:
Award agreement for incentive stock options.
Award agreement for nonqualified stock options.
Award agreement for restricted stock awards.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The exhibits listed in the exhibit index are filed as a part
of this current report on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REGIONS FINANCIAL CORPORATION
(Registrant)
By: /s/ D. Bryan Jordan
D. Bryan Jordan
Executive Vice President and Chief
Financial Officer
Date: December 22, 2005
INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Form of change of control agreement between registrant and
various officers, including executive officers William E. Askew,
David C. Gordon, Robert A. Goethe, D. Bryan Jordan, Peter D.
Miller, Andrew W. Stein, Samuel E. Upchurch, Jr., and Steve R.
Vinson, dated as of December 14, 2005 and executed December 20,
2005, by registrant and each of such parties as a separate
agreement.
99.2 Change of control agreement between registrant and John M.
Daniel, dated as of December 16, 2005, and executed December 20,
2005.
99.3 Form of career award agreement between registrant and various
officers, including executive officers William E. Askew, D. Bryan
Jordan, Robert A. Goethe, Samuel E. Upchurch, Jr., and Steve R.
Vinson dated as of December 20, 2005, and executed by registrant
and each of such parties as a separate agreement.
99.4 Career award agreement between registrant and Richard D. Horsley,
dated and executed as of December 20, 2005.
99.5 Career award agreement between registrant and David C. Gordon,
dated and executed as of December 20, 2005.
99.6 Career award agreement between registrant and Peter D. Miller,
dated and executed as of December 20, 2005.
99.7 Career award agreement between registrant and Andrew W. Stein,
dated and executed as of December 20, 2005.
99.8 Form of Regions Financial Corporation career award severance
arrangement effective December 20, 2005.
99.9 Form of award agreement for incentive stock options granted under
Regions Financial Corporation 1999 Long Term Incentive Plan.
99.10 Form of award agreement for nonqualified stock options granted
under Regions Financial Corporation 1999 Long Term Incentive
Plan.
99.11 Form of award agreement for restricted stock awards granted under
Regions Financial Corporation 1999 Long Term Incentive Plan.