AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1998
REGISTRATION NO. 333 - 61539
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SUNTRUST BANKS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
GEORGIA 6711 58-1575035
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 588-7711
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------
RAYMOND D. FORTIN
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 588-7711
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C> <C>
C. WILLIAM BAXLEY LATHAN M. EWERS, JR. WILLIAM S. RUBENSTEIN
KING & SPALDING HUNTON & WILLIAMS SKADDEN, ARPS, SLATE, MEAGHER &
191 PEACHTREE STREET 951 EAST BYRD STREET FLOM LLP
ATLANTA, GEORGIA 30303 P.O. BOX 1535 919 THIRD AVENUE
(404) 572-4600 RICHMOND, VIRGINIA 23219 NEW YORK, NEW YORK 10022
(804) 788-8200 (212) 735-3000
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable following the effectiveness of this Registration
Statement.
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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
[SunTrust Logo] [Crestar Logo]
MERGER PROPOSED
Dear Fellow Shareholders,
The Boards of Directors of SunTrust Banks, Inc. and Crestar Financial
Corporation have agreed on a merger transaction which will result in the
acquisition of Crestar by SunTrust. This merger will create the tenth largest
bank holding company, measured by total assets, in the United States. The
combined company will have expanded geographic operations in six states and
Washington, D.C. and will be better positioned to be a strong competitor in the
rapidly changing and consolidating financial services industry.
If you approve the merger, Crestar will become a wholly owned subsidiary
of SunTrust and Crestar shareholders will receive 0.96 shares of SunTrust
common stock for each share of Crestar common stock they own. SunTrust
shareholders will continue to hold their existing shares of SunTrust common
stock after the merger. We estimate that, upon completion of the merger,
approximately 34% of the outstanding SunTrust common stock will be owned by
current Crestar shareholders and approximately 66% will be owned by persons who
are SunTrust shareholders just before the merger is completed. After the merger,
SunTrust senior management intends to recommend to the SunTrust board, which
will include four current Crestar directors, that the annual dividend on
SunTrust common stock be increased to $1.32 per share, effective as of the first
quarterly dividend date to occur after the merger.
AFTER CAREFUL CONSIDERATION THE BOARDS OF DIRECTORS OF SUNTRUST AND
CRESTAR HAVE DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THEIR
RESPECTIVE SHAREHOLDERS, AND EACH BOARD UNANIMOUSLY RECOMMENDS VOTING FOR
APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS PROVIDED FOR IN THE
MERGER AGREEMENT.
YOUR VOTE IS VERY IMPORTANT. We cannot complete the merger unless the
shareholders of both companies approve the merger agreement and, in the case of
SunTrust, the issuance of SunTrust common stock in the merger.
We have each scheduled special meetings for our shareholders to vote on
the merger agreement. Whether or not you plan to attend your shareholder
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. Crestar shareholders also may vote by telephone by calling
1-800-840-1208 (complete instructions are on your proxy card). If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote in favor of the transaction. If you do not
return your card (or, in the case of Crestar shareholders, you do not return
your card or vote by telephone), the effect will be a vote against the merger.
If your shares are held in "street name," you must instruct your broker in
order to vote.
The dates, times and places of the special meetings are as follows:
For SunTrust shareholders:
November 19, 1998, 10:00 a.m.
Room 10
SunTrust Bank, Atlanta Tower
25 Park Place, N.E.
Atlanta, Georgia
For Crestar shareholders:
November 19, 1998, 10:00 a.m.
Crestar Center
4th Floor Auditorium
919 East Main Street
Richmond, Virginia
The document accompanying this letter contains additional information
regarding the merger agreement, the proposed merger and the two companies. We
encourage you to read this entire document carefully. You can also obtain more
information about SunTrust and Crestar in documents we have filed with the
Securities and Exchange Commission.
We strongly support this strategic combination between SunTrust and
Crestar and appreciate your prompt attention to this very important matter.
<TABLE>
<S> <C>
L. Phillip Humann Richard G. Tilghman
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
SunTrust Banks, Inc. Crestar Financial Corporation
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1998
AND IT IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT , 1998.
<PAGE>
SUNTRUST BANKS, INC.
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On November 19, 1998
A Special Meeting of Shareholders of SunTrust Banks, Inc. ("SunTrust")
will be held on November 19, 1998, at 10:00 a.m., at Room 10, SunTrust Bank,
Atlanta Tower, 25 Park Place, N.E., Atlanta, Georgia, for the following
purposes:
(1) To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger (the "Merger Agreement"),
dated as of July 20, 1998, by and among SunTrust, Crestar Financial
Corporation ("Crestar") and SMR Corporation (Va.), a wholly owned
subsidiary of SunTrust ("Sub"), and the transactions contemplated
thereby, including the merger of Sub with and into Crestar (the
"Merger") and the issuance of shares of common stock, par value $1.00
per share, of SunTrust pursuant to the Merger (the "Stock Issuance");
and
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement of the meeting.
THE SUNTRUST BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SUNTRUST
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT
AND THE STOCK ISSUANCE. PLEASE READ THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS FOR A DETAILED DESCRIPTION OF THE PROPOSAL.
Only holders of record of SunTrust common stock as of the close of
business on September 25, 1998, are entitled to notice of and to vote at the
Special Meeting and any adjournments or postponements of the meeting. SunTrust
will make available at the Special Meeting a list of shareholders entitled to
vote at the meeting for examination by any shareholder, his agent or his
attorney.
We direct your attention to the documents submitted with this Notice.
By Order of the Board of
Directors
Raymond D. Fortin
Corporate Secretary
Atlanta, Georgia
, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE URGE
YOU TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE
MANNER PROVIDED IN THE ACCOMPANYING DOCUMENT.
<PAGE>
[CFC Letterhead]
[Crestar Logo]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 1998
A Special Meeting of shareholders of Crestar Financial Corporation
("Crestar") will be held at 10:00 a.m. on November 19, 1998 at Crestar Center,
4th Floor Auditorium, 919 East Main Street, Richmond, Virginia to consider the
following matters:
(1) The proposal to approve the Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement") dated as of July 20, 1998, by and among
Crestar, SunTrust Banks, Inc. and SMR Corporation (Va.), a wholly owned
subsidiary of SunTrust ("Sub"), which agreement provides for Sub to
merge with and into Crestar; and
(2) Any other business properly brought before the Special Meeting or any
adjournment or postponement thereof.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
APPROVAL OF THE MERGER AGREEMENT.
Only Crestar shareholders of record at the close of business on September
25, 1998 are entitled to notice of, and to vote at, this Special Meeting and
any adjournments or postponements thereof. A list of shareholders entitled to
vote will be available at Crestar's offices for a period of ten days prior to
the Special Meeting, as well as at the Special Meeting, for examination by any
shareholder, his agent or his attorney.
Your attention is directed to the Joint Proxy Statement/Prospectus
delivered with this Notice.
By Order of the Board of Directors
Linda F. Rigsby
Corporate Secretary
Richmond, Virginia
, 1998
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON,
YOU ARE URGED TO VOTE PROMPTLY BY CALLING 1-800-840-1208 OR BY DATING, SIGNING
AND RETURNING THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOU MAY REVOKE
YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER PROVIDED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS CRESTAR BEING ACQUIRED BY SUNTRUST?
A: Both the Crestar Board and the SunTrust Board believe the Merger is in the
best interests of their respective companies and will provide significant
benefits to their respective shareholders, customers and employees. The Boards
believe the Merger will create a company with enhanced financial performance
which will be better positioned to be a strong competitor in the rapidly
changing and consolidating financial services industry. To review the
background and reasons for the Merger in greater detail, see pages 17 through
22.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: CRESTAR SHAREHOLDERS. Crestar Shareholders will receive 0.96 shares of
SunTrust Common Stock in exchange for each share of Crestar Common Stock they
hold. This is the "Exchange Ratio."
SunTrust will not issue fractional shares in the Merger. Instead, Crestar
Shareholders will receive a cash payment, without interest, for the value of
any fraction of a share of SunTrust Common Stock that they would otherwise be
entitled to receive based upon the market value (as determined in the Merger
Agreement) of a share of SunTrust Common Stock at the time of the Merger.
The SunTrust Common Stock and cash in lieu of fractional shares that
Crestar Shareholders are entitled to receive in the Merger are referred to as
the "Merger Consideration."
SUNTRUST SHAREHOLDERS. Each share of SunTrust Common Stock held by
SunTrust Shareholders will continue to represent one share of SunTrust Common
Stock following the Merger. After the Merger, Crestar's former shareholders
will own approximately 34% of SunTrust's outstanding shares of Common Stock and
current SunTrust Shareholders will own approximately 66% of SunTrust's
outstanding shares of Common Stock.
FOR EXAMPLE:
o IF YOU OWN 100 SHARES OF CRESTAR COMMON STOCK, THEN AFTER THE
MERGER YOU WILL RECEIVE 96 SHARES OF SUNTRUST COMMON STOCK.
o IF YOU OWN 10 SHARES OF CRESTAR COMMON STOCK, THEN AFTER THE
MERGER YOU WILL RECEIVE 9 SHARES OF SUNTRUST COMMON STOCK AND A CHECK FOR
THE MARKET VALUE OF 0.6 TIMES THE MARKET VALUE OF ONE SHARE OF SUNTRUST
COMMON STOCK.
o IF YOU OWN 100 SHARES OF SUNTRUST COMMON STOCK, THEN AFTER THE
MERGER THOSE SHARES WILL CONTINUE TO REPRESENT 100 SHARES OF SUNTRUST
COMMON STOCK.
Q: WHAT WILL MY DIVIDENDS BE AFTER THE MERGER?
A: After the Merger, SunTrust senior management intends to recommend to the
SunTrust Board, which will include four current Crestar directors, that the
annual dividend on SunTrust Common Stock be increased to $1.32 per share,
effective as of the first quarterly dividend date to occur after the Merger.
$1.32 is the amount that Crestar has recently paid as a regular annual dividend
to its shareholders. This amounts to a pro forma equivalent dividend per share
for current Crestar Shareholders of $1.2672. SunTrust cannot, however, assure
these payments. The SunTrust Board will use its discretion to decide whether
and when to declare dividends and in what amount, and it will consider all
relevant factors in doing so.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "Risk Factors" on page 12.
You should also review the factors considered by each
company's Board of Directors. See "The Merger -- Background of and Reasons for
the Merger" (page 17).
Q: WHAT HAPPENS AS THE MARKET PRICE OF SUNTRUST COMMON STOCK FLUCTUATES?
A: The Exchange Ratio is fixed at 0.96. Since the market value of SunTrust
Common Stock will fluctuate before and after the closing of the Merger, the
value of the SunTrust Common Stock that Crestar Shareholders will receive in
the Merger will fluctuate as well and could increase or decrease. You should
obtain current market prices for shares of SunTrust Common Stock and shares of
Crestar Common Stock.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: We are working to complete the Merger during the fourth quarter of 1998.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: CRESTAR SHAREHOLDERS. We expect that the exchange of shares by Crestar
Shareholders generally will be tax-free to Crestar Shareholders for U.S.
federal income tax purposes. Crestar Shareholders will, however, have to pay
taxes on cash received for fractional shares. To review the tax consequences to
Crestar Shareholders in greater detail, see pages 39 and 40.
YOUR TAX CONSEQUENCES WILL DEPEND ON YOUR PERSONAL SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF
THE MERGER TO YOU.
(i)
<PAGE>
SUNTRUST SHAREHOLDERS. The Merger will have no tax consequences to
SunTrust Shareholders.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: CRESTAR SHAREHOLDERS: You are being asked to approve the Merger Agreement
which provides for the acquisition of Crestar through a merger of a SunTrust
subsidiary into Crestar, following which Crestar will become a wholly owned
subsidiary of SunTrust. Approval of the proposal requires the affirmative vote
of more than two-thirds of the outstanding shares of Crestar Common Stock.
THE CRESTAR BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND RECOMMENDS VOTING FOR THE APPROVAL OF THE MERGER AGREEMENT.
SUNTRUST SHAREHOLDERS: You are being asked to approve and adopt the
Merger Agreement and the transactions contemplated thereby, including the
issuance of SunTrust Common Stock to Crestar Shareholders. Approval of the
proposal requires the affirmative vote of a majority of the shares voted, so
long as the shares voted represent over 50% of the shares entitled to vote.
THE SUNTRUST BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE STOCK ISSUANCE AND RECOMMENDS VOTING FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE STOCK ISSUANCE.
Q: WHAT SHOULD I DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail
it in the enclosed envelope as soon as possible, so that your shares will be
represented at your Meeting. If you are a Crestar Shareholder, you also may
vote by telephone by calling 1-800-840-1208. We have included on your proxy
card instructions for voting by telephone.
If you sign and send in your proxy and do not indicate how you want to
vote, your proxy will be voted in favor of the proposal to approve and adopt
the Merger Agreement and, in the case of SunTrust Shareholders, the Stock
Issuance. If you are a Crestar Shareholder and you do not sign and send in your
proxy (or vote by telephone) or you abstain, it will have the effect of a vote
against the Merger. If you are a SunTrust Shareholder and you do not sign and
send in your proxy or you abstain, your shares will not be counted as having
voted at the SunTrust Meeting.
The Crestar Meeting and the SunTrust Meeting will both take place on
November 19, 1998 at 10:00 a.m. You may attend your shareholders' meeting and
vote your shares in person, rather than voting by proxy. In addition, you may
withdraw your proxy up to and including the day of your shareholders' meeting
by following the directions on pages 13 through 16 and either change your vote
or attend your shareholders' meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares of Crestar Common Stock or SunTrust
Common Stock only if you provide instructions on how to vote. You should
instruct your broker how to vote your shares, following the directions your
broker provides. If you do not provide instructions to your broker, your shares
will not be voted. If you are a Crestar Shareholder and do not provide
instructions to your broker, your shares will not be voted and this will have
the effect of voting against the Merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you are a Crestar Shareholder, after the Merger is completed we
will send you written instructions for exchanging your Crestar Common Stock
certificates for SunTrust Common Stock certificates. If you are a SunTrust
Shareholder, the Merger will not require you to take any action regarding your
SunTrust Common Stock certificates.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you want additional copies of this document, or if you want to ask any
questions about the Merger, you should contact:
SUNTRUST SHAREHOLDERS:
James C. Armstrong
SunTrust Banks, Inc.
303 Peachtree Street
Atlanta, Georgia 30308
Telephone: (404) 588-7425
CRESTAR SHAREHOLDERS:
Jeanne E. Napier
Assistant Vice President -- Investor Relations
Crestar Financial Corporation
919 East Main Street
Richmond, Virginia 23219
Telephone: (804) 782-7933
(ii)
<PAGE>
A WARNING ABOUT FORWARD-LOOKING INFORMATION
SunTrust and Crestar have each made forward-looking statements in this
document (and in certain documents that we refer to in this document) that are
subject to risks and uncertainties. These statements are based on the beliefs
and assumptions of the respective company's management, and on information
currently available to such management. Forward-looking statements include the
information concerning possible or assumed future results of operations of
SunTrust and/or Crestar set forth under "Questions and Answers About the
Merger," "Summary," "The Merger -- Background of and Reasons for the Merger,"
"Management and Operations After the Merger" and "Unaudited Pro Forma Condensed
Combined Financial Statements," and statements preceded by, followed by or that
include the words "believes, "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions.
In particular, we have made statements in this document regarding expected
cost savings from the Merger, estimated restructuring charges relating to the
Merger, the anticipated accretive effect of the Merger and SunTrust's
anticipated performance in future periods. With respect to estimated cost
savings and restructuring charges, SunTrust has made certain assumptions
regarding, among other things, the extent of operational overlap between
SunTrust and Crestar, the amount of general and administrative expense
consolidation, costs relating to converting Crestar bank operations and data
processing to SunTrust's systems, the size of anticipated reductions in fixed
labor costs, the amount of severance expenses, the extent of the charges that
may be necessary to align the companies' respective accounting reserve policies
and the costs related to the Merger. The realization of cost savings and the
amount of restructuring charges are subject to the risk that the foregoing
assumptions are inaccurate.
Moreover, any statements in this document regarding the anticipated
accretive effect of the Merger and SunTrust's anticipated performance in future
periods are subject to risks relating to, among other things, the following:
1. expected cost savings from the Merger may not be fully realized or
realized within the expected time-frame;
2. revenues following the Merger may be lower than expected, or deposit
attrition, operating costs or customer loss and business disruption
following the Merger may be greater than expected;
3. competitive pressures among depository and other financial institutions
may increase significantly;
4. costs of difficulties related to the integration of the businesses of
SunTrust and Crestar may be greater than expected;
5. changes in the interest rate environment may reduce margins;
6. general economic or business conditions, either nationally or in the
states or regions in which SunTrust and Crestar do business, may be less
favorable than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for credit;
7. legislative or regulatory changes, including changes in accounting
standards, may adversely affect the businesses in which SunTrust and
Crestar are engaged;
8. changes may occur in the securities markets; and
9. competitors of SunTrust and Crestar may have greater financial resources
and develop products that enable such competitors to compete more
successfully than SunTrust and Crestar.
Management of SunTrust believes these forward-looking statements are
reasonable; however, undue reliance should not be placed on such
forward-looking statements, which are based on current expectations.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of SunTrust following completion of the Merger may differ materially from those
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond SunTrust's and Crestar's ability
to control or predict. In addition, SunTrust and Crestar do not have any
intention or obligation to update forward-looking statements after they
distribute this document, even if new information, future events or other
circumstances have made them incorrect or misleading. For those statements,
SunTrust and Crestar claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
(iii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER ............................................. i
A WARNING ABOUT FORWARD-LOOKING
INFORMATION ........................................ iii
SUMMARY ............................................... 1
The Companies ...................................... 1
The Meetings ....................................... 1
Record Date; Voting Power .......................... 1
Votes Required ..................................... 1
Share Ownership of Management ...................... 1
Recommendations .................................... 2
Opinions of Financial Advisors ..................... 2
Terms of the Merger Agreement ...................... 2
Stock Option Agreements ............................ 3
Interests of Certain Persons in the Merger ......... 3
Directors of SunTrust Following the Merger ......... 4
Accounting Treatment ............................... 4
Resales of SunTrust Common Stock ................... 4
Regulatory Approvals ............................... 4
Appraisal Rights ................................... 4
Differences in the Rights of Shareholders .......... 4
Market Price and Dividend Information .............. 5
Selected Financial Data ............................ 7
RISK FACTORS .......................................... 12
Fixed Merger Consideration Despite Potential
Change in Relative Stock Prices .................. 12
Uncertainties in Integrating Business Operations
and Realizing Enhanced Earnings .................. 12
THE MEETINGS .......................................... 13
General ............................................ 13
SunTrust Meeting ................................... 13
Crestar Meeting .................................... 14
THE MERGER ............................................ 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Structure of the Merger ............................ 17
Background of and Reasons for the Merger ........... 17
Opinions of Financial Advisors ..................... 22
Exchange of Crestar Common Stock for SunTrust
Common Stock ..................................... 29
Terms of the Merger Agreement ...................... 30
Interests of Certain Persons in the Merger ......... 34
Accounting Treatment ............................... 36
Resales of SunTrust Common Stock ................... 37
Regulatory Approvals ............................... 37
Appraisal Rights ................................... 39
Certain Federal Income Tax Consequences ............ 39
The Stock Option Agreements ........................ 40
Crestar Rights Agreement ........................... 44
MANAGEMENT AND OPERATIONS AFTER
THE MERGER ............................................ 45
COMPARATIVE RIGHTS OF
SHAREHOLDERS .......................................... 46
EXPERTS ............................................... 54
LEGAL MATTERS ......................................... 54
SHAREHOLDER PROPOSALS ................................. 54
WHERE YOU CAN FIND MORE
INFORMATION ........................................... 55
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION ........................ 57
ANNEXES
Annex A -- Merger Agreement ........................... A-1
Annex B -- Opinion of Lehman Brothers Inc. ............ B-1
Annex C -- Opinion of Morgan Stanley & Co.
Incorporated ............................... C-1
</TABLE>
(iv)
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY
NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE
UNDERSTANDING OF THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE MERGER, YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY, AS WELL AS
THE ADDITIONAL DOCUMENTS TO WHICH WE REFER YOU, INCLUDING THE MERGER AGREEMENT.
SEE "WHERE YOU CAN FIND MORE INFORMATION" (PAGE 55).
THE COMPANIES
SUNTRUST BANKS, INC.
303 Peachtree Street
Atlanta, Georgia 30308
(404) 588-7711
SunTrust is a bank holding company based in Atlanta, Georgia. SunTrust
offers traditional deposit and credit services as well as trust and investment
services through 697 full-service banking offices in Florida, Georgia,
Tennessee and Alabama. SunTrust also provides, through various subsidiaries,
credit cards, mortgage banking, credit-related insurance, data processing and
information services, discount brokerage and investment banking services.
CRESTAR FINANCIAL CORPORATION
919 East Main Street
Richmond, Virginia 23261
(804) 782-5000
Crestar is the holding company for Crestar Bank with 396 banking offices
in Virginia, Maryland and the District of Columbia. Crestar also provides,
through various subsidiaries, insurance, equipment and automobile leasing,
mortgage banking and full-service securities and investment advisory services.
THE MEETINGS (PAGES 13 AND 14)
SUNTRUST. The SunTrust Meeting will be held at Room 10 SunTrust Bank,
Atlanta Tower, 25 Park Place, N.E., Atlanta, Georgia, at 10:00 a.m., local
time, on November 19, 1998. At the SunTrust Meeting, SunTrust Shareholders will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement and approve the issuance of SunTrust Common Stock in connection with
the Merger.
CRESTAR. The Crestar Meeting will be held at Crestar Center, 4th Floor
Auditorium, 919 East Main Street, Richmond, Virginia, at 10:00 a.m., local
time, on November 19, 1998. At the Crestar Meeting, Crestar Shareholders will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement.
RECORD DATE; VOTING POWER (PAGES 13 AND 15)
SUNTRUST. You are entitled to vote at the SunTrust Meeting if you owned
shares on September 25, 1998, the SunTrust Record Date. As of such date, there
were --- shares of SunTrust Common Stock issued and outstanding held by
approximately --- holders of record. SunTrust Shareholders are entitled to one
vote per share on any matter that may properly come before the SunTrust
Meeting.
CRESTAR. You are entitled to vote at the Crestar Meeting if you owned
shares on September 25, 1998, the Crestar Record Date. On such date, there were
- --- shares of Crestar Common Stock issued and outstanding held by
approximately --- holders of record. Crestar Shareholders are entitled to one
vote per share on any matter that may properly come before the Crestar Meeting.
VOTES REQUIRED (PAGES 13 AND 15)
SUNTRUST. Approval by the SunTrust Shareholders of the proposal to
approve and adopt the Merger Agreement and the issuance of SunTrust Common
Stock will require a greater number of votes cast in favor of the proposal than
the number of votes cast opposing such proposal, so long as the total number of
votes cast on the proposal represents over 50% of the shares entitled to vote.
CRESTAR. Approval by the Crestar Shareholders of the proposal to approve
and adopt the Merger Agreement will require the affirmative vote of more than
two-thirds of the shares of Crestar Common Stock outstanding on the Crestar
Record Date.
SHARE OWNERSHIP OF MANAGEMENT (PAGES 14 AND 15)
On the SunTrust Record Date, the executive officers and directors of
SunTrust, including their affiliates, beneficially owned an aggregate of
5,709,018 shares of SunTrust Common Stock, or approximately --- % of the shares
of SunTrust Common Stock then outstanding. On the SunTrust Record Date,
directors and executive officers of Crestar did not beneficially own any shares
of SunTrust Common Stock.
On the Crestar Record Date, the executive officers and directors of
Crestar, including their affiliates, beneficially owned an aggregate of
3,029,050 shares of Crestar Common Stock, or approximately --- % of the shares
of Crestar Common Stock then outstanding. On the Crestar Record Date, directors
and executive officers of SunTrust did not beneficially own any shares of
Crestar Common Stock.
We currently expect that such directors and executive officers of
SunTrust and Crestar will vote the shares of SunTrust Common Stock and Crestar
Common Stock, respectively, owned by them FOR the proposal to approve
1
<PAGE>
and adopt the Merger Agreement and the transactions contemplated thereby,
including, in the case of SunTrust, the issuance of SunTrust Common Stock
pursuant to the Merger.
RECOMMENDATIONS (PAGES 14 AND 15)
The SunTrust Board and the Crestar Board have each unanimously approved
and adopted the Merger Agreement, and each Board recommends a vote FOR approval
of the Merger Agreement and the transactions contemplated thereby. You also
should refer to the reasons that each of the SunTrust Board and the Crestar
Board considered in determining whether to approve and adopt the Merger
Agreement on pages 19 through 22.
OPINIONS OF FINANCIAL ADVISORS (PAGE 22)
SUNTRUST. Lehman Brothers Inc., financial advisor to SunTrust, rendered
an opinion dated as of July 20, 1998 to the SunTrust Board that as of such date
the Exchange Ratio was fair to SunTrust from a financial point of view. A copy
of the fairness opinion, setting forth the information reviewed, assumptions
made and matters considered, is attached to this document as Annex B. SunTrust
Shareholders should read the fairness opinion of Lehman Brothers in its
entirety.
CRESTAR. Morgan Stanley & Co. Incorporated, financial advisor to Crestar,
rendered an opinion dated as of July 19, 1998 to the Crestar Board that as of
such date, the Exchange Ratio was fair to the Crestar Shareholders from a
financial point of view. A copy of the fairness opinion, setting forth the
information reviewed, assumptions made and matters considered, is attached to
this document as Annex C. Crestar Shareholders should read the fairness opinion
of Morgan Stanley in its entirety.
TERMS OF THE MERGER AGREEMENT (PAGE 30)
THE MERGER AGREEMENT IS ATTACHED TO THIS DOCUMENT AS ANNEX A. WE
ENCOURAGE YOU TO READ THE MERGER AGREEMENT IN ITS ENTIRETY. IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
GENERAL. The Merger Agreement provides that Sub will be merged with and
into Crestar, with Crestar becoming a wholly owned subsidiary of SunTrust.
EXCHANGE RATIO. As a result of the Merger, Crestar Shareholders will
receive 0.96 shares of SunTrust Common Stock for each share of Crestar Common
Stock they own. SunTrust will not issue fractional shares. Instead, Crestar
Shareholders will receive a check equal to the amount of any fractional share
they would otherwise receive.
EFFECTIVE TIME. The Merger will become effective upon the filing of
articles of merger with the State Corporation Commission of Virginia. The
Merger Agreement provides that the parties will file such articles of merger as
soon as practicable following the satisfaction or waiver of the conditions to
the Merger.
CONDITIONS TO THE MERGER. The completion of the Merger depends upon the
satisfaction of a number of conditions, including:
o approval of the Merger Agreement by the Crestar Shareholders and the
SunTrust Shareholders;
o receipt of listing approval from the New York Stock Exchange for the
SunTrust Common Stock to be issued in the Merger;
o receipt of all necessary authorizations, orders and consents of
governmental authorities and the expiration of any regulatory waiting
periods;
o effectiveness of the registration statement of SunTrust relating to the
shares of SunTrust Common Stock to be issued to Crestar Shareholders in
the Merger, of which this document forms a part;
o receipt from Arthur Andersen LLP and KPMG Peat Marwick LLP of letters
confirming that the Merger qualifies for pooling of interests accounting
treatment; and
o receipt of opinions of Crestar's and SunTrust's counsel that the Merger
will be treated for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended.
Unless prohibited by law, either SunTrust or Crestar could elect to waive
a condition that has not been satisfied and complete the Merger anyway. If
either SunTrust or Crestar fails to obtain the opinion of its counsel that the
Merger will be treated for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and either SunTrust or Crestar, respectively, decides to waive the
receipt of such opinion as a condition to the completion of the Merger, then
SunTrust or Crestar, as applicable, will resolicit the vote of its shareholders
to approve the Merger Agreement. See "The Merger -- Certain Federal Income Tax
Consequences."
TERMINATION. Either Crestar or SunTrust may call off the Merger under
certain circumstances, including if:
o both parties consent in writing;
o the Merger is not completed before March 31, 1999;
o legal restraints prevent the Merger;
o the Crestar Shareholders or the SunTrust Shareholders do not approve the
Merger Agreement;
2
<PAGE>
o the other party breaches in a material manner any of the representations
or warranties or any covenant or agreement it has under the Merger
Agreement and such breach is not cured within 30 days of notice to such
party; or
o any condition to such party's obligations under the Merger Agreement has
not been met or waived at a time when such condition could no longer be
satisfied.
In addition, SunTrust may call off the Merger if the Crestar Board (i)
withdraws, or modifies in a manner adverse to SunTrust, its approval or
recommendation of the Merger Agreement or the Merger or (ii) approves,
recommends or causes Crestar to enter into any agreement with respect to any
merger, consolidation, share exchange, joint venture, business combination or
similar transaction involving Crestar or any subsidiary of Crestar, or any
purchase of all or any material portion of the assets of Crestar or any
subsidiary of Crestar.
FEES AND EXPENSES. SunTrust and Crestar will pay their own fees, costs
and expenses incurred in connection with the Merger Agreement except that they
will equally divide printing and mailing costs associated with this document
and all filing and registration fees. In addition, each of Crestar and SunTrust
have agreed that if the Merger Agreement is terminated under certain
circumstances, including the withdrawal by the Crestar Board of its
recommendation to the Crestar Shareholders with respect to the Merger or the
failure of the SunTrust Shareholders or Crestar Shareholders, respectively, to
approve the Merger Agreement at their respective special meetings, then,
depending upon the reason for termination, either Crestar or SunTrust, as
applicable, will reimburse all out-of-pocket expenses and fees of the other
party relating to the transactions contemplated by the Merger Agreement.
STOCK OPTION AGREEMENTS (PAGE 40)
As an inducement to SunTrust to enter into the Merger Agreement, Crestar
granted SunTrust an irrevocable option to purchase from Crestar up to
22,338,161 shares of Crestar Common Stock at a price of $62.875 per share.
As an inducement to Crestar to enter into the Merger Agreement, SunTrust
granted Crestar an irrevocable option to purchase from SunTrust up to
21,097,697 shares of SunTrust Common Stock at a price of $87.00 per share.
The grantee of each of the options discussed above may exercise such
option only under certain limited and specifically defined circumstances (none
of which, to the best knowledge of SunTrust and Crestar, has occurred as of the
date of this document). At the request of the holder of each option, under
certain circumstances, the issuer of that option will repurchase for a formula
price such option and any shares of the issuer's common stock purchased upon
the exercise of the option and beneficially owned by such holder at that time.
The purchase of any shares of Crestar Common Stock or SunTrust Common
Stock, as the case may be, pursuant to the options is subject to compliance
with applicable law, including receipt of any approvals under the Bank Holding
Company Act of 1956, as amended, and the rules and regulations promulgated
thereunder.
Certain aspects of the options may have the effect of discouraging
parties who might be interested in acquiring all of or a significant interest
in Crestar or SunTrust, as the case may be, from considering or proposing such
an acquisition, even if such persons, in the case of an acquisition with
respect to Crestar, were prepared to offer to pay consideration to the Crestar
Shareholders that had a higher value than the shares of SunTrust Common Stock
to be received for each share of Crestar Common Stock in the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 34)
A number of directors and executive officers of Crestar have interests in
the Merger as employees and/or directors that are different from, or in addition
to, yours as a Crestar Shareholder. The Crestar Board recognized these interests
and determined that they did not affect the benefits of the Merger to the
Crestar Shareholders.
If the Merger takes place, Mr. Richard G. Tilghman, currently the
Chairman of the Board and Chief Executive Officer of Crestar, will be named
Vice-Chairman of the SunTrust Board, and three additional non-employee members
of the Crestar Board will become members of the SunTrust Board. Certain members
of the senior management of Crestar also will remain as senior management of
Crestar and/or become members of senior management of SunTrust. SunTrust has
entered into employment agreements with Mr. Tilghman and Mr. James M. Wells III,
currently the President and Chief Operating Officer of Crestar, which would
become effective if the Merger takes place. Also, certain indemnification
arrangements and directors' and officers' liability insurance for existing
directors and officers of Crestar will be continued by SunTrust and by Crestar
after the Merger.
In addition, if the Merger takes place, (i) options to purchase Crestar
Common Stock held by Crestar's directors and officers will be automatically
converted into options to acquire shares of SunTrust Common Stock adjusted to
account for the Exchange Ratio and (ii) an aggregate of 202,824 performance
shares previously awarded under Crestar's stock option plans to certain Crestar
executives will be paid out in shares of Crestar Common Stock immediately prior
to the Merger. Further, if the Merger is completed and 22 Crestar executives
with whom Crestar has severance agreements are terminated under certain
circumstances, then such
3
<PAGE>
persons would be entitled to aggregate benefits (if all of such persons
are terminated following completion of the Merger) of approximately $20 million
under such agreements. Upon the signing of the Merger Agreement, outstanding
unvested options to purchase an aggregate of 510,450 shares of Crestar Common
Stock became exercisable in full. Of these, Messrs. Tilghman, Wells and the 22
other Crestar executives held options to purchase 295,400 shares of Crestar
Common Stock at a per share weighted average exercise price of $51.42.
DIRECTORS OF SUNTRUST FOLLOWING THE MERGER (PAGES 34 AND 45)
The Merger Agreement provides that Mr. Tilghman will become a member of
the SunTrust Board, and SunTrust has agreed that he will be named as Vice
Chairman of the SunTrust Board. In addition, SunTrust has agreed to appoint
three additional persons who are currently members of the Crestar Board to the
SunTrust Board.
ACCOUNTING TREATMENT (PAGE 36)
We expect the Merger to be accounted for as a pooling of interests, which
means that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes. In order to comply with certain
accounting requirements for pooling of interests transactions, SunTrust has
ceased its share repurchase program and will need to reissue certain shares of
SunTrust Common Stock.
RESALES OF SUNTRUST COMMON STOCK (PAGE 37)
Shares of SunTrust Common Stock received by Crestar Shareholders in the
Merger will be freely transferable by the holders, except for those shares held
by holders who may be deemed to be "affiliates" (generally including directors,
certain executive officers and holders of ten percent or more of SunTrust
Common Stock) of Crestar or SunTrust under applicable federal securities laws.
Both Crestar and SunTrust have agreed to provide to the other the written
agreements of certain "affiliates" of each of them that such "affiliates" will
not dispose of their shares of Crestar Common Stock and SunTrust Common Stock,
except in compliance with the Securities Act of 1933 and applicable accounting
rules governing pooling of interests.
REGULATORY APPROVALS (PAGE 37)
SunTrust and Crestar are both required to make certain filings with or
obtain approvals from certain regulatory authorities to effect the Merger.
These consents and approvals include the approval of the Federal Reserve Board
under the Bank Holding Company Act of 1956, as well as approvals of or notices
to certain other state agencies and other authorities.
An application and notice was filed with the Federal Reserve Board on
August 26, 1998. All other necessary applications and notices have been filed
or are in the process of being filed.
We cannot predict whether or when we will obtain all required regulatory
approvals or whether any approvals will include adverse conditions that would
cause the parties to call off the Merger.
APPRAISAL RIGHTS (PAGE 39)
Neither SunTrust nor Crestar Shareholders will have the right to an
appraisal of the value of their shares of SunTrust Common Stock or Crestar
Common Stock, respectively, in the Merger.
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 46)
SunTrust is incorporated under the laws of the State of Georgia and
Crestar is incorporated under the laws of the Commonwealth of Virginia. Crestar
Shareholders, upon completion of the Merger, will become SunTrust Shareholders,
and their rights as such will be governed by Georgia law and SunTrust's
articles of incorporation and bylaws.
4
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE DATA
The following table presents trading information for SunTrust Common Stock
and Crestar Common Stock on the New York Stock Exchange on July 17, 1998 and
- ------- , 1998. July 17, 1998 was the last full trading day prior to our
announcement of the signing of the Merger Agreement. ----- , 1998 was the last
practicable trading day for which information was available prior to the date
of this document.
<TABLE>
<CAPTION>
SUNTRUST CRESTAR COMMON
COMMON STOCK STOCK
(DOLLARS PER SHARE) (DOLLARS PER SHARE)
------------------------------------- --------------------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
----------- ----------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
July 17, 1998 ......... $ 87.75 $ 86.50 $ 87.4375 $ 64.875 $ 61.4375 $ 64.00
- ---- , 1998 ...........
<CAPTION>
SUNTRUST COMMON
STOCK PRICE X 0.96
(DOLLARS PER SHARE)
-----------------------------------
HIGH LOW CLOSE
----------- ----------- -----------
<S> <C> <C> <C>
July 17, 1998 ......... $ 84.24 $ 83.04 $ 83.94
- ---- , 1998 ...........
</TABLE>
We urge you to obtain current market quotations for SunTrust Common Stock
and Crestar Common Stock. We expect that the market price of SunTrust Common
Stock will fluctuate between the date of this document and the date on which
the Merger is completed and thereafter. Because the number of shares of
SunTrust Common Stock to be received by Crestar Shareholders in the Merger is
fixed and the market price of SunTrust Common Stock is subject to fluctuation,
the value of the shares of SunTrust Common Stock that Crestar Shareholders will
receive in the Merger may increase or decrease prior to and after the Merger.
See "Risk Factors -- Fixed Merger Consideration Despite Potential Change in
Relative Stock Prices."
5
<PAGE>
HISTORICAL MARKET PRICES AND DIVIDENDS
SUNTRUST. SunTrust Common Stock is listed on the New York Stock Exchange
under the symbol "STI." On the SunTrust Record Date, there were approximately
- --- holders of record of SunTrust Common Stock. The following table sets forth
for the calendar quarter indicated the high and low sales prices per share of
SunTrust Common Stock as reported on the New York Stock Exchange, and the
dividends per share of SunTrust Common Stock, through August 13, 1998. The
prices per share of SunTrust Common Stock set forth below have been adjusted to
reflect a two-for-one stock split completed in May 1996.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
- ---------------------------------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
1996:
First quarter ...................................... $ 38.38 $ 32.00 $ .20
Second quarter ..................................... 38.00 33.25 .20
Third quarter ...................................... 41.50 34.88 .20
Fourth quarter ..................................... 52.50 40.88 .225
1997:
First quarter ...................................... $ 54.75 $ 46.13 $.225
Second quarter ..................................... 59.00 44.13 .225
Third quarter ...................................... 70.44 54.75 .225
Fourth quarter ..................................... 75.25 61.13 .25
1998:
First quarter ...................................... $ 77.44 $ 65.25 .25
Second quarter ..................................... 83.44 73.38 .25
Third quarter (through September 22, 1998) ......... 87.75 54.31 .25
</TABLE>
CRESTAR. Crestar Common Stock is listed on the New York Stock Exchange
under the symbol "CF." On the Crestar Record Date, there were approximately --
holders of record of Crestar Common Stock. The following table sets forth for
the calendar quarter indicated the high and low sales prices per share of
Crestar Common Stock as reported on the New York Stock Exchange, and the
dividends per share of Crestar Common Stock, through August 13, 1998. The
prices per share of Crestar Common Stock set forth below have been adjusted to
reflect a two-for-one stock split completed in January 1997.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
- ---------------------------------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
1996:
First quarter ...................................... $ 29.81 $ 26.50 $ .225
Second quarter ..................................... 29.19 26.63 .26
Third quarter ...................................... 30.69 26.19 .26
Fourth quarter ..................................... 37.75 29.00 .53
1997:
First quarter ...................................... $ 38.75 $ 34.38 .00
Second quarter ..................................... 42.63 33.63 .29
Third quarter ...................................... 49.19 39.25 .29
Fourth quarter ..................................... 57.25 43.00 .29
1998:
First quarter ...................................... $ 60.81 $ 49.00 .29
Second quarter ..................................... 63.13 52.38 .33
Third quarter (through September 22, 1998) ......... 75.13 48.94 .33
</TABLE>
DIVIDEND POLICY OF SUNTRUST
The SunTrust Board and senior management of SunTrust are aware that a
difference exists in the annual dividends per share paid by SunTrust and
Crestar. After the Merger, SunTrust senior management intends to recommend to
the SunTrust Board, which will include four current Crestar directors, that the
annual dividend on SunTrust Common Stock be increased to $1.32 per share,
effective as of the first quarterly dividend date to occur after the Merger.
$1.32 is the amount that Crestar has recently paid as a regular annual dividend
to its shareholders. At this rate, the pro forma equivalent dividend per share
for current Crestar Shareholders would be $1.2672 annually. SunTrust cannot,
however, assure these payments. The SunTrust Board will use its discretion to
decide whether and when to declare dividends and in what amount, and it will
consider all relevant factors in doing so.
6
<PAGE>
SELECTED FINANCIAL DATA
The following tables show financial results actually achieved by each of
SunTrust and Crestar (the "historical" figures). The tables also show results
as if the companies had been combined for the periods presented (the "pro forma
combined" figures). Pro forma combined figures are simply arithmetical
combinations of SunTrust's and Crestar's separate financial results; you should
not assume that SunTrust and Crestar would have achieved the pro forma combined
results if they had actually been combined during the periods presented. See
"Unaudited Pro Forma Condensed Combined Financial Information" (page 57).
SunTrust's annual historical figures are derived from financial statements
audited by Arthur Andersen LLP, independent public accountants of SunTrust.
Crestar's annual historical figures are derived from financial statements
audited by KPMG Peat Marwick LLP, independent auditors of Crestar, whose report
refers to their reliance on another auditor's report with respect to amounts
related to Citizens Bancorp for 1996 and 1995 included in Crestar's
consolidated financial statements (Crestar acquired Citizens Bancorp on
December 31, 1996). The annual historical information presented below should be
read together with the consolidated audited financial statements of SunTrust
and Crestar incorporated in this document by reference. See "Where You Can Find
More Information" (page 55). Figures for the six months ended June 30, 1998 and
1997 are unaudited, but SunTrust and Crestar each believes that its own
six-month figures reflect all normal recurring adjustments necessary for a fair
presentation of the financial position and results of operations for those
periods. You should not assume that the results for the first six months of
1998 are indicative of results for any future period.
We expect to incur restructuring and merger-related expenses as a result
of combining our companies. We also anticipate that the Merger will provide the
combined company with financial benefits such as reduced operating expenses and
the opportunity to earn additional revenue. However, none of these anticipated
expenses or benefits has been factored into the pro forma combined income
statement information. For that reason, the pro forma combined information,
while helpful in illustrating the financial attributes of the combined company
under one set of assumptions, does not attempt to predict or suggest future
results.
7
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED
AS OF OR FOR THE DECEMBER 31,
SIX MONTHS ENDED ---------------------------------
JUNE 30, 1998 1997 1996 1995
----------------- --------- --------- ---------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE OF COMMON STOCK:
SunTrust
Historical
Diluted ....................................... $ 1.73 $ 3.13 $ 2.76 $ 2.47
Basic ......................................... 1.76 3.17 2.80 2.49
Pro forma combined ..............................
Diluted ....................................... 1.68 3.04 2.52 2.32
Basic ......................................... 1.71 3.09 2.56 2.34
Crestar
Historical
Diluted ....................................... 1.52 2.77 1.95 1.92
Basic ......................................... 1.54 2.80 1.97 1.95
Pro Forma Equivalent (1)
Diluted ....................................... 1.61 2.92 2.42 2.23
Basic ......................................... 1.64 2.97 2.46 2.25
CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK:
SunTrust
Historical ...................................... $ .500 $ .925 $ .825 $ .740
Pro forma combined (2) .......................... .500 .925 .825 .740
Crestar
Historical (3) .................................. .620 .870 1.275 .875
Pro forma equivalent (1) ........................ .480 .888 .792 .710
BOOK VALUE PER SHARE AT PERIOD END:
SunTrust
Historical ...................................... $28.32 $24.77 $22.13 $18.91
Pro Forma Combined .............................. 25.65 22.91 20.43 18.24
Crestar
Historical ...................................... 19.65 18.49 16.20 16.12
Pro Forma equivalent (1) ........................ 24.62 21.99 19.61 17.51
</TABLE>
- ---------
(1) Pro forma equivalent amounts for the Merger are calculated by multiplying
the pro forma combined amounts of SunTrust by the Exchange Ratio of 0.96.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by SunTrust.
(3) Crestar declared five quarterly dividends in 1996 and three quarterly
dividends in 1997. Crestar, however, paid four quarterly dividends in each
year.
8
<PAGE>
SUNTRUST HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30,
-----------------------------------------
1998 1997
-------------------- --------------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest and dividend income ................ $ 1,935.2 $ 1,761.5
Interest expense ............................ 948.9 829.3
---------- ----------
Net interest income ......................... 986.3 932.2
Provision for loan losses ................... 62.1 55.4
---------- ----------
Net interest income after provision for
loan losses ................................ 924.2 876.8
Noninterest income .......................... 583.2 453.9
Noninterest expense ......................... 953.8 827.3
---------- ----------
Income before provision for income tax 553.6 503.4
Provision for income taxes .................. 187.7 176.9
---------- ----------
Net income .................................. $ 365.9 326.5
========== ==========
Net interest income (taxable-equivalent) $ 1,002.2 $ 951.2
PER COMMON SHARE (1)
Net income-diluted .......................... $ 1.73 $ 1.51
Net income-basic ............................ 1.76 1.53
Dividends paid .............................. 0.500 0.450
SELECTED AVERAGE BALANCES
Total assets (2) ............................ $ 59,147.6 $ 52,706.8
Earnings assets (2) ......................... 54,198.4 48,571.6
Loans (5) ................................... 40,991.8 36,450.6
Deposits .................................... 36,394.0 35,800.7
Realized shareholders' equity ............... 3,374.1 3,178.4
Total shareholders' equity (2) .............. 5,587.1 4,987.4
AT PERIOD END
Total assets (2) ............................ $ 61,393.4 $ 55,462.8
Earning assets (2) .......................... 55,774.7 50,638.9
Loans (5) ................................... 41,647.3 37,684.3
Reserve for loan losses ..................... 762.6 739.8
Deposits .................................... 36,982.6 35,832.9
Long-term debt .............................. 4,547.9 2,699.2
Realized shareholders' equity ............... 3,292.3 3,076.6
Total shareholders' equity (2) .............. 5,911.6 5,140.7
RATIOS AND OTHER DATA
ROA (2) ..................................... 1.33%(3) 1.32%(3)
ROE (2) ..................................... 21.87 (3) 20.71 (3)
Net interest margin (2) ..................... 3.99 (3) 4.20 (3)
Efficiency ratio ............................ 60.2 58.9
Tier 1 capital ratio (4) .................... 7.16 7.60
Total capital ratio (4) ..................... 13.67 11.00
Tier 1 leverage ratio (4) ................... 6.80 6.77
Total shareholders' equity to assets ........ 9.63 9.27
Nonperforming assets to total loans plus
other real estate owned .................... 0.39 (3) 0.57 (3)
Common dividend payout ratio ................ 28.7 (3) 29.5 (3)
Full-time equivalent employees .............. 21,737 20,993
Average common shares-diluted (in
thousands) ................................. 11,186 215,886
Average common shares-basic (in
thousands) ................................. 207,886 212,762
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest and dividend income ................ $ 3,650.8 $ 3,246.0 $ 3,027.2 $ 2,552.3 $ 2,362.3
Interest expense ............................ 1,756.4 1,461.8 1,350.8 932.5 790.7
----------- ----------- ----------- ----------- -----------
Net interest income ......................... 1,894.4 1,784.2 1,676.4 1,619.8 1,571.6
Provision for loan losses ................... 117.0 115.9 112.1 137.8 189.1
----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ................................ 1,777.4 1,668.3 1,564.3 1,482.0 1,382.5
Noninterest income .......................... 934.2 818.0 713.1 699.9 726.5
Noninterest expense ......................... 1,685.6 1,583.1 1,451.5 1,400.0 1,408.4
----------- ----------- ----------- ----------- -----------
Income before provision for income tax 1,026.0 903.2 825.9 781.9 700.6
Provision for income taxes .................. 358.7 286.6 260.4 259.2 226.9
----------- ----------- ----------- ----------- -----------
Net income .................................. 667.3 616.6 565.5 522.7 473.7
=========== =========== =========== =========== ===========
Net interest income (taxable-equivalent) $ 1,931.0 $ 1,824.3 $ 1,726.0 $ 1,675.6 $ 1,634.4
PER COMMON SHARE (1)
Net income-diluted .......................... $ 3.13 $ 2.76 $ 2.47 $ 2.25 $ 1.99
Net income-basic ............................ 3.17 2.80 2.49 2.28 2.01
Dividends paid .............................. 0.925 0.825 0.740 0.660 0.580
SELECTED AVERAGE BALANCES
Total assets (2) ............................ $ 54,272.0 $ 47,718.8 $ 43,072.6 $ 40,489.2 $ 37,524.9
Earnings assets (2) ......................... 50,001.6 44,024.4 39,780.4 37,094.6 34,050.7
Loans (5) ................................... 37,516.2 32,792.5 29,709.3 26,412.6 24,162.8
Deposits .................................... 35,915.3 34,241.3 31,808.7 30,877.8 29,683.3
Realized shareholders' equity ............... 3,158.4 3,263.9 3,052.3 2,960.1 2,875.1
Total shareholders' equity (2) .............. 5,018.0 4,621.5 3,905.2 3,571.5 2,877.2
AT PERIOD END
Total assets (2) ............................ $ 57,982.7 $ 52,468.2 $ 46,471.5 $ 42,709.1 $ 40,728.4
Earning assets (2) .......................... 53,055.3 47,771.0 42,403.1 38,962.2 37,139.8
Loans (5) ................................... 40,135.5 35,404.2 31,301.4 28,548.9 25,292.1
Reserve for loan losses ..................... 751.8 725.8 698.9 647.0 561.2
Deposits .................................... 38,197.5 36,890.4 33,183.2 32,218.4 30,485.8
Long-term debt .............................. 3,171.8 1,565.3 1,002.4 930.4 630.4
Realized shareholders' equity ............... 3,150.5 3,278.2 3,111.0 2,883.3 2,845.8
Total shareholders' equity (2) .............. 5,199.4 4,880.0 4,269.6 3,453.3 3,609.6
RATIOS AND OTHER DATA
ROA (2) ..................................... 1.30% 1.35% 1.36% 1.32% 1.26%
ROE (2) ..................................... 21.13 18.89 18.53 17.66 16.48
Net interest margin (2) ..................... 4.11 4.36 4.49 4.64 4.80
Efficiency ratio ............................ 58.8 59.9 59.5 58.9 59.7
Tier 1 capital ratio (4) .................... 7.22 7.46 7.78 7.95 8.88
Total capital ratio (4) ..................... 12.48 10.87 9.71 10.05 10.55
Tier 1 leverage ratio (4) ................... 6.49 6.40 6.71 6.68 6.82
Total shareholders' equity to assets ........ 8.97 9.30 9.19 8.09 8.86
Nonperforming assets to total loans plus
other real estate owned .................... 0.37 0.72 0.80 0.96 1.61
Common dividend payout ratio ................ 29.3 29.8 29.8 30.1 30.6
Full-time equivalent employees .............. 21,227 20,863 19,415 19,408 19,532
Average common shares-diluted (in
thousands) ................................. 213,480 223,486 229,544 232,078 237,805
Average common shares-basic (in
thousands) ................................. 210,243 220,364 226,665 229,317 235,189
</TABLE>
- ---------
(1) Per common share data has been restated to reflect SunTrust's two-for-one
stock split, which was effected by means of a stock dividend in May 1996.
(2) Total assets, earning assets and total shareholders' equity include net
unrealized securities gains. The calculations of ROA, ROE and net interest
margin exclude this gain due to the fact that the net unrealized gain is
not included in income.
(3) These amounts have been annualized.
(4) These ratios are calculated in accordance with the rules of the Federal
Reserve Board.
(5) Includes loan balances classified as loans held for sale.
9
<PAGE>
CRESTAR HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED)
-------------------------------------------
1998 1997
-------------------- ----------------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest and dividend income ................... $ 871.3 $ 774.4
Interest expense ............................... 410.9 336.4
------------ ------------
Net interest income ............................ 460.4 438.0
Provision for loan losses ...................... 44.9 65.7
------------ ------------
Net interest income after provision for loan
losses ........................................ 415.5 372.3
Noninterest income ............................. 225.2 214.5
Noninterest expense ............................ 372.7 359.1
------------ ------------
Income before provision for income tax ......... 268.0 227.7
Provision for income taxes ..................... 95.7 80.1
------------ ------------
Net income ..................................... $ 172.3 $ 147.6
============ ============
Net interest income (taxable-equivalent) ....... $ 466.6 $ 443.3
PER COMMON SHARE (1)
Net income-diluted ............................. $ 1.52 $ 1.32
Net income-basic ............................... 1.54 1.34
Dividends paid ................................. 0.620 0.560
SELECTED AVERAGE BALANCES
Total assets (2) ............................... $ 24,632.8 $ 21,470.5
Earnings assets (2) ............................ 22,583.3 19,570.6
Loans (3) ...................................... 17,338.2 14,548.3
Deposits ....................................... 16,781.0 15,611.7
Realized shareholders' equity .................. 2,096.1 1,850.0
Total shareholders' equity (2) ................. 2,097.0 1,814.3
AT PERIOD END
Total assets (2) ............................... $ 26,161.2 $ 22,809.8
Earning assets (2) ............................. 23,805.2 20,500.5
Loans (3) ...................................... 18,127.6 14,901.8
Reserve for loan losses ........................ 246.0 279.2
Deposits ....................................... 17,870.2 15,846.5
Long-term debt ................................. 947.7 819.1
Realized shareholders' equity .................. 2,199.2 1,929.0
Total shareholders' equity (2) ................. 2,205.6 1,900.1
RATIOS AND OTHER DATA
ROA (as reported) (2) .......................... 1.40%(4) 1.37%(4)
ROA (conformed) (5) ............................ 1.40 (4) 1.37 (4)
ROE (as reported) (2) .......................... 16.43 (4) 16.27 (4)
ROE (conformed) (5) ............................ 16.44 (4) 15.95 (4)
Net interest margin (as reported) (2) .......... 4.13 (4) 4.54 (4)
Net interest margin (conformed) (5) ............ 4.13 (4) 4.52 (4)
Efficiency ratio ............................... 53.9 54.6
Tier 1 capital ratio (6) ....................... 10.15 10.66
Total capital ratio (6) ........................ 13.12 13.39
Tier 1 leverage ratio (6) ...................... 8.80 9.25
Total shareholders' equity to assets ........... 8.51 8.45
Nonperforming assets to total loans plus
other real estate owned ....................... 0.42 (4) 0.62 (4)
Common dividend payout ratio ................... 40.2 (4) 42.0 (4)
Full-time equivalent employees ................. 8,125 7,960
Average common shares-diluted (in
thousands) .................................... 113,354 111,573
Average common shares-basic (in thousands) 111,928 110,394
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest and dividend income ................... $ 1,575.6 $ 1,563.4 $ 1,491.9 $ 1,300.8 $ 1,175.9
Interest expense ............................... 699.3 697.1 677.0 522.9 468.6
----------- ----------- ----------- ----------- -----------
Net interest income ............................ 876.3 866.3 814.9 777.9 707.3
Provision for loan losses ...................... 108.1 95.9 66.3 36.5 63.3
----------- ----------- ----------- ----------- -----------
Net interest income after provision for loan
losses ........................................ 768.2 770.4 748.6 741.4 644.0
Noninterest income ............................. 421.4 333.2 320.1 286.0 271.2
Noninterest expense ............................ 714.2 780.3 718.2 697.9 650.4
----------- ----------- ----------- ----------- -----------
Income before provision for income tax ......... 475.4 323.3 350.5 329.5 264.8
Provision for income taxes ..................... 165.6 105.0 134.6 114.3 85.2
----------- ----------- ----------- ----------- -----------
Net income ..................................... $ 309.8 $ 218.3 $ 215.9 $ 215.2 $ 179.6
=========== =========== =========== =========== ===========
Net interest income (taxable-equivalent) ....... $ 887.5 $ 876.3 $ 826.1 $ 790.1 $ 722.1
PER COMMON SHARE (1)
Net income-diluted ............................. $ 2.77 $ 1.95 $ 1.92 $ 1.93 $ 1.60
Net income-basic ............................... 2.80 1.97 1.95 1.95 1.62
Dividends paid ................................. 1.140 1.005 0.875 0.765 0.570
SELECTED AVERAGE BALANCES
Total assets (2) ............................... $ 21,809.7 $ 21,588.0 $ 20,435.8 $ 19,380.1 $ 17,824.2
Earnings assets (2) ............................ 19,863.1 19,719.3 18,603.1 17,674.9 16,153.5
Loans (3) ...................................... 15,074.7 14,465.3 14,049.6 12,219.1 10,380.0
Deposits ....................................... 15,738.9 16,048.2 15,431.5 15,145.8 13,983.9
Realized shareholders' equity .................. 1,904.8 1,801.4 1,725.3 1,575.4 1,475.0
Total shareholders' equity (2) ................. 1,881.9 1,776.7 1,716.7 1,561.3 1,475.0
AT PERIOD END
Total assets (2) ............................... $ 24,928.5 $ 22,861.9 $ 22,332.6 $ 20,167.7 $ 18,924.1
Earning assets (2) ............................. 22,539.2 20,740.1 20,045.8 18,226.4 17,304.1
Loans (3) ...................................... 16,641.7 14,708.5 14,721.0 13,435.3 11,392.1
Reserve for loan losses ........................ 281.4 268.9 274.4 265.2 254.7
Deposits ....................................... 16,369.3 15,671.2 16,297.0 15,200.0 14,432.2
Long-term debt ................................. 831.4 859.3 671.3 715.1 604.0
Realized shareholders' equity .................. 2,060.6 1,800.8 1,772.4 1,640.9 1,510.1
Total shareholders' equity (2) ................. 2,059.8 1,779.5 1,785.6 1,601.5 1,510.1
RATIOS AND OTHER DATA
ROA (as reported) (2) .......................... 1.42% 1.01% 1.06% 1.11% 1.01%
ROA (conformed) (5) ............................ 1.42 1.01 1.06 1.11 1.01
ROE (as reported) (2) .......................... 16.46 12.28 12.58 13.78 12.18
ROE (conformed) (5) ............................ 16.26 12.12 12.51 13.66 12.18
Net interest margin (as reported) (2) .......... 4.47 4.44 4.44 4.47 4.47
Net interest margin (conformed) (5) ............ 4.46 4.44 4.43 4.47 4.47
Efficiency ratio ............................... 54.6 64.5 62.7 64.9 65.5
Tier 1 capital ratio (6) ....................... 10.05 10.52 9.31 9.95 10.88
Total capital ratio (6) ........................ 12.50 13.40 12.26 13.13 13.33
Tier 1 leverage ratio (6) ...................... 9.20 8.42 7.70 7.75 7.76
Total shareholders' equity to assets ........... 8.26 7.78 8.00 7.94 8.03
Nonperforming assets to total loans plus
other real estate owned ....................... 0.55 0.77 0.92 1.13 1.55
Common dividend payout ratio ................... 42.2 45.2 40.3 35.7 33.9
Full-time equivalent employees ................. 8,215 8,720 8,487 9,212 8,803
Average common shares-diluted (in
thousands) .................................... 111,929 112,037 112,432 111,643 110,836
Average common shares-basic (in thousands) 110,618 110,560 110,986 110,216 109,365
</TABLE>
- ---------
(1) Per common share data has been restated to reflect Crestar's two-for-one
stock split, which was effected by means of a stock dividend in January
1997.
(2) Total assets, earning assets and total shareholders' equity include net
unrealized securities gains or losses. Calculations of ROA, ROE and net
interest margin also include the impact of such net unrealized securities
gains or losses.
(3) Includes loan balances classified as loans held for sale.
(4) These amounts have been annualized.
(5) Excludes net unrealized securities gains or losses in order to conform such
calculation to the calculation of ROA, ROE and net interest margin for
SunTrust.
(6) These ratios are calculated in accordance with the rules of the Federal
Reserve Board.
10
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
--------------------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE
SUMMARY OF OPERATIONS DATA)
<S> <C>
Interest and dividend income ......................................... $ 2,806.5
Interest expense ..................................................... 1,359.8
------------
Net interest income .................................................. 1,446.7
Provision for loan losses ............................................ 107.0
------------
Net interest income after provision for loan losses .................. 1,339.7
Noninterest income ................................................... 808.4
Noninterest expense .................................................. 1,326.5
------------
Income before provision for income tax ............................... 821.6
Provision for income taxes ........................................... 283.4
------------
Net income ........................................................... $ 538.2
============
Net interest income (taxable-equivalent) ............................. $ 1,468.8
PER COMMON SHARE
Net income-diluted ................................................... $ 1.68
Net income-basic ..................................................... 1.71
Dividends paid (4) ................................................... 0.500
SELECTED AVERAGE BALANCES
Total assets (1) ..................................................... $ 83,780.4
Earnings assets (1) .................................................. 76,781.7
Loans ................................................................ 58,330.0
Deposits ............................................................. 53,175.0
Realized shareholders' equity ........................................ 5,470.2
Total shareholders' equity (1) ....................................... 7,684.1
AT PERIOD END
Total assets (1) ..................................................... $ 87,554.6
Earning assets (1) ................................................... 79,579.9
Loans ................................................................ 59,774.9
Reserve for loan losses .............................................. 1,008.6
Deposits ............................................................. 54,852.8
Long-term debt ....................................................... 5,495.6
Realized shareholders' equity ........................................ 5,491.5
Total shareholders' equity (1) ....................................... 8,117.2
RATIOS AND OTHER DATA
ROA (1) .............................................................. 1.35%(2)
ROE (1) .............................................................. 19.79 (2)
Net interest margin (1) .............................................. 4.04 (2)
Efficiency ratio ..................................................... 60.2 (2)
Tier 1 capital ratio (3) ............................................. 8.03
Total capital ratio (3) .............................................. 13.52
Tier 1 leverage ratio (3) ............................................ 7.42
Total shareholders' equity to assets ................................. 9.31
Nonperforming assets to total loans plus other real estate owned ..... 0.37 (2)
Common dividend payout ratio ......................................... 32.4 (2)
Full-time equivalent employees ....................................... 29,862
Average common shares-diluted (in thousands) ......................... 320,006
Average common shares-basic (in thousands) ........................... 315,337
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
-------------- -------------- --------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Interest and dividend income ......................................... $ 5,226.4 $ 4,809.4 $ 4,519.1
Interest expense ..................................................... 2,455.7 2,158.9 2,027.8
----------- ----------- -----------
Net interest income .................................................. 2,770.7 2,650.5 2,491.3
Provision for loan losses ............................................ 225.1 211.8 178.4
----------- ----------- -----------
Net interest income after provision for loan losses .................. 2,545.6 2,438.7 2,312.9
Noninterest income ................................................... 1,355.6 1,151.2 1,033.2
Noninterest expense .................................................. 2,399.8 2,363.4 2,169.7
----------- ----------- -----------
Income before provision for income tax ............................... 1,501.4 1,226.5 1,176.4
Provision for income taxes ........................................... 524.3 391.6 395.0
----------- ----------- -----------
Net income ........................................................... $ 977.1 $ 834.9 $ 781.4
=========== =========== ===========
Net interest income (taxable-equivalent) ............................. $ 2,818.5 $ 2,700.6 $ 2,552.1
PER COMMON SHARE
Net income-diluted ................................................... $ 3.04 $ 2.52 $ 2.32
Net income-basic ..................................................... 3.09 2.56 2.34
Dividends paid (4) ................................................... 0.925 0.825 0.74
SELECTED AVERAGE BALANCES
Total assets (1) ..................................................... $ 76,081.7 $ 69,306.8 $ 63,508.4
Earnings assets (1) .................................................. 69,864.7 63,743.7 58,383.5
Loans ................................................................ 52,590.9 47,257.8 43,758.9
Deposits ............................................................. 51,654.2 50,289.5 47,240.2
Realized shareholders' equity ........................................ 5,063.2 5,065.3 4,777.6
Total shareholders' equity (1) ....................................... 6,899.9 6,398.2 5,621.9
AT PERIOD END
Total assets (1) ..................................................... $ 82,911.2 $ 75,330.1 $ 68,804.1
Earning assets (1) ................................................... 75,594.5 68,511.1 62,448.9
Loans ................................................................ 56,777.2 50,112.7 46,022.4
Reserve for loan losses .............................................. 1,033.2 994.7 973.3
Deposits ............................................................. 54,566.8 52,561.6 49,480.2
Long-term debt ....................................................... 4,003.2 2,424.6 1,673.7
Realized shareholders' equity ........................................ 5,211.1 5,079.0 4,883.4
Total shareholders' equity (1) ....................................... 7,259.2 6,659.5 6,055.2
RATIOS AND OTHER DATA
ROA (1) .............................................................. 1.34% 1.24% 1.26%
ROE (1) .............................................................. 19.30 16.48 16.35
Net interest margin (1) .............................................. 4.21 4.39 4.47
Efficiency ratio ..................................................... 57.5 61.4 60.5
Tier 1 capital ratio (3) ............................................. 8.08 8.38 8.27
Total capital ratio (3) .............................................. 12.49 11.63 10.52
Tier 1 leverage ratio (3) ............................................ 7.30 7.04 7.04
Total shareholders' equity to assets ................................. 8.76 8.84 8.80
Nonperforming assets to total loans plus other real estate owned ..... 0.42 0.73 0.84
Common dividend payout ratio ......................................... 33.4 33.8 32.7
Full-time equivalent employees ....................................... 29,442 29,583 27,902
Average common shares-diluted (in thousands) ......................... 320,932 331,041 337,479
Average common shares-basic (in thousands) ........................... 316,436 326,501 333,212
</TABLE>
- ---------
(1) Total assets, earning assets and total shareholders' equity include net
unrealized securities gains or losses. Calculations of ROA, ROE and net
interest margin exclude this gain due to the fact that the unrealized gain
is not included in income.
(2) These amounts have been annualized.
(3) These ratios are calculated in accordance with the rules of the Federal
Reserve Board.
(4) Pro forma combined dividends per share represent historical dividends per
share paid by SunTrust.
11
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS DOCUMENT (INCLUDING
THE MATTERS ADDRESSED IN "A WARNING ABOUT FORWARD-LOOKING INFORMATION"),
CRESTAR SHAREHOLDERS AND SUNTRUST SHAREHOLDERS SHOULD CONSIDER THE MATTERS
DESCRIBED BELOW CAREFULLY IN DETERMINING WHETHER TO APPROVE THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
FIXED MERGER CONSIDERATION DESPITE POTENTIAL CHANGE IN RELATIVE STOCK PRICES
Upon completion of the Merger, each share of Crestar Common Stock will be
converted into the right to receive 0.96 shares of SunTrust Common Stock. This
exchange ratio will not be adjusted if there is an increase or decrease in the
price of Crestar Common Stock or SunTrust Common Stock. The prices of Crestar
Common Stock and SunTrust Common Stock when the Merger takes place may vary
from their prices at the date of this document and at the date of the special
meetings. Such variations in the prices of SunTrust Common Stock and Crestar
Common Stock may result from changes in the business, operations or prospects
of Crestar, SunTrust or the combined company, market assessments of the
likelihood that the Merger will be consummated and the timing thereof,
regulatory considerations, general market and economic conditions and other
factors. At the time of the special meetings the holders of Crestar Common
Stock and SunTrust Common Stock will not know the exact value of the SunTrust
Common Stock that Crestar Shareholders will receive when the Merger is
completed. We urge you to obtain current market quotations for SunTrust Common
Stock and Crestar Common Stock.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND REALIZING ENHANCED
EARNINGS
The Merger involves the integration of two companies that have previously
operated independently. Successful integration of Crestar's operations will
depend primarily on SunTrust's ability to consolidate operations, systems and
procedures and to eliminate redundancies and costs. No assurance can be given
that SunTrust and Crestar will be able to integrate their operations without
encountering difficulties including, without limitation, the loss of key
employees and customers, the disruption of their respective ongoing businesses
or possible inconsistencies in standards, controls, procedures and policies.
Additionally, in determining that the Merger is in the best interests of
SunTrust and Crestar, as the case may be, each of the SunTrust Board and the
Crestar Board considered that enhanced earnings may result from the Merger,
primarily through the realization of an estimated $130 million per year on a
pre-tax basis in 1999 and 2000, respectively, in cost savings from business line
consolidation, infrastructure reduction and general and administrative expense
savings, and an estimated $20 million and $28 million, on a pre-tax basis, in
1999 and 2000, respectively, in incremental income. SunTrust expects to achieve
75% of such $130 million annual cost savings by the end of 1999 and a full 100%
of such $130 million annual cost savings by the end of 2000. See "Management and
Operations After the Merger." The realization and timing of such operating
efficiencies and cost savings could be affected by a number of factors beyond
SunTrust's control (see "A Warning About Forward-Looking Information").
Therefore, there can be no assurance that any enhanced earnings will result from
the Merger.
12
<PAGE>
THE MEETINGS
GENERAL
We are furnishing this document to shareholders (the "SunTrust
Shareholders") of SunTrust Banks, Inc., a Georgia corporation (together, where
the context requires, with its subsidiaries, "SunTrust"), and shareholders (the
"Crestar Shareholders") of Crestar Financial Corporation, a Virginia
corporation (together, where the context requires, with its subsidiaries,
"Crestar"), in connection with the solicitation of proxies by the Board of
Directors of SunTrust (the "SunTrust Board") for use at the Special Meeting of
SunTrust Shareholders (including any adjournments or postponements thereof, the
"SunTrust Meeting") and by the Board of Directors of Crestar (the "Crestar
Board") for use at the Special Meeting of Crestar Shareholders (including any
adjournments or postponements thereof, the "Crestar Meeting" and, together with
the SunTrust Meeting, the "Meetings"), each to be held on November 19, 1998 at
the time and places set forth in the accompanying notice.
The purpose of the Meetings is to consider and vote upon the Amended and
Restated Agreement and Plan of Merger, dated as of July 20, 1998 (the "Merger
Agreement"), among SunTrust, Crestar and SMR Corporation (Va.), a Virginia
corporation and a wholly owned subsidiary of SunTrust ("Sub"). The Merger
Agreement is attached to this document as Annex A and is incorporated in this
document by this reference. For a description of the Merger Agreement, see "The
Merger -- Terms of the Merger Agreement."
The Merger Agreement provides that Sub will merge with and into Crestar
(the "Merger," which term includes, where the context so indicates, the other
transactions contemplated by the Merger Agreement). In the Merger, each share
of common stock, par value $5.00 per share, of Crestar ("Crestar Common Stock")
then outstanding will be converted into the right to receive 0.96 shares (the
"Exchange Ratio") of common stock, par value $1.00 per share, of SunTrust
("SunTrust Common Stock"). SunTrust will pay cash in lieu of fractional shares.
Concurrently with the execution of the Merger Agreement, SunTrust (as
grantee) and Crestar (as issuer) entered into a Stock Option Agreement, dated
as of July 20, 1998 (the "Crestar Stock Option Agreement"), pursuant to which
Crestar granted SunTrust an irrevocable option to purchase up to 22,338,161
shares of Crestar Common Stock at an exercise price of $62.875 per share. At
the same time, SunTrust (as issuer) and Crestar (as grantee) entered into a
Stock Option Agreement, dated as of July 20, 1998 (the "SunTrust Stock Option
Agreement" and, together with the Crestar Stock Option Agreement, the "Stock
Option Agreements"), pursuant to which SunTrust granted Crestar an irrevocable
option to purchase up to 21,097,697 shares of SunTrust Common Stock at an
exercise price of $87.00 per share.
SUNTRUST MEETING
GENERAL. The SunTrust Meeting will be held on November 19, 1998 at 10:00
a.m., local time, at Room 10, SunTrust Bank, Atlanta Tower, 25 Park Place,
N.E., Atlanta, Georgia 30303. At the SunTrust Meeting, holders of SunTrust
Common Stock will be asked, in accordance with the rules of the New York Stock
Exchange, Inc. (the "NYSE"), to consider and vote upon a proposal to approve
(i) the Merger Agreement and (ii) the issuance of SunTrust Common Stock in
connection with the Merger (the "Stock Issuance"). The NYSE requires
shareholder approval of the Merger Agreement and the Stock Issuance because the
number of shares of SunTrust Common Stock to be issued in the Merger is
expected to exceed 20% of the shares of SunTrust Common Stock outstanding
immediately prior to the Effective Time. SunTrust Shareholders may also be
asked to vote upon a proposal to adjourn or postpone the SunTrust Meeting for
the purpose of, among other things, allowing additional time for the
solicitation of proxies from SunTrust Shareholders to approve and adopt the
Merger Agreement and the Stock Issuance.
RECORD DATE; VOTING POWER. Only holders of record of shares of SunTrust
Common Stock at the close of business on September 25, 1998 (the "SunTrust
Record Date") are entitled to notice of and to vote at the SunTrust Meeting. On
such date, there were ----- issued and outstanding shares of SunTrust Common
Stock held by approximately --- holders of record. Holders of record of
SunTrust Common Stock on the SunTrust Record Date are entitled to one vote per
share on any matter that may properly come before the SunTrust Meeting. Brokers
who hold shares of SunTrust Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof. Any shares of SunTrust Common Stock for which a
broker has submitted an executed proxy but for which the beneficial owner
thereof has not given instructions on voting to such broker are referred to as
"broker non-votes."
VOTE REQUIRED. The approval and adoption of the Merger Agreement and the
Stock Issuance at the SunTrust Meeting requires a greater number of votes cast
in favor of the matter than the number of votes cast opposing such matter,
provided that the total number of votes cast on such matter represents over 50%
of the shares entitled to vote on the proposal.
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Broker non-votes and abstentions will be counted for purposes of
establishing the presence of a quorum at the SunTrust Meeting. Abstentions and
broker non-votes will not, however, be deemed to have been cast either "for" or
"against" the proposal considered at the meeting and, since approval of the
proposal requires the affirmative vote of a majority of the votes cast at the
SunTrust Meeting, will have no effect on the approval of the Merger Agreement
and the Stock Issuance, unless the total number of votes cast does not exceed
50% of the shares entitled to vote. Accordingly, the SunTrust Board urges
SunTrust Shareholders to complete, date and sign the accompanying proxy and
return it promptly in the enclosed, postage-paid envelope.
On the SunTrust Record Date, the executive officers and directors,
including their affiliates, beneficially owned an aggregate of 5,709,018 shares
of SunTrust Common Stock which such persons are entitled to vote, or
approximately --- % of the shares of SunTrust Common Stock then outstanding. We
currently expect that such directors and officers will vote all of such shares
in favor of the approval of the Merger Agreement and the Stock Issuance. In
addition, on the SunTrust Record Date, the directors and executive officers of
Crestar did not beneficially own any shares of SunTrust Common Stock.
RECOMMENDATION OF THE SUNTRUST BOARD. The SunTrust Board has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Stock Issuance. The SunTrust Board believes that the
Merger Agreement and the transactions contemplated thereby, including the Stock
Issuance, are fair to and in the best interests of SunTrust and the SunTrust
Shareholders and recommends that the SunTrust Shareholders vote "FOR" approval
and adoption of the Merger Agreement and the Stock Issuance. See "The Merger --
Background of and Reasons for the Merger -- SunTrust's Reasons for the Merger."
SOLICITATION AND REVOCATION OF PROXIES. A form of proxy is enclosed with
this document. All shares of SunTrust Common Stock represented by properly
executed proxies will, unless such proxies have been previously revoked, be
voted in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such shares will be voted FOR approval and adoption
of the Merger Agreement and the Stock Issuance and in the discretion of the
proxy holder as to any other matter which may properly come before the SunTrust
Meeting.
EACH HOLDER OF SUNTRUST COMMON STOCK IS REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO SUNTRUST IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE OR BY FACSIMILE.
Any SunTrust Shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of SunTrust prior to the
SunTrust Meeting, at SunTrust's principal executive offices, a written
revocation of such proxy or a duly executed proxy bearing a later date or (ii)
attending the SunTrust Meeting and voting in person. Presence at the SunTrust
Meeting will not revoke a shareholder's proxy unless such shareholder votes in
person.
SunTrust has retained Corporate Investor Communications, Inc. to aid in
the solicitation of proxies. SunTrust estimates the cost of these services to
be approximately $9,000, plus expenses. The cost of soliciting proxies will be
borne by SunTrust. Proxies may be solicited by personal interview, mail or
telephone. In addition, SunTrust may reimburse brokerage firms and other
persons representing beneficial owners of shares of SunTrust Common Stock for
their expenses in forwarding solicitation materials to beneficial owners.
Proxies may also be solicited by certain of SunTrust's executive officers,
directors and regular employees, without additional compensation, personally or
by telephone or facsimile transmission.
OTHER MATTERS. SunTrust is unaware of any matter to be presented at the
SunTrust Meeting other than the proposal to approve and adopt the Merger
Agreement and the Stock Issuance. If other matters are properly presented at
the SunTrust Meeting, the persons named in the enclosed form of proxy will have
authority to vote all properly executed proxies in accordance with their
judgment on any such matter, including, without limitation, any proposal to
adjourn or postpone the SunTrust Meeting, provided that no proxy that has been
designated to vote against approval and adoption of the Merger Agreement and
the Stock Issuance will be voted in favor of any proposal to adjourn or
postpone the SunTrust Meeting for the purpose of soliciting additional proxies
to approve and adopt the Merger Agreement and the Stock Issuance.
CRESTAR MEETING
GENERAL. The Crestar Meeting will be held on November 19, 1998 at 10:00
a.m., local time, at Crestar Center, 4th Floor Auditorium, 919 East Main
Street, Richmond, Virginia 23219. At the Crestar Meeting, holders of Crestar
Common Stock will be asked to consider and vote upon a proposal to approve the
Merger Agreement. Crestar Shareholders may also be asked to vote upon a
proposal to adjourn or postpone the Crestar Meeting for the purpose of, among
other things, allowing additional time for the solicitation of proxies from
Crestar Shareholders to approve the Merger Agreement.
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RECORD DATE; VOTING POWER. Only holders of record of shares of Crestar
Common Stock at the close of business on September 25, 1998 (the "Crestar
Record Date") are entitled to notice of and to vote at the Crestar Meeting. As
of such date, there were ------- issued and outstanding shares of Crestar
Common Stock held by approximately ------- holders of record. Holders of record
of Crestar Common Stock on the Crestar Record Date are entitled to one vote per
share on any matter that may properly come before the Crestar Meeting. Brokers
who hold shares of Crestar Common Stock as nominees will not have discretionary
authority to vote such shares in the absence of instructions from the
beneficial owners thereof. Any such shares of Crestar Common Stock for which a
broker has submitted an executed proxy but for which the beneficial owner
thereof has not given instructions on voting to such broker are referred to as
"broker non-votes."
VOTE REQUIRED. The presence in person or by proxy of the holders of a
majority of the shares of Crestar Common Stock outstanding on the Crestar
Record Date will constitute a quorum for the transaction of business at the
Crestar Meeting. Abstentions and broker non-votes will be counted for purposes
of establishing the presence of a quorum at the Crestar Meeting. The approval
of the proposal to approve the Merger Agreement requires the affirmative vote
of holders of more than two-thirds of the shares of Crestar Common Stock
outstanding on the Crestar Record Date. Broker non-votes and abstentions will
be counted and will have the effect of a vote against the proposal to approve
the Merger Agreement.
On the Crestar Record Date, the executive officers and directors of
Crestar, including their affiliates, owned an aggregate of 3,029,050 shares of
Crestar Common Stock which such persons are entitled to vote, or approximately
- --- % of the shares of Crestar Common Stock then outstanding. We currently
expect that such directors and officers will vote all of such shares in favor
of the proposal to approve the Merger Agreement. In addition, on the Crestar
Record Date, the directors and executive officers of SunTrust did not
beneficially own any shares of Crestar Common Stock.
RECOMMENDATION OF THE CRESTAR BOARD. The Crestar Board has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby. The Crestar Board believes that the Merger is fair to and in the best
interests of Crestar and the Crestar Shareholders and unanimously recommends
that the Crestar Shareholders vote "FOR" approval of the Merger Agreement and
the transactions contemplated thereby. See "The Merger -- Background of and
Reasons for the Merger -- Crestar's Reasons for the Merger."
SOLICITATION AND REVOCATION OF PROXIES. A form of proxy is enclosed with
this document. All shares of Crestar Common Stock represented by properly
executed proxies (whether through the return of the enclosed proxy card or by
telephone) will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR approval of the Merger Agreement
and in the discretion of the proxy holder as to any other matter which may
properly come before the Crestar Meeting.
EACH HOLDER OF CRESTAR COMMON STOCK IS REQUESTED TO VOTE BY TELEPHONE BY
CALLING 1-800-840-1208 OR BY COMPLETING, DATING AND SIGNING THE ACCOMPANYING
PROXY CARD AND RETURNING IT PROMPTLY TO CRESTAR IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE. CRESTAR SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
Specific instructions to be followed by any registered Crestar Shareholder
interested in voting by telephone are set forth on the accompanying form of
proxy. The telephone voting procedures are designed to authenticate
shareholders' identities and to allow shareholders to vote their shares and to
confirm that their instructions have been properly recorded.
Any Crestar Shareholder that has previously delivered a properly executed
proxy (whether through the return of the enclosed proxy card or by telephone)
may revoke such proxy at any time before its exercise. A proxy may be revoked
either by (i) filing with the Secretary of Crestar prior to the Crestar
Meeting, at Crestar's principal executive offices, either a written revocation
of such proxy or a duly executed proxy bearing a later date or (ii) attending
the Crestar Meeting and voting in person. Presence at the Crestar Meeting will
not revoke a shareholder's proxy unless such shareholder votes in person.
Crestar has retained D.F. King & Co., Inc. and Shareholder Communications
Corporation to aid in the solicitation of proxies. Crestar estimates the
aggregate cost of these services, including the reimbursement of out-of-pocket
expenses, to be approximately $90,000. The cost of soliciting proxies will be
borne by Crestar. Proxies may be solicited by personal interview, mail or
telephone. In addition, Crestar may reimburse brokerage firms and other persons
representing beneficial owners of shares of Crestar Common Stock for their
expenses in forwarding solicitation materials to beneficial owners. Proxies may
also be solicited by certain of Crestar's executive officers, directors and
regular employees, without additional compensation, personally or by telephone
or facsimile transmission.
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OTHER MATTERS. Crestar is unaware of any matter to be presented at the
Crestar Meeting other than the proposal to approve the Merger Agreement. If
other matters are properly presented at the Crestar Meeting, the persons named
in the enclosed form of proxy will have authority to vote all properly executed
proxies in accordance with their judgment on any such matter, including,
without limitation, any proposal to adjourn or postpone the Crestar Meeting,
provided that no proxy that has been designated to vote against approval of the
Merger Agreement will be voted in favor of any proposal to adjourn or postpone
the Crestar Meeting for the purpose of soliciting additional proxies to approve
the Merger Agreement.
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THE MERGER
THE DETAILED TERMS OF THE MERGER ARE CONTAINED IN THE MERGER AGREEMENT
ATTACHED AS ANNEX A TO THIS DOCUMENT. THE FOLLOWING DISCUSSION DESCRIBES THE
MORE IMPORTANT ASPECTS OF THE MERGER AND ALL OF THE MATERIAL TERMS OF THE
MERGER AGREEMENT. THIS DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE MERGER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE IN THIS DOCUMENT. WE
ENCOURAGE YOU TO READ THE MERGER AGREEMENT CAREFULLY.
STRUCTURE OF THE MERGER
GENERAL. The Merger Agreement provides that, after its approval by the
SunTrust Shareholders and the Crestar Shareholders and the satisfaction or
waiver of the other conditions to the Merger, Sub will merge with and into
Crestar upon the filing of articles of merger (the "Articles of Merger") with
the State Corporation Commission of the Commonwealth of Virginia, or such later
time as the parties have agreed upon and designated in such filing (the
"Effective Time"), in accordance with the Virginia Stock Corporation Act (the
"VSCA"). Crestar will survive the Merger as a wholly owned subsidiary of
SunTrust. The Articles of Incorporation of Crestar, as in effect immediately
prior to the Effective Time, will be the Articles of Incorporation of the
surviving corporation, until amended in accordance with applicable law. The
Bylaws of Crestar, as in effect immediately prior to the Effective Time, will
be the Bylaws of the surviving company, until amended in accordance with
applicable law. The directors and officers of Crestar immediately prior to the
Effective Time will be the directors and officers of the surviving company
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as applicable.
The Merger Agreement provides that SunTrust may change the structure of
the Merger if it deems such a change to be desirable. SunTrust, however, may
not effect any change in the structure of the Merger if such change would (i)
alter or change the amount or kind of consideration to be issued to Crestar
Shareholders, (ii) adversely affect the tax treatment of Crestar or the Crestar
Shareholders as a result of the Merger or (iii) materially impede or delay the
Merger. If SunTrust determines after the Crestar Meeting that such a change in
the structure of the Merger is desirable and not otherwise prohibited under the
Merger Agreement, then Crestar Shareholders would not have an opportunity to
vote on, or otherwise agree to, such change.
CONVERSION OF SHARES. At the Effective Time, each issued and outstanding
share of Crestar Common Stock (other than certain shares held by SunTrust or
any of its subsidiaries) will be converted into the right to receive from
SunTrust 0.96 shares of SunTrust Common Stock. Cash will be paid in lieu of
fractional shares of SunTrust Common Stock in an amount equal to such fraction
multiplied by the average per share closing price on the NYSE of the SunTrust
Common Stock for the 20 consecutive trading days ending at the end of the third
trading day immediately prior to the Effective Time. If SunTrust changes the
number of shares of SunTrust Common Stock through any reclassification,
recapitalization, split-up, combination or exchange of shares, or if SunTrust
declares a stock dividend on the shares of SunTrust Common Stock, then the
Exchange Ratio also will be adjusted appropriately.
Crestar Shareholders and SunTrust Shareholders are urged to obtain current
market quotations for SunTrust Common Stock and Crestar Common Stock. It is
expected that the market price of SunTrust Common Stock will fluctuate between
the date of this document and the date on which the Merger is completed and
thereafter. Because the number of shares of SunTrust Common Stock to be
received by Crestar Shareholders in the Merger is fixed and the market price of
SunTrust Common Stock is subject to fluctuation, the value of the shares of
SunTrust Common Stock that Crestar Shareholders will receive in the Merger may
increase or decrease prior to and after the Merger. See "Risk Factors -- Fixed
Merger Consideration Despite Potential Change in Relative Stock Prices."
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. During early January through March, L. Phillip
Humann, Chairman and Chief Executive Officer of SunTrust, John W. Spiegel,
Executive Vice President and Chief Financial Officer of SunTrust, and James B.
Williams, Chairman of the Executive Committee of the SunTrust Board (the
"SunTrust Executive Committee"), met on several occasions to discuss potential
strategic options available to SunTrust. These discussions involved a review of
changes in the industry, the industry's financial performance, the financial
services consolidation trend and characteristics of recent mergers and
acquisitions of financial institutions. During that same period, beginning on
January 12, 1998, Mr. Humann and Mr. Spiegel also met with Lehman Brothers
Inc., SunTrust's financial advisor ("Lehman Brothers"), on several occasions,
both in person and by telephone, to discuss these matters. During the course of
these discussions, Lehman Brothers specifically suggested that a combination
with Crestar might best fulfill SunTrust's strategic goals.
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Mr. Humann then requested that Mr. Richard G. Tilghman, Chairman and Chief
Executive Officer of Crestar, meet with him to renew their business
acquaintance at a dinner meeting on March 11, 1998. At this dinner meeting, Mr.
Humann and Mr. Tilghman discussed general banking issues and developments in
the financial services industry, including SunTrust's and Crestar's positions
in the industry. Neither Mr. Humann nor Mr. Tilghman discussed any specific
transaction between SunTrust and Crestar at this meeting. Subsequently, during
April and early May, Mr. Humann and Mr. Spiegel began to discuss the financial
and other aspects of a potential transaction involving Crestar with Lehman
Brothers, including the compatability of the two companies' strategic plans and
the benefits that the combined company might enjoy, such as purchasing leverage
and potential cost savings.
On May 14, 1998, Mr. Tilghman met with Mr. Humann at Mr. Humann's request.
Mr. Humann broadly discussed the possibility of a strategic business
combination between SunTrust and Crestar. Mr. Tilghman gave no indication of
interest in such a transaction and no negotiations regarding such a transaction
took place at that time. Later in May, Mr. Humann telephoned Mr. Tilghman to
indicate continued interest in such a transaction and suggested that the two
companies enter into an arrangement to exchange confidential information. Mr.
Tilghman stated that he would contact Mr. Humann with a response.
On June 2, 1998, Mr. Tilghman reported his discussions with Mr. Humann at
a meeting of the Executive Committee of the Crestar Board (the "Crestar
Executive Committee"), which consists of J. Carter Fox, Charles R. Longsworth,
Patrick J. Maher, Gordon F. Rainey, Jr., Frank S. Royal, Mr. Tilghman and James
M. Wells III. The Crestar Executive Committee authorized Mr. Tilghman to
respond to Mr. Humann's request to exchange certain information to determine
whether a business combination was feasible. On June 10, 1998, SunTrust and
Crestar signed a confidentiality memorandum and began to exchange on a verbal
basis certain high-level business and financial information, consisting of
interim financial results, information about the operational structure of each
company and information regarding the strategic plans of each company.
During the rest of June and early July, members of the senior managements
of SunTrust and Crestar exchanged and reviewed such information in order to
determine whether to commence negotiations. During this period, SunTrust
continued to consult with Lehman Brothers regarding the potential values of
Crestar and the combined company. On July 7, 1998, the Crestar Executive
Committee met and authorized Mr. Tilghman to commence negotiations with
SunTrust regarding a potential business combination between the two companies.
On July 8, 1998, Crestar contacted Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), who had been working with Crestar from time to time with respect to
its strategic alternatives, to review certain financial aspects of, and to
advise Crestar regarding, any proposed transaction.
On July 10, 1998, Mr. Spiegel discussed various aspects of a possible
combination of SunTrust and Crestar with a representative of Morgan Stanley,
including details regarding SunTrust's ownership of stock in The Coca-Cola
Company and the reflection of such ownership in the market price of SunTrust
Common Stock. Over the next several days, members of the senior managements of
both companies continued to discuss various matters, including financial and
non-financial due diligence, related to a possible business combination
involving the two companies.
On July 14, 1998, the SunTrust Executive Committee, which consists of J.
Hyatt Brown, Mr. Humann, M. Douglas Ivester, Scott L. Probasco, Jr. and James
B. Williams, met to review the proposed terms of a potential transaction with
Crestar and a financial analysis of the potential transaction. At the meeting,
the SunTrust Executive Committee discussed (i) the financial effects of a
proposed transaction with Crestar, (ii) the potential benefits of such a
business combination, including potential cost savings to the combined company,
(iii) potential key conditions to the consummation of any proposed transaction,
including shareholder and regulatory approvals, and (iv) the expected
accounting and tax treatment of the proposed transaction. The SunTrust
Executive Committee also discussed a proposed exchange ratio for Crestar Common
Stock of 0.96. At the conclusion of the meeting, the SunTrust Executive
Committee authorized Mr. Humann to continue the negotiations with Crestar
regarding a potential transaction with an exchange ratio of 0.96 shares of
SunTrust Common Stock for each share of Crestar Common Stock.
During July 15 and 16, 1998, SunTrust's and Crestar's senior management
and their respective legal and financial advisors continued negotiations
regarding the proposed transaction, including negotiating the terms of the
Merger Agreement, the Stock Option Agreements and related documents.
On the morning of July 17, 1998, Mr. Humann, other members of SunTrust's
senior management and SunTrust's legal and financial advisors presented the
terms of the proposed merger to the SunTrust Board, including the exchange
ratio of 0.96, and discussed with the SunTrust Board the various factors
described elsewhere in this document. See
" -- SunTrust's Reasons for the Merger." SunTrust's legal advisors reviewed the
terms of the Merger Agreement and the related agreements (including the Stock
Option Agreements and employment agreements for Messrs. Tilghman and
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Wells), and the legal standards applicable to the SunTrust Board's
consideration of the proposed transaction with Crestar. Lehman Brothers
reviewed financial information concerning Crestar, SunTrust and the proposed
transaction. After such discussion and due consideration of the foregoing
matters, the SunTrust Board determined that the Merger Agreement and the
transactions contemplated thereby, including the Stock Issuance, are in the
best interests of SunTrust and the SunTrust Shareholders and approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Stock Issuance, subject to the satisfactory completion of
SunTrust's due diligence review of Crestar and subject to the receipt of the
opinion of Lehman Brothers to the effect that the Exchange Ratio, as of the
date of the execution of the Merger Agreement, was fair to SunTrust.
On the afternoon of July 17, 1998, the Crestar Board met with Crestar's
legal and financial advisors and other members of Crestar's senior management
to review and discuss the terms of the proposed merger transaction. Crestar's
senior management reviewed with the Crestar Board the terms of the proposed
transaction with SunTrust and related matters, including the factors described
in " -- Crestar's Reasons for the Merger." Crestar's legal advisors reviewed
the proposed terms of the Merger Agreement and the related agreements,
including the Stock Option Agreements and employment agreements for Messrs.
Tilghman and Wells. Morgan Stanley reviewed financial information regarding
Crestar, SunTrust and the proposed transaction. After review and discussion of
the foregoing matters, the Crestar Board authorized Crestar's senior management
to continue negotiations with, and its due diligence review of, SunTrust with a
view to finalizing the terms of definitive transaction documents, and scheduled
a special meeting of the Crestar Board for July 19, 1998 for the purpose of
considering the proposed merger transaction following further negotiations.
On July 18 and 19, 1998, the senior management of both SunTrust and
Crestar, along with their financial and legal advisors, met to finalize
negotiations regarding the terms of the Merger Agreement, the Merger and the
ancillary documents and transactions contemplated thereby. Each of the parties
also completed its due diligence review of the other party.
On the afternoon of July 19, 1998, the Crestar Board reconvened to review
and discuss the terms of the proposed merger transaction. Crestar's senior
management reviewed with the Crestar Board the results of Crestar's due
diligence review of SunTrust and, with the assistance of Crestar's legal and
financial advisors, the terms of the Merger Agreement, the Stock Option
Agreements, the employment agreements for Messrs. Tilghman and Wells and
related matters. Morgan Stanley rendered its opinion that, as of such date, the
Exchange Ratio was fair, from a financial point of view, to the holders of
Crestar Common Stock (other than SunTrust and its affiliates). After review and
discussion of the foregoing matters, the Crestar Board, by unanimous vote,
determined that the Merger was in the best interests of Crestar and its
shareholders, and authorized and approved the Merger Agreement, the Stock
Option Agreements and related matters.
During the period between the March 11, 1998 meeting between Mr. Humann
and Mr. Tilghman through the execution of the confidentiality memorandum on
June 10, 1998, and through the date of each company's board meeting, neither
the SunTrust Board nor the Crestar Board received or solicited any indications
of interest from other parties concerning a significant business combination
transaction.
On the morning of July 20, 1998, the parties executed the Merger Agreement
and the Stock Option Agreements.
SUNTRUST'S REASONS FOR THE MERGER. The SunTrust Board believes that the
terms of the Merger Agreement and the transactions contemplated thereby,
including the Stock Issuance are fair from a financial point of view to, and
are in the best interests of, SunTrust and its shareholders. Accordingly, the
SunTrust Board has unanimously approved and adopted the Merger Agreement and
the transactions contemplated thereby, including the Stock Issuance, and
recommends approval and adoption of the Merger Agreement and the Stock Issuance
by the SunTrust Shareholders. In reaching its decision, the SunTrust Board
consulted with SunTrust's management and legal counsel and Lehman Brothers, its
financial advisor. The principal reasons for the SunTrust Board's approval and
adoption of the Merger Agreement and the transactions contemplated thereby,
including the Stock Issuance, and its recommendation to the SunTrust
Shareholders are as follows:
(i) The SunTrust Board's belief that the Merger will effectively
implement and accelerate SunTrust's strategy for long-term growth and
enhanced shareholder value by enabling SunTrust to take advantage of (a)
the strong Crestar banking franchise in important markets in Virginia,
Maryland and Washington, D.C., (b) the fact that the Crestar franchise is
contiguous with SunTrust's Tennessee banking franchise and provides
additional geographic and product diversity over a resulting market that
will include six states and Washington, D.C., in the Eastern United States
and (c) an opportunity for additional acquisitions in the Mid-Atlantic
market areas of Crestar that could be negotiated and implemented by a
combined management team with experience in acquisitions.
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(ii) The SunTrust Board's assessment of the current and prospective
economic and competitive environment facing the financial services industry
generally, and SunTrust in particular. These factors included the continued
rapid consolidation in the industry, the increasing importance of
operational scale in remaining competitive and supporting the necessary
investments in technology, and the benefits of geographic and product
diversification. In this regard, the SunTrust Board noted that the Merger
would allow SunTrust to become the tenth largest bank holding company in
the United States based on total assets and would enable SunTrust to
possess the financial resources and economies of scale necessary to compete
more effectively in the financial services industry in the future.
(iii) The SunTrust Board's review of certain financial information about
the Merger, SunTrust and Crestar. This information included information
regarding respective recent and historical stock performance, valuation
analyses, pro forma analyses, comparative financial data, and comparable
merger and acquisition transactions as presented by SunTrust's financial
advisor and senior management, as well as the anticipated cost savings,
operating efficiencies and opportunities for revenue enhancement available
to the combined company as a result of the Merger that are discussed more
specifically under "Management and Operations After the Merger." The
SunTrust Board also considered the fact that the Merger would be expected
to have an accretive effect on SunTrust's earnings in 1999.
(iv) The results of SunTrust's due diligence review of Crestar.
(v) The SunTrust Board's belief that Crestar is a high quality franchise
with a respected and capable management team with a compatible approach to
customer service, credit quality and shareholder value.
(vi) The SunTrust Board's review of certain nonfinancial terms of the
Merger, including information about the terms of the Merger Agreement, the
Stock Option Agreements, the addition of four directors to the SunTrust
Board (including Mr. Tilghman) and employment agreements with Mr. Tilghman
and Mr. Wells.
(vii) The presentation of Lehman Brothers to the SunTrust Board on July
17, 1998, and the opinion of Lehman Brothers (including the assumptions and
financial information and projections relied upon by Lehman Brothers in
arriving at such opinion) rendered on July 20, 1998 that, as of such date,
the Exchange Ratio was fair to SunTrust from a financial point of view. See
" -- Opinions of Financial Advisors -- SunTrust."
(viii) The SunTrust Board's expectation that the Merger would constitute
a tax-free "reorganization" under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). See " -- Certain Federal Income Tax
Consequences."
(ix) The SunTrust Board's expectation that the Merger would be accounted
for as a "pooling of interests" for accounting and financial reporting
purposes. In particular, the SunTrust Board took into account the fact
that, because of the amount of treasury stock generated by SunTrust's share
repurchase program and the limitation on treasury stock under the
Accounting Principles Board Opinion No. 16, SunTrust would be unable to
account for smaller acquisitions under the pooling of interests method of
accounting. See "Accounting Treatment."
(x) The likelihood of the Merger being approved by the appropriate
regulatory authorities. See " -- Regulatory Approvals."
The SunTrust Board also discussed certain potentially negative factors in
connection with the Merger. These included, among others, the expansion into a
new region and new markets with which SunTrust has little prior experience; the
potential difficulties of integrating Crestar's operations into SunTrust; the
significant costs involved in connection with completing the Merger; the
substantial time and effort of SunTrust management required to implement the
Merger, integrate the business of Crestar into SunTrust, and manage the
increased size of the combined business; the risk that the anticipated benefits
of the Merger might not be fully realized; the fact that the SunTrust Stock
Option Agreement, which Crestar required as an inducement to enter into the
Merger Agreement, might discourage third parties from offering to acquire
SunTrust during the pendency of the Merger; and the dilution of current
SunTrust Shareholders' indirect interest in SunTrust's holdings of stock in The
Coca-Cola Company. The SunTrust Board believes that the benefits and advantages
of the Merger outweigh these potentially negative factors.
The foregoing discussion of the information and factors considered by the
SunTrust Board is not intended to be exhaustive but is believed to include all
material factors considered by the SunTrust Board. In reaching its
determination to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Stock Issuance, the SunTrust Board did not
assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
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THE SUNTRUST BOARD BELIEVES THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE STOCK ISSUANCE, ARE FAIR TO AND IN THE BEST
INTERESTS OF SUNTRUST AND THE SUNTRUST SHAREHOLDERS AND RECOMMENDS THAT THE
SUNTRUST SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE STOCK ISSUANCE.
CRESTAR'S REASONS FOR THE MERGER. The Crestar Board believes that the
terms of the Merger Agreement and the Merger are fair from a financial point of
view to, and are in the best interests of, Crestar and the Crestar
Shareholders. Accordingly, the Crestar Board has unanimously approved and
adopted the Merger Agreement and recommends approval of the Merger Agreement by
the Crestar Shareholders. In reaching its decision, the Crestar Board consulted
with Crestar's management and legal counsel and Morgan Stanley, Crestar's
financial advisor, and considered a number of factors, to which relative
weights were not assigned, including the following:
(i) The Crestar Board's familiarity with and review of the factors
contributing to Crestar's limited prospects for utilization of its excess
capital in a manner that could be expected to maintain or enhance
shareholder returns, including (a) Crestar's inability under applicable
accounting guidelines to implement a large share repurchase program, (b)
the expectation that a continued acquisition strategy would only serve to
maintain or increase Crestar's excess capital given the high capital ratios
of Crestar's potential acquisition candidates and the desirability of
accounting for any such acquisition transaction as a pooling of interests,
(c) the undesirability of engaging in any significant acquisitions on a
purchase accounting basis given the amount of goodwill any such acquisition
would be expected to generate based on prevailing pricing multiples in the
financial institution merger and acquistion market, and (d) the limitations
on Crestar's ability to repurchase shares in connection with any such
acquisition transaction accounted for as a pooling of interests.
(ii) The Crestar Board's review of (a) the business, operations,
financial condition and earnings of SunTrust on an historical and a
prospective basis and of the combined company on a pro forma basis, (b) the
anticipated cost savings, operating efficiencies and opportunities for
revenue enhancement available to the combined company as a result of the
Merger that are discussed more specifically under "Management and
Operations After the Merger" and (c) the historical and prospective stock
price performance of SunTrust Common Stock, including the anticipated
impact of the Merger on the price of SunTrust Common Stock over the short
term and the long term and the contribution to the market price of SunTrust
Common Stock represented by SunTrust's ownership of stock in The Coca-Cola
Company. The Crestar Board gave due consideration to the disparity between
the current dividend per share on Crestar Common Stock and the pro forma
equivalent dividend per share for current holders of Crestar Common Stock
following the Merger, and the fact that SunTrust's senior management
indicated its willingness to consider recommending to the SunTrust Board
that the annual dividend on SunTrust Common Stock be increased following
the Merger to a level closely aligned to that of the current dividend per
share on Crestar Common Stock.
(iii) The compatibility of the respective businesses, operating
philosophies and strategic objectives of Crestar and SunTrust, including
their respective decentralized management structures, the growth of their
respective fee-based businesses and the superior credit quality of their
respective loan portfolios.
(iv) The terms of the Merger Agreement and the Merger, including the
Exchange Ratio, which reflected price-to-1998 estimated earnings and
price-to-book value multiples of approximately 27.1x and 4.27x,
respectively (based on the closing price of $87.44 for SunTrust Common
Stock on the NYSE on July 17, 1998) at the time that the Crestar Board
approved the Merger Agreement. The Crestar Board gave due consideration to
the fact that the fixed Exchange Ratio would allow holders of Crestar
Common Stock to benefit from any increase in the market price of SunTrust
Common Stock prior to the Merger while also subjecting them to any declines
in such market price prior to the Merger. See " -- Conversion of Shares."
(v) The current and prospective economic and competitive environment
facing the financial services industry generally, and Crestar in
particular, including the continued pace of consolidation in the industry,
the perceived importance of operational scale in enhancing efficiency and
profitability and remaining competitive over the long term, and the
benefits of increased geographic diversification. In this regard, the
Crestar Board noted that the combined company resulting from the Merger
would be the tenth largest bank holding company in the United States based
on total assets and the eighth largest in market capitalization (based on
financial information as of June 30, 1998 and market information as of July
16, 1998), would have a leading market position (based on total deposits)
in five Southeastern states, and would possess the financial resources and
economies of scale necessary to compete more effectively in the financial
services industry in the future.
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(vi) The Crestar Board's familiarity with and review of Crestar's
business, operations, financial condition and earnings on an historical and
a prospective basis.
(vii) The presentation of Morgan Stanley to the Crestar Board on July 17,
1998, and the opinion of Morgan Stanley rendered on July 19, 1998 that, as
of such date, the Exchange Ratio was fair from a financial point of view to
the holders of Crestar Common Stock. See " -- Opinions of Financial
Advisors -- Crestar."
(viii) The expectation that the Merger will be tax-free (except for cash
paid in lieu of fractional shares) for federal income tax purposes to
Crestar and Crestar Shareholders and will qualify as a pooling of interests
for accounting and financial reporting purposes. See " -- Accounting
Treatment" and " -- Certain Federal Income Tax Consequences."
(ix) The generally favorable impact that the Merger could be expected to
have on the constituencies served by Crestar, including its customers,
employees and communities.
(x) The commitment of SunTrust to appoint Mr. Tilghman and three other
current members of the Crestar Board to become members of the SunTrust
Board at the Effective Time. The Crestar Board also considered the terms of
the employment agreements entered into between SunTrust and Messrs.
Tilghman and Wells, which will become effective as of the Effective Time.
See " -- Interests of Certain Persons in the Merger."
(xi) The terms of the Stock Option Agreements, including the risk that
the Crestar Stock Option Agreement (as defined herein) might discourage
third parties from offering to acquire Crestar by increasing the cost of
such an acquisition, and recognizing that the execution of the Crestar
Stock Option Agreement was a condition to SunTrust's willingness to enter
into the Merger Agreement. See " -- The Stock Option Agreements."
The foregoing discussion of the information and factors considered by the
Crestar Board is not intended to be exhaustive but is believed to include all
material factors considered by the Crestar Board. In reaching its determination
to approve the Merger, the Crestar Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors.
THE CRESTAR BOARD BELIEVES THAT THE MERGER, INCLUDING THE EXCHANGE RATIO,
IS FAIR TO AND IN THE BEST INTERESTS OF CRESTAR AND THE CRESTAR SHAREHOLDERS
AND HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT AND RECOMMENDS
THAT THE CRESTAR SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
SUNTRUST
SunTrust has retained Lehman Brothers to act as its financial advisor in
connection with the Merger. Lehman Brothers has rendered its written opinion to
the SunTrust Board, dated July 20, 1998, to the effect that, based upon and
subject to the factors and assumptions set forth in such opinion, and as of the
date of such opinion, the Exchange Ratio to be paid by SunTrust to the Crestar
Shareholders in the Merger was fair to SunTrust from a financial point of view.
THE FULL TEXT OF THE LEHMAN BROTHERS OPINION, WHICH SETS FORTH ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN BY LEHMAN BROTHERS, IS ATTACHED TO THIS DOCUMENT AS ANNEX B. THE
SUMMARY SET FORTH IN THIS DOCUMENT OF THE OPINION OF LEHMAN BROTHERS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE LEHMAN BROTHERS
OPINION.
SunTrust did not impose any limitations on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the SunTrust Board as to the form or amount of consideration
to be offered by SunTrust to the Crestar Shareholders in the Merger, which was
determined through arm's-length negotiations between the parties. In arriving
at its opinion, Lehman Brothers did not ascribe a specific range of values to
SunTrust or Crestar, but rather made its determination as to the fairness, from
a financial point of view, of the Exchange Ratio to be paid by SunTrust to the
Crestar Shareholders in the Merger on the basis of the financial and
comparative analyses described below. Lehman Brothers' opinion is addressed to
the SunTrust Board and was rendered to the SunTrust Board in connection with
its consideration of whether to approve the Merger and whether or not the
Exchange Ratio was fair to SunTrust. Lehman Brothers' opinion is not intended
to be and does not constitute a recommendation to any SunTrust Shareholder as
to how such Shareholder should vote with respect to the Merger Agreement and
the Stock Issuance. Lehman Brothers was not requested to opine as to, and its
opinion does not address, SunTrust's underlying business decision to proceed
with or effect the Merger.
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In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement and the specific terms of the Merger; (ii) such publicly
available information concerning SunTrust and Crestar that it believed to be
relevant to its analysis, including, without limitation, public information
released by SunTrust and Crestar with respect to income for the three month
period and six month period ended, and financial condition as of June 30, 1998,
SunTrust's and Crestar's quarterly reports on Form 10-Q for the period ended
March 31, 1998 and SunTrust's and Crestar's reports on Form 10-K for the year
ended December 31, 1997; (iii) financial and operating information with respect
to the businesses, operations and prospects of SunTrust and Crestar furnished
to it by SunTrust and Crestar, respectively; (iv) trading histories of the
common stocks of SunTrust and Crestar from July 15, 1993 to the present and a
comparison of those trading histories with those of other companies that it
deemed relevant; (v) a comparison of the historical financial results and
present financial conditions of SunTrust and Crestar with those of other
companies that it deemed relevant; (vi) published estimates of third party
research analysts regarding the future financial performance of SunTrust and
Crestar; (vii) a comparison of the financial terms of the Merger with the
financial terms of certain other recent transactions that it deemed relevant;
(viii) the relative contributions of SunTrust and Crestar on a pro forma basis
to the historical and projected financial condition and operations of the
combined company upon completion of the Merger; and (ix) the potential pro
forma impact of the Merger on SunTrust. In addition, Lehman Brothers had
discussions with the managements of SunTrust and Crestar concerning their
respective businesses, operations, assets, liabilities, financial conditions
and prospects, and the potential cost savings, operating synergies, incremental
earnings (including as a result of the use of excess capital) and other
strategic benefits expected to result from a combination of the businesses of
SunTrust and Crestar, and undertook such other studies, analyses and
investigations as it deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information. Lehman Brothers further relied upon the assurances of managements
of SunTrust and Crestar that they were not aware of any facts or circumstances
that would make such information inaccurate or misleading. In arriving at its
opinion, with the consent of SunTrust, Lehman Brothers was not provided with
and did not have any access to any financial forecasts or projections prepared
by the management of SunTrust as to the projected stand-alone financial
performance of SunTrust or any financial forecasts or projections prepared by
the management of Crestar as to the projected stand-alone financial performance
of Crestar, and accordingly, in performing its analysis, based upon advice of
SunTrust, Lehman Brothers assumed that the publicly available estimates of
research analysts are a reasonable basis upon which to evaluate and analyze the
future stand-alone financial performance of SunTrust and Crestar and that
SunTrust and Crestar would perform substantially in accordance with such
estimates. Lehman Brothers assumed, with the consent of SunTrust, that cost
savings, operating synergies, incremental earnings and other strategic benefits
to result from the Merger would be achieved substantially in accordance with
estimates prepared by management of SunTrust. In arriving at its opinion,
Lehman Brothers did not conduct a physical inspection of the properties and
facilities of Crestar or SunTrust and did not make or obtain any evaluations or
appraisals of the assets or liabilities of Crestar or SunTrust. In addition,
Lehman Brothers noted that it is not expert in the evaluation of loan
portfolios or allowances for loan and real estate owned losses and, upon advice
of SunTrust, it assumed that the allowances for loan and real estate owned
losses provided to it by SunTrust and Crestar were in the aggregate adequate to
cover all such losses. Upon advice of SunTrust and its legal and accounting
advisors, Lehman Brothers assumed that the Merger will qualify for
pooling-of-interests accounting treatment. Lehman Brothers' opinion necessarily
was based upon market, economic and other conditions as they existed on, and
could be evaluated as of, the date of its letter.
In connection with the preparation and delivery of its opinion to the
SunTrust Board, Lehman Brothers performed a variety of financial and
comparative analyses, as described below. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial and comparative analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Lehman Brothers did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance and general business and
economic conditions, many of which are beyond the control of SunTrust. Any
estimates contained in these analyses were not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses
relating to the value of businesses did not purport to be appraisals or to
reflect the prices at which businesses may actually be sold.
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PURCHASE PRICE ANALYSIS. Based upon the Exchange Ratio, the closing price
of SunTrust Common Stock on July 15, 1998 of $85.19 represented a value to be
received by holders of Crestar Common Stock of $81.78 per share. Based on this
implied transaction value per share, Lehman Brothers calculated the
price-to-market, price-to-book, price-to-tangible book, adjusted price-to-book
(wherein price and book value were adjusted to reflect a tangible common equity
to tangible assets ratio of 6.00%) and price-to-earnings multiples, paid in the
Merger. The implied transaction value per share yielded a premium of 34% over
the closing price of Crestar Common Stock of $60.88 on July 15, 1998. This
analysis also yielded a price-to-book value multiple of 4.16x, a
price-to-tangible book value multiple of 4.57x, an adjusted price-to-book value
multiple of 4.97x, a price to estimated 1998 earnings multiple of 26.4x and a
price to estimated 1999 earnings multiple of 24.1x (based on median estimates
of Crestar's 1998 and 1999 earnings published by Institutional Brokers Estimate
System ("IBES") as of July 15, 1998). IBES is a data service that monitors and
publishes a compilation of earnings estimates produced by selected research
analysts regarding companies of interest to institutional investors. Lehman
Brothers also noted that the transaction price to estimated 1998 and 1999
earnings multiples represented 108% and 110%, respectively, of the price to
estimated 1998 and 1999 earnings multiples of SunTrust.
COMPARABLE TRANSACTION ANALYSIS. Using publicly available information,
Lehman Brothers reviewed certain terms and financial characteristics, including
historical and estimated current year and forward year price-to-earnings
ratios, the price-to-book ratio, the price-to-tangible book ratio and the
adjusted price-to-book ratio paid at the time of transaction announcement, of
nine selected banking company pooling-of-interests merger or acquisition
transactions (the "Comparable Bank Transactions Group"). The Comparable Bank
Transactions Group considered by Lehman Brothers in its analysis consisted of
the following transactions (identified by acquiror/acquiree): NationsBank
Corp./Boatmen's Bankshares, Inc.; Wachovia Corporation/Central Fidelity Banks
Inc.; First Union Corp./Signet Banking Corporation; NationsBank Corp./
Barnett Banks Inc.; National City Corp./First of America Bank Corporation;
First American Corporation/Deposit Guaranty Corporation; Regions Financial
Corporation/First Commercial Corporation; Union Planters Corporation/Magna
Group Inc.; and Star Banc Corporation/Firstar Corporation. The median values
for these transactions for the price to latest twelve months earnings ratio,
price to estimated current year earnings ratio (based upon estimates published
by IBES), price to estimated forward year earnings ratio (based upon estimates
published by IBES), price-to-book ratio, price-to-tangible book ratio and
adjusted price-to-book ratio were 25.2x, 23.1x, 21.0x, 3.84x, 4.22x and 4.26x,
respectively. The range of values for these parameters were from 18.5x to
34.6x, 16.3x to 28.5x, 15.1x to 25.3x, 2.71x to 4.19x, 2.99x to 5.81x and 3.15x
to 5.59x, respectively. These compared to transaction multiples of 27.5x,
26.4x, 24.1x, 4.16x, 4.57x and 4.97x for the Merger based on the closing price
of SunTrust Common Stock on July 15, 1998. The range of premiums of implied
transaction value per share in these transactions to market price of the
acquiree was 3% to 46% with a median value of 31%, compared with a transaction
premium to market price of 34% based on the closing prices of SunTrust and
Crestar Common Stock on July 15, 1998. The range of values of the transaction
price to estimated current year and forward year earnings multiples as a
percentage of the acquiror's estimated current year and forward year earnings
multiples was 97% to 163% and 107% to 167%, respectively, with median values of
137% and 136%, respectively, compared with values of 108% and 110%,
respectively, for the transaction.
Because the reasons for and circumstances surrounding each of the
transactions analyzed were different and because of the inherent differences in
the businesses, operations, financial conditions and prospects of Crestar and
the companies included in the Comparable Bank Transactions Group, Lehman
Brothers did not rely on a purely quantitative analysis but also made certain
qualitative judgments concerning the differences between the characteristics of
these transactions and the Merger which would affect the acquisition values of
the acquired companies and Crestar. In particular, Lehman Brothers considered
the size, location and desirability of the acquired company's markets of
operation in relation to the acquiring company, the strategic fit of the
acquired company with the acquiring company, the form and aggregate amount of
consideration offered to the acquired company, and the tax and accounting
treatment of the transaction. These qualitative judgments did not lead to
specific conclusions regarding the value of Crestar Common Stock, but rather
were part of Lehman Brothers' evaluation of the relevancy of this comparative
analysis under the particular circumstances of the Merger.
COMPARABLE COMPANY ANALYSIS. Using publicly available information, Lehman
Brothers compared the financial performance and stock market valuation of
Crestar with the following selected banking companies (the "Comparable Bank
Group"): AmSouth Bancorporation, BB&T Corporation, First Tennessee National
Corporation, First Union Corp., NationsBank Corp., Regions Financial
Corporation, SouthTrust Corporation, Union Planters Corporation and Wachovia
Corporation. Lehman Brothers reviewed the ratio of price to estimated 1998
earnings (19.6x for Crestar and a median of 18.5x for the Comparable Bank
Group); the ratio of price-to-book (3.10x for Crestar and a median of 3.39x for
the Comparable Bank Group) and the ratio of price-to-tangible book (3.40x for
Crestar and a median of 4.19x for the Comparable Bank Group). These ratios for
the Comparable Bank Group are based on published financial results as of
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June 30, 1998, closing stock market prices on July 15, 1998 and estimated
earnings per share based on the most recent median estimates for 1998 and 1999
earnings published by IBES. These ratios for Crestar are based on published
financial results as of June 30, 1998, IBES 1998 and 1999 earnings per share
estimates as of July 15, 1998 and the closing price for Crestar Common Stock of
$60.88 as of close of business on July 15, 1998.
Because of the inherent differences in the businesses, operations,
financial conditions and prospects of Crestar and the companies included in the
Comparable Bank Group, Lehman Brothers did not rely on a purely quantitative
analysis but also made certain qualitative judgments concerning the differences
between Crestar and the companies included in the Comparable Bank Group which
would affect the trading values of the comparable companies and Crestar. In
particular, Lehman Brothers considered for the banking companies included in
the Comparable Bank Group, the size, location and desirability of the markets
of operation of such companies, the aggregate amount of assets, deposits and
loans of such companies, the current levels of and historical rates of growth
in market capitalization, net interest revenues, fee income and EPS of such
companies and the components of fee income of such companies. These qualitative
judgments did not lead to specific conclusions regarding the value of Crestar
Common Stock, but rather were part of Lehman Brothers' evaluation of the
relevancy of this comparative analysis under the particular circumstances of
the Merger.
DISCOUNTED CASH FLOW ANALYSIS. Lehman Brothers discounted five years of
estimated cash flows of Crestar (based upon estimates published by IBES),
including SunTrust management projections of cost savings and operational
synergies resulting from the Merger, assuming a dividend rate sufficient to
maintain a tangible capital ratio (defined as tangible common equity divided by
tangible assets) of 6.00% and using a range of discount rates from 11% to 13%.
SunTrust management projections of cost savings were approximately $130
million, on a pre-tax basis, for 1999 and 2000, respectively, with 75% of such
$130 million annual cost savings being achieved by the end of 1999 and a full
100% of such $130 million annual cost savings being achieved by the end of
2000. SunTrust management projections of operational synergies were $20 million
and $28 million, pre-tax, for 1999 and 2000, respectively, in incremental
income. In addition, Lehman Brothers included the impact of $75 million and $130
million, pre-tax, for 1999 and 2000, respectively, in capital management
benefits which SunTrust management estimated the combined company could derive
after the Merger. Lehman Brothers derived an estimate of a range of terminal
values by applying multiples ranging from 17 times to 19 times estimated
year-end 2003 net income assuming IBES median estimates for 1999 and a growth
rate of 10% for 2000, 2001, 2002 and 2003. This analysis yielded a range of
stand alone, fully diluted values for Crestar Common Stock of approximately $58
to $69 per share and a range of fully diluted values including expected cost
savings and incremental earnings for Crestar Common Stock of approximately $86
to $102 per share.
PRO FORMA MERGER ANALYSIS. Lehman Brothers analyzed the impact of the
Merger on SunTrust's estimated earnings per share based on the most recent
estimates for the 1998 and 1999 earnings of SunTrust published by IBES. In
connection with this analysis, management of SunTrust provided Lehman Brothers
with estimates for cost savings and incremental earnings (including as a result
of the use of excess capital from the Merger), which estimates were incorporated
in Lehman Brothers' analyses. SunTrust management projections of cost savings
were approximately $130 million per year, on a pre-tax basis, for 1999 and 2000,
with 75% of such $130 million annual cost savings being achieved by the end of
1999 and a full 100% of such $130 million annual cost savings being achieved by
the end of 2000. SunTrust management projections of operational synergies were
$20 million and $28 million, pre-tax, for 1999 and 2000, respectively, in
incremental income. In addition, Lehman Brothers included the impact of $75
million and $130 million, pre-tax, for 1999 and 2000, respectively, in capital
management benefits which SunTrust management estimated the combined company
could derive after the Merger. Based on such IBES estimates and management
projections of expected cost savings and incremental income, Lehman Brothers
calculated that the Merger would result in accretion of 3.6% and 4.3% to
SunTrust's earnings per share in 1999 and 2000, respectively, assuming 75% of
such expected cost savings and incremental earnings were realized in 1999 and
assuming 100% of such expected cost savings and incremental earnings were
realized thereafter.
CONTRIBUTION ANALYSIS. Lehman Brothers analyzed the respective
contributions of Crestar and SunTrust to the combined company's pro forma
balance sheet as of June 30, 1998, and pro forma net income based on the most
recent estimates for the 1998 and 1999 earnings of SunTrust and Crestar
published by IBES. This analysis showed that Crestar would have contributed 30%
of total assets, 27% of total equity and 40% of common equity on a pro forma
basis as of June 30, 1998 and that, based on earnings estimates published by
IBES, Crestar's contribution to the combined company's 1999 net income, would
be 33% before cost savings and operational synergies and would be 37% assuming
full phase-in of cost savings. Based upon the Exchange Ratio, Crestar
Shareholders would own an estimated 34% of the combined company upon completion
of the Merger.
Lehman Brothers is an internationally recognized investment banking firm.
Lehman Brothers, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The SunTrust Board retained
Lehman Brothers based upon Lehman Brothers' experience and expertise and its
familiarity with SunTrust and transactions similar
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to the Merger. Lehman Brothers is acting as financial advisor to SunTrust in
connection with the Merger. Pursuant to a letter agreement dated July 17, 1998,
between SunTrust and Lehman Brothers, SunTrust has agreed to pay Lehman
Brothers (i) a retainer of $125,000 paid upon signing of the letter agreement,
(ii) a fee of $2,000,000 upon delivery of the opinion and the signing of a
definitive agreement and (iii) a fee of 0.18% of the consideration payable to
the Crestar Shareholders under the Merger Agreement (less any amounts paid to
Lehman Brothers under (i) and (ii)), payable upon consummation of the Merger
for its services in connection with the Merger. The estimated fee payable to
Lehman Brothers under the preceding formula equals approximately $17.1 million.
The letter agreement with Lehman Brothers also provides that SunTrust will
reimburse Lehman Brothers for its out-of-pocket expenses and indemnify Lehman
Brothers and certain related persons and entities against certain liabilities,
including liabilities under securities laws, incurred in connection with its
services thereunder. Lehman Brothers has performed various investment banking
services for SunTrust and Crestar in the past, and has received customary fees
for such services. In the past two years, Lehman Brothers has been paid fees
aggregating approximately $2.7 million for services rendered to SunTrust. In
the ordinary course of its business, Lehman Brothers and its affiliates
actively trade in the debt and equity securities of SunTrust and Crestar for
their own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
CRESTAR
Crestar retained Morgan Stanley to act as Crestar's financial advisor in
connection with the Merger and related matters based upon its qualifications,
expertise and reputation, as well as Morgan Stanley's prior investment banking
relationship and familiarity with Crestar. At the July 19, 1998 meeting of the
Crestar Board, Morgan Stanley delivered an oral opinion to the Crestar Board,
which opinion was subsequently confirmed in writing, that, as of such date and
subject to certain considerations set forth in such opinion, the Exchange Ratio
in the Merger Agreement was fair from a financial point of view to the holders
of shares of Crestar Common Stock (other than SunTrust and its affiliates). The
Crestar Board did not impose any limitations with respect to the investigations
made or procedures followed by Morgan Stanley in rendering its opinion.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, WHICH SETS FORTH, AMONG OTHER
THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX C TO THIS DOCUMENT.
CRESTAR SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE MORGAN STANLEY OPINION
CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE
CRESTAR BOARD AND THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF
VIEW TO THE HOLDERS OF SHARES OF CRESTAR COMMON STOCK (OTHER THAN SUNTRUST AND
ITS AFFILIATES), AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER NOR
DOES IT CONSTITUTE A RECOMMENDATION TO ANY CRESTAR SHAREHOLDER AS TO HOW TO
VOTE AT THE CRESTAR MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET
FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things: (i) reviewed certain publicly available financial statements and other
information of Crestar and SunTrust, respectively; (ii) reviewed certain
internal financial statements and other financial and operating data concerning
Crestar and SunTrust prepared by the managements of Crestar and SunTrust,
respectively; (iii) analyzed certain financial projections prepared by the
managements of Crestar and SunTrust, respectively; (iv) discussed the past and
current operations and financial condition and the prospects of Crestar and
SunTrust with senior executives of Crestar and SunTrust, respectively; (v)
reviewed the reported prices and trading activity for the Crestar Common Stock
and the SunTrust Common Stock; (vi) compared the financial performance of
Crestar and SunTrust and the prices and trading activity of the Crestar Common
Stock and the SunTrust Common Stock with that of certain other comparable
publicly-traded companies and their securities; (vii) discussed the results of
regulatory examinations of Crestar and SunTrust with senior management of the
respective companies; (viii) discussed with senior managements of Crestar and
SunTrust the strategic objectives of the Merger and their estimates of the
synergies and other benefits of the Merger for the combined company; (ix)
analyzed the pro forma impact of the Merger on the combined company's earnings
per share, consolidated capitalization and financial ratios; (x) reviewed the
financial terms, to the extent publicly available, of certain comparable merger
transactions; (xi) participated in discussions and negotiations among
representatives of Crestar and SunTrust and their financial and legal advisors;
(xii) reviewed the Merger Agreement and certain related documents; and (xiii)
performed such other analyses and considered such other factors as deemed
appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including the synergies and other benefits expected to
result from the Merger, Morgan Stanley has assumed
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that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of
Crestar and SunTrust. Morgan Stanley has not made any independent valuation or
appraisal of the assets or liabilities of Crestar or SunTrust, nor has Morgan
Stanley been furnished with any such appraisals, and Morgan Stanley has not
examined any individual loan credit files of Crestar or SunTrust. In addition,
Morgan Stanley has assumed the Merger will be completed substantially in
accordance with the terms set forth in the Merger Agreement. Morgan Stanley's
opinion was necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to Morgan
Stanley as of, the date of such opinion. In arriving at its opinion, Morgan
Stanley was not authorized to solicit, and did not solicit, interest from any
party with respect to an acquisition or merger involving Crestar or any of its
assets.
The following is a summary of the financial analyses performed by Morgan
Stanley and reviewed with the Crestar Board on July 17, 1998 in connection with
rendering its opinion dated as of July 19, 1998.
VALUATION METHODOLOGIES. As part of its financial analyses, Morgan Stanley
performed valuation analyses of Crestar using various methodologies. Morgan
Stanley evaluated the positions and strengths of Crestar on a stand-alone
basis, considered estimates by Crestar and SunTrust management of the synergies
which could be expected to be realized in a merger with Crestar and determined
an acquisition value based upon specified assumptions. The following is a
summary of the various methodologies underlying the valuation analyses
conducted by Morgan Stanley.
COMPARABLE COMPANY ANALYSIS. As part of its analysis, Morgan Stanley
compared certain financial information of Crestar with corresponding publicly
available information of (i) a group of twelve publicly traded bank holding
companies that Morgan Stanley considered comparable in certain respects with
Crestar (the "Peer Group") and (ii) thirty-five bank holding companies (the
"Morgan Stanley Bank Index" and together with the Peer Group, the
"Comparables"). Historical financial information used in connection with the
ratios provided below is as of June 30, 1998 with respect to financial
information for Crestar and SunTrust, and as of March 31, 1998 with respect to
financial information for the Comparables.
Morgan Stanley analyzed the relative performance and value of Crestar by
comparing certain market trading statistics for Crestar with those of the
Comparables. Market information used in ratios provided below is as of July 16,
1998. The market trading information used in the valuation analysis was market
price to book value (which was 3.1x in the case of Crestar; 3.8x in the case of
the average of the Peer Group; and 3.5x in the case of the average of the
Morgan Stanley Bank Index) and market price to estimated earnings per share for
1999 (which was 18.1x in the case of Crestar; 17.1x in the case of the average
of the Peer Group; and 17.9x in the case of the average of the Morgan Stanley
Bank Index). Earnings per share estimates for Crestar, the Morgan Stanley Bank
Index and the Peer Group were based on IBES estimates as of July 16, 1998. The
implied range of values for Crestar Common Stock derived from the analysis of
the Comparables' market price to book value and market price to 1999 estimated
earnings per share ranged from approximately $58 to $69 per share.
DIVIDEND DISCOUNT ANALYSIS. Morgan Stanley performed a dividend discount
analysis to determine a range of present values per share of Crestar Common
Stock assuming Crestar continued to operate as a stand-alone entity. This range
was determined by adding (i) the present value of the estimated future dividend
stream that Crestar could generate over the five-year period from 1998 through
2002, and (ii) the present value of the "terminal value" of Crestar Common
Stock at the end of the year 2002. To determine a projected dividend stream,
Morgan Stanley assumed a constant tangible common equity/tangible assets ratio
of 7%. The earnings projections which formed the basis for the dividends and
the terminal value were adapted from IBES estimates for 1998 and 1999, and
earnings growth rates ranging from 10%-14% for estimating earnings for 2000
through 2003. The "terminal value" of Crestar Common Stock at the end of the
period was determined by applying two price-to-earnings multiples (17x and 19x)
to year 2003 projected earnings. The dividend stream and terminal values were
discounted to present values using discount rates of 12% and 14%, which Morgan
Stanley viewed as the appropriate discount rate range for a company with
Crestar's risk characteristics. Based on the above assumptions, fully diluted
stand-alone value of Crestar Common Stock ranged from approximately $53 to $73
per share.
IMPLIED ACQUISITION VALUE. Morgan Stanley performed an analysis of the
acquisition valuation of Crestar in which it assumed that the net present value
of estimated cost savings and revenue enhancements was added to the stand-alone
value of Crestar Common Stock calculated using IBES estimates as described
above (see " -- Dividend Discount Analysis" above). Based on pre-tax synergies
ranging from $113-$188 million (15%-25% of 1998 projected non-interest expense
base of $750 million), discount rates of 12% and 14%, a phase-in cost of
savings over two years, a cost savings growth rate of 4% after the phase-in
period, and merger and reorganization charges equal to the synergies incurred
in the
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first year following the Merger, Morgan Stanley estimated the implied
acquisition value of Crestar Common Stock to range from approximately $58 to
$83 per share.
PRECEDENT TRANSACTION ANALYSIS. Morgan Stanley performed an analysis of
eleven precedent transactions (the "Precedent Transactions") by selected
holding companies of commercial banks that Morgan Stanley deemed comparable to
the Merger in order to compare the multiples of book value and projected
earnings indicated by the Exchange Ratio in the Merger to those multiples
indicated for the Precedent Transactions. The eleven transactions constituting
the Precedent Transactions were (acquiror/acquiree): Wachovia
Corporation/Jefferson Bancshares, Inc., Wachovia Corporation/Central Fidelity
Banks, Inc., First Union Corporation/Signet Banking Corp., NationsBank
Corporation/Barnett Banks, Inc., Banc One Corporation/First Commerce
Corporation, First Union Corporation/CoreStates Financial Corporation, National
City Corporation/First of America Bank Corporation, First American
Corporation/Deposit Guaranty Corp., Regions Financial Corporation/First
Commercial Bancshares, Inc., Union Planters Corporation/Magna Group, Inc., and
Star Banc Corporation/Firstar Corporation.
The ranges of multiples of book value (based on the acquired company's
most recently reported book value per share prior to the announcement of the
transaction) and of estimated earnings per share (based on IBES estimates of
the acquired company's earnings per share prior to announcement of the
transaction) for the Precedent Transactions were 2.6x to 5.3x and 18.2x to
25.3x, respectively. The resulting medians of the book value and earnings
multiples for the Precedent Transactions were 3.8x and 22.3x, respectively. The
range of premiums to market for the Precedent Transactions were 17% to 46% with
a median premium to market of 34%. The multiples of Crestar's book value per
share as of June 30, 1998 and of Crestar's 1999 IBES earnings per share
estimate as of July 16, 1998, indicated by the Exchange Ratio in the Merger
were 4.2x and 24.4x, respectively, and the premium to market value per share of
Crestar Common Stock indicated by the Exchange Ratio in the Merger was 35%. The
foregoing multiples indicated by the Exchange Ratio were based on the closing
prices of SunTrust Common Stock and Crestar Common Stock on July 16, 1998.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Crestar or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning financial and operating characteristics
of Crestar and other factors that could affect the public trading value of the
companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not in itself a meaningful method of
using comparable transaction data or comparable company data.
CONTRIBUTION ANALYSIS. Morgan Stanley reviewed the pro forma effects of
the Merger and computed the contribution to the combined company's pro forma
financial results attributable to each of Crestar and SunTrust. The computation
showed, among other things, that Crestar and SunTrust would contribute to the
combined company approximately 27% and 73%, respectively, of book value as of
June 30, 1998, 30% and 70%, respectively, of assets, 30% and 70%, respectively,
of net revenues, 32% and 68%, respectively, of 1998 estimated earnings based on
IBES estimates, and 28% and 72%, respectively, of market value as of July 16,
1998. Morgan Stanley calculated that the Exchange Ratio would result in an
allocation between the holders of Crestar Common Stock and SunTrust Common
Stock of pro forma ownership of the combined company equal to approximately 34%
and 66%, respectively.
PRO FORMA MERGER ANALYSIS. Morgan Stanley analyzed the financial impact of
the Merger on SunTrust's estimated earnings per share and the estimates of cost
savings, revenue enhancements and other synergies expected to result from the
Merger. Earnings estimates were based on IBES earnings estimates as of July 16,
1998 for 1998 and 1999 and assumed an 11% growth rate for 2000. This analysis
showed that, after giving effect to the Merger, the timing for the realization
of the Merger synergies and before the impact of one-time Merger-related
charges, SunTrust's fully diluted earnings per share would increase in 1999 and
2000, in each case compared to SunTrust on a stand-alone basis.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any analysis
or factor considered by it. Morgan Stanley believes that selecting any portion
of its analyses, without considering all analyses, would create an incomplete
view of the process underlying its opinion. In addition, Morgan Stanley may
have deemed various assumptions more or less probable than other assumptions,
so that the ranges of valuations resulting from any particular analysis
described above should not be taken to be Morgan Stanley's view of the actual
value of Crestar.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Crestar or SunTrust. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be
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significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as a part of Morgan Stanley's analysis of the
fairness from a financial point of view of the Exchange Ratio in the Merger
Agreement to the holders of shares of Crestar Common Stock (other than SunTrust
and its affiliates) and were conducted in connection with the delivery of
Morgan Stanley's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which Crestar might actually be sold.
As described above, Morgan Stanley's opinion and the information provided
by Morgan Stanley to the Crestar Board were two of a number of factors taken
into consideration by the Crestar Board in making its determination to
recommend approval and adoption of the Merger Agreement to the Crestar
Shareholders. Consequently, the Morgan Stanley analyses described above should
not be viewed as determinative of the opinion of the entire Crestar Board or
the view of the management with respect to the value of Crestar. The Exchange
Ratio was determined through negotiations between Crestar and its advisors and
SunTrust, and was approved by the entire Crestar Board.
The Crestar Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. As part of its investment banking business, Morgan Stanley
is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuation for estate, corporate and other purposes. In the
course of its business, Morgan Stanley and its affiliates may actively trade
the debt and equity securities of Crestar and SunTrust for their own account
and for the accounts of customers and, accordingly may at any time hold a long
or short position in such securities. In the past, Morgan Stanley has provided
financial advisory and investment banking services to Crestar and SunTrust for
which services Morgan Stanley received customary fees. In the past two years,
Morgan Stanley has been paid fees aggregating approximately $5.0 million for
services rendered to Crestar, including acting as underwriter for Crestar's
issuance of subordinated notes and capital securities and for financial
advisory services.
Pursuant to a letter agreement dated July 10, 1998, Crestar has agreed to
pay Morgan Stanley: (i) an advisory fee estimated to be between $100,000 and
$150,000 which is payable regardless of whether the Merger is consummated, and
(ii) a transaction fee equal to approximately $--- million, based on the price
of SunTrust Common Stock as of --- , 1998, which is payable upon the
consummation of the Merger. Any advisory fee paid will be credited against the
transaction fee. In addition, Crestar has agreed, among other things, to
reimburse Morgan Stanley for all reasonable out-of-pocket expenses incurred in
connection with the services provided by Morgan Stanley, and to indemnify and
hold harmless Morgan Stanley and certain related parties from and against
certain liabilities and expenses, which may include certain liabilities under
the federal securities laws, in connection with its engagement.
EXCHANGE OF CRESTAR COMMON STOCK FOR SUNTRUST COMMON STOCK
Promptly after the Effective Time, SunTrust will cause SunTrust Bank,
Atlanta (the "Exchange Agent"), to send to each holder of record of Crestar
Common Stock transmittal materials for use in exchanging all of their
certificates representing shares of Crestar Common Stock for a certificate or
certificates representing shares of SunTrust Common Stock and a check for any
fractional share interest, as applicable. The transmittal materials will
contain information and instructions with respect to the surrender of
certificates of shares of Crestar Common Stock in exchange for certificates
representing shares of SunTrust Common Stock.
CRESTAR SHAREHOLDERS SHOULD NOT SEND IN THEIR SHARE CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Following the Effective Time and upon surrender of all of the certificates
representing shares of Crestar Common Stock registered in the name of a holder
of Crestar Common Stock (or indemnity satisfactory to SunTrust or the Exchange
Agent if any of such certificates are lost, stolen or destroyed), together with
a properly completed letter of transmittal, the Exchange Agent will mail to
such holder a certificate or certificates representing the number of shares of
SunTrust Common Stock to which such holder is entitled, together with all
undelivered dividends or distributions, less the amount of any withholding
taxes which may be required thereon, in respect of such shares and, where
applicable, a check in the amount of any cash to be paid in lieu of fractional
shares.
Declaration of dividends by SunTrust after the Effective Time will include
dividends on all SunTrust Common Stock issued in the Merger, but no dividend or
other distribution payable to the holders of record of SunTrust Common Stock at
or as of any time after the Effective Time will be paid to the holder of any
certificates representing shares of Crestar Common Stock until such holder
physically surrenders all such certificates as described above. Promptly after
such surrender, all undelivered dividends and other distributions, less the
amount of any withholding taxes which may be
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required thereon and, where applicable, a check for the amount representing any
fractional share interest, will be delivered to such holder (in each case,
without interest). After the Effective Time, the stock transfer books of
Crestar will be closed and there will be no transfers on the transfer books of
Crestar of the shares of Crestar Common Stock that were outstanding immediately
prior to the Effective Time.
TERMS OF THE MERGER AGREEMENT
EFFECTIVE TIME OF THE MERGER. The Merger will become effective upon the
filing of the Articles of Merger with the State Corporation Commission of
Virginia, or such later time as the parties have agreed upon and designated in
such filing. The Merger Agreement provides that the parties will file the
Articles of Merger as soon as practicable following the satisfaction or waiver
of the conditions to the Merger.
CONDITIONS TO THE MERGER. The respective obligations of SunTrust and
Crestar to effect the Merger and to consummate the other transactions
contemplated to occur on the closing date of the Merger are subject to the
satisfaction or waiver of certain conditions, including the following: (i)
approval of the Merger Agreement by the Crestar Shareholders and the SunTrust
Shareholders; (ii) approval of the listing on the NYSE of the shares of
SunTrust Common Stock to be issued to Crestar Shareholders in the Merger; (iii)
receipt of all necessary authorizations, consents, orders or approvals of, and
all expirations of waiting periods imposed by, any governmental authorities
(collectively, "Consents") which are necessary for consummation of the Merger;
PROVIDED, HOWEVER, that no such Consent shall be deemed obtained if it imposes
any condition or requirement that would so materially and adversely impact the
economic or business benefits to SunTrust or Crestar of the transactions
contemplated by the Merger Agreement that, had such condition or requirement
been known, such party would not, in its reasonable judgement, have entered
into the Merger Agreement; (iv) the effectiveness of the Registration Statement
on Form S-4 (the "Registration Statement") filed by SunTrust under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission (the "Commission") covering the shares of SunTrust
Common Stock to be issued in connection with the Merger and the absence of any
stop order or proceeding by the Commission seeking a stop order; (v) receipt
from Arthur Andersen LLP and KPMG Peat Marwick LLP of letters confirming that
the Merger qualifies for pooling of interests accounting treatment; (vi)
receipt of opinions of Crestar's and SunTrust's counsel that the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; (vii) the accuracy as of the Closing
Date of the other party's representations and warranties as set forth in the
Merger Agreement (except where the failure or failures of such accuracy,
individually or in the aggregate, does not result in a material adverse
effect); and (viii) the performance by the other party in all material respects
of its obligations under the Merger Agreement.
NO SOLICITATION; BOARD ACTION. Crestar has agreed not to, directly or
indirectly, (i) solicit, initiate, encourage or facilitate the submission of
any proposal relating to or involving any merger, consolidation, share
exchange, joint venture, business combination or similar transaction involving
Crestar or any subsidiary of Crestar, or any purchase of all or any material
portion of the assets of Crestar or any subsidiary of Crestar (an "Acquisition
Transaction") or (ii) enter into, encourage or facilitate any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to encourage or facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to or constitute an effort to facilitate, any proposal relating to or involving
an Acquisition Transaction. Crestar has also agreed to terminate immediately
and cease any and all discussions, negotiations and/or contacts with any other
person or entity which may exist relating to or involving an Acquisition
Transaction.
Notwithstanding the above-described non-solicitation provision and other
provisions of the Merger Agreement, the Crestar Board may furnish information
to, or enter into discussions or negotiations with, any person or entity that
makes an unsolicited, written BONA FIDE proposal regarding an Acquisition
Transaction if, and only to the extent that (i) the Crestar Board concludes in
good faith, after consultation with and based upon the advice of outside
counsel, that it is required to furnish such information or enter into such
discussions or negotiations in order to comply with its fiduciary duties to
shareholders under applicable law, (ii) prior to taking such action, Crestar
receives from such person or entity an executed confidentiality agreement and
an executed standstill agreement, each in reasonably customary form (provided
that such agreement is at least as limiting as any such agreement between
SunTrust and Crestar), and (iii) the Crestar Board concludes in good faith that
the proposal regarding the Acquisition Transaction contains an offer of
consideration that is superior to the consideration set forth in the Merger
Agreement. Crestar has also agreed that it shall (i) immediately advise
SunTrust orally and in writing of (A) the receipt by it (directly or
indirectly) of any proposal regarding an Acquisition Transaction, or any
inquiry which could reasonably be expected to lead to any such proposal, (B)
the material terms and conditions of such proposal or inquiry (whether written
or oral), and (C) the identity of the person making any such proposal or
inquiry, (ii) keep SunTrust fully informed of the status and details of any
such
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proposal or inquiry, and (iii) negotiate in good faith with SunTrust to make
such adjustments in the terms and conditions of the Merger Agreement as would
enable Crestar to proceed with the transactions contemplated therein on such
adjusted terms.
CONDUCT OF BUSINESS PENDING THE MERGER. From the date of the Merger
Agreement to the Effective Time, Crestar has agreed to carry on its businesses
in the ordinary course consistent with past practice, to use all commercially
reasonable efforts to preserve intact the business organization of Crestar and
each of its subsidiaries, to keep available the services of its and their
present key officers and employees and to preserve the goodwill of those having
business relationships with Crestar or its subsidiaries. SunTrust has agreed
not to make any extraordinary or special dividend on the SunTrust Common Stock
or take any action that would (i) materially delay or adversely affect the
ability of SunTrust to obtain any Consents required to permit consummation of
the Merger or (ii) materially adversely affect its ability to perform its
obligations under the Merger Agreement or to consummate the transactions
contemplated thereby.
In addition, from the date of the Merger Agreement to the Effective Time,
except as specifically contemplated by the Merger Agreement or the Crestar
Stock Option Agreement, Crestar has agreed not to, and to cause its
subsidiaries not to, without the prior written consent of SunTrust:
(i) except in the ordinary course of business, (A) incur any indebtedness
for borrowed money, (B) assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity, or (C) make any loan or advance;
(ii) make any change or amendment to the articles of incorporation (the
"Crestar Charter") or bylaws (the "Crestar Bylaws") of Crestar (or
comparable governing instruments for subsidiaries) in a manner that would
materially and adversely affect Crestar's or SunTrust's ability to
consummate the Merger or the economic benefits of the Merger to either
party;
(iii) issue or sell any shares of capital stock or any other securities
(other than (A) pursuant to outstanding exercisable stock options, (B)
pursuant to the Rights Agreement between Crestar and Mellon Bank, NA, as
Rights Agent, dated as of June 23, 1989 (the "Crestar Rights Agreement"),
(C) pursuant to the terms of 401(k) plans of Crestar and any subsidiary of
Crestar, or (D) pursuant to the Crestar Dividend Reinvestment Plan) or
issue any securities convertible into or exchangeable for, or options,
warrants to purchase, scrip, rights to subscribe for, calls or commitments
of any character whatsoever relating to, or enter into any contract,
understanding or arrangement with respect to the issuance of, any shares of
capital stock or any other securities of Crestar or any of its subsidiaries
(other than pursuant to Crestar's option plans) or enter into any
arrangement or contract with respect to the purchase or voting of shares of
their capital stock, or adjust, split, combine or reclassify any of their
capital stock or other securities or make any other changes in their
capital structures;
(iv) declare, set aside, pay or make any dividend or other distribution
or payment (whether in cash, stock or property) with respect to, or
purchase or redeem, any shares of the capital stock of Crestar or any of
its subsidiaries other than (A) regular quarterly cash dividends in an
amount not to exceed $0.33 per share of Crestar Common Stock payable on the
regular historical payment dates and (B) dividends paid by any subsidiary
to Crestar or another subsidiary of Crestar with respect to its capital
stock;
(v) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any person;
(vi) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of a material amount of Crestar's properties
or assets (including securitizations), other than in the ordinary course of
business consistent with past practice;
(vii) adopt or amend (except as required by law or other contractual
obligations existing on the date of the Merger Agreement) any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee, or (except for normal merit
increases in the ordinary course of business consistent with past practice)
increase the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any existing plan, agreement or
arrangement (including, without limitation, the granting of stock options
or stock appreciation rights) or take any action or grant any benefit not
required under the terms of any existing agreements, trusts, plans, funds
or other such arrangements or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing; or
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(viii) authorize, or commit or agree to take, any of the actions
described above.
MODIFICATION OF CERTAIN POLICIES. Crestar has agreed that at the request
of SunTrust it will modify its loan, litigation, real estate valuation, asset,
liquidity and investment portfolio policies and practices (including loan
classifications and level of reserves) prior to the Effective Time so as to be
consistent on a mutually satisfactory basis with those of SunTrust and
generally accepted accounting principles, at the earlier of (i) such time
within seven days prior to the Effective Time as SunTrust acknowledges in
writing that all conditions to its obligations to complete the Merger set forth
in the Merger Agreement have been waived or satisfied if the Merger were to be
completed on such date or (ii) immediately prior to the Effective Time.
BOARD OF DIRECTORS. SunTrust has agreed to increase the size of the
SunTrust Board by three members and to elect three non-employee members of the
Crestar Board to fill such vacancies, each of whom will be placed in a separate
class on the SunTrust Board. SunTrust also has agreed to expand the SunTrust
Board by one additional director and has agreed to name Mr. Tilghman as Vice
Chairman of the SunTrust Board.
INDEMNIFICATION OBLIGATIONS. SunTrust has agreed to indemnify each present
and former officer and director of Crestar or any Crestar subsidiaries, for a
period of six years after the Effective Time, against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time, which are based upon or relate to such person's capacity as a
director or officer, to the fullest extent that such persons are permitted to
be indemnified under the VSCA or the Crestar Charter or the Crestar Bylaws.
SunTrust also has agreed to cause the persons serving as officers and directors
of Crestar immediately prior to the Effective Time to be covered for a period
of six years from the Effective Time by the directors' and officers' liability
insurance policy maintained by Crestar (provided that SunTrust may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous than such policy) with respect
to acts or omissions occurring prior to the Effective Time which were committed
by such officers and directors in their capacity as such. Notwithstanding the
preceding sentence, in no event will SunTrust be required to expend on any
annual basis more than 200% of the current amount expended by Crestar to
maintain or procure insurance coverage.
ADDITIONAL COVENANTS. SunTrust and Crestar also have agreed to: (i)
prepare and file this document and the Registration Statement with the
Commission; (ii) hold the Meetings to obtain the approval of the SunTrust
Shareholders and the Crestar Shareholders of the Merger and the Merger
Agreement and the transactions contemplated thereby; (iii) afford the other
party and its respective representatives access to the books, records,
properties, personnel and such other information of it or its subsidiaries as
such party may reasonably request; (iv) hold and cause its and its respective
subsidiaries' representatives and affiliates to hold any nonpublic information
in confidence to the extent required by, and in accordance with, the
Confidentiality Agreement dated July 17, 1998 between SunTrust and Crestar; (v)
cooperate with one another with respect to any filings, consents, approvals,
permits or authorizations required by governmental or regulatory authorities
and any third parties in connection with the transactions contemplated by the
Merger Agreement; (vi) keep the other party apprised of the status of matters
relating to completion of the transactions contemplated by the Merger
Agreement; (vii) coordinate with the other party regarding the declaration and
payment of dividends in respect of SunTrust Common Stock and Crestar Common
Stock and the record dates and payment dates relating thereto; (viii) consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated by the Merger
Agreement and in making any filings with any governmental entity or with any
national securities exchange with respect thereto; (ix) use commercially
reasonable efforts to cause to be delivered to the other party from such
party's independent public accountants (A) letters to the effect that
accounting for the Merger as a pooling of interests is appropriate under
Opinion 16 of the Accounting Principles Board and applicable Commission rules
and regulations and (B) customary "comfort" letters with respect to certain
financial information contained in the Registration Statement; (x) obtain
letters from each of Crestar's and SunTrust's respective "affiliates" for
purposes of qualifying the Merger for pooling of interests accounting treatment
(see " -- Resales of SunTrust Common Stock"); and (xi) assist each other in any
defense of any shareholder litigation relating to the transactions contemplated
by the Merger Agreement.
Crestar also has agreed to (i) take all necessary steps to exempt Crestar
and the Merger from the requirements of any applicable state takeover law, and
(ii) redeem or tender for, or cause to be redeemed or tendered for, such
outstanding securities of Crestar or any subsidiary as SunTrust may reasonably
request. SunTrust has also agreed to use all commercially reasonable efforts to
(i) reissue the requisite number of shares of SunTrust Common Stock held as
treasury stock so that the Merger will not fail to qualify for pooling of
interests accounting treatment by virtue of the number of
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such shares held in SunTrust's treasury and (ii) list on the NYSE, upon
official notice of issuance, the SunTrust Common Stock to be issued in the
Merger.
AMENDMENT. The Merger Agreement may be amended or supplemented by the
parties in writing at any time prior to approval by the Crestar Shareholders or
the SunTrust Shareholders. After such time, the Merger Agreement may not be
amended or supplemented in a manner that reduces or changes the form of the
Merger Consideration without further shareholder approval.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the Crestar
Shareholders and the SunTrust Shareholders:
(i) by mutual written consent of the SunTrust Board and the Crestar
Board;
(ii) by either SunTrust or Crestar if (A) the Merger is not completed on
or before March 31, 1999; PROVIDED, HOWEVER, that any party that is in
material breach of its obligations under the Agreement or whose failure to
fulfill any of its obligations contained in the Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to March 31, 1999 shall not have such right or (B) any court or other
governmental entity having jurisdiction over the parties to the Merger
Agreement issues an order enjoining, restraining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order,
decree, ruling or other action becomes final and nonappealable;
(iii) by either SunTrust or Crestar if the Merger Agreement is not
approved at the Crestar Meeting or the SunTrust Meeting (provided the
terminating party is not otherwise in material breach of its obligations
under the Merger Agreement);
(iv) by SunTrust if the Crestar Board (A) withdraws, or modifies in a
manner adverse to SunTrust, its approval or recommendation of the Merger
Agreement or the Merger or (B) approves, recommends or causes Crestar to
enter into any agreement with respect to any Acquisition Transaction;
(v) by Crestar if any of the conditions to Crestar's obligation to
consummate the Merger have not been met or waived by Crestar at such time
as such condition can no longer be satisfied;
(vi) by SunTrust if any of the conditions to SunTrust's obligation to
consummate the Merger have not been met or waived by SunTrust at such time
as such condition can no longer be satisfied;
(vii) by Crestar in the event of a breach by SunTrust of any
representation or warranty (provided that such breach of representation or
warranty, together with all other such breaches, would entitle Crestar not
to consummate the transactions contemplated by the Merger Agreement) or any
covenant or other agreement (in any material respect) contained in the
Merger Agreement which breach is not cured within 30 days after written
notice thereof to SunTrust by Crestar; or
(viii) by SunTrust in the event of a breach by Crestar of any
representation or warranty (provided that such breach of representation or
warranty, together with all other such breaches, would entitle SunTrust not
to consummate the transactions contemplated by the Merger Agreement) or any
covenant or other agreement (in any material respect) contained in the
Merger Agreement which breach is not cured within 30 days after written
notice thereof to Crestar by SunTrust.
FEES AND EXPENSES. All out-of-pocket costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such cost or expense, with the exception
that the parties will equally divide printing and mailing costs associated with
this document and all filing and registration fees. In addition, the parties
have agreed to reimburse each other upon the termination of the Merger
Agreement under certain circumstances as described below.
Crestar has agreed to reimburse SunTrust for all out-of-pocket expenses
and fees incurred by SunTrust, including without limitation fees and expenses
payable to all legal, accounting, financial and other professional advisors,
relating to the Merger or the transactions contemplated by the Merger Agreement
if: (i) SunTrust or Crestar terminates the Merger Agreement because the Crestar
Shareholders do not approve the Merger Agreement at the Crestar Meeting; or
(ii) SunTrust terminates the Merger Agreement because (A) the Crestar Board (x)
withdraws, or modifies in a manner adverse to SunTrust, its approval or
recommendation of the Merger Agreement or the Merger or (y) approves,
recommends or
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causes Crestar to enter into any agreement with respect to any Acquisition
Transaction, or (B) Crestar has breached a representation, warranty, covenant
or agreement contained in the Merger Agreement which is not cured within 30
days thereof.
SunTrust has agreed to reimburse Crestar for all out-of-pocket expenses
and fees incurred by Crestar, including without limitation fees and expenses
payable to all legal, accounting, financial and other professional advisors,
relating to the Merger or the transactions contemplated by the Merger Agreement
if: (i) Crestar or SunTrust terminates the Merger Agreement because the
SunTrust Shareholders do not approve the Merger Agreement and the Stock
Issuance at the SunTrust Meeting; or (ii) Crestar terminates the Merger
Agreement because SunTrust has breached a representation, warranty, covenant or
agreement contained in the Merger Agreement which is not cured within 30 days
thereof.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Crestar Board with respect to the
Merger Agreement, Crestar Shareholders should be aware that, as described
below, certain members of Crestar's management and the Crestar Board have
interests in the Merger that differ from, or are in addition to, their
interests as Crestar Shareholders. Two executive officers of Crestar (Messrs.
Tilghman and Wells) are members of the 16-person Crestar Board that approved
the Merger.
DIRECTORS AND EXECUTIVE OFFICERS OF CRESTAR AND SUNTRUST FOLLOWING THE
MERGER. Upon completion of the Merger, (i) Mr. Tilghman will become a member of
the SunTrust Board and will be named as Vice Chairman of the SunTrust Board at
the Effective Time and (ii) three additional individuals who are non-employee
members of the Crestar Board and who are mutually agreed upon by Crestar and
SunTrust prior to the Effective Time will be elected to the SunTrust Board at
the Effective Time. These three additional designees have not yet been
identified. The Crestar Board and executive officers of Crestar will remain as
presently constituted immediately after the Effective Time until such time as
their successors, if any, are properly appointed and duly qualified.
EQUITY-BASED AWARDS. In accordance with the terms of the various option
plans maintained by Crestar and the terms of the Merger Agreement, all awards
of stock options outstanding at the Effective Time under any such Crestar plan
will be converted into similar options with respect to SunTrust Common Stock,
adjusted to reflect the Exchange Ratio.
Under Crestar's stock option plans, an aggregate of 202,824 performance
shares previously awarded under the stock option plans to the Severance
Executives (as defined below) vested on July 20, 1998 and will be paid out in
shares of Crestar Common Stock immediately prior to the Effective Time.
Pursuant to the terms of Mr. Tilghman's 1995 performance share grant, as a
result of the signing of the Merger Agreement the portion of such award which
will (without regard to such signing) vest on October 26, 1998 also will be
distributed to him as of such date. The remaining portion of the award will
convert to an award of SunTrust Common Stock at the Effective Time and will be
distributed to Mr. Tilghman upon his retirement. Upon the signing of the Merger
Agreement, one other Severance Executive received a distribution of a portion
of his unvested performance share grant, the remainder of which was forfeited.
In addition, pursuant to the terms of the Crestar plans, upon the signing
of the Merger Agreement all outstanding unvested options to purchase shares of
Crestar Common Stock immediately became exercisable in full. As of July 19,
1998, Messrs. Tilghman, Wells, Hagen and Katchuk held unexercisable options to
purchase 52,100, 29,300, 11,300 and 11,300 shares of Crestar Common Stock,
respectively, which became exercisable upon the signing of the Merger
Agreement. In addition, as of July 19, 1998, the remaining twenty Severance
Executives held unexercisable options to purchase an aggregate of 191,400
shares of Crestar Common Stock which became exercisable upon the signing of the
Merger Agreement. SunTrust and Crestar have agreed that the execution of the
Merger Agreement (or in some cases the consummation of the Merger) will
constitute a change in control for purposes of all applicable Crestar benefit
and compensation plans, including all Crestar stock option plans and agreements
as provided under the terms of such plans.
SEVERANCE AGREEMENTS. Crestar has entered into severance agreements with
24 executives (the "Severance Executives"). Each agreement is subject to
Crestar's Executive Severance Plan and was unanimously approved by the
non-employee members of the Crestar Board.
All of the agreements provide for certain benefits if Crestar has a change
in control followed by termination of the Severance Executive's employment
without cause by Crestar's successor, or by the Severance Executive for certain
reasons, including assignment of duties inconsistent with senior officer status
or substantial adverse change in responsibilities, decrease in base pay, change
of principal work location or a material decrease in benefits. "Cause" is
defined as (i) continued and willful failure to perform duties or (ii) conduct
demonstrably and materially injurious to Crestar's successor or its affiliates.
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All of the agreements for the Severance Executives provide for three-year
terms. The current agreements are in effect until December 31, 2000. As of July
20, 1998, the agreements were automatically extended for 36 additional months
due to the signing of the Merger Agreement.
Agreements with Messrs. Tilghman, Wells, Hagen, Katchuk and five other
Severance Executives are identical. If benefits become due under these
agreements, the Severance Executive involved will receive a lump-sum severance
payment equal to three times annual base salary and annual incentive bonus
(determined at the change in control date, the date of termination or one year
before either event, whichever is largest); an additional sum equal to the cost
of certain benefits; continuation of life insurance benefits; and if the
Severance Executive is age 50 or older, continuation of health and dental
benefits in lieu of a cash payment. In addition, the Severance Executive will
be compensated for any excise tax liability and penalties he may incur as a
result of excess parachute payments and for taxes attributable to excise tax
and penalty reimbursements.
Three other Severance Executives have agreements that are identical to
those described above, except that (i) no additional payment is made if the
Severance Executive incurs excise tax liability as a result of excess parachute
payments and (ii) excess parachute payments are reduced if, and to the extent,
that an independent accountant determines that the Severance Executive would
receive a greater net after-tax amount with the reduction. An additional twelve
Severance Executives have agreements pursuant to which the lump sum payment is
based on two times annual base pay and annual incentive bonus and which provide
for payment of 80% of certain benefit costs.
All legal fees and expenses incurred by a Severance Executive in enforcing
a severance agreement will be paid by Crestar's successor.
Pursuant to the Merger Agreement, as of the completion of the Merger,
SunTrust will assume and agree to perform all employment, severance and other
compensation agreements between Crestar or a Crestar subsidiary and any
director, officer or employee of Crestar, including the severance agreements
described above. The aggregate benefits payable (if all of the Severance
Executives, other than Messrs. Tilghman and Wells, whose severance agreements
will be superseded by the Employment Agreements (as defined below), were
terminated following completion of the Merger) under the severance agreements
are approximately $20 million.
SERP. Severance Executives who participate in Crestar's Supplemental
Executive Retirement Plan will become fully vested in their earned benefit as
of the Effective Time and under the terms of the severance agreements described
above will receive additional years of service credit if their employment
terminates under certain circumstances during the term of the agreements.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, SunTrust
has agreed to indemnify and hold harmless from liability for acts or omissions
occurring at or prior to the Effective Time the present and former officers and
directors of Crestar and its subsidiaries to the fullest extent that such
persons are permitted to be indemnified under the VSCA or the Crestar Charter
or the Crestar Bylaws. See " -- Terms of the Merger Agreement --
Indemnification Obligations."
DIRECTOR BENEFITS. Four members of the Crestar Board who were not fully
vested in their equity awards under the Crestar Directors Equity Program became
fully vested in such awards as of the signing of the Merger Agreement. All such
awards will be converted into awards payable in SunTrust Common Stock and will
be distributed to such directors commencing in February following the year of
the termination of the director's service on the Crestar Board.
EMPLOYMENT AGREEMENTS. Simultaneously with the execution of the Merger
Agreement, SunTrust entered into employment agreements with Mr. Tilghman
("Tilghman Employment Agreement"), and Mr. Wells (the "Wells Employment
Agreement" and, together with the Tilghman Employment Agreement, the
"Employment Agreements"). The Employment Agreements become effective on the
date of completion of the Merger and will supersede the existing severance
agreements of Messrs. Tilghman and Wells described above.
TILGHMAN EMPLOYMENT AGREEMENT. The Tilghman Employment Agreement has a
term beginning on the Effective Date through December 31, 2000. During Mr.
Tilghman's employment, he will serve as Vice Chairman and Executive Vice
President of SunTrust and will continue to serve as the Chief Executive Officer
of Crestar. Mr. Tilghman will be entitled to receive a base salary during the
term of his employment equal to $900,000 per year, plus an annual bonus in an
amount equal to $600,000 in calendar year 1999 and $700,000 in calendar year
2000. Mr. Tilghman will also receive, (i) as of the Effective Time, (A) a grant
of 60,000 shares of restricted SunTrust Common Stock and (B) a ten-year option
to acquire an aggregate of 180,000 shares of SunTrust Common Stock with an
exercise price per share equal to the price of a share of SunTrust Common Stock
on the NYSE as of the Effective Time (subject to anti-dilution provisions), and
(ii) at
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the time SunTrust makes option grants to other senior executives, an option to
purchase 25,000 shares of SunTrust Common Stock in each of 1999 and 2000. Such
awards generally vest in accordance with the vesting schedules applicable under
SunTrust's existing award plans for executives similarly situated to Mr.
Tilghman. When his employment with SunTrust ends, Mr. Tilghman is also entitled
to elect a supplemental retirement benefit under either the SunTrust
supplemental retirement benefit plan or the Crestar supplemental retirement
benefit plan (as each such plan was in effect on July 20, 1998). In addition,
if any payments received by Mr. Tilghman are subject to an excise tax under
Section 4999 of the Code, Mr. Tilghman will be entitled to receive an
additional amount necessary to make him whole with respect to such excise tax.
WELLS EMPLOYMENT AGREEMENT. The Wells Employment Agreement has a term
beginning on the Effective Date through December 31, 2001. During Mr. Wells'
employment, he will continue to serve as the President and Chief Operating
Officer of Crestar and will continue to serve on the Crestar Board. Mr. Wells
will be entitled to receive a base salary during the term of his employment
equal to $500,000 in calendar year 1999, $525,000 in calendar year 2000 and
$550,000 in calendar year 2001, plus an annual bonus in an amount equal to
$300,000 in calendar year 1999, $315,000 in calendar year 2000 and, in calendar
year 2001, the greater of (i) $330,000 or (ii) the aggregate amount paid to Mr.
Wells for such calendar year under SunTrust's existing management incentive
plans. Mr. Wells will also receive, as of the Effective Time, a grant of 30,000
shares of restricted SunTrust Common Stock and a ten-year option to acquire an
aggregate of 90,000 shares of SunTrust Common Stock with an exercise price per
share equal to the price of a share of SunTrust Common Stock on the NYSE as of
the Effective Time (subject to anti-dilution provisions). Mr. Wells will
participate in grants pursuant to SunTrust's existing management incentive
plans during the term of his employment, but in no case will he be granted
options at the time SunTrust makes option grants to other senior executives for
less than 15,000 shares of SunTrust Common Stock in each of 1999, 2000 and
2001. Such awards generally vest in accordance with the vesting schedules
applicable under SunTrust's existing award plans for executives similarly
situated to Mr. Wells. When his employment with SunTrust ends, Mr. Wells is
also entitled to elect a supplemental retirement benefit under either the
SunTrust supplemental retirement benefit plan or the Crestar supplemental
retirement benefit plan (as each such plan was in effect on July 20, 1998). In
addition, if any payments received by Mr. Wells are subject to an excise tax
under Section 4999 of the Code, Mr. Wells will be entitled to receive an
additional amount necessary to make him whole with respect to such excise tax.
Mr. Wells also has the option to resign from his employment with SunTrust
effective at the end of the 18 month period which starts at the Effective Time
if he tenders his resignation before the end of such period. If Mr. Wells
exercises such option, then his resignation will be treated as a termination of
employment for "good cause" under the Wells Employment Agreement and he will
receive (i) a lump sum payment equal to his base salary and annual bonus which
would have been paid to Mr. Wells during the remainder of the term of
employment absent such termination, (ii) continued provision of his benefits as
if he were employed for the remainder of the term, (iii) immediate vesting of
all options, restricted stock or other awards then remaining unvested and (iv)
a payment equal to the amount of any contributions to Mr. Wells' supplemental
retirement plan that would have been paid absent such termination. If Mr. Wells
exercises his option to resign at the end of such 18-month period, he will be
prohibited, for a period of two years from the date of such resignation, from
serving as an officer, director or employee, or consultant to, or having a
significant investment in, any organization which engages in the same business
or lines of business as Crestar and which operates in Virginia, Maryland or the
District of Columbia.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Accordingly, after the Merger, the assets,
liabilities and stockholders' equity of Crestar will be added to the
corresponding balance sheet categories of SunTrust at their recorded book
values, subject to any adjustments required to conform the accounting policies
and financial statement classifications of the two companies. In future
financial statements, the results of operations of SunTrust will include the
results of both Crestar and SunTrust for the entire fiscal year in which the
Merger occurs and all prior fiscal periods presented therein. SunTrust must
treat certain expenses incurred to effect the Merger as current charges against
income rather than as adjustments to its balance sheet.
Pursuant to the Merger Agreement, SunTrust must issue and sell
approximately 600,000 shares of SunTrust Common Stock held in the treasury of
SunTrust to the public, which sales may be made directly by SunTrust or through
agents, underwriters or dealers, prior to consummation of the Merger so that
the Merger will not fail to qualify for pooling of interests accounting
treatment by virtue of the number of shares of SunTrust Common Stock held in
SunTrust's treasury.
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The unaudited pro forma condensed combined financial information contained
in this document has been prepared using the pooling of interests accounting
method to account for the Merger. See "Summary -- Selected Unaudited Pro Forma
Combined Financial Data" and "Unaudited Pro Forma Condensed Combined Financial
Statements."
SunTrust has ceased its share repurchase program in connection with the
Merger.
RESALES OF SUNTRUST COMMON STOCK
CRESTAR SHAREHOLDERS. The shares of SunTrust Common Stock to be issued to
Crestar Shareholders in the Merger have been registered under the Securities
Act. These shares may be traded freely and without restriction by those
shareholders not deemed to be "affiliates" of Crestar as that term is defined
under the Securities Act. An affiliate of a corporation, as defined by the
rules promulgated under the Securities Act, is a person who directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, that corporation. Any subsequent transfer by an
affiliate of Crestar must be one permitted by the resale provisions of Rule 145
promulgated under the Securities Act or as otherwise permitted under the
Securities Act.
AFFILIATES OF SUNTRUST AND CRESTAR. Commission guidelines regarding
qualifying for the pooling of interests method of accounting also limit sales
of shares of the acquiring company and acquired company by affiliates of either
company in a business combination such as the Merger. These guidelines indicate
that the pooling of interests method of accounting will generally not be
challenged on the basis of sales by such affiliates if these persons do not
dispose of any of the shares of the corporation they own or any shares of the
corporation they receive in connection with a merger during the period
beginning 30 days prior to the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published (the "Pooling Restricted Period").
Crestar has agreed to deliver to SunTrust not less than 30 days prior to
the Effective Time, for each of its affiliates, an agreement that such person
will not dispose of (i) any SunTrust Common Stock in violation of the
Securities Act or (ii) any Crestar Common Stock or SunTrust Common Stock during
the Pooling Restricted Period.
SunTrust has agreed to deliver to Crestar not less than 30 days prior to
the Effective Time, for each of its affiliates, an agreement that such person
will not dispose of any SunTrust Common Stock or Crestar Common Stock during
the Pooling Restricted Period.
REGULATORY APPROVALS
Under the Merger Agreement, SunTrust and Crestar have agreed to use their
commercially reasonable efforts to obtain all necessary actions or nonactions,
extensions, waivers, consents and approvals from any governmental authority
necessary, proper or advisable to consummate the transactions contemplated by
the Merger Agreement. Such approvals include the approvals of the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and the rules and regulations promulgated thereunder, and certain
other state banking agencies.
The closing of the Merger is conditioned on the receipt of all approvals
of regulatory authorities required for the Merger without the imposition of any
conditions or requirements that would so materially and adversely impact the
economic or business benefits to SunTrust or Crestar of the transactions
contemplated by the Merger Agreement to such a degree that SunTrust or Crestar
would not, in its reasonable judgment, have entered into the Merger Agreement
had such conditions or requirements been known at the date the Merger Agreement
was executed.
FEDERAL RESERVE BOARD. The Merger is subject to prior approval by the
Federal Reserve Board under Section 3 of the BHCA and prior notice to the
Federal Reserve Board under Section 4 of the BHCA. Section 3 of the BHCA
requires the Federal Reserve Board, when considering a transaction such as the
Merger, to take into consideration the financial and managerial resources
(including the competence, experience and integrity of the officers, directors
and principal stockholders), and the future prospects of the existing and
proposed institutions and the effect of the transaction on the convenience and
needs of the communities to be served. In considering financial resources and
future prospects, the Federal Reserve Board will, among other things, evaluate
the adequacy of the capital levels of the parties to a proposed transaction and
of the resulting institutions. In considering financial and managerial factors,
the Federal Reserve Board will also assess the degree to which SunTrust and
Crestar are taking appropriate steps to assure that electronic data processing
systems and those of their vendors can safely accommodate the upcoming change
to the new millennium and plans for ensuring Year 2000 readiness of the
resulting organization.
The BHCA prohibits the Federal Reserve Board from approving a merger if
(i) it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
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any part of the United States or (ii) its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly,
or if it would in any other respect result in a restraint of trade, unless the
Federal Reserve Board finds that the anti-competitive effects of the merger are
clearly outweighed by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve Board must take into account the record of
performance of the depository institution subsidiaries of SunTrust and Crestar
in meeting the credit needs of the communities served by such institutions,
including low- and moderate-income neighborhoods.
Furthermore, applicable federal law provides for the publication of notice
and public comment on applications filed with the Federal Reserve Board. The
Federal Reserve Board frequently receives comments and protests from community
groups and others and may, in its discretion, choose to hold public hearings on
the application. Such comments and hearings could delay the regulatory
approvals required for consummation of the Merger.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
Board must consider whether the performance of SunTrust's and Crestar's
nonbanking activities on a combined basis can reasonably be expected to produce
benefits to the public (such as greater convenience, increased competition and
gains in efficiency) that outweigh possible adverse effects (such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices). This consideration includes an
evaluation of the financial and managerial resources of SunTrust and Crestar
and the effect of the proposed transaction on those resources.
An application and notice pursuant to the BHCA was filed with the Federal
Reserve Board on August 26, 1998. The Merger may not be completed until the
30th day (or, with the consent of the relevant agencies, the 15th day)
following the date of the requisite Federal Reserve Board approval, during
which period the United States Department of Justice may comment adversely on
the Merger (which has the effect of extending the waiting period to the 30th
day following approval) or challenge the Merger on antitrust grounds. The
commencement of an antitrust action would stay the effectiveness of such an
approval unless a court specifically orders otherwise.
STATE NOTICES AND APPROVALS. Other regulatory approvals include filings
with and approvals by certain state regulatory authorities. The Merger will be
subject to approval by the State Corporation Commission of Virginia, pursuant
to title 6.1, chapter 15 of the Virginia Code. The State Corporation Commission
of Virginia is required by statute to determine (i) whether the acquisition
would be detrimental to the safety and soundness of SunTrust or Crestar, (ii)
whether SunTrust and its directors and officers are qualified by character,
experience and financial responsibility to control and operate Crestar, (iii)
whether the acquisition would be prejudicial to the interests of depositors,
creditors, beneficiaries of fiduciary accounts or Crestar Shareholders and (iv)
whether the acquisition is in the public interest. Notice of the proposed
Merger is also being provided to the Georgia Department of Banking and Finance.
The Merger is also subject to notification of certain state mortgage
regulators.
In addition to the approvals listed above, additional notices with
self-regulatory organizations may be required to be given in connection with
the acquisition of Crestar's securities-related businesses.
THE MERGER WILL NOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED, AND IF THE MERGER IS APPROVED, THERE CAN BE NO ASSURANCE AS TO THE
DATE OF ANY SUCH APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT SUCH APPROVALS
WILL NOT CONTAIN ANY ADVERSE CONDITION OR REQUIREMENT WHICH CAUSES THE PARTIES
TO ABANDON THE MERGER BECAUSE THE APPROVAL FAILS TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT AND DESCRIBED IN THIS DOCUMENT. SEE " -- TERMS OF
THE MERGER AGREEMENT -- CONDITIONS TO THE MERGER." THERE CAN LIKEWISE BE NO
ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE
MERGER, OR IF SUCH A CHALLENGE IS MADE, AS TO THE OUTCOME THEREOF.
REGULATION OF SUNTRUST AND CRESTAR. SunTrust and Crestar are bank holding
companies subject to extensive federal supervision and regulation by the
Federal Reserve Board. The banking affiliates of SunTrust and Crestar are
similarly subject to federal and state supervision and regulation by their
respective regulators. As bank holding companies, SunTrust's and Crestar's
activities and those of their banking and nonbanking subsidiaries are limited
to the business of banking and activities closely related to or incidental to
banking, and bank holding companies may not directly or indirectly acquire the
ownership or control of more than five percent of any class of voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. Federal and state banking
regulations govern most aspects of the business of SunTrust and Crestar and
their subsidiaries, including, without limitation, the payment of dividends,
maintenance of capital and transactions with affiliates, as well as their
investment,
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lending and deposit-taking activities. A more detailed description of the
banking regulations applicable to SunTrust and Crestar is contained in
SunTrust's and Crestar's respective Annual Reports on Form 10-K for the year
ended December 31, 1997 filed with the Commission. See "Where You Can Find More
Information."
APPRAISAL RIGHTS
The Georgia Business Corporation Code (the "GBCC") generally provides
shareholders with dissenters' rights in connection with mergers and share
exchanges that require shareholder approval and certain types of amendments to
the articles of incorporation of a Georgia corporation. SunTrust is seeking the
approval of the SunTrust Shareholders of the Merger Agreement and the Stock
Issuance in accordance with the rules of the NYSE because the number of shares
of SunTrust Common Stock to be issued in the Merger is expected to exceed 20%
of the shares of SunTrust Common Stock outstanding immediately prior to the
Effective Time. Therefore, because the approval of the SunTrust Shareholders of
the Merger Agreement and the Stock Issuance is not required under the GBCC, the
SunTrust Shareholders do not have dissenters' appraisal rights with respect to
such matter.
The VSCA generally provides shareholders with dissenters' rights in
connection with mergers and share exchanges that require shareholder approval
and certain types of amendments to the articles of incorporation of a Virginia
corporation. Crestar, however, has more than 2,000 record shareholders and
Crestar Common Stock is listed on the NYSE. Therefore, pursuant to the VSCA,
holders of Crestar Common Stock who are entitled to vote at the Crestar Meeting
do not have dissenters' appraisal rights with respect to the proposal to
approve and adopt the Merger Agreement. See "Comparative Rights of Shareholders
- -- Dissenter's Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material anticipated U.S.
federal income tax consequences of the Merger to a Crestar Shareholder (a
"Holder") who holds shares of Crestar Common Stock as a capital asset at the
Effective Time. The discussion is based on laws, regulations, rulings and
decisions in effect on the date hereof, all of which are subject to change
(possibly with retroactive effect) and to differing interpretations. This
discussion does not address all aspects of U.S. federal income taxation that
may be relevant to particular Holders in light of their personal circumstances
or to Holders subject to special treatment under the Code, including, without
limitation, banks, tax-exempt organizations, insurance companies, dealers in
securities or foreign currency, traders in securities that elect to mark to
market, Holders who received their Crestar Common Stock through the exercise of
employee stock options or otherwise as compensation, Holders who are not U.S.
persons (as defined in Section 7701(a)(30) of the Code) and Holders who hold
Crestar Common Stock as part of a hedge, straddle or conversion transaction. In
addition, the discussion does not address any state, local or foreign tax
consequences of the Merger.
EACH HOLDER OF CRESTAR COMMON STOCK IS URGED TO CONSULT ITS TAX ADVISOR
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
TAX OPINIONS. In the opinion of King & Spalding, counsel to SunTrust, and
the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Crestar
(such opinions referred to collectively herein as the "Tax Opinions"), subject
to the assumptions, limitations, qualifications and other considerations
described below under " -- Certain Considerations with Respect to Opinions,"
the Merger will be treated as a "reorganization" for U.S. federal income tax
purposes within the meaning of Section 368(a) of the Code.
The Merger is conditioned upon counsel to both SunTrust and Crestar
reaffirming the Tax Opinions at the Effective Time (the "Closing Tax
Opinions"). If either SunTrust or Crestar is unable to obtain its respective
Closing Tax Opinion from its legal counsel, SunTrust or Crestar, as applicable,
is permitted under the Merger Agreement to waive the receipt of such Closing
Tax Opinion as a condition to such party's obligation to consummate the Merger.
As of the date of this document, neither SunTrust nor Crestar intends to waive
the receipt of the Closing Tax Opinions as a condition to the consummation of
the Merger. If either SunTrust or Crestar fails to obtain a Closing Tax Opinion
and either SunTrust or Crestar decides to waive such condition to the
completion of the Merger, Crestar or SunTrust, as applicable, will resolicit
the vote of their respective shareholders to approve the Merger Agreement.
TAX CONSEQUENCES OF THE MERGER. In accordance with the Tax Opinions
regarding the treatment of the Merger as a "reorganization" within the meaning
of Section 368(a) of the Code, and subject to the assumptions, limitations,
qualifications and other considerations described below under "Certain
Considerations with Respect to Opinions," the anticipated U.S. federal income
tax consequences of the Merger can be summarized as follows: (i) no gain or
loss will be recognized by SunTrust, Sub or Crestar as a result of the Merger;
(ii) no gain or loss will be recognized by the Holders of
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Crestar Common Stock who exchange all of their shares of Crestar Common Stock
in the Merger solely for shares of SunTrust Common Stock, except with respect
to cash, if any, received in lieu of fractional shares of SunTrust Common
Stock; (iii) the tax basis of the shares of SunTrust Common Stock received by a
Holder of Crestar Common Stock will be the same as the tax basis of the shares
of Crestar Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share of SunTrust Common Stock for which cash is
received); (iv) the holding period of the shares of SunTrust Common Stock
received in the Merger by a Holder of Crestar Common Stock (including a
fractional share of SunTrust Common Stock for which cash is received) will
include the holding period of the shares of Crestar Common Stock surrendered in
exchange therefor; and (v) cash received by a Holder of Crestar Common Stock in
lieu of a fractional share of SunTrust Common Stock will be treated as received
in exchange for such fractional share, and capital gain or loss will be
recognized by such Holder in an amount equal to the difference between the
amount of cash received and the portion of the tax basis of the share of
Crestar Common Stock allocable to such fractional interest.
CERTAIN CONSIDERATIONS WITH RESPECT TO OPINIONS. The Tax Opinions, the
Closing Tax Opinions and the foregoing summary of the anticipated U.S. federal
income tax consequences of the Merger are based upon, and are subject to
certain assumptions, limitations and qualifications, including certain
representations made by the respective managements of Crestar, SunTrust and
Sub. If any of such representations or assumptions are inconsistent with the
actual facts, the U.S. federal income tax consequences of the Merger could be
adversely affected. In addition, no ruling from the Internal Revenue Service
with respect to the tax consequences of the Merger has been, or will be,
requested and the Tax Opinions are not binding on the Internal Revenue Service
or the courts and do not preclude the Internal Revenue Service from adopting a
contrary position and a court sustaining such position.
THE STOCK OPTION AGREEMENTS
Concurrently with the execution of the Merger Agreement, SunTrust (as
grantee) and Crestar (as issuer) entered into the Crestar Stock Option
Agreement, pursuant to which Crestar granted SunTrust an irrevocable option
(the "Crestar Option") to purchase up to 22,338,161 shares of Crestar Common
Stock (the "Crestar Option Shares" or the "Issuer Option Shares," as the case
may be), subject to adjustment in certain circumstances, but in no event to
exceed 19.9% of the shares of Crestar Common Stock outstanding upon exercise
thereof, at a price of $62.875 per share. At the same time, SunTrust (as
issuer) and Crestar (as grantee) entered into the SunTrust Stock Option
Agreement, pursuant to which SunTrust granted Crestar an irrevocable option
(the "SunTrust Option" and, together with the Crestar Option, the "Options") to
purchase from SunTrust up to 21,097,697 shares of SunTrust Common Stock (the
"SunTrust Option Shares" or the "Issuer Option Shares," as the case may be),
subject to adjustment in certain circumstances, but in no event to exceed 9.9%
of the shares of SunTrust Common Stock outstanding upon exercise thereof, at a
price of $87.00 per share. SunTrust and Crestar approved and entered into the
SunTrust Stock Option Agreement and the Crestar Stock Option Agreement,
respectively, as an inducement to the other to enter into the Merger Agreement.
Except as otherwise noted below, the terms and conditions of the SunTrust
Stock Option Agreement and the Crestar Stock Option Agreement are identical in
all material respects. For purposes of this section, except as otherwise noted,
(i) the SunTrust Stock Option Agreement and the Crestar Stock Option Agreement
are sometimes individually referred to as the "Issuer Option Agreement," (ii)
SunTrust, as issuer of the SunTrust Common Stock, and Crestar, as issuer of the
Crestar Common Stock, upon the exercise of the SunTrust Option and the Crestar
Option, respectively, are sometimes individually referred to as the "Issuer,"
(iii) SunTrust and Crestar, as the holder of the Crestar Option and the
SunTrust Option, respectively, are sometimes individually referred to as the
"Optionee," (iv) the SunTrust Option and the Crestar Option are sometimes
individually referred to as the "Issuer Option" and (v) SunTrust Common Stock
and Crestar Common Stock are sometimes individually referred to as "Issuer
Common Stock."
The Stock Option Agreements are intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreements may
have the effect of discouraging persons who might now or at any other time
prior to the Effective Time be interested in acquiring all of or a significant
interest in SunTrust or Crestar from considering or proposing such an
acquisition, even if, in the case of Crestar, such persons were prepared to
offer to pay consideration to the Crestar Shareholders which had a higher value
than the shares of SunTrust Common Stock to be received per share of Crestar
Common Stock in the Merger. The acquisition of SunTrust or Crestar could cause
the SunTrust Option or the Crestar Option, as the case may be, to become
exercisable. The existence of the Issuer Option could significantly increase
the cost to a potential acquiror of acquiring the applicable Issuer compared to
its cost had the applicable Issuer Option Agreement not been entered into. 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 such Issuer than it might otherwise have
proposed
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to pay. Moreover, Crestar and SunTrust believe that the exercise or repurchase
of an Issuer Option is likely to prohibit any other potential acquirer of the
applicable Issuer from accounting for an acquisition of such Issuer using the
pooling of interests accounting method for a period of two years.
The number of shares of Issuer Common Stock subject to the applicable
Issuer Option will be increased to the extent that additional shares of Issuer
Common Stock are issued or otherwise become outstanding (other than pursuant to
the Issuer Option Agreement) such that, after such issuance, the number of
Crestar Option Shares will continue to equal 19.9% of the Crestar Common Stock
then issued and outstanding in the case of the Crestar Stock Option and the
number of SunTrust Option Shares will continue to equal 9.9% of the SunTrust
Common Stock then issued and outstanding in the case of the SunTrust Option, in
each case, without giving effect to the issuance of any stock subject to the
applicable Issuer Option. In the event of any change in the number of shares of
Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares, or
similar transaction, the type and number of Issuer Option Shares purchasable
upon exercise of the applicable Issuer Option, and the applicable option price
will also be adjusted in such a manner as will fully preserve the economic
benefits of the Option.
Each Issuer Option Agreement provides that the Optionee or any other
holder or holders of the Issuer Option (as used in this section, collectively,
the "Option Holder") may exercise the Issuer Option, in whole or in part,
subject to regulatory approval, if both an Initial Triggering Event (as defined
herein) and a Subsequent Triggering Event (as defined herein) has occurred
prior to the occurrence of an Exercise Termination Event (as defined herein);
provided that the Option Holder has sent to the Issuer written notice of such
exercise within 90 days following such Subsequent Triggering Event (subject to
extension as provided in each Issuer Option Agreement). The terms "Initial
Triggering Event" and "Subsequent Triggering Event" generally relate to
attempts by one or more third parties to acquire a significant interest in the
Issuer. Any exercise of the Issuer Option will be deemed to occur on the date
such notice is sent.
For purposes of each Issuer Option Agreement:
(i) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after July 20, 1998: (a) the Issuer or
any subsidiary of the Issuer (which subsidiary, in the case of SunTrust,
must be "significant"), without the Optionee's prior written consent,
enters into an agreement to engage in, or the Issuer's Board of Directors
recommends that shareholders of the Issuer approve or accept, any Competing
Transaction (as defined herein) with any person (other than as contemplated
by the Merger Agreement); (b) the Issuer's Board of Directors does not
recommend that the shareholders of Issuer approve the Merger Agreement or
publicly withdraws or modifies, or publicly announces its intention to
withdraw or modify, in any manner adverse to the Optionee, its
recommendation that its shareholders approve the Merger Agreement; (c) any
person, other than the Optionee, any subsidiary of the Optionee or any
Issuer subsidiary acting in a fiduciary capacity, acquires beneficial
ownership, or the right to acquire beneficial ownership, of 10% (20% in the
case of the SunTrust Stock Option Agreement) or more of the outstanding
shares of the Issuer's Common Stock; (d) any person other than the Optionee
or any subsidiary of the Optionee makes a BONA FIDE proposal to the Issuer
or its shareholders by public announcement or written communication that is
or becomes the subject of public disclosure to engage in a Competing
Transaction; (e) the Issuer breaches any covenant or obligation in the
Merger Agreement after any person, other than the Optionee or any
subsidiary of the Optionee, has proposed a Competing Transaction, and such
breach (1) would entitle the Optionee to terminate the Merger Agreement and
(2) is not remedied prior to the date of the Optionee's notice to the
Issuer of the exercise of the Option; (f) any person other than the
Optionee or any subsidiary of the Optionee, other than in connection with a
transaction to which the Optionee has given its prior written consent,
files an application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in a Competing
Transaction; (g) the shareholders of Issuer vote and fail to approve the
Merger Agreement and the Merger at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
canceled, prior to such termination), it shall have been publicly announced
that any person (other than the Optionee or any subsidiary of the Optionee)
shall have made, or disclosed an intention to make, a proposal to engage in
a Competing Transaction; or (h) any person other than the Optionee or any
subsidiary of the Optionee shall have filed with the Commission a
registration statement or tender offer materials with respect to a
potential exchange or tender offer that would constitute a Competing
Transaction.
(ii) For purposes of the Crestar Stock Option Agreement, the term
"Competing Transaction" means (a) a merger, consolidation, share exchange,
or any similar transaction with Crestar or any of its subsidiaries,
PROVIDED that in no
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event shall (x) any merger, consolidation or similar transaction involving
only Crestar and one or more of its subsidiaries, or involving only any two
or more of such subsidiaries be deemed to be a Competing Transaction, or
(y) any merger, consolidation or similar transaction as to which the
shareholders of Crestar immediately prior thereto own in the aggregate at
least 75% of the common stock of the surviving corporation or its
publicly-held parent corporation immediately following consummation thereof
be deemed to be a Competing Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement; (b)
a purchase, lease or other acquisition of assets of Crestar or any of its
subsidiaries (other than any purchase, lease or other acquisition not
involving all or a substantial portion of the assets of Crestar and its
subsidiaries taken as a whole); (c) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Crestar or any
of its subsidiaries; or (d) any substantially similar transaction.
(iii) For purposes of the SunTrust Stock Option Agreement, the term
"Competing Transaction" means (a) a merger, consolidation or share exchange
with SunTrust or any of its significant subsidiaries, PROVIDED that in no
event shall (x) any merger, consolidation or share exchange involving only
SunTrust and one or more of its subsidiaries, or involving only any two or
more of such subsidiaries be deemed to be a Competing Transaction, or (y)
any merger, consolidation or share exchange (A) in which SunTrust is the
surviving entity or (B) as to which the shareholders of SunTrust
immediately prior thereto own in the aggregate at least 40% of the common
stock of the surviving corporation or its publicly-held parent corporation
immediately following consummation thereof, be deemed to be a Competing
Transaction; (b) a purchase, lease or other acquisition of all or
substantially all of the assets of SunTrust and its subsidiaries taken as a
whole; or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 20%
or more of the voting power of SunTrust.
(iv) The term "Subsequent Triggering Event" in either Stock Option
Agreement means the occurrence of either of the following events or
transactions after July 20, 1998: (a) the acquisition by any person, other
than any Optionee subsidiary or Issuer subsidiary acting in a fiduciary
capacity, of beneficial ownership of 20% (25% in the case of the SunTrust
Stock Option Agreement) or more of the then outstanding shares of Issuer
Common Stock; or (b) the occurrence of the Initial Triggering Event
described above in clause (i)(a), except that the percentage referred to in
clause (ii)(c) and (iii)(c) of the definitions of "Competing Transaction"
set forth above will be 20% in the case of the Crestar Option Agreement and
25% in the case of the SunTrust Stock Option Agreement.
Each Issuer Option will expire upon the occurrence of an "Exercise
Termination Event," which includes: (i) the Effective Time; (ii) termination of
the Merger Agreement in accordance with the provisions thereof (other than a
termination resulting from a willful breach by Issuer of a provision of the
Merger Agreement) if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the date that is 18 months after the
termination of the Merger Agreement if such termination occurs after the
occurrence of an Initial Triggering Event or is a termination by the Optionee
as a result of a willful, uncured material breach by the Issuer of any of its
representations, warranties, covenants or agreements set forth in the Merger
Agreement.
As of the date of this document, to the best knowledge of SunTrust and
Crestar, no Initial Triggering Event or Subsequent Triggering Event has
occurred.
At any time after the occurrence of a Repurchase Event (as defined below),
(i) at the request of a Option Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10 of the Issuer
Option Agreement), the Issuer (or any successor thereto) will repurchase the
Issuer Option from the Option Holder at a price (the "Issuer Option Repurchase
Price") equal to the amount by which (a) the market/offer price (as defined
below) exceeds (b) the option price, multiplied by the number of shares for
which the Issuer Option may then be exercised and (ii) at the request of the
owner of Issuer Option Shares from time to time (the "Owner"), delivered prior
to an Exercise Termination Event (or such later period as provided in Section
10 of the Issuer Option Agreement), the Issuer (or any successor thereto) will
repurchase such number of the Issuer Option Shares from the Owner as the Owner
will designate at a price (the "Issuer Option Share Repurchase Price") equal to
the market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" means the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Issuer Common Stock within the six-month period immediately
preceding the date the Option Holder gives notice of the required repurchase of
the Issuer Option or the Owner gives notice of the required repurchase of
Issuer Option Shares, as the case may be, or (iv) in the
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event of a sale of all or substantially all of the Issuer's assets, the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by the Option Holder or the Owner, as the case
may be, and the Issuer, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In determining the market/offer price,
the value of consideration other than cash will be determined by a nationally
recognized investment banking firm selected by the Option Holder or Owner, as
the case may be, and reasonably acceptable to the Issuer. If, however, the
Issuer at any time after delivery of a notice of repurchase as described in
this paragraph is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Option Holder
and/or the Owner, as appropriate, the Issuer Option Repurchase Price and the
Issuer Option Share Repurchase Price, respectively, in full, the Option Holder
or Owner may revoke its notice of repurchase of the Issuer Option or the Issuer
Option Shares, either in whole or to the extent of the prohibition, whereupon,
in the latter case, the Issuer will promptly (i) deliver to the Option Holder
and/or the Owner, as appropriate, that portion of the Issuer Option Repurchase
Price or the Issuer Option Share Repurchase Price that the Issuer is not
prohibited from delivering and (ii) deliver, as appropriate, (a) to the Option
Holder, a new Issuer Option Agreement evidencing the right of the Option Holder
to purchase that number of shares of the Issuer Common Stock obtained by
multiplying the number of shares of the Issuer Common Stock for which the
surrendered Issuer Option Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Issuer
Option Repurchase Price less the portion thereof theretofore delivered to the
Option Holder and the denominator of which is the Issuer Option Repurchase
Price, and (b) to the Owner, a certificate for the Issuer Option Shares it is
then so prohibited from repurchasing. A "Repurchase Event" is deemed to have
occurred (i) upon the consummation of a Competing Transaction, except that the
percentage referred to in clause (c) of the definition of Competing Transaction
shall be 50%, or (ii) upon the acquisition by any person (other than the
Optionee or any subsidiary of Optionee) of the beneficial ownership of 50% or
more of the then outstanding Issuer Common Stock.
If, prior to an Exercise Termination Event, the Issuer enters into any
agreement (i) to consolidate with or merge into any person, other than the
Optionee or one of its subsidiaries, such that Issuer is not the continuing or
surviving corporation of such consolidation or merger; (ii) to permit any
person, other than the Optionee or one of its subsidiaries, to merge into the
Issuer and the Issuer is the continuing or surviving corporation, but, in
connection with such consolidation or merger, the outstanding shares of the
Issuer Common Stock are changed into or exchanged for stock or other securities
of any other person or cash or any other property, or the then outstanding
shares of Issuer Common Stock after such merger will represent less than 50% of
the outstanding shares and share equivalents of the merged corporation; or
(iii) to sell or otherwise transfer all or substantially all of its assets to
any person, other than the Optionee or any of its subsidiaries, then, and in
each such case, the agreement governing such transaction must provide that,
upon consummation of any such transaction and upon terms and conditions set
forth in the Issuer Option Agreement, the Issuer Option will be converted into,
or exchanged for, an option having substantially the same terms as the Issuer
Option (the "Substitute Option") to purchase securities, at the election of the
Option Holder, of either the acquiring person or any person that controls the
acquiring person. At the request of the Option Holder, the issuer of the
Substitute Option will repurchase it at a price, and subject to such other
terms and conditions, as set forth in the Issuer Option Agreement.
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event (subject to extension as provided
in the Issuer Option Agreement), the Optionee may request the Issuer to
promptly prepare, file and keep current with respect to the Option Shares, a
registration statement with the Commission. The Issuer is required to use its
reasonable best efforts to cause such registration statement to become
effective and then to remain effective for 180 days or such shorter time as may
be reasonably necessary to effect such sales or other disposition of Option
Shares. The Optionee has the right to demand two such registrations.
Neither the Issuer nor the Optionee may assign any of its rights and
obligations under the Issuer Option Agreements or the Issuer Option to any
other person without the express written consent of the other party, except
that, if a Subsequent Triggering Event occurs prior to an Exercise Termination
Event, the Optionee, subject to the terms of the Issuer Option Agreement, may
assign, in whole or in part, its rights and obligations thereunder, within 90
days (subject to extension as provided in the Issuer Option Agreement) of such
Subsequent Triggering Event; provided that, until the date 15 days after the
date on which the Federal Reserve Board approves an application by the Optionee
to acquire the Issuer Option Shares, the Optionee may not assign its rights
under the Issuer Option.
Certain rights and obligations of the Optionee and the Issuer under the
Stock Option Agreements are subject to receipt of required regulatory
approvals. The approval of the Federal Reserve Board is required for the
acquisition by the Optionee of more than 5% of the outstanding shares of Issuer
Common Stock. Accordingly, SunTrust has included or will include in its
applications with the Federal Reserve Board a request for approval of the right
each Optionee to exercise its
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rights under the Issuer Option Agreement, including its right to purchase more
than 5% of the outstanding shares of Issuer Common Stock. See " -- Regulatory
Matters."
CRESTAR RIGHTS AGREEMENT
On June 23, 1989, the Crestar Board declared a dividend distribution of
one right (a "Crestar Right") for each share of Crestar Common Stock
outstanding to shareholders of record at the close of business on July 10,
1989. See "Comparative Rights of Shareholders -- Shareholder Rights Plans." In
connection with the execution of the Merger Agreement and the Crestar Stock
Option Agreement, Crestar amended the Crestar Rights Agreement to provide,
among other things, that (i) the execution and delivery of the Merger Agreement
and the completion of the Merger and execution and delivery of the Crestar
Stock Option Agreement and any acquisition of shares of Crestar Common Stock by
SunTrust (and certain related persons) upon exercise thereof, or as
contemplated by the Merger Agreement, will not cause the Crestar Rights to
become exercisable, or cause the Crestar Rights to be separated from the shares
of Crestar Common Stock to which they are attached, and (ii) the Crestar Rights
will terminate and be extinguished at the Effective Time.
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MANAGEMENT AND OPERATIONS AFTER THE MERGER
The Merger Agreement provides that Mr. Tilghman and three additional
non-employee directors of Crestar will become members of the SunTrust Board as
of the Effective Time and SunTrust has agreed to name Mr. Tilghman as Vice
Chairman of the SunTrust Board. See "The Merger -- Interests of Certain Persons
in the Merger."
While no assurance can be given, SunTrust and Crestar, based on
information available at this time, expect to achieve substantial expense
savings as a result of the Merger. SunTrust and Crestar estimate that the
combined company can reduce its expenses by approximately $130 million per year
on a pre-tax basis. SunTrust expects that the expense savings will be derived
principally from (i) an aggregate $30 million cost reduction as a result of
business line consolidation, (ii) an aggregate $50 million reduction in
infrastructure expenses and (iii) an aggregate $50 million reduction of general
and administrative expenses. Business line consolidations generate savings from
combining businesses where economies of scale can be gained. These areas
include treasury management, credit card, retail banking, mortgage banking,
commercial banking, capital markets and indirect lending businesses.
Infrastructure savings result from running combined volumes through existing
infrastructure in the transaction processing and technology units while
downsizing the overlapping facilities. General and administrative expenses are
reduced by combining staff areas such as finance, accounting, human resources
and legal, as well by reducing per unit costs for certain supplies and services
through increased purchasing leverage. SunTrust expects to achieve 75% of such
$130 million annual cost savings by the end of 1999 and a full 100% of such
$130 million annual cost savings by the end of 2000.
SunTrust and Crestar estimate that the combined company will also possess
enhanced revenue potential in 1999, primarily as a result of both a greater
ability to address the growth potential of the combined company's key market
regions and through cross-selling opportunities involving the credit card,
retail banking and commercial banking businesses. SunTrust estimates that these
operational synergies will amount to a total pre-tax benefit of $20 million in
1999 and $28 million in 2000, respectively, in incremental income.
SunTrust also expects to incur pre-tax Merger-related restructuring
charges of $200 million in 1998 and Crestar expects to incur a pre-tax
Merger-related charge of $50 million to align Crestar's accounting and
reserving policies with those of SunTrust.
SunTrust and Crestar do not overlap geographically, but are contiguous.
There will be no Merger-related branch closings in either company's geographic
area of business. Both SunTrust and Crestar believe that minimal job losses
will occur as a result of the Merger and expect that any reductions will be
accomplished primarily through attrition.
The extent to which such expense savings will be achieved or such charges
will occur in the amounts stated is dependent upon various factors, a number of
which are beyond the control of SunTrust and Crestar, including regulatory
requirements attendant to the completion of the Merger, the general regulatory
environment, economic conditions, unanticipated changes in business conditions
and inflation, and no assurances can be given with respect to the ultimate
level and composition of expense savings to be realized or that such savings
will be realized in the time frame currently anticipated. See "A Warning About
Forward-Looking Information" and "Risk Factors -- Uncertainties in Integrating
Business Operations and Realizing Enhanced Earnings."
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COMPARATIVE RIGHTS OF SHAREHOLDERS
GENERAL
SunTrust is a Georgia corporation subject to the provisions of the GBCC,
and Crestar is a Virginia corporation subject to the provisions of the VSCA.
Crestar Shareholders will, upon consummation of the Merger, become SunTrust
Shareholders. The rights of such shareholders as SunTrust Shareholders will be
governed by the articles of incorporation (the "SunTrust Charter") and bylaws
(the "SunTrust Bylaws") of SunTrust, in addition to the GBCC.
Set forth below are the material differences between the rights of a
Crestar Shareholder under the VSCA, the Crestar Charter and the Crestar Bylaws,
on the one hand, and the rights of a SunTrust Shareholder under the GBCC, the
SunTrust Charter and the SunTrust Bylaws, on the other hand. This summary does
not purport to be a complete discussion of, and is qualified in its entirety by
reference to, the governing law and the charter and bylaws of each corporation.
AUTHORIZED CAPITAL
CRESTAR. Crestar has authority to issue 200,000,000 shares of Crestar
Common Stock, with a par value of $5.00 per share, and 2,000,000 shares of
preferred stock, with a par value of $25.00 per share. As of the Record Date,
there were ----- shares of Crestar Common Stock outstanding. There are no
shares of preferred stock outstanding.
SUNTRUST. SunTrust has authority to issue 500,000,000 shares of SunTrust
Common Stock, with a par value of $1.00 per share and 50,000,000 shares of
preferred stock with no par value per share. As of the Record Date, there were
- --------- shares of SunTrust Common Stock outstanding. There are no shares of
preferred stock outstanding.
AMENDMENT TO CHARTER OR BYLAWS
CRESTAR. As permitted by the VSCA, the Crestar Charter provides that,
unless a greater vote is required by law or the Crestar Charter, the Crestar
Charter may be amended by the Crestar Board with the approval of a vote of the
holders of a majority of the votes entitled to be cast on the amendment by each
voting group entitled to vote thereon. To be amended, the Article providing for
a classified Crestar Board and establishing criteria for removing Directors
requires the approval of a majority of "Disinterested Directors" and the
holders of at least two-thirds of the votes entitled to be cast on the
amendment.
The Crestar Bylaws generally provide that the Crestar Board may, by a
majority vote, amend its Bylaws. The Crestar Bylaws also provide that such
Bylaws may be amended by shareholders entitled to vote in an election of
directors and that such shareholders may enact Bylaws which may not be amended,
altered or repealed by the Board of Directors.
SUNTRUST. As permitted by the GBCC, the SunTrust Charter may be amended if
the amendment is adopted by the SunTrust Board and approved by a vote of the
holders of a majority of votes entitled to be cast on the amendment by each
voting group entitled to vote thereon. However, in order to amend certain
provisions of the SunTrust Charter, an affirmative vote of seventy-five percent
(75%) of the outstanding shares of SunTrust stock is required. The SunTrust
Bylaws provide that the Bylaws may be altered, amended, repealed or new Bylaws
adopted by the SunTrust Board, but any Bylaws adopted by the SunTrust Board may
be altered, amended or repealed and new Bylaws adopted by the Shareholders.
Action by the SunTrust Board with respect to the Bylaws shall be taken by an
affirmative vote of a majority of all of the Directors then elected and
serving.
DIRECTORS AND CLASSES; VACANCIES AND REMOVAL
CRESTAR. The Crestar Charter provides that the number of directors shall
be set forth in the Bylaws, but the number of directors set forth in the Bylaws
may not be increased by more than four during any 12-month period except by the
affirmative vote of more than two-thirds of the votes entitled to be cast at an
election of directors. The Crestar Bylaws provide for a Board of Directors
consisting of not less than five nor more than 26 members, with the number to
be fixed by the Board. The Crestar Board currently has fixed the number of
directors at 16. The Crestar Board is divided into three classes, each as
nearly equal in number as possible, with one class being elected annually.
The Crestar Charter provides that any vacancy occurring on the Crestar
Board, including a vacancy resulting from an increase in the number of
directors, may be filled by the affirmative vote a majority of the remaining
directors though less than a quorum of the Crestar Board. If at the time any
such vacancy is filled, any person, or any associate or affiliate of such
person (as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, or any
successor rule or regulation) is directly or indirectly the beneficial owner of
10% (or more) of outstanding voting shares, the vacancy shall be filled by the
affirmative vote of a majority of the remaining directors in the class of
directors in which the vacancy has occurred. Directors so chosen shall hold
office for a
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term expiring at the next following annual meeting of shareholders at which
directors are elected. No decrease in the number of directors constituting the
Crestar Board shall shorten the term of any incumbent director.
Subject to the rights of the holders of preferred stock then outstanding,
any director may be removed, with cause, only by the affirmative vote of the
holders of at least two-thirds of outstanding voting shares.
SUNTRUST. The SunTrust Bylaws provide that the number of directors shall
consist of not less that 10 nor more than 16 members, with the number to be
fixed by the SunTrust Board. In the absence of the SunTrust Board setting the
number of directors, the number shall be 12. The SunTrust Board is divided into
three classes, each as nearly equal is size as possible, with the term of each
class being three years.
The SunTrust Bylaws provide that any vacancy occurring on the SunTrust
Board, including a vacancy resulting from an increase in the number of
directors, may be filled by the affirmative vote of a majority of directors.
Subject to the rights of the holders of any series of preferred stock then
outstanding, any Director, or all Directors, may be removed from office at any
time with or without cause by the SunTrust Shareholders.
DIRECTOR EXCULPATION; INDEMNIFICATION
CRESTAR. The Crestar Charter provides that, to the full extent that the
VSCA permits the limitation or elimination of the liability of directors or
officers, a director or officer of Crestar shall not be liable to Crestar or
its shareholders for monetary damages. The Crestar Charter provides that, to
the full extent permitted by the VSCA and any other applicable law, Crestar
shall indemnify a director or officer of Crestar who is or was made a party to
any proceeding by reason of the fact that he or she is or was such a director
or officer or is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, at the request of
Crestar. The VSCA provides that a corporation may indemnify an individual made
party to a proceeding because he is or was a director against liability
incurred in the proceeding if he (a) conducted himself in good faith, (b)
believed, in the case of conduct in his official capacity, that his conduct was
in the best interests of the corporation, and in all other cases that his
conduct was at least not opposed to the corporation's best interests and (c) in
the case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful.
SUNTRUST. Under the GBCC, a corporation may indemnify a director, officer,
employee or agent, acting in his capacity as such, for judgments, settlements,
penalties, fines or reasonable expenses incurred with respect to a threatened,
pending or completed action, suit or proceeding if he acted in a manner he
believed in good faith to be in or not opposed to the best interests of the
corporation and, in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. Indemnification in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding. A corporation may pay for
or reimburse the reasonable expenses incurred by a party to a proceeding in
advance of final disposition of the proceeding if (i) he furnishes the
corporation a written affirmation of his good faith belief that he has met the
required standard of conduct and (ii) he furnishes the corporation a written
undertaking to repay any advances if it is ultimately determined that he is not
entitled to indemnification under the GBCC.
The SunTrust Bylaws provide that SunTrust shall indemnify an individual
who is made a party to a proceeding because he is or was a director or officer
against liability incurred by him in the proceeding if he conducted himself in
good faith and, in the case of conduct in his official capacity, he reasonably
believed such conduct was in the best interests of SunTrust, or in all other
cases, he reasonably believed such conduct was at least not opposed to the best
interests of SunTrust and, in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
DIRECTOR CONFLICT OF INTERESTS TRANSACTIONS
CRESTAR. The VSCA provides that a transaction between a corporation and a
director in which the director has a direct or indirect personal interest is
not voidable by the corporation solely because of the director's interest in
the transaction if: (i) the material facts of the transaction and the
director's interest were disclosed or known to the board of directors (or a
committee thereof) and the board (or such committee) authorized, approved or
ratified the transaction, (ii) the material facts of the transaction and the
director's interest were disclosed to the shareholders entitled to vote and
they authorized, approved or ratified the transaction, or (iii) the transaction
was fair to the corporation. For purposes of clause (i) above, a conflict of
interests transaction is authorized, approved or ratified if it receives the
affirmative vote of a majority of directors (or committee members) who have no
direct or indirect personal interest in the transaction. The presence of, or a
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vote cast by, a director with a direct or indirect personal interest does not
affect the validity of any action taken under clause (i) above if the
transaction is otherwise authorized, approved or ratified pursuant to that
clause.
SUNTRUST. The GBCC provides that a transaction in which the director has a
conflicting interest may not be enjoined, set aside or give rise to an award of
damages or other sanctions on the ground of an interest in the transaction of
the director or any other person with whom or which he has a personal,
economic, or other association if: (i) the transaction received the affirmative
vote of a majority (but not less than two) of those qualified directors on the
board of directors or of a duly empowered committee thereof who voted on the
transaction after either (a) required disclosure to them or (b) in the case of
a director with a conflicting interest where neither he nor a related person is
a party thereto and the director has a duty under law, professional canon, or a
duty of confidentiality to another person respecting information relating to
the transaction such that the director cannot, consistent with that duty, make
necessary disclosure, discloses to the directors voting on the transaction the
existence and nature of his conflicting interest and informs them of the
character of and limitations imposed by that duty prior to their vote on the
transaction and plays no part, directly or indirectly, in their deliberations
or vote, (ii) the transaction received the affirmative vote of a majority of
votes entitled to be cast by the holders of all qualified shares after (a)
notice to shareholders describing the director's conflicting interest
transaction, (b) notice to the secretary of the corporation of the number and
identity of persons holding or controlling the vote of all shares that, to the
knowledge of the director, are beneficially owned by the director or by a
related person of the director and (c) required disclosure to the shareholders
who voted on the transaction or (iii) the transaction is established to be fair
to the corporation.
SHAREHOLDER MEETINGS
CRESTAR. The Crestar Bylaws provide that special meetings of the Crestar
Shareholders for any purpose or purposes may be called at any time by the
Chairman of the Crestar Board, the President of Crestar or by a majority of the
Crestar Board.
SUNTRUST. The SunTrust Bylaws provide that a special meeting of the
shareholders may be called at any time by the Chairman of the SunTrust Board or
the President of SunTrust. Special meetings also may be called at any time by a
majority of the SunTrust Board or the holders of at least 25% of the
outstanding common stock of SunTrust.
DIRECTOR NOMINATIONS
CRESTAR. The Crestar Bylaws provide that any nomination for director made
by a shareholder must be made in writing to the Secretary of Crestar not less
than 60 nor more than 90 days prior to the anniversary date of the immediately
preceeding annual meeting. If mailed, such notice shall be sent by certified
mail, return receipt requested, and shall be deemed to have been given when
received by the Secretary of Crestar. A shareholder's nomination for director
shall set forth (a) the name and business address of the shareholder's nominee,
(b) the fact that the nominee has consented to his or her name being placed in
nomination, (c) the name and address, as they appear on Crestar's books, of the
shareholder making the nomination, (d) the class and number of shares of
Crestar's stock beneficially owned by the shareholder, and (e) any material
interest of the shareholder in the proposed nomination.
SUNTRUST. The SunTrust Bylaws provide that nominations for election to the
SunTrust Board may be made by the SunTrust Board, or by any shareholder of any
outstanding class of capital stock entitled to vote for the election of
Directors. Nominations shall specify the class of directors to which each
person is nominated, and nominations, other than those made by the existing
SunTrust Board, shall be made in writing and shall be delivered or mailed to
the Chairman of the SunTrust Board not less than 30 days nor more than 75 days
prior to any meeting of the shareholders called for the election of Directors;
provided, however, that if less than thirty-five (35) days notice of the
meeting is given to shareholders such nomination shall be mailed or delivered
to the Chairman of the SunTrust Board not later than the close of business on
the seventh day following the day on which the notice of meeting was mailed.
Such nomination and notification shall contain (i) the names and addresses of
the proposed nominee or nominees, (ii) the principal occupation of each
proposed nominee, (iii) the total number of shares that, to the knowledge of
the notifying or nominating shareholder, will be voted for each of the proposed
nominees, (iv) the name and residence address of each notifying or nominating
shareholder, (v) the number of shares owned by the notifying or nominating
shareholder, (vi) the total number of shares that, to the knowledge of the
notifying or nominating shareholder, are owned by the proposed nominee and
(vii) the signed consent of the proposed nominee to serve, if elected.
SHAREHOLDER PROPOSALS
CRESTAR. The Crestar Bylaws provide that at any meeting of shareholders of
Crestar, only that business that is properly brought before the meeting may be
presented to and acted upon by the shareholders. To be properly brought
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before the meeting, business must be brought (a) by or at the direction of the
Crestar Board or (b) by a shareholder who has given written notice of business
he or she expects to bring before the meeting to the Secretary of Crestar not
less than 60 nor more than 90 days prior to the anniversary date of the
immediately preceeding annual meeting. If mailed, such notice shall be sent by
certified mail, return receipt requested, and shall be deemed to have been
given when received by the Secretary of Crestar. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the meeting (a) a brief description of the business to be brought before
the meeting and the reasons for conducting such business at the meeting, (b)
the name and address, as they appear on Crestar's books, of the shareholder
proposing such business, (c) the class and number of shares of Crestar stock
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. No business shall be conducted at a meeting of
shareholders except in accordance with the procedures set forth in the Crestar
Bylaws.
SUNTRUST. The SunTrust Charter and the SunTrust Bylaws contain no such
restriction on the ability of SunTrust Shareholders to make shareholder
proposals.
SHAREHOLDER RIGHTS PLANS
CRESTAR. On June 23, 1989, the Crestar Board declared a dividend
distribution of one Crestar Right for each outstanding share of Crestar Common
Stock to shareholders of record at the close of business on July 10, 1989. Each
Crestar Right entitles the registered holder to purchase from Crestar one
one-thousandth of a share (a "Unit") of a newly authorized Participating
Cumulative Preferred Stock, Series C, par value $25 per share. Each Unit was
initially structured to be the economic equivalent of one share of Crestar
Common Stock. Crestar Shareholders received one Crestar Right per share of
Crestar Common Stock held of record at the close of business on July 10, 1989.
The initial exercise price of each Right is $115 subject to adjustment (the
"Purchase Price").
Crestar Rights will also attach to all shares of Crestar Common Stock
issued after July 10, 1989, but prior to the Distribution Date (as defined
below) unless the Crestar Board determines otherwise at the time of issuance.
The description and terms of the Crestar Rights are set forth in the Crestar
Rights Agreement.
The Crestar Rights are attached to all Crestar Common Stock certificates
representing shares currently outstanding, and no separate certificates
evidencing the Crestar Rights have been distributed. The Crestar Rights will
separate from the Common Stock (the "Distribution Date") upon the earlier of
(i) 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding shares of Crestar Common Stock (the "Stock Acquisition Date"), or
(ii) 10 business days following the commencement of a tender offer or exchange
offer that would result in a person or group beneficially owning 10% or more of
such outstanding shares of Crestar Common Stock. Until the Distribution Date,
(i) the Crestar Rights will be evidenced by the Crestar Common Stock
certificates and will be transferred only with such Crestar Common Stock
certificates, (ii) new Crestar Common Stock certificates issued after July 10,
1998 will contain a notation incorporating the Crestar Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for Common
Stock outstanding also will constitute the transfer of the Crestar Rights
associated with the Common Stock represented by such certificates.
The Crestar Rights are not exercisable until the Distribution Date and
will expire at the close of business on June 23, 1999, unless earlier redeemed
by Crestar as described below.
While each Crestar Right initially will provide for the acquisition of one
Unit of Preferred Stock at the Purchase Price, the Crestar Rights Agreement
provides that if (i) an Acquiring Person purchases 30% or more of the
outstanding Common Stock, or (ii) at any time following the Distribution Date,
Crestar is the surviving corporation in a merger with an Acquiring Person and
its Common Stock is not changed or exchanged, or (iii) an Acquiring Person
effects a statutory share exchange with Crestar after which Crestar is not a
subsidiary of any Acquiring Person, each holder of a Crestar Right (except as
set forth below) will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, Preferred Stock or Common Stock at the option of
Crestar (or, in certain circumstances, cash, property or other securities of
Crestar) having a value equal to twice the amount of the Purchase Price.
If, at any time following the Stock Acquisition Date, (i) Crestar is
acquired in a merger, statutory share exchange, or other business combination
in which Crestar is not the surviving corporation (other than a transaction
described in the preceding paragraph), or (ii) 50% or more of Crestar's assets
or earning power is sold or transferred, each holder of a Crestar Right (except
as set forth below) shall thereafter have the right to receive, upon exercise
and payment of the Purchase Price, Common Stock of the acquiring company having
a value equal to twice the Purchase Price. The events set forth in this
paragraph and in the preceding paragraph are referred to as the "Triggering
Events."
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At any time after any person becomes an Acquiring Person, Crestar may
exchange all or part of the Crestar Rights (except as set forth below) for
shares of Common Stock (an "Exchange") at an exchange ratio of one share per
Crestar Right, as appropriately adjusted to reflect any stock split
transaction.
At any time until 10 days following the Stock Acquisition Date, Crestar
may redeem the Crestar Rights in whole, but not in part, at a price of $.01 per
Crestar Right (the "Redemption Price"). Immediately upon the action of the
Crestar Board ordering redemption of the Crestar Rights, with, where required,
the concurrence of the members of the Crestar Board who were members prior to
June 23, 1989 (the "Continuing Directors") and any person consequently elected
to the Board if such person is recommended or approved by a majority of the
Continuing Directors, in each case not including an Acquiring Person, the
Crestar Rights will terminate and the only right of the holders of Crestar
Rights will be to receive the Redemption Price.
The Crestar Rights may have certain anti-takeover effects. The Crestar
Rights will cause substantial dilution to a person or group that acquires more
than 10% of the outstanding shares of Crestar Common Stock if a Triggering
Event thereafter occurs without the Crestar Rights having been redeemed or in
the event of an Exchange. However, the Crestar Rights should not interfere with
any merger or other business combination approved by the Crestar Board and the
Crestar shareholders because the Crestar Rights are redeemable under certain
circumstances.
In connection with the execution of the Merger Agreement, Crestar amended
the Crestar Rights Agreement. See "The Merger -- Crestar Rights Agreement."
SUNTRUST. SunTrust does not have a shareholder rights plan.
SHAREHOLDER INSPECTION RIGHTS; SHAREHOLDER LISTS
CRESTAR. Under the VSCA, a shareholder of a Virginia corporation is
entitled to inspect and copy certain books and records, including the articles
of incorporation and bylaws of the corporation, if he gives the corporation
written notice of his demand at least five business days before the date on
which he wishes to inspect and copy. The shareholder of a Virginia corporation
is entitled to inspect and copy certain other books and records, including a
list of shareholders, minutes of any meeting of the board of directors (or any
committee thereof) and accounting records of the corporation, if (i) the
shareholder has been a shareholder of record for at least six months
immediately preceding his or her written demand or is the holder of at least 5%
of the corporation's outstanding shares, (ii) the shareholder's demand is made
in good faith and for a proper purpose, (iii) the shareholder describes with
reasonable particularity the purpose of the request and the records desired to
be inspected and (iv) the records are directly connected with the stated
purpose, and if he gives the corporation written notice of his demand at least
five business days before the date on which he wishes to inspect and copy. The
VSCA also provides that a corporation shall make available for inspection by
any shareholder during usual business hours, at least 10 days before each
meeting of shareholders, a complete list of the shareholders entitled to vote
at such meeting.
SUNTRUST. The SunTrust Bylaws provide that the SunTrust Board shall
determine whether and to what extent the accounts and books of SunTrust, or any
of them, other than the share records, shall be open to the inspection of
shareholders, and no shareholder shall have any right to inspect any account or
books or document of SunTrust except as conferred by law or by resolution of
the shareholders or the SunTrust Board. Without prior approval of the SunTrust
Board in their discretion, the right of inspection set forth in Section
14-2-1602(c) of the GBCC shall not be available to any shareholder owning two
(2%) percent or less of the shares outstanding. Section 14-2-1602(c) provides
that (i) if a written demand is given at least five business days before the
date on which he wishes to inspect, (ii) the demand is made in good faith and
for a proper purpose that is reasonably relevant to his legitimate interests as
a shareholder, (iii) the demand describes with reasonable particularity the
purpose and the records he desires to inspect, (iv) the records are directly
connected with his purpose and (v) the records are to be used only for the
stated purpose, a shareholder may inspect and copy, during regular business
hours, excerpts from minutes of any board meeting, records of any action of a
committee of the board of directors, minutes of any meeting of the
shareholders, records of action taken by the shareholders or board of directors
without a meeting, accounting records and the records of shareholders.
REQUIRED SHAREHOLDER VOTE FOR CERTAIN ACTIONS
CRESTAR. The VSCA generally requires the approval of a majority of a
corporation's board of directors, and the holders of more than two-thirds of
all the votes entitled to be cast thereon by each voting group entitled to
vote, on any plan of merger or consolidation, plan of share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business. The VSCA also specifies additional voting requirements for Affiliated
Transactions (as
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hereinafter defined) and transactions that would cause an acquiring person's
voting power to meet or exceed specified thresholds, as discussed below.
The VSCA contains provisions governing "Affiliated Transactions." These
provisions, with several exceptions discussed below, require approval of
material acquisition transactions between a Virginia corporation and any holder
of more than ten percent of any class of its outstanding voting shares (a
"Virginia Interested Shareholder") by the holders of at least two-thirds of the
remaining voting shares. Affiliated Transactions subject to the approval
requirement include mergers, share exchanges, material dispositions of
corporate assets not in the ordinary course of business, any dissolution of the
corporation proposed by or on behalf of a Virginia Interested Shareholder, or
any reclassification, including reverse stock splits, recapitalization or
merger of the corporation with its subsidiaries which increases the percentage
of voting shares owned beneficially by a Virginia Interested Shareholder by
more than five percent.
For three years following the time that a Virginia Interested Shareholder
becomes an owner of ten percent of the outstanding voting shares, a Virginia
corporation cannot engage in an Affiliated Transaction with such Virginia
Interested Shareholder without approval of two-thirds of the voting shares
other than those shares beneficially owned by the Virginia Interested
Shareholder, and majority approval of the "Disinterested Directors". A
Disinterested Director means, with respect to a particular Virginia Interested
Shareholder, any member of a corporation's board of directors who was (i) a
member before the later of January 1, 1998 and the date on which a Virginia
Interested Shareholder became a Virginia Interested Shareholder, and (ii)
recommended for election by, or was elected to fill a vacancy and received the
affirmative vote of, a majority of the Disinterested Directors then on the
board. At the expiration of the three-year period, the statute requires
approval of Affiliated Transactions by two-thirds of the voting shares other
than those beneficially owned by the Virginia Interested Shareholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three-year period has expired and require
either that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the VSCA. In general, the fair-price requirement provides that
in a two-step acquisition transaction, the Virginia Interested Shareholder must
pay the shareholders in the second step either the same amount of cash or the
same amount and type of consideration paid to acquire the Virginia
corporation's shares in the first step.
None of the foregoing limitations and special voting requirements apply to
a transaction, such as the Merger, with a Virginia Interested Shareholder whose
acquisition of shares making such person a Virginia Interested Shareholder was
approved by a majority of the Virginia corporation's Disinterested Directors.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Virginia
Interested Shareholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. Crestar has not "opted out" of (i.e.,
elected not to be governed by) the Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction ("control
shares") that would cause the acquiring person's voting rights to meet or
exceed any of three thresholds (20 percent, 33 1/3 percent or a majority) have
no voting rights unless granted by a majority vote of shares not owned by the
acquiring person or any officer or employee-director of the Virginia
corporation. This provision empowers an acquiring person (at its own expense)
to require the Virginia corporation to hold a special meeting of shareholders
to consider the matter within 50 days of the receipt of the request. This
Virginia law provides that, in the event control shares are accorded voting
rights and, as a result, the holder of the control shares has a majority of all
voting power for the election of directors, the shareholders, other than such
holder, may cause the corporation to redeem their shares at a price which meets
certain fair value criteria as determined in accordance with the VSCA.
SUNTRUST. The SunTrust Charter requires (unless other conditions are met)
the affirmative vote of the holders of at least seventy-five percent (75%) of
the then outstanding shares of common stock of the corporation, including the
affirmative vote of the holders of at least seventy-five (75%) of the then
outstanding shares of common stock of the corporation other than those
beneficially owned by a SunTrust Interested Shareholder (as defined in the
SunTrust Charter) for (i) any merger or consolidation of SunTrust or any
subsidiary with (a) any SunTrust Interested Shareholder or (b) any other
corporation (whether or not itself a SunTrust Interested Shareholder) which is,
or after such merger or consolidation would be, an Affiliate (as defined in the
SunTrust Charter) of a SunTrust Interested Shareholder, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction
or a series of transactions) to or with any SunTrust Interested Shareholder or
any Affiliate of any SunTrust Interested Shareholder of any assets of SunTrust
or any
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subsidiary having an aggregate Fair Market Value (as defined in the SunTrust
Charter) of $1,000,000 or more, (iii) the issuance or transfer by SunTrust or
any subsidiary (in one transaction or a series of transactions) of any
securities of SunTrust or any subsidiary to any SunTrust Interested Shareholder
or any Affiliate of any SunTrust Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof) having an aggregate
Fair Market Value of $1,000,000 or more, (iv) the adoption of any plan or
proposal for the liquidation or dissolution of SunTrust proposed by or on
behalf of a SunTrust Interested Shareholder or any Affiliate of any SunTrust
Interested Shareholder or (v) any reclassification of securities (including any
reverse stock split), or recapitalization of SunTrust, or any merger or
consolidation of SunTrust with any of its subsidiaries or any other transaction
(whether or not with or into or otherwise involving a SunTrust Interested
Shareholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of SunTrust or any subsidiary which is directly or
indirectly owned by any SunTrust Interested Shareholder or any Affiliate of any
SunTrust Interested Shareholder. The Suntrust Charter provides that such vote
of SunTrust shareholders is not required if three-fourths of all directors
approve the transaction.
The GBCC also specifies additional voting requirements for Affiliated
Transactions (as hereinafter defined) and transactions that would cause an
acquiring person's voting power to meet or exceed specified thresholds, as
discussed below.
Under the GBCC, certain "business combinations" (including a merger,
consolidation, asset transfer or reclassification of equity securities) between
a Georgia corporation and any person who beneficially owns, directly or
indirectly, ten percent or more of the voting power of the corporation's voting
stock (a "Georgia Interested Shareholder"), are prohibited for five years from
the time that such Georgia Interested Shareholder becomes a Georgia Interested
Shareholder unless (i) prior to such time the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the shareholder becoming a Georgia Interested Shareholder; (ii) the
Georgia Interested Shareholder became the beneficial owner of at least 90% of
the corporation's outstanding shares at the time the transaction commenced,
excluding shares owned by directors and officers (or any affiliates or
associates thereof) of the corporation, subsidiaries of the corporation, and
certain employee stock plans of the corporation; or (iii) subsequent to
becoming a Georgia Interested Shareholder, such shareholder acquired additional
shares resulting in the Georgia Interested Shareholder being the beneficial
owner of at least 90% of the outstanding voting stock of the corporation,
excluding shares owned by directors and officers (or any affiliates or
associates thereof) of the corporation, subsidiaries of the corporation and
certain employee stock plans of the corporation.
Furthermore, the GBCC provides that business combinations must be either
(i) unanimously approved by the continuing directors provided that the
continuing directors constitute at least three members of the board of
directors at the time of such approval; or (ii) recommended by at least
two-thirds of the continuing directors and approved by a majority of the votes
entitled to be cast by holders of voting shares, other than voting shares
beneficially owned by the interested shareholders unless, among other
conditions, the Georgia corporation's common shareholders receive a minimum
price (as defined in the GBCC) for their shares and the consideration is
received in cash or in the same form as previously paid by the Georgia
Interested Shareholder for its shares.
These GBCC provisions do not apply to business combinations with
Interested Shareholders unless the bylaws of the corporation so provide. The
SunTrust Bylaws provide that the Georgia Business Combination Statute (as
defined in the GBCC) shall apply in addition to Article XI of the SunTrust
Charter.
DISSENTERS' RIGHTS
CRESTAR. The provisions of Article 15 of the VSCA which provide
shareholders of a Virginia corporation the right to dissent from, and obtain
payment of the fair value of their shares in the event of, mergers,
consolidations and certain other corporate transactions are applicable to
Crestar as a Virginia corporation. However, because Crestar has at least 2,000
record shareholders and has shares listed on a national securities exchange,
shareholders of Crestar generally do not have rights to dissent from mergers,
consolidations and certain other corporate transactions to which Crestar is a
party because Article 15 of the VSCA provides that holders of shares of a
Virginia corporation which has shares listed on a national securities exchange
or which has at least 2,000 record shareholders are not entitled to dissenters'
rights unless certain requirements (none of which are present) are met.
SUNTRUST. The GBCC provides that a shareholder of a Georgia corporation
may dissent from and obtain payment of the fair value of their shares in the
event of (i) consummation of a plan of merger to which the corporation is a
party if (A) approval of the shareholders of the corporation is required and
the shareholder is entitled to vote or (B) the corporation is as subsidiary
that is merged with its parent, (ii) consummation of a plan of share exchange
to which the
52
<PAGE>
corporation is a party as the corporation whose shares will be acquired if the
shareholder is entitled to vote, (iii) consummation of a sale or exchange of
all or substantially all of the property of the corporation if a shareholder
vote is required under GBCC Section 14-2-1202, (iv) an amendment to the
articles of incorporation that materially and adversely affects rights in
respect of a dissenter's shares and (v) any corporate action taken pursuant to
a shareholder vote to the extent that Article 9 of GBCC, 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. However, because SunTrust has more than 2,000 record shareholders
and has shares listed on a national securities exchange, the shareholders of
SunTrust generally do not have the right to dissent from mergers, sales or
exchanges of substantially all of the assets of the corporation or an amendment
to the articles of incorporation because the GBCC provides that holders of
shares of a Georgia corporation which has shares listed on a national
securities exchange or which has more than 2,000 record shareholders are not
entitled to dissenter's rights unless certain requirements are met.
DIVIDENDS AND OTHER DISTRIBUTIONS
CRESTAR. The VSCA generally provides that a corporation may make
distributions to its shareholders unless, after giving effect to the
distribution, (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 labilities plus (unless the
articles of incorporation permit otherwise, which the Crestar Charter does not)
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 shareholders whose preferential rights are superior to those receiving the
distribution. These requirements are applicable to Crestar as a Virginia
corporation.
In addition to the limitations set forth in the VSCA, there are various
regulatory requirements which are applicable to distributions by bank holding
companies such as Crestar.
SUNTRUST. The GBCC provides that SunTrust may not pay a dividend if after
giving effect to the dividend, SunTrust would not be able to pay its debts as
they become due in the usual course of business or SunTrust's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if SunTrust were to be dissolved at such time, to satisfy any
preferential rights upon dissolution held by its shareholders whose
preferential rights are superior to those receiving the dividend. In addition
to the limitations set forth in the VSCA, there are various regulatory
requirements which are applicable to distributions by bank holding companies
such as Crestar.
VOLUNTARY DISSOLUTION
CRESTAR. The VSCA generally provides that a corporation's board of
directors may propose dissolution for submission to shareholders and that to be
authorized, the dissolution must be recommended by the board to the
shareholders and approved by the holders of more than two-thirds of all votes
entitled to be cast on the proposal, unless the articles of incorporation of
the corporation require a greater or lesser vote. There are no provisions in
the Crestar Charter which would modify the statutory requirements for
dissolution under the VSCA.
SUNTRUST. The GBCC provides that the SunTrust Board may propose
dissolution for the submission to the sharholders. Unless the articles of
incorporation, bylaws or the board of directors require a greater vote or vote
by classes, the proposal to dissolve to be adopted must be approved by a
majority of all the votes entitled to be cast on that proposal.
LIQUIDATION RIGHTS
CRESTAR. In the event of liquidation, dissolution or winding-up of the
affairs of Crestar, holders of outstanding Crestar Common Stock are entitled to
share, in proportion to their respective interests, in Crestar's assets and
funds remaining after payment, or provision for payment, of all debts and other
liabilities of Crestar. In the event of voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of Crestar, the holders of Crestar
preferred stock shall be preferred over the common stock as to both dividends
and amounts distributable upon any voluntary or involuntary liquidation of the
corporation.
SUNTRUST. The SunTrust Charter provides that in the event of voluntary or
involuntary dissolution, liquidation or winding up of the affairs of SunTrust,
after payment or provision for payment of debts and other liabilities of
SunTrust and before any distribution to the holders of shares of common stock
or any stock junior to the preferred stock as to the distribution of assets
upon liquidation, the holder of each series of the preferred stock shall be
entitled to receive out of the net assets of SunTrust an amount in cash for
each share equal to the amount fixed and determined by the SunTrust Board in
the resolution providing for the issuance of the particular series of preferred
stock, plus an amount equal to all dividends accrued and unpaid on each such
share of the preferred stock up to the date fixed for distribution, and no
more. The SunTrust common shareholders will be entitled to receive any
remaining assets of SunTrust upon liquidation.
53
<PAGE>
EXPERTS
The audited consolidated financial statements of SunTrust incorporated by
reference into this Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The consolidated financial statements of Crestar and its subsidiaries
appearing in Crestar's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein and
in the Registration Statement, and upon the authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Marwick LLP refers to their
reliance on another auditors' report with respect to amounts related to
Citizens Bancorp for 1996 and 1995 included in the aforementioned consolidated
financial statements.
Representatives of Arthur Andersen LLP are expected to be present at the
SunTrust Meeting, and representatives of KPMG Peat Marwick LLP are expected to
be present at the Crestar Meeting. In each case, such representatives will have
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the shares of SunTrust Common Stock to be issued pursuant
to the terms of the Merger Agreement will passed upon for SunTrust by Raymond
D. Fortin, Senior Vice President - Legal and Corporate Secretary. As of the
date of this document, Mr. Fortin beneficially owned 23,000 shares of SunTrust
Common Stock and held options to purchase 3,000 shares of SunTrust Common
Stock. Certain legal matters in connection with the federal income tax
consequences of the Merger will be passed upon for Crestar by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York, and for SunTrust by King &
Spalding, Atlanta, Georgia.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual Meeting
of Shareholders of SunTrust must be received by the Secretary of SunTrust not
later than November 3, 1998 for inclusion in the proxy materials for such
meeting.
Due to the contemplated consummation of the Merger, Crestar does not
currently expect to hold a 1999 Annual Meeting of Shareholders because Crestar
will be a wholly owned subsidiary of SunTrust following the Merger. If the
Merger is not consummated and such a meeting is held, to be eligible for
inclusion in Crestar's proxy statement and form of proxy relating to that
meeting, proposals of shareholders intended to be presented at such meeting
must be received by Crestar either (i) within a reasonable time after Crestar
announces publicly the date of the meeting and before Crestar mails its proxy
statement to shareholders in connection with such meeting or (ii) not later
than November 20, 1998, if Crestar shall have publicly announced its intention
not to consummate the Merger prior to such date. Any other shareholder proposal
intended to be presented at such meeting may only be so presented if the
shareholder seeking to have such proposal presented has provided notice of such
proposal, in compliance with the requirements of the Crestar Bylaws, not later
than February 23, 1999.
54
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
SunTrust and Crestar file annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or other information that the companies file at the
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. SunTrust and Crestar public filings
are also available to the public from commercial document retrieval services
and at the Internet World Wide Web site maintained by the Commission at
"http:// www.sec.gov." Reports, proxy statements and other information
concerning SunTrust and Crestar also may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
SunTrust has filed the Registration Statement to register with the
Commission the shares of SunTrust Common Stock to be issued to Crestar
Shareholders in the Merger. This document is a part of the Registration
Statement and constitutes a prospectus of SunTrust, a proxy statement of
SunTrust for the SunTrust Meeting and a proxy statement of Crestar for the
Crestar Meeting.
As allowed by Commission rules, this document does not contain all the
information that shareholders can find in the Registration Statement or the
exhibits to the Registration Statement.
The Commission allows SunTrust and Crestar to "incorporate by reference"
information into this document, which means that the companies can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be a part of this document, except for any information superseded by
information contained directly in this document. This document incorporates by
reference the documents set forth below that SunTrust and Crestar have
previously filed with the Commission. These documents contain important
business information about the companies and their financial condition.
<TABLE>
<S> <C>
SUNTRUST COMMISSION FILINGS (FILE NO. 1-8918) PERIOD
Annual Report on Form 10-K .................... Year ended December 31, 1997, as amended
Quarterly Reports on Form 10-Q ................ Quarters ended June 30, 1998 and March 31, 1998
Current Reports on Form 8-K ................... Dated August 13, 1998, July 20, 1998, March 10, 1998 and
January 16, 1998, as amended
Registration Statement on Form 8-B ............ Dated June 10, 1985, as amended on August 4, 1987, setting forth
a description of the SunTrust Common Stock (including any amendments
or reports filed for the purpose of updating such description)
CRESTAR COMMISSION FILINGS (FILE NO. 1-7083) PERIOD
Annual Report on Form 10-K .................... Year ended December 31, 1997
Quarterly Reports on Form 10-Q ................ Quarters ended June 30, 1998 and March 31, 1998
Current Reports on Form 8-K ................... Dated July 20, 1998, July 9, 1998 and January 27, 1998, as amended
Registration Statement on Form 8-A ............ Dated June 30, 1993, setting forth a description of the Crestar Common
Stock (including any amendments or reports filed for the purpose of
updating such information)
</TABLE>
SunTrust and Crestar incorporate by reference additional documents that
either company may file with the Commission between the date of this document
and the date of the Meetings. These include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, as well as proxy statements.
SunTrust has supplied all information contained or incorporated by
reference in this document relating to SunTrust, and Crestar has supplied all
such information relating to Crestar.
If you are a shareholder of SunTrust or Crestar, SunTrust or Crestar, as
the case may be, may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through SunTrust or Crestar, as the
case may be, or the Commission or the Commission's Internet World Wide Web site
described above. Documents incorporated by reference are available from the
companies without charge, excluding all exhibits unless specifically
incorporated by reference as an exhibit to this document. Shareholders of
SunTrust or Crestar may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
55
<PAGE>
SUNTRUST BANKS, INC.
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Telephone: (404) 588-7425
Attention: James C. Armstrong -- Investor Relations
CRESTAR FINANCIAL CORPORATION
919 East Main Street
Richmond, Virginia 23219
Telephone: (804) 782-7933
Attention: Jeanne E. Napier -- Investor Relations
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM EITHER COMPANY, PLEASE DO SO
AT LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE MEETINGS IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE MEETINGS.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the SunTrust Meeting and/or
the Crestar Meeting. SunTrust and Crestar have not authorized anyone to provide
you with information that is different from what is contained in this document.
This document is dated ___________, 1998. You should not assume that the
information contained in this document is accurate as of any date other than
that date, and neither the mailing of this document to shareholders nor the
issuance of SunTrust Common Stock in the Merger creates any implication to the
contrary.
56
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
June 30, 1998, combines the historical consolidated balance sheets of SunTrust
and Crestar as if the Merger had been effective on June 30, 1998, after giving
effect to certain adjustments. The Unaudited Pro Forma Combined Condensed
Statements of Income for the six months ended June 30, 1998, and for the years
ended December 31, 1997, 1996 and 1995 present the combined results of
operations of SunTrust and Crestar as if the Merger had been effective at the
beginning of each period.
The Unaudited Pro Forma Combined Condensed Financial Information and
accompanying notes reflect the application of the pooling of interests method
of accounting for the Merger. Under this method of accounting, the recorded
assets, liabilities, shareholders' equity, income and expenses of SunTrust and
Crestar are combined and reflected at their historical amounts. The pro forma
combined figures shown in the Unaudited Pro Forma Combined Condensed Financial
Information are simply arithmetical combinations of SunTrust's and Crestar's
separate financial results; you should not assume that SunTrust and Crestar
would have achieved the pro forma combined results if they had actually been
combined during the periods presented.
The combined company expects to achieve substantial merger benefits in the
form of operating cost savings. The pro forma earnings, which do not reflect
any direct costs or potential savings which are expected to result from the
consolidation of the operations of SunTrust and Crestar, are not indicative of
the results of future operations. No assurances can be given with respect to
the ultimate level of expense savings. See "A Warning About Forward-Looking
Information" and "Risk Factors -- Uncertainties in Integrating Business
Operations and Realizing Enhanced Earnings."
57
<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------------------------------------------------
SUNTRUST CRESTAR ADJUSTMENTS COMBINED
---------------- ---------------- ------------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ............................. $ 3,018,148 $ 939,382 $ 3,957,530
Trading account assets .............................. 172,689 13,351 186,040
Securities Held to Maturity ......................... 0 578,813 578,813
Securities Available for Sale ....................... 12,791,021 4,210,810 17,001,831
Funds sold .......................................... 1,163,721 874,628 2,038,349
------------ ------------ ------- ------------
Loans ............................................... 41,647,269 18,127,581 59,774,850
Reserve for loan losses ............................. (762,582) (246,017) (1,008,599)
------------ ------------ ------- ------------
Net Loans ........................................... 40,884,687 17,881,564 58,766,251
Premises and equipment .............................. 986,501 479,759 1,466,260
Intangible assets ................................... 438,194 199,447 637,641
Other assets ........................................ 1,938,442 983,419 2,921,861
------------ ------------ ------- ------------
Total Assets ....................................... $ 61,393,403 $ 26,161,173 $ 87,554,576
============ ============ ======= ============
LIABILITIES
Deposits
Noninterest-bearing deposits ........................ $ 9,066,213 $ 3,766,030 $ 12,832,243
Interest-bearing deposits ........................... 27,916,371 14,104,151 42,020,522
------------ ------------ ------------
Total deposits ...................................... 36,982,584 17,870,181 54,852,765
Funds purchased ..................................... 7,992,582 3,257,598 11,250,180
Other short-term borrowings ......................... 2,151,846 1,381,809 3,533,655
Long-term debt ...................................... 4,547,860 947,704 155,000 (B) 5,650,564
Other liabilities ................................... 3,806,902 498,281 4,305,183
------------ ------------ ------- ------------
Total liabilities .................................. 55,481,774 23,955,573 155,000 79,592,347
------------ ------------ ------- ------------
STOCKHOLDERS' EQUITY
Preferred stock ..................................... 0 0 0
Common stock ........................................ 213,108 561,099 (448,879)(A) 325,328
Additional paid in capital ........................... 392,598 382,180 448,879 (A) 1,223,657
Retained earnings ................................... 3,012,629 1,255,891 (155,000)(B) 4,113,520
Treasury stock and other ............................ (326,058) 0 (326,058)
------------ ------------ ------- ------------
Realized shareholders' equity ...................... 3,292,277 2,199,170 (155,000) 5,336,447
Accumulated Other Comprehensive Income .............. 2,619,352 6,430 2,625,782
------------ ------------ ------- ------------
Total shareholders' equity ......................... 5,911,629 2,205,600 (155,000) 7,962,229
------------ ------------ -------- ------------
Total liabilities and shareholders' equity ......... $ 61,393,403 $ 26,161,173 0 $ 87,554,576
============ ============ ======== ============
</TABLE>
(A) Adjustment to show the change in par value from $5.00 per share of Crestar
Common Stock before the Merger to $1.00 per share of SunTrust Common Stock
after the Merger.
(B) Adjustment for one-time Merger related charges of $250 million on pre-tax
basis. The $200 million in pre-tax merger related charges to be taken by
SunTrust consists of $100 million for severance and retention, $65 million for
conversion costs and $35 million for transaction related costs. The $50 million
in pre-tax merger related charges to be taken by Crestar consists of $20
million for state income tax provision, $20 million for a loan loss provision
and $10 million for other identified items.
58
<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------
SUNTRUST CRESTAR COMBINED
--------------- ------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................. $ 1,625,088 $ 710,505 $2,335,593
Interest and dividends on investment securities ............. 274,670 148,557 423,227
Other interest income ....................................... 35,422 12,212 47,634
----------- --------- ----------
Total interest income ...................................... 1,935,180 871,274 2,806,454
----------- --------- ----------
INTEREST EXPENSE
Interest on deposits ........................................ 568,307 258,791 827,098
Interest on short-term borrowings ........................... 253,516 118,366 371,882
Interest on long-term debt .................................. 127,063 33,723 160,786
----------- --------- ----------
Total interest expense ..................................... 948,886 410,880 1,359,766
----------- --------- ----------
NET INTEREST INCOME 986,294 460,394 1,446,688
Provision for loan losses ................................... 62,056 44,907 106,963
----------- --------- ----------
Net interest income after provision for loan losses ......... 924,238 415,487 1,339,725
----------- --------- ----------
NONINTEREST INCOME
Trust and investment advisory income ........................ 235,880 41,069 276,949
Service charges on deposit accounts ......................... 124,846 67,927 192,773
Securities gains (losses) ................................... 2,872 5,155 8,027
Other noninterest income .................................... 219,607 111,022 330,629
----------- --------- ----------
Total noninterest income ................................... 583,205 225,173 808,378
----------- --------- ----------
NONINTEREST EXPENSE
Personnel expense ........................................... 549,195 202,978 752,173
Net occupancy expense ....................................... 66,027 27,047 93,074
Equipment expense ........................................... 63,395 21,764 85,159
Other noninterest expense ................................... 275,275 120,877 396,152
----------- --------- ----------
Total noninterest expense .................................. 953,892 372,666 1,326,558
----------- --------- ----------
Income before provision for income taxes .................... 553,551 267,994 821,545
Provision for income taxes .................................. 187,688 95,693 283,381
----------- --------- ----------
Net Income ................................................. $ 365,863 $ 172,301 $ 538,164
=========== ========= ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 1.73 $ 1.52 $ 1.68 (A)
Earnings -- basic ........................................... 1.76 1.54 1.71 (A)
Average common shares -- diluted ............................ 211,186 113,354 320,006 (A)
Average common shares -- basic .............................. 207,886 111,928 315,337 (A)
</TABLE>
(A) Adjusted for the exchange ratio of 0.96.
59
<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------
SUNTRUST CRESTAR COMBINED
--------------- --------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................. $ 3,036,100 $ 1,280,186 $4,316,286
Interest and dividends on investment securities ............. 542,234 273,716 815,950
Other interest income ....................................... 72,405 21,682 94,087
----------- ----------- ----------
Total interest income .................................... 3,650,739 1,575,584 5,226,323
----------- ----------- ----------
INTEREST EXPENSE
Interest on deposits ........................................ 1,151,157 478,466 1,629,623
Interest on short-term borrowings ........................... 436,708 158,819 595,527
Interest on long-term debt .................................. 168,508 62,001 230,509
----------- ----------- ----------
Total interest expense ..................................... 1,756,373 699,286 2,455,659
----------- ----------- ----------
NET INTEREST INCOME ......................................... 1,894,366 876,298 2,770,664
Provision for loan losses ................................... 117,043 108,097 225,140
----------- ----------- ----------
Net interest income after provision for loan losses ......... 1,777,323 768,201 2,545,524
----------- ----------- ----------
NONINTEREST INCOME
Trust and investment advisory income ........................ 376,430 74,421 450,851
Service charges on deposit accounts ......................... 247,828 126,105 373,933
Securities gains (losses) ................................... 1,523 5,328 6,851
Other noninterest income .................................... 308,457 215,585 524,042
----------- ----------- ----------
Total noninterest income ................................... 934,238 421,439 1,355,677
----------- ----------- ----------
NONINTEREST EXPENSE
Personnel expense ........................................... 955,603 390,646 1,346,249
Net occupancy expense ....................................... 126,802 60,016 186,818
Equipment expense ........................................... 120,675 41,400 162,075
Other noninterest expense ................................... 482,515 222,195 704,710
----------- ----------- ----------
Total noninterest expense .................................. 1,685,595 714,257 2,399,852
----------- ----------- ----------
Income before provision for income taxes .................... 1,025,966 475,383 1,501,349
Provision for income taxes .................................. 358,713 165,575 524,288
----------- ----------- ----------
Net income ................................................. $ 667,253 $ 309,808 $ 977,061
=========== =========== ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 3.13 $ 2.77 $ 3.04 (A)
Earnings -- basic ........................................... 3.17 2.80 3.09 (A)
Average common shares -- diluted ............................ 213,480 111,929 320,932 (A)
Average common shares -- basic .............................. 210,243 110,618 316,436 (A)
</TABLE>
(A) Adjusted for the exchange ratio of 0.96.
60
<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
SUNTRUST CRESTAR COMBINED
--------------- --------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................. $ 2,678,566 $ 1,241,248 $3,919,814
Interest and dividends on investment securities ............. 521,891 304,256 826,147
Other interest income ....................................... 45,585 17,875 63,460
----------- ----------- ----------
Total interest income ...................................... 3,246,042 1,563,379 4,809,421
----------- ----------- ----------
INTEREST EXPENSE
Interest on deposits ........................................ 1,083,035 502,773 1,585,808
Interest on short-term borrowings ........................... 293,766 144,797 438,563
Interest on long-term debt .................................. 85,031 49,499 134,530
----------- ----------- ----------
Total interest expense ..................................... 1,461,832 697,069 2,158,901
----------- ----------- ----------
NET INTEREST EXPENSE ........................................ 1,784,210 866,310 2,650,520
Provision for loan losses ................................... 115,916 95,890 211,806
----------- ----------- ----------
Net interest income after provision for loan losses ......... 1,668,294 770,420 2,438,714
----------- ----------- ----------
NONINTEREST INCOME
Trust and investment advisory income ........................ 314,819 65,939 380,758
Service charges on deposit accounts ......................... 232,426 114,249 346,675
Securities gains (losses) ................................... 14,168 3,393 17,561
Other noninterest income .................................... 256,576 149,604 406,180
----------- ----------- ----------
Total noninterest income ................................... 817,989 333,185 1,151,174
----------- ----------- ----------
NONINTEREST EXPENSE
Personnel expense ........................................... 874,049 397,448 1,271,497
Net occupancy expense ....................................... 138,186 64,450 202,636
Equipment expense ........................................... 115,423 38,479 153,902
Other noninterest expense ................................... 455,425 279,969 735,394
----------- ----------- ----------
Total noninterest expense .................................. 1,583,083 780,346 2,363,429
----------- ----------- ----------
Income before provision for income taxes .................... 903,200 323,259 1,226,459
Provision for income taxes .................................. 286,585 104,988 391,573
----------- ----------- ----------
Net Income ................................................. $ 616,615 $ 218,271 $ 834,886
=========== =========== ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 2.76 $ 1.95 $ 2.52 (A)
Earnings -- basic ........................................... 2.80 1.97 2.56 (A)
Average common shares -- diluted ............................ 223,486 112,037 331,041 (A)
Average common shares -- basic .............................. 220,364 110,560 326,501 (A)
</TABLE>
(A) Adjusted for the exchange ratio of 0.96.
61
<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
SUNTRUST CRESTAR COMBINED
------------- ------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................. $2,501,536 $1,209,193 $3,710,729
Interest and dividends on investment securities ............. 487,036 262,532 749,568
Other interest income ....................................... 38,632 20,178 58,810
---------- ---------- ----------
Total interest income ...................................... 3,027,204 1,491,903 4,519,107
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits ........................................ 988,725 493,301 1,482,026
Interest on short-term borrowings ........................... 293,923 133,709 427,632
Interest on long-term debt .................................. 68,114 50,038 118,152
---------- ---------- ----------
Total interest expense ..................................... 1,350,762 677,048 2,027,810
---------- ---------- ----------
NET INTEREST INCOME ......................................... 1,676,442 814,855 2,491,297
Provision for loan losses ................................... 112,108 66,265 178,373
---------- ---------- ----------
Net interest income after provision for loan losses ......... 1,564,334 748,590 2,312,924
---------- ---------- ----------
NONINTEREST INCOME
Trust and investment advisory income ........................ 284,243 59,841 344,084
Service charges on deposit accounts ......................... 212,582 109,264 321,846
Securities gains (losses) ................................... (6,649) (2,067) (8,716)
Other noninterest income .................................... 222,894 153,030 375,924
---------- ---------- ----------
Total noninterest income ................................... 713,070 320,068 1,033,138
---------- ---------- ----------
NONINTEREST EXPENSE
Personnel expense ........................................... 778,990 388,542 1,167,532
Net occupancy expense ....................................... 130,124 62,851 192,975
Equipment expense ........................................... 105,122 37,916 143,038
Other noninterest expense ................................... 437,243 228,890 666,133
---------- ---------- ----------
Total noninterest expense .................................. 1,451,479 718,199 2,169,678
---------- ---------- ----------
Income before provision for income taxes .................... 825,925 350,459 1,176,384
Provision for income taxes .................................. 260,449 134,572 395,021
---------- ---------- ----------
Net Income ................................................. $ 565,476 $ 215,887 $ 781,363
========== ========== ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 2.47 $ 1.92 $ 2.32 (A)
Earnings -- basic ........................................... 2.49 1.95 2.34 (A)
Average common shares -- diluted ............................ 229,544 112,432 337,479 (A)
Average common shares -- basic .............................. 226,665 110,986 333,212 (A)
</TABLE>
(A) Adjusted for the exchange ratio of 0.96.
62
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(1) The Unaudited Pro Forma Condensed Combined Financial Information
presented herein is not necessarily indicative of the results of
operations or the combined financial position that would have resulted
had the merger been consummated at the beginning of the earliest period
presented, nor is it necessarily indicative of the results of operations
in future periods or the future financial position of the combined
entities. The Unaudited Pro Forma Condensed Combined Financial
Information should be read together with the historical consolidated
financial statements and the related notes thereto of each of SunTrust
and Crestar incorporated by reference herein.
(2) It is assumed that the Merger will be accounted for on a
pooling-of-interests accounting basis, and accordingly, the related pro
forma amounts are included using the Exchange Ratio of 0.96 shares of
SunTrust Common Stock for each share of Crestar Common Stock.
(3) Earnings per share data has been computed based on the combined
historical net income applicable to SunTrust Shareholders and Crestar
Shareholders using the historical weighted average shares outstanding of
SunTrust Common Stock and the weighted average outstanding shares of
Crestar Common Stock, adjusted to equivalent shares of SunTrust Common
Stock, as of the earliest period presented.
(4) Certain insignificant reclassifications have been included to ensure
consistent presentation.
(5) The Unaudited Pro Forma Condensed Combined Financial Information, with
the exception of the Pro Forma Combined Condensed Balance Sheet, does
not include any material expenses related to the Merger. SunTrust
currently estimates pre-tax Merger related charges of approximately $200
million will be recorded in the fourth quarter of 1998. Crestar is
expected to record $50 million in pre-tax Merger related charges in 1998
to align certain accounting and reserve methods.
(6) SunTrust expects to realize significant revenue enhancements and cost
savings from the Merger, primarily through the realization of certain
operating efficiencies and reductions in fixed, labor and other costs.
The Unaudited Pro Forma Condensed Combined Financial Information, which
does not reflect any revenue enhancements, direct costs or potential
savings, is therefore not indicative of the results of future
operations. There can be no assurance that anticipated revenue
enhancements or cost savings will be achieved in the expected amounts or
at the times anticipated.
63
<PAGE>
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SUNTRUST BANKS, INC.
CRESTAR FINANCIAL CORPORATION
AND
SMR CORPORATION (VA.)
DATED AS OF JULY 20, 1998
A-1
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I THE MERGER .................................................... A-5
1.1 Merger ........................................................... A-5
1.2 Effective Time ................................................... A-5
1.3 Effect of Merger ................................................. A-5
1.4 Articles of Incorporation and Bylaws ............................. A-6
1.5 Directors and Officers ........................................... A-6
1.6 Additional Actions ............................................... A-6
1.7 Tax Consequences; Accounting Treatment ........................... A-6
ARTICLE II CONVERSION OF SHARES ......................................... A-6
2.1 Conversion of Shares ............................................. A-6
2.2 Assumption of Employee and Director Stock Options ................ A-7
2.3 Exchange of Certificates ......................................... A-7
2.4 Closing of Crestar's Transfer Books .............................. A-9
2.5 Changes in SunTrust Common Stock ................................. A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SUNTRUST .................. A-9
3.1 Corporate Organization ........................................... A-9
3.2 Authority ........................................................ A-9
3.3 Capitalization ................................................... A-9
3.4 Subsidiaries ..................................................... A-10
3.5 Information in Disclosure Documents, Registration Statement, Etc. A-10
3.6 Consents and Approvals; No Violation ............................. A-10
3.7 Reports .......................................................... A-11
3.8 Financial Statements ............................................. A-11
3.9 Taxes ............................................................ A-11
3.10 Employee Plans .................................................. A-11
3.11 Material Contracts .............................................. A-12
3.12 Absence of Certain Changes or Events ............................ A-12
3.13 Litigation ...................................................... A-13
3.14 Compliance with Laws and Orders ................................. A-13
3.15 Agreements with Bank Regulators, Etc. ........................... A-13
3.16 SunTrust Ownership of Stock ..................................... A-13
3.17 Accounting Treatment; Tax Treatment ............................. A-13
3.18 Fees ............................................................ A-13
3.19 SunTrust Action ................................................. A-13
3.20 Vote Required ................................................... A-14
3.21 Material Interests of Certain Persons ........................... A-14
3.22 Intellectual Property ........................................... A-14
3.23 Interest Rate Risk Management Instruments ....................... A-14
3.24 Insurance ....................................................... A-14
3.25 Environmental Matters ........................................... A-14
3.26 Rescission of Repurchases ....................................... A-15
3.27 Disclosure Letter ............................................... A-15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CRESTAR .................... A-16
4.1 Corporate Organization ........................................... A-16
4.2 Authority ........................................................ A-16
4.3 Capitalization ................................................... A-16
4.4 Subsidiaries ..................................................... A-16
4.5 Information in Disclosure Documents, Registration Statement, Etc. A-17
4.6 Consents and Approvals; No Violation ............................. A-17
4.7 Reports .......................................................... A-17
4.8 Financial Statements ............................................. A-17
4.9 Taxes ............................................................ A-18
</TABLE>
A-2
<PAGE>
<TABLE>
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<S> <C>
4.10 Employee Plans .................................................. A-18
4.11 Material Contracts .............................................. A-19
4.12 Absence of Certain Changes or Events ............................ A-19
4.13 Litigation ...................................................... A-19
4.14 Compliance with Laws and Orders ................................. A-20
4.15 Agreements with Bank Regulators, Etc. ........................... A-20
4.16 Crestar Ownership of Stock ...................................... A-20
4.17 Accounting Treatment; Tax Treatment ............................. A-20
4.18 Fees ............................................................ A-20
4.19 Crestar Action .................................................. A-20
4.20 Vote Required ................................................... A-20
4.21 Material Interests of Certain Persons ........................... A-20
4.22 Intellectual Property ........................................... A-21
4.23 Interest Rate Risk Management Instruments ....................... A-21
4.24 Insurance ....................................................... A-21
4.25 Environmental Matters ........................................... A-21
4.26 Rescission of Repurchases ....................................... A-22
4.27 Disclosure Letter ............................................... A-22
ARTICLE V COVENANTS ..................................................... A-22
5.1 Acquisition Proposals ............................................ A-22
5.2 Interim Operations of Crestar .................................... A-22
5.3 Interim Operations of SunTrust ................................... A-24
5.4 Coordination of Dividends ........................................ A-24
5.5 Employee Matters ................................................. A-24
5.6 Access and Information ........................................... A-25
5.7 Certain Filings, Consents and Arrangements ....................... A-25
5.8 State Takeover Statutes .......................................... A-25
5.9 Indemnification and Insurance .................................... A-26
5.10 Additional Agreements ........................................... A-26
5.11 Publicity ....................................................... A-26
5.12 Preparation of the Registration Statement and the Proxy
Statement; Shareholders' ...................................... A-27
Meetings
5.13 Securities Act; Pooling-of-Interests ............................ A-27
5.14 Stock Exchange Listings ......................................... A-28
5.15 Shareholder Litigation .......................................... A-28
5.16 Pooling-of-Interests and Tax-free Reorganization Treatment ...... A-28
5.17 Letters of Accountants .......................................... A-28
5.18 Expenses ........................................................ A-28
5.19 Adverse Action .................................................. A-28
5.20 Standstill Agreements; Confidentiality Agreements ............... A-28
5.21 Issuance of Treasury Shares ..................................... A-28
5.22 Redemption of Securities. ....................................... A-29
ARTICLE VI CLOSING MATTERS .............................................. A-29
6.1 The Closing ...................................................... A-29
6.2 Documents and Certificates ....................................... A-29
ARTICLE VII CONDITIONS .................................................. A-29
7.1 Conditions to Each Party's Obligations to Effect the Merger ...... A-29
7.2 Conditions to Obligation of Crestar to Effect the Merger ......... A-30
7.3 Conditions to Obligation of SunTrust to Effect the Merger ........ A-30
ARTICLE VIII MISCELLANEOUS .............................................. A-30
8.1 Termination ...................................................... A-30
8.2 Expense Reimbursement. ........................................... A-31
8.3 Non-Survival of Representations, Warranties and Agreements ....... A-32
8.4 Waiver and Amendment ............................................. A-32
</TABLE>
A-3
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<TABLE>
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8.5 Entire Agreement ................................................. A-32
8.6 Applicable Law ................................................... A-32
8.7 Certain Definitions; Headlines ................................... A-32
8.8 Notices .......................................................... A-33
8.9 Counterparts ..................................................... A-34
8.10 Parties in Interest; Assignment ................................. A-34
8.11 Severability .................................................... A-34
</TABLE>
A-4
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of July
20, 1998 ("Agreement"), is made by and among SUNTRUST BANKS, INC., a Georgia
corporation ("SunTrust"), CRESTAR FINANCIAL CORPORATION, a Virginia corporation
("Crestar") and SMR CORPORATION (VA.), a Virginia corporation and a wholly
owned subsidiary of SunTrust ("Sub").
WHEREAS, SunTrust and Crestar have each determined that it is in the best
interests of their respective shareholders for Sub to merge with and into
Crestar upon the terms and subject to the conditions set forth in this
Agreement (the "Merger"), so that Crestar will continue as the surviving
corporation of the Merger and will become a wholly owned subsidiary of
SunTrust;
WHEREAS, the respective Boards of Directors of SunTrust, Crestar and Sub
have approved and declared advisable the Merger, the terms and provisions of
this Agreement, the Crestar Option Agreement (as defined below) and the
SunTrust Option Agreement (as defined below) and the transactions contemplated
hereby and thereby;
WHEREAS, the respective Boards of Directors of SunTrust and Crestar have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective shareholders;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization for purposes of
Section 368 of the Code;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling-of-interests";
WHEREAS, as a condition to, and contemporaneously with, the execution of
this Agreement, the parties have entered into a stock option agreement, with
Crestar as issuer and SunTrust as grantee (the "Crestar Option Agreement") in
the form attached hereto as EXHIBIT A; and
WHEREAS, as a condition to, and contemporaneously with, the execution of
this Agreement, the parties have entered into a stock option agreement, with
SunTrust as issuer and Crestar as grantee (the "SunTrust Option Agreement") in
the form attached hereto as EXHIBIT B.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.2), Sub will be merged with and into
Crestar (the "Merger") in accordance with the applicable provisions of the
Virginia Stock Corporation Act ("VSCA") and the separate corporate existence of
Sub will thereupon cease.
SunTrust may at any time in its discretion change the method of effecting
the combination of Sub with Crestar (including, without limitation, the
provisions of this Article I) if and to the extent it deems such change to be
desirable, including, without limitation, to provide for a merger of Crestar
with or into SunTrust; PROVIDED, HOWEVER, that no such change shall (A) alter
or change the amount or kind of consideration to be issued to holders of shares
of common stock, par value $5.00 per share, of Crestar ("Crestar Common Stock")
as provided for in this Agreement, (B) adversely affect the tax treatment of
Crestar or Crestar's shareholders as a result of the Merger or (C) materially
impede or delay consummation of the transactions contemplated by this
Agreement.
1.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver of
all conditions to the Merger, Sub and Crestar (the "Constituent Corporations")
shall cause articles of merger complying with the requirements of the VSCA to
be filed with the State Corporation Commission of the Commonwealth of Virginia
("Virginia Articles of Merger"). The Merger will become effective upon the
filing of the Virginia Articles of Merger, or such later time as shall be
specified in such filing ("Effective Time").
1.3 EFFECT OF MERGER. The Merger will have the effects specified in the
VSCA. Without limiting the generality of the foregoing, Crestar will be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation")
A-5
<PAGE>
and will continue to be governed by the laws of the State of Virginia, and the
separate corporate existence of Crestar and all of its rights, privileges,
powers and franchises, public as well as private, and all its debts,
liabilities and duties as a corporation organized under the VSCA, will continue
unaffected by the Merger.
1.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws of Crestar in effect immediately prior to the Effective Time shall
be the Articles of Incorporation and Bylaws of the Surviving Corporation, until
amended in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS.
(a) The directors and officers of Crestar immediately prior to the
Effective Time will be the directors and officers, respectively, of the
Surviving Corporation, from and after the Effective Time, until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the terms of the
Surviving Corporation's Articles of Incorporation and Bylaws and the VSCA.
(b) As of the Effective Time, in accordance with the Bylaws of SunTrust,
the Board of Directors of SunTrust shall increase its size to such number as is
necessary to create three vacancies and shall elect three non-employee Crestar
directors to fill such vacancies (the "Crestar Directors"). The identity of the
non-employee Crestar Directors shall be mutually agreed upon by Crestar and
SunTrust prior to the Effective Time. Each non-employee Crestar Director so
agreed upon shall be placed in a separate class on SunTrust's Board of
Directors. In addition to the Crestar Directors, the Board of Directors of
SunTrust shall increase its size to such number as is necessary to create a
vacancy in order to elect Richard G. Tilghman to the Board of Directors of
SunTrust.
1.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
to (i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Crestar, or (ii) otherwise carry out the purposes of
this Agreement, Crestar and its officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such deeds, assignments or assurances in law or any
other acts as are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of Crestar or (ii)
otherwise carry out the purposes of this Agreement, Crestar and its officers
and directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such deeds,
assignments or assurances in law and to all acts necessary or proper to vest,
perfect or confirm title to and possession of such rights, properties or assets
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving Corporation are
authorized in the name of Crestar or otherwise to take any and all such action.
1.7 TAX CONSEQUENCES; ACCOUNTING TREATMENT. It is intended that the Merger
shall (i) constitute a reorganization within the meaning of Section 368(a) of
the Code and that this Agreement shall constitute a "plan of reorganization"
for the purposes of Section 368 of the Code, and (ii) be accounted for as a
"pooling of interests" under generally accepted accounting principles.
ARTICLE II
CONVERSION OF SHARES
2.1 CONVERSION OF SHARES. Subject to Section 2.3, at the Effective Time:
(a) each share of Crestar Common Stock issued and outstanding immediately
prior to the Effective Time, including each attached right issued pursuant to
the Rights Agreement between Crestar and Mellon Bank, NA, as Rights Agent,
dated as of June 23, 1989 (the "Crestar Rights Agreement"), other than shares
of Crestar Common Stock owned by SunTrust or any direct or indirect
wholly-owned subsidiary of SunTrust (except for any such shares of Crestar
Common Stock held in trust accounts, managed accounts or in any similar manner
as trustee or in a fiduciary capacity ("Trust Account Shares") or shares held
in respect of a debt previously contracted ("DPC Shares")), will be canceled,
retired and converted into 0.96 (the "Conversion Ratio") shares of common
stock, par value $1.00 per share, of SunTrust ("SunTrust Common Stock"). The
number of shares of SunTrust Common Stock that each share of Crestar Common
Stock will be converted into is sometimes referred to herein as the "Merger
Consideration";
(b) each then-outstanding share of Crestar Common Stock owned by SunTrust
or any direct or indirect wholly-owned subsidiary of SunTrust (except for any
shares that are Trust Account Shares or DPC Shares) will be canceled and
retired; and
A-6
<PAGE>
(c) each share of capital stock of Sub that is issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $5.00 per share,
of the Surviving Corporation.
2.2 ASSUMPTION OF EMPLOYEE AND DIRECTOR STOCK OPTIONS.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder of an option, each option granted by Crestar to
purchase shares of Crestar Common Stock (any such option to purchase shares of
Crestar Common Stock being referred to herein as a "Crestar Option") that is
outstanding and unexercised, whether vested or unvested, immediately prior
thereto (excluding any such option the holder of which is then entitled to
receive cash or stock in satisfaction thereof under the terms of such option)
shall be assumed by SunTrust and converted into an option (each, a "New
Option") to purchase such number of shares of SunTrust Common Stock at an
exercise price determined as provided below (and otherwise having the same
duration and other terms as the original Crestar Option pursuant to the Crestar
1993 Stock Incentive Plan, the Crestar 1981 Stock Option Plan, the
Crestar/Loyola Stock Option Plan (for former Loyola Bancorp directors and
officers), the Crestar/Citizens Stock Option Plan (including prior 1988 and
1986 Citizens Stock Option Plan for former officer and directors), and the
Crestar/American National Stock Option Plan (including three prior American
National stock option plans for employees and outside directors) (the "Crestar
Option Plans")):
(i) the number of shares of SunTrust Common Stock to be subject to the
New Option shall be equal to (x) the number of shares of Crestar Common
Stock purchasable upon exercise of the original Crestar Option, multiplied
by (y) the Conversion Ratio (rounded to the nearest whole share); and
(ii) the exercise price per share of SunTrust Common Stock under the New
Option shall be equal to (x) the exercise price per share of Crestar Common
Stock under the original Crestar Option, divided by (y) the Conversion
Ratio (rounded to the nearest whole cent).
With respect to any Crestar Options that are "incentive stock options" (as
defined in Section 422 of the Code) or which are described in Section 423 of
the Code, the foregoing assumption and conversion shall be effected in a manner
consistent with the requirements of Section 424(a) of the Code.
(b) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder of a Performance Share awarded by Crestar pursuant to
that certain Performance Award Agreement dated October 27, 1995 between Crestar
and Richard G. Tilghman (the "Performance Share Award") that is outstanding
immediately prior to the Effective Time, the Performance Shares underlying such
Performance Share Award shall be converted into Performance Shares of SunTrust
("New Performance Shares") on the same terms as are in effect on the date
hereof, adjusted such that the number of shares of SunTrust Common Stock to be
subject to the New Performance Share Award shall be equal to (x) the number of
shares of Crestar Common Stock subject to such Performance Share Award,
multiplied by (y) the Conversion Ratio (rounded to the nearest whole share).
(c) On or before the Effective Time, SunTrust shall file a registration
statement with the Securities and Exchange Commission (the "Commission")
registering a number of shares of SunTrust Common Stock necessary to fulfill
SunTrust's obligations under this Section 2.2. Such registration statement
shall be kept effective (and the current status of the prospectus required
thereby shall be maintained) for at least as long as New Options, remain
outstanding. Prior to the Effective Time, SunTrust shall reserve for issuance
the number of shares of SunTrust Common Stock necessary to satisfy SunTrust's
obligations under this Section 2.2.
2.3 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, SunTrust shall designate SunTrust Bank,
Atlanta, to act as exchange agent (the "Exchange Agent") in connection with the
Merger pursuant to an exchange agent agreement providing for, among other
things, the matters set forth in this Section 2.3. At or prior to the Effective
Time, SunTrust shall deposit, or shall cause to be deposited, with the Exchange
Agent, for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, certificates representing the shares of
SunTrust Common Stock, and the cash in lieu of fractional shares (such cash and
certificates for shares of SunTrust Common Stock, together with any dividends
or distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued in exchange for outstanding shares of Crestar
Common Stock in accordance with the terms of this Article II. Except as set
forth herein, from and after the Effective Time each holder of a certificate
that immediately prior to the Effective Time represented outstanding shares of
Crestar Common Stock ("Certificate") shall be entitled to receive in exchange
therefor, upon surrender thereof to the Exchange Agent, the Merger
Consideration for each share of Crestar Common Stock so represented by the
Certificate surrendered by such holder thereof. The certificates
A-7
<PAGE>
representing shares of SunTrust Common Stock which constitute the Merger
Consideration shall be properly issued and countersigned and executed and
authenticated, as appropriate.
(b) Promptly after the Effective Time, SunTrust shall cause the Exchange
Agent to mail to each record holder of a Certificate a notice and letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificate shall pass, only upon proper delivery of the
Certificate to the Exchange Agent) advising such holder of the effectiveness of
the Merger and the procedures to be used in effecting the surrender of the
Certificate in exchange for Merger Consideration. Crestar shall have the right
to review both the letter of transmittal and the instructions prior to the
Effective Time and provide reasonable comments thereon. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and such
other documents as may reasonably be requested, the Exchange Agent shall
promptly deliver to the person entitled thereto (x) a certificate representing
that number of whole shares of SunTrust Common Stock to which such holder of
Crestar Common Stock shall have become entitled pursuant to the provisions of
this Article II and (y) a check representing the amount of cash in lieu of
fractional shares, if any, which such holder has the right to receive in
respect of the Certificate surrendered by such holder thereof, and such
Certificate shall forthwith be canceled.
(c) If delivery of all or part of the Merger Consideration is to be made
to a person other than the person in whose name a surrendered Certificate is
registered, it shall be a condition to such delivery or exchange that the
Certificate surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such delivery or
exchange shall have paid any transfer and other taxes required by reason of
such delivery or exchange in a name other than that of the registered holder of
the Certificate surrendered or shall have established to the reasonable
satisfaction of the Exchange Agent that such tax either has been paid or is not
payable.
(d) Subject to Section 2.3(e), until surrendered and exchanged in
accordance with this Section 2.3, each Certificate shall, after the Effective
Time, represent solely the right to receive the Merger Consideration,
multiplied by the number of shares of Crestar Common Stock evidenced by such
Certificate, together with any dividends or other distributions as provided in
Sections 2.3(e) and 2.3(f), and shall have no other rights. From and after the
Effective Time, SunTrust and Surviving Corporation shall be entitled to treat
such Certificates that have not yet been surrendered for exchange as evidencing
the ownership of the aggregate Merger Consideration into which the shares of
Crestar Common Stock represented by such Certificates may be converted,
notwithstanding any failure to surrender such Certificates. One hundred eighty
(180) days following the Effective Time, the Exchange Agent shall deliver to
the Surviving Corporation any shares of SunTrust Common Stock and funds
(including any interest received with respect thereto) which SunTrust has made
available to the Exchange Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to SunTrust
(subject to abandoned property, escheat or other similar laws) with respect to
the shares of SunTrust Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions thereon deliverable or payable upon due
surrender of their Certificates. Neither Exchange Agent nor any party hereto
shall be liable to any holder of shares of Crestar Common Stock for any Merger
Consideration (or dividends, distributions or interest with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) Whenever a dividend or other distribution is declared by SunTrust on
the SunTrust 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, provided that no dividends
or other distributions declared or made with respect to SunTrust Common Stock
shall be paid to the holder of any unsurrendered Certificate with respect to
the share of SunTrust Common Stock represented thereby until the holder of such
Certificate shall surrender such Certificate in accordance with this Article
II. The Surviving Corporation shall pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Crestar on Crestar Common Stock in accordance with the
terms of this Agreement on or prior to the Effective Time and which remain
unpaid at the Effective Time.
(f) If any Certificate shall have been lost, stolen or destroyed, the
Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
certificate, upon the making of an affidavit of that fact by the holder thereof
in form satisfactory to the Exchange Agent, the Merger Consideration, as may be
required pursuant to this Agreement; provided, however, that the Exchange Agent
may, in its sole discretion and as a condition precedent to the delivery of the
Merger Consideration to which the holder of such certificate is entitled as a
result of the Merger, require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Crestar, SunTrust or the Exchange Agent or
any other party with respect to the certificate alleged to have been lost,
stolen or destroyed.
(g) Holders of unsurrendered Certificates will not be entitled to vote at
any meeting of SunTrust shareholders.
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(h) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of SunTrust Common Stock
shall be issued upon the surrender for exchange of a Certificate or
Certificates. No dividends or distributions of SunTrust shall be payable on or
with respect to any fractional share and any such fractional share interest
will not entitle the owner thereof to vote or to any rights of shareholders of
SunTrust. In lieu of any such fractional shares, holders of Certificates
otherwise entitled to fractional shares shall be entitled to receive promptly
from the Exchange Agent a cash payment in an amount equal to the fraction of
such share of SunTrust Common Stock to which such holder would otherwise be
entitled multiplied by the Market Price (as defined in Section 8.7).
2.4 CLOSING OF CRESTAR'S TRANSFER BOOKS. Immediately after the Effective
Time, the stock transfer books of Crestar shall be closed. In the event of a
transfer of ownership of Crestar Common Stock which is not registered in the
transfer records of Crestar, the Merger Consideration to be distributed
pursuant to this Agreement may be delivered to a transferee, if a Certificate
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by payment of any applicable stock
transfer taxes. SunTrust and the Exchange Agent shall be entitled to rely upon
the stock transfer books of Crestar to establish the identity of those persons
entitled to receive the Merger Consideration specified in this Agreement for
their shares of Crestar Common Stock, which books shall be conclusive with
respect to the ownership of such shares. In the event of a dispute with respect
to the ownership of any such shares, the Surviving Corporation and the Exchange
Agent shall be entitled to deposit any Merger Consideration represented thereby
in escrow with an independent party and thereafter be relieved with respect to
any claims to such Merger Consideration.
2.5 CHANGES IN SUNTRUST COMMON STOCK. If between the date of this
Agreement and the Effective Time, the shares of SunTrust Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or if a stock
dividend thereon shall be declared with a record date within said period, the
Merger Consideration shall be adjusted accordingly.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUNTRUST
SunTrust hereby represents and warrants to Crestar that:
3.1 CORPORATE ORGANIZATION. Each of SunTrust and Sub is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
the nature of the business conducted by it makes such qualification necessary,
except for such jurisdictions in which the failure to be so qualified would not
have a Material Adverse Effect. SunTrust is registered as a bank holding
Crestar under the Bank Holding Crestar Act of 1956, as amended (the "BHCA").
SunTrust has the requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as it is now
being conducted. SunTrust has heretofore made available to Crestar true and
complete copies of its articles of incorporation and bylaws.
3.2 AUTHORITY. Each of SunTrust and Sub has the requisite corporate power
and authority to execute and deliver this Agreement and, except for any
required approval of SunTrust's shareholders, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
approved by the Board of Directors of SunTrust and Sub and no other corporate
proceedings on the part of SunTrust or Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated, subject only to
approval by the shareholders of SunTrust as described in Section 5.12(b) of
this Agreement. This Agreement has been duly executed and delivered by, and
constitutes the valid and binding obligation of, each of SunTrust and Sub
enforceable against each of them in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other 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 proceedings
may be brought.
3.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of
SunTrust consists of 500,000,000 shares of SunTrust Common Stock and 50,000,000
shares of SunTrust preferred stock. As of the close of business on July 17,
1998, (i) 213,108,057 shares of SunTrust Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable, (ii) no shares of
preferred stock were issued and outstanding and (iii) 4,247,953 shares of
SunTrust Common Stock were held in SunTrust's treasury. As of the date hereof,
except as set forth in this Section 3.3, pursuant to the exercise of employee
stock options under SunTrust's various stock option plans in effect, pursuant
to the SunTrust Option Agreement, pursuant to SunTrust's dividend reinvestment
plan and pursuant to stock grants made pursuant to SunTrust's various stock
plans, there are no other shares of capital stock of SunTrust authorized,
issued or outstanding and there are no outstanding
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subscriptions, options, warrants, rights, convertible securities or any other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of SunTrust obligating SunTrust to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of SunTrust or obligating SunTrust to grant, extend or enter into
any subscription, option, warrant, right, convertible security or other similar
agreement or commitment. As of the date hereof, except as provided in this
Agreement, there are no voting trusts or other agreements or understandings to
which SunTrust or any SunTrust subsidiary is a party with respect to the voting
of the capital stock of SunTrust. All of the shares of SunTrust Common Stock
issuable in exchange for Crestar Common Stock at the Effective Time in
accordance with this Agreement and all of the shares of SunTrust Common Stock
issuable upon exercise of New Options will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and will not be subject to
preemptive rights.
3.4 SUBSIDIARIES. The name and state of incorporation of each significant
subsidiary (as defined in Section 8.7) of SunTrust (collectively, the
"Significant Subsidiaries") is set forth in the SunTrust SEC Reports (as
defined in Section 3.7). Each of the Significant Subsidiaries is a bank or a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation or organization and is
duly qualified to do business as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the nature of the business
conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a Material
Adverse Effect. Each of the Significant Subsidiaries has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its businesses as they are now being conducted. All
outstanding shares of capital stock of each of the Significant Subsidiaries are
owned by SunTrust or another of SunTrust's subsidiaries and are validly issued,
fully paid and (except pursuant to 12 USC Section 55 in the case of each
national bank subsidiary and applicable state law in the case of each state
bank subsidiary) nonassessable, are not subject to preemptive rights and are
owned free and clear of all liens, claims and encumbrances. There are no
outstanding subscriptions, options, warrants, rights, convertible securities or
any other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any Significant Subsidiary
obligating any of the Significant Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold additional shares of its capital stock or
obligating any of the Significant Subsidiaries to grant, extend or enter into
any subscription, option, warrant, right, convertible security or other similar
agreement or commitment.
3.5 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT, ETC. None
of the information with respect to SunTrust or any of SunTrust's subsidiaries
provided by SunTrust for inclusion in (i) the Registration Statement to be
filed with the Commission by SunTrust on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), for the purpose of registering the
shares of SunTrust Common Stock to be issued in the Merger (the "Registration
Statement") and (ii) any joint proxy statement of Crestar and SunTrust ("Proxy
Statement") required to be mailed to Crestar's shareholders and SunTrust's
shareholders in connection with the Merger will, in the case of the Proxy
Statement or any amendments or supplements thereto, at the time of the mailing
of the Proxy Statement and any amendments or supplements thereto, and at the
time of the Crestar Meeting and the SunTrust Meeting (each as hereinafter
defined), or, in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder.
3.6 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by SunTrust and Sub nor the consummation by SunTrust
and Sub of the transactions contemplated hereby will (a) conflict with or
result in any breach of any provision of its articles of incorporation or
bylaws, (b) violate, conflict with, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien or other encumbrance upon any of the
properties or assets of SunTrust or any of SunTrust's subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which SunTrust or any of SunTrust's subsidiaries is a party or to which they or
any of their respective properties or assets are subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other encumbrances, which, either individually or in the
aggregate, will not have a Material Adverse Effect, (c) constitute or result in
a violation of any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which it
or any of its subsidiaries is subject, except for the consents, approvals and
notices set forth below and except for such violations which, either
individually or in the aggregate, will not have a Material Adverse Effect, or
(d) require any consent, approval, authorization or permit of or from, or
filing with or notification to, any court, governmental authority or other
regulatory or
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administrative agency or commission, including, but not limited to,
authorities, agencies and the staff's thereof regulating financial
institutions, domestic (whether federal, state, municipal or local) or foreign
("Governmental Entity"), except (i) pursuant to the Exchange Act and the
Securities Act, (ii) filing the Virginia Articles of Merger, (iii) filings
required under the securities or blue sky laws of the various states, (iv) the
applications, notices, reports and other filings required to be made in
connection with the approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Crestar Act of
1956, as amended (the "BHC Act"), (v) the approvals of any other Governmental
Entities pursuant to state banking laws and regulations (the "Regulatory
Approvals"), (vi) filings and approvals pursuant to any applicable state
takeover law, (vii) pursuant to the rules of the New York Stock Exchange or
(viii) consents, approvals, authorizations, permits, filings or notifications
which, if not obtained or made will not, individually or in the aggregate, have
a Material Adverse Effect.
3.7 REPORTS. Since January 1, 1996, SunTrust and each of SunTrust's
subsidiaries have timely filed all reports, registrations and statements,
together with any required amendments thereto, that they were required to file
with (i) the Commission under Section 12(b), 12(g), 13(a) or 14(a) of the
Exchange Act, including, but not limited to Forms 10-K, Forms 10-Q and proxy
statements ("SunTrust SEC Reports"), (ii) the Federal Reserve Board, (iii) any
other Governmental Entities, and (iv) any self-regulatory organizations
("SROs") and all other reports and statements required to be filed by SunTrust
or SunTrust's subsidiaries, including, without limitation, any report or
statement required to be filed pursuant to laws, rules or regulations of the
United States, any state, or any Governmental Entity, and have paid all fees
and assessments due and payable in connection therewith, except where the
failure to file such report, registration or statement, or to pay such fees and
assessments, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. SunTrust has made available to
Crestar true and complete copies of each of SunTrust's annual reports on Form
10-K for the years 1996 and 1997 and its quarterly report on Form 10-Q for
March 31, 1998. As of their respective dates, the SunTrust SEC Reports complied
with the requirements of the Commission and did not contain any untrue
statement of a material fact or omit to state 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.
3.8 FINANCIAL STATEMENTS. The audited consolidated financial statements of
SunTrust included in SunTrust's annual report on Form 10-K as filed with the
Commission for the year ended December 31, 1997, and the unaudited interim
financial statements of SunTrust as of and for the three months ended March 31,
1998 included in a quarterly report on Form 10-Q as filed with the Commission,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial position of
SunTrust and SunTrust's subsidiaries as of the dates thereof and the results of
their operations and cash flows for the periods then ended, subject, in the
case of the unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein, and are derived
from the books and records of SunTrust and SunTrust's subsidiaries, which are
complete and accurate in all material respects and have been maintained in all
material respects in accordance with applicable laws and regulations. There
exist no liabilities of SunTrust and its consolidated subsidiaries, contingent
or otherwise of a type required to be disclosed in accordance with generally
accepted accounting practices, except as disclosed in the SunTrust SEC Reports
and except for liabilities which, either individually or in the aggregate,
would not have a Material Adverse Effect. SunTrust's reserve for possible loan
losses as shown in its Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998 was adequate, within the meaning of generally accepted
accounting principles and safe and sound banking practices.
3.9 TAXES. SunTrust will promptly make available to Crestar, upon request
by Crestar, true and correct copies of the federal, state and local income tax
returns, and state and local property and sales tax returns and any other tax
returns filed by SunTrust and any of SunTrust's subsidiaries for each of the
fiscal years that remains open, as of the date hereof, for examination or
assessment of tax. SunTrust and each SunTrust subsidiary have prepared in good
faith and duly and timely filed, or caused to be duly and timely filed, all
federal, state, local and foreign income, estimated tax, withholding tax,
franchise, sales and other tax returns or reports required to be filed by them
on or before the date hereof, except to the extent that all such failures to
file, taken together, would not have a Material Adverse Effect. Except as
otherwise would not have, either individually or in the aggregate, a Material
Adverse Effect, SunTrust and each of its subsidiaries have paid, or have made
adequate provision or set up an adequate accrual or reserve for the payment of,
all taxes, shown or required to be shown to be owing on all such returns or
reports, together with any interest, additions or penalties related to any such
taxes or to any open taxable year or period.
3.10 EMPLOYEE PLANS. All employee benefit, welfare, bonus, deferred
compensation, pension, profit sharing, stock option, employee stock ownership,
consulting, severance, or fringe benefit plans, formal or informal, written or
oral, and all trust agreements related thereto, relating to any present or
former directors, officers or employees of SunTrust or its subsidiaries
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("SunTrust Employee Plans") have been maintained, operated, and administered in
all material respects in compliance with their terms and currently comply, and
have at all relevant times complied, in all material respects with the
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code, and any other applicable laws. With respect to
each SunTrust Employee Plan which is a pension plan (as defined in Section 3(2)
of ERISA): (a) each pension plan as amended (and any trust relating thereto)
intended to be a qualified plan under Section 401(a) of the Code either: (i)
has been determined by the Internal Revenue Service ("IRS") to be so qualified,
(ii) is the subject of a pending application for such determination that was
timely filed, or (iii) will be submitted for such a determination prior to end
of the "remedial amendment period" within the meaning of Section 401(b) of the
Code, (b) there is no accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, and no waiver of
the minimum funding standards of such sections has been requested from the IRS,
(c) neither SunTrust nor any of its subsidiaries has provided, or is required
to provide, security to any pension plan pursuant to Section 401(a)(29) of the
Code, (d) the fair market value of the assets of each defined benefit plan (as
defined in Section 3(35) of ERISA) exceeds the value of the "benefit
liabilities" within the meaning of Section 4001(a)(16) of ERISA under such
defined benefit plan as of the end of the most recent plan year thereof ending
prior to the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such defined benefit plan as of
the date hereof, (e) no reportable event described in Section 4043 of ERISA has
occurred for which the 30 day reporting requirement has not been waived has
occurred, (f) no defined benefit plan has been terminated, nor has the Pension
Benefit Guaranty Corporation ("PBGC") instituted proceedings to terminate a
defined benefit plan or to appoint a trustee or administrator of a defined
benefit plan, and no circumstances exist that constitute grounds under Section
4042(a)(2) of ERISA entitling the PBGC to institute any such proceedings and
(g) no pension plan is a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a "multiple employer plan" within the meaning of Section
413(c) of the Code. Neither SunTrust nor any of its subsidiaries has incurred
any liability to the PBGC with respect to any "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by any
entity considered one employer with it under Section 4001 of ERISA or Section
414 of the Code, except for premiums all of which have been paid when due.
Neither SunTrust nor any of its subsidiaries has incurred any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA. Neither SunTrust nor any of its subsidiaries has an obligation to
institute any Employee Plan or any such other arrangement, agreement or plan.
With respect to any insurance policy that heretofore has or currently does
provide funding for benefits under any SunTrust Employee Plan, (A) there is no
liability on the part of SunTrust or any of its subsidiaries in the nature of a
retroactive or retrospective rate adjustment, loss sharing arrangement, or
other actual or contingent liability, nor would there be any such liability if
such insurance policy was terminated, and (B) no insurance Crestar issuing such
policy is in receivership, conservatorship, liquidation or similar proceeding
and, to the knowledge of SunTrust, no such proceeding with respect to any such
insurer is imminent. Neither the execution of this Agreement, nor the
consummation of the transactions contemplated thereby will (A) constitute a
stated triggering event under any SunTrust Employee Plan that will result in
any payment (whether of severance pay or otherwise) becoming due from SunTrust
or any of its subsidiaries to any present or former officer, employee,
director, shareholder, consultant or dependent of any of the foregoing or (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any present or former officer, employee, director,
shareholder, consultant, or dependent of any of the foregoing. Neither SunTrust
nor any of its subsidiaries has any obligations for retiree health and life
benefits under any SunTrust Employee Plan. There are no restrictions on the
rights of SunTrust or its subsidiaries to amend or terminate any such SunTrust
Employee Plan without incurring any liability thereunder.
3.11 MATERIAL CONTRACTS. Neither SunTrust nor any of SunTrust's
subsidiaries is in default under any contract or agreement required to be filed
as an exhibit to a Form 10-K filed by SunTrust with the Commission as of the
date of this Agreement, which default is reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect, and there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default. Neither SunTrust nor any of SunTrust's
subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is SunTrust or any of SunTrust's subsidiaries the
subject of a proceeding asserting that it or any such subsidiary has committed
an unfair labor practice or seeking to compel it or such subsidiary to bargain
with any labor organization as to wages and conditions of employment, nor is
there any strike, work stoppage or other labor dispute involving it or any of
its subsidiaries pending or threatened.
3.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby,
since December 31, 1997, SunTrust and its subsidiaries have conducted their
business only in the ordinary course or as disclosed in any SunTrust SEC
Reports, and there has not been (1) any change or event having a Material
Adverse Effect on SunTrust, (2) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock, or property) with
respect to any of SunTrust's capital stock, other than regular quarterly cash
dividends on the SunTrust Common Stock, (3) any split, combination or
reclassification of any of SunTrust's capital stock or any
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substitution for shares of SunTrust's capital stock, except for issuances of
SunTrust's Common Stock upon the exercise of options awarded prior to the date
hereof in accordance with the SunTrust Stock Option Plans, or (4) except
insofar as may have been disclosed in the SunTrust SEC Reports or required by a
change in generally accepted accounting principles, any change in accounting
methods, principles or practices by SunTrust materially affecting its assets,
liabilities or business.
3.13 LITIGATION. Except as disclosed in the SunTrust SEC Reports filed by
SunTrust with the Commission prior to the date of this Agreement, there is no
suit, action or proceeding pending, or, to the knowledge of SunTrust,
threatened, against or affecting SunTrust or any of SunTrust's subsidiaries
which, either individually or in the aggregate, would be reasonably expected to
result in a Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator, outstanding
against SunTrust or any of SunTrust's subsidiaries having, or which, insofar as
reasonably can be foreseen, in the future would have, either individually or in
the aggregate, a Material Adverse Effect.
3.14 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in the SunTrust
SEC Reports filed by SunTrust with the Commission prior to the date of this
Agreement, the businesses of SunTrust and of SunTrust's subsidiaries are not
being conducted in violation of any law, ordinance, regulation, judgment,
order, decree, license or permit of any Governmental Entity (including, without
limitation, in the case of SunTrust's subsidiaries that are banks, all
statutes, rules and regulations pertaining to the conduct of the banking
business and the exercise of trust powers), except for violations which
individually or in the aggregate do not, and, insofar as reasonably can be
foreseen, in the future will not, have a Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to SunTrust or
any of SunTrust's subsidiaries is pending or, to the knowledge of SunTrust,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same in each case other than those the outcome of which will not, either
individually or in the aggregate, have a Material Adverse Effect.
3.15 AGREEMENTS WITH BANK REGULATORS, ETC. Neither SunTrust nor any
SunTrust subsidiary is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter, board resolution or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any Governmental Entity
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies or its
management, nor has SunTrust been advised by any Governmental Entity that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission. Neither SunTrust nor any of SunTrust's subsidiaries is required by
Section 32 of the Federal Deposit Insurance Act ("FDIA") to give prior notice
to a Federal banking agency of the proposed addition of an individual to its
board of directors or the employment of an individual as a senior executive
officer. SunTrust knows of no reason why the regulatory approvals referred to
in Section 3.6(d) should not be obtained.
3.16 SUNTRUST OWNERSHIP OF STOCK. As of the date of this Agreement, other
than with respect to the Crestar Option Agreement, neither SunTrust nor any of
its affiliates or associates (i) beneficially owns, directly or indirectly, or
(ii) are parties to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, Crestar Common Stock (other than
Trust Account Shares), which in the aggregate, represent 5% or more of the
outstanding shares of Crestar Common Stock.
3.17 ACCOUNTING TREATMENT; TAX TREATMENT. SunTrust knows of no reason,
assuming the reissuance of SunTrust Common Stock contemplated by Section 5.21
occurs, with respect to SunTrust and its affiliates that would prevent SunTrust
from accounting for the business combination to be effected by the Merger as a
"pooling-of-interests." As of the date hereof, SunTrust is aware of no reason
why the Merger will fail to qualify as a reorganization under Section 368(a) of
the Code.
3.18 FEES. Except for the fees paid and payable to Lehman Brothers Inc.,
neither SunTrust nor any of SunTrust's subsidiaries has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
3.19 SUNTRUST ACTION. The Board of Directors of SunTrust (at a meeting
duly called, constituted and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and in the best interests
of SunTrust and its shareholders, (b) approved this Agreement and the
transactions contemplated by this Agreement and (c) directed that the Merger be
submitted for consideration by SunTrust's shareholders at the SunTrust Meeting.
SunTrust has taken all steps necessary to exempt (i) the execution of this
Agreement, the SunTrust Option Agreement and the Crestar Option Agreement, (ii)
the Merger and (iii) the transactions contemplated hereby and thereby from (x)
any statute of the State of Georgia that purports to limit or restrict business
combinations or the ability to acquire or to vote shares, including, without
limitation, Sections 14-2-1110 et seq. and Sections 14-2-1131 et seq. of the
Georgia Business Corporation Code, and (y) any applicable provision of
SunTrust's articles of incorporation or bylaws containing change of control or
anti-takeover provisions.
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3.20 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the total votes cast (provided that the total votes cast represent over 50% of
all securities entitled to vote) by the holders of SunTrust Common Stock is the
only vote of the holders of any class or series of SunTrust capital stock
necessary to approve this Agreement and the transactions contemplated herein.
3.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
SunTrust's Proxy Statement for its 1998 Annual Meeting of Shareholders, no
officer or director of SunTrust, or any "associate" (as such term is defined in
Rule 14a-1 under the 1934 Act) of any such officer or director, has any
material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of SunTrust or
any of its subsidiaries.
3.22 INTELLECTUAL PROPERTY.
(a) SunTrust and its subsidiaries own or have a valid license to use all
trademarks, service marks and trade names (including any registrations or
applications for registration of any of the foregoing) (collectively, the
"SunTrust Intellectual Property") necessary to carry on its business
substantially as currently conducted, except for such SunTrust Intellectual
Property the failure of which to own or validly license individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
Neither SunTrust nor any such subsidiary has received any notice of
infringement of or conflict with, and, to SunTrust's knowledge, there are no
infringements of or conflicts with, the rights of others with respect to the
use of any SunTrust Intellectual Property that individually or in the
aggregate, in either such case, would reasonably be expected to have a Material
Adverse Effect.
(b) The consummation of the Merger and the other transactions contemplated
by this Agreement will not result in the loss by SunTrust of any rights to use
computer and telecommunications software including source and object code and
documentation and any other media (including, without limitation, manuals,
journals and reference books) necessary to carry on its business substantially
as currently conducted and the loss of which would have a Material Adverse
Effect.
(c) The computer software operated by SunTrust which is material to the
conduct of its business is capable of providing or is being adapted to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores,
processes and presents such calendar dates falling on or before December 31,
1999, except as would not have a Material Adverse Effect. None of SunTrust or
any of its subsidiaries has received, or reasonably expects to receive, a "Year
2000 Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). SunTrust has disclosed to Crestar a complete and accurate copy of
SunTrust's plan for addressing the issues set forth in the statements of the
Federal Financial Institutions Examination Council, dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 1997, entitled "Safety
and Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect SunTrust and its subsidiaries. The costs of the adaptions and
compliance referred to in this Section 3.22(c) will not have a Material Adverse
Effect.
3.23 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Except as would not
reasonably be expected to have a Material Adverse Effect, all interest rate
swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of SunTrust or
for the account of a customer of SunTrust or of one of SunTrust's subsidiaries,
were entered into in the ordinary course of business and, to SunTrust's
knowledge, in accordance with prudent banking practices and applicable rules,
regulations and policies of any Governmental Entity and with counterparties
believed to be financially responsible at the time and are legal, valid and
binding obligations of SunTrust or one of its subsidiaries enforceable in
accordance with their terms (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors generally and the availability of equitable remedies), and are in
full force and effect. Except as would not reasonably be expected to have a
Material Adverse Effect, SunTrust and each of SunTrust's subsidiaries have duly
performed all of their obligations thereunder to the extent that such
obligations to perform have accrued, and, to SunTrust's knowledge, there are no
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.
3.24 INSURANCE. Except as would not reasonably be expected to have a
Material Adverse Effect, SunTrust and SunTrust's subsidiaries have in effect
insurance coverage with reputable insurers which, in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by bank holding companies and
their subsidiaries comparable in size and operations to SunTrust and SunTrust's
subsidiaries.
3.25 ENVIRONMENTAL MATTERS. For purposes of this Agreement, the following
terms shall have the indicated meanings:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, determination, judgment, decree, injunction or agreement with
any Governmental
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Entity relating to (1) the health, protection, preservation, containment or
restoration of the environment including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface soil, subsurface
soil, wetlands, plant and animal life or any other natural resource,
conservation, and/or (2) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances. The term "Environmental Law" includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, ET SEQ.; the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601(2)(D); the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ.; the
Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ.; the Federal Water
Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. Section
1251, ET SEQ.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section
9601, ET SEQ.; the Emergency Planning and Community Right to Know Act, 42
U.S.C. Section 11001, ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section
300f, ET SEQ.; and all comparable state and local laws, ordinances, rules,
regulations respecting the interpretation or enforcement of same and (2) any
common law (including without limitation common law that may impose strict
liability) that may impose liability for injuries or damages due to the release
of any Hazardous Substance.
"Hazardous Substance" means (i) any hazardous wastes, toxic chemicals,
materials, substances or wastes as defined by or for the purposes of any
Environmental Law; (ii) any "oil", as defined by the Clean Water Act, as
amended from time to time, and regulations promulgated thereunder (including
crude oil or any fraction thereof and any petroleum products or derivatives
thereof); (iii) any substance, the presence of which is prohibited, regulated
or controlled by any applicable federal, state or local laws, regulations,
statutes or ordinances now in force or hereafter enacted relating to waste
disposal or environmental protection with respect to the exposure to, or
manufacture, possession, presence, use, generation, storage, transportation,
treatment, release, emission, discharge, disposal, abatement, cleanup, removal,
remediation or handling of any such substance; (iv) any asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBs") in the form
of electrical equipment, fluorescent light fixtures with ballasts, cooling oils
or any other form, urea formaldehyde or atmospheric radon; (v) any solid,
liquid, gaseous or thermal irritant or contaminant, such as smoke, vapor, soot,
fumes, alkalis, acids, chemicals, pesticides, herbicides, sewage, industrial
sludge or other similar wastes; (vi) industrial, nuclear or medical
by-products; (vii) any lead based paint or coating and (viii) any underground
storage tank(s).
"Loan Portfolio Properties, Trust Properties and Other Properties" means
any real property, interest in real property, improvements, appurtenances,
rights and personal property attendant thereto, which is owned, leased as a
landlord or a tenant, licensed as a licensor or licensee, managed or operated
or upon which is held a mortgage, deed of trust, deed to secure debt or other
security interest by SunTrust or Crestar, as the case may be, or any of their
subsidiaries whether directly, as an agent, as trustee or other fiduciary or
otherwise.
(i) Neither SunTrust nor any of its subsidiaries is in violation of or has
any liability, absolute or contingent, in connection with or under any
Environmental Law, except any such violations or liabilities which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (ii) none of the Loan Portfolio Properties, Trust Properties
and Other Properties of SunTrust or its subsidiaries is in violation of or has
any liability, absolute or contingent, under any Environmental Law, except any
such violations or liabilities which, individually or in the aggregate would
not have a Material Adverse Effect; and (iii) there are no actions, suits,
demands, notices, claims, investigations or proceedings pending or threatened
relating to any Loan Portfolio Properties, Trust Properties and Other
Properties including, without limitation any notices, demand letters or
requests for information from any federal or state environmental agency
relating to any such liability under or violation of Environmental Law, which
would impose a liability upon SunTrust or its subsidiaries pursuant to any
Environmental Law, except such as would not, individually or in the aggregate,
have a Material Adverse Effect.
3.26 RESCISSION OF REPURCHASES. All share repurchase programs previously
authorized by the Board of Directors of SunTrust, except to the extent that
SunTrust is advised by the Commission that such purchases would not adversely
affect the ability of SunTrust and Crestar to account for the Merger as a
"pooling of interests" for accounting purposes, have been revoked by resolution
duly adopted on or prior to the date hereof.
3.27 DISCLOSURE LETTER. Prior to the execution and delivery of this
Agreement, SunTrust has delivered to Crestar a schedule (the "SunTrust
Disclosure Letter") setting forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to SunTrust's
representations or warranties contained in Article III or to SunTrust's
covenants contained in Article V; PROVIDED, HOWEVER, that notwithstanding
anything in this Agreement to the contrary the mere inclusion of an item in the
SunTrust Disclosure Letter as an exception to a representation or warranty
shall not be deemed an admission by a party that such item represents a
material exception or material fact, event or circumstance or that such item
has had or would have a Material Adverse Effect with respect to SunTrust.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CRESTAR
Crestar hereby represents and warrants to SunTrust that:
4.1 CORPORATE ORGANIZATION. Crestar is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia and is duly qualified to do business as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the nature of the
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a Material
Adverse Effect. Crestar is registered as a bank holding Crestar under the BHCA.
Crestar has the requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Crestar has heretofore made available to SunTrust true and
complete copies of its articles of incorporation and bylaws.
4.2 AUTHORITY. Crestar has the requisite corporate power and authority to
execute and deliver this Agreement and, except for any required approval of
Crestar's shareholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly approved by the Board of
Directors of Crestar and no other corporate proceedings on the part of Crestar
are necessary to authorize this Agreement or to consummate the transactions so
contemplated, subject only to approval by the shareholders of Crestar as
described in Section 5.12(c) of this Agreement. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding obligation of
Crestar, enforceable against Crestar in accordance with its terms, except as
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other 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 proceedings
may be brought.
4.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of
Crestar consists of 200,000,000 shares of Crestar Common Stock and 2,000,000
shares of Crestar preferred stock. As of the close of business on July 17,
1998, (i) 112,252,068 shares of Crestar Common Stock were duly authorized,
validly issued and outstanding, fully paid and nonassessable and (ii) no shares
of preferred stock were issued or outstanding. As of the date of this Agreement
except as set forth in this Section 4.3, pursuant to the Crestar Option Plans,
pursuant to the Crestar Option Agreement, pursuant to the Crestar Rights
Agreement, pursuant to the Crestar Dividend Reinvestment Plan, pursuant to the
Crestar Thrift and Profit Sharing Plan or as set forth in the Crestar
Disclosure Letter, there are no shares of capital stock of Crestar authorized,
issued or outstanding and there are no outstanding subscriptions, options,
warrants, rights, convertible securities or any other agreements or commitments
of any character relating to the issued or unissued capital stock or other
securities of Crestar obligating Crestar to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of Crestar or
obligating Crestar to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
Except as set forth in the Crestar Disclosure Letter, there are no voting
trusts or other agreements or understandings to which Crestar or any of
Crestar's subsidiaries is a party with respect to the voting of the capital
stock of Crestar. As of the date of this Agreement, there were outstanding
under the Crestar Option Plans options to purchase 3,264,247 shares of Crestar
Common Stock, which Crestar stock options had a weighted average exercise price
of $27.60 and for which adequate shares of Crestar Common Stock have been
reserved for issuance under the Crestar Option Plans.
4.4 SUBSIDIARIES. The Crestar Disclosure Letter sets forth the name and
state of incorporation of each subsidiary of Crestar (collectively, the
"Crestar Subsidiaries"). Each of the Crestar Subsidiaries is a bank, a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation or
organization and is duly qualified to do business as a foreign corporation or
foreign business entity in each jurisdiction in which its ownership or lease of
property or the nature of the business conducted by it makes such qualification
necessary, except for such jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect. Each of the Crestar
Subsidiaries has the requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its businesses as they are
now being conducted. Except as set forth in the Crestar Disclosure Letter, all
outstanding shares of capital stock of each Crestar Subsidiary is owned by
Crestar or another Crestar Subsidiary and are validly issued, fully paid and
(except pursuant to 12 USC Section 55 in the case of each national bank
subsidiary and applicable state law in the case of each state bank subsidiary)
nonassessable, are not subject to preemptive rights and are owned free and
clear of all liens, claims and encumbrances. There are no outstanding
subscriptions, options, warrants, rights, convertible securities or any other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any Crestar Subsidiary obligating any
Crestar Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold additional shares of its capital stock or obligating any Crestar
Subsidiary to grant, extend or enter into any subscription, option, warrant,
right, convertible security or other similar agreement or commitment.
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4.5 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENT, ETC. None
of the information with respect to Crestar or any Crestar Subsidiary provided
by Crestar for inclusion in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments
or supplements thereto, and at the time of the Crestar Meeting and the SunTrust
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
4.6 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
Crestar Disclosure Letter, neither the execution and delivery of this Agreement
by Crestar nor the consummation by Crestar of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of its
certificate of incorporation or bylaws, (b) violate, conflict with, constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien or other
encumbrance upon any of the properties or assets of Crestar or any Crestar
Subsidiary under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Crestar or any Crestar Subsidiary is a party
or to which they or any of their respective properties or assets are subject,
except for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or other encumbrances, which, either
individually or in the aggregate, will not have a Material Adverse Effect, (c)
constitute or result in a violation of any law, rule, ordinance or regulation
or judgment, decree, order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject, except for the
consents, approvals and notices set forth below and except for such violations
which, either individually or in the aggregate, will not have a Material
Adverse Effect, or (d) require any consent, approval, authorization or permit
of or from, or filing with or notification to, any Governmental Entity, except
(i) pursuant to the Exchange Act and the Securities Act, (ii) filing the
Virginia Articles of Merger, (iii) filings required under the securities or
blue sky laws of the various states, (iv) the applications, notices, reports
and other filings required to be made in connection with the approval of the
Federal Reserve Board under the BHC Act, (v) the Regulatory Approvals, (vi)
filings and approvals pursuant to any applicable state takeover law, (vii)
pursuant to the rules of the New York Stock Exchange or (viii) consents,
approvals, authorizations, permits, filings or notifications which, if not
obtained or made will not, individually or in the aggregate, have a Material
Adverse Effect.
4.7 REPORTS. Since January 1, 1996, Crestar and each Crestar Subsidiary
have timely filed all reports, registrations and statements, together with any
required amendments thereto, that they were required to file with (i) the
Commission under Section 12(b), 12(g), 13(a) or 14(a) of the Exchange Act,
including, but not limited to Forms 10-K, Forms 10-Q and proxy statements
("Crestar SEC Reports"), (ii) the Federal Reserve Board, (iii) any other
Governmental Entity, and (iv) any SRO, and all other reports and statements
required to be filed by Crestar and the Crestar Subsidiaries, including,
without limitation, any report or statement required to be filed pursuant to
laws, rules or regulations of the United States, any state, or any Governmental
Entity, and have paid all fees and assessments due and payable in connection
therewith, except where the failure to file such report, registration or
statement, or to pay such fees and assessments, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Crestar has made available to SunTrust true and complete copies of each of
Crestar's annual reports on Form 10-K for the years 1996 and 1997 and its
quarterly report on Form 10-Q for March 31, 1998. As of their respective dates,
the Crestar SEC Reports complied with the requirements of the Commission and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstance under which they were made, not
misleading.
4.8 FINANCIAL STATEMENTS. The audited consolidated financial statements of
Crestar included in Crestar's annual report on Form 10-K as filed with the
Commission for the year ended December 31, 1997, and the unaudited interim
financial statements of Crestar as of and for the three months ended March 31,
1998 included in a quarterly report on Form 10-Q as filed with the Commission,
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial position of
Crestar and the Crestar Subsidiaries as of the dates thereof and the results of
their operations and cash flows for the periods then ended, subject, in the
case of the unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein, and are derived
from the books and records of Crestar and the Crestar Subsidiaries, which are
complete and accurate in all material respects and have been maintained in all
material respects in accordance with applicable laws and regulations. There
exist no liabilities of Crestar and its consolidated subsidiaries, contingent
or otherwise of a type required to be disclosed in accordance with generally
accepted accounting practices, except as disclosed in the Crestar SEC Reports
and except for liabilities which, either individually or in the aggregate,
would not have a Material Adverse Effect. Crestar's reserve for possible loan
losses as shown in its Quarterly Report on Form 10-Q
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for the fiscal quarter ended March 31, 1998 was adequate, within the meaning of
generally accepted accounting principles and safe and sound banking practices.
4.9 TAXES. Crestar will promptly make available to SunTrust, upon request
by SunTrust, true and correct copies of the federal, state and local income tax
returns, and state and local property and sales tax returns filed by Crestar
and the Crestar Subsidiaries for each of the fiscal years that remains open, as
of the date hereof, for examination or assessment of tax. Crestar and each
Crestar Subsidiary have prepared in good faith and duly and timely filed, or
caused to be duly and timely filed, all federal, state, local and foreign
income, franchise, sales and other tax returns or reports required to be filed
by them on or before the date hereof, except to the extent that all failures to
file, taken together, would not have a Material Adverse Effect. Except as
otherwise would not have, either individually or in the aggregate, a Material
Adverse Effect, Crestar and each Crestar Subsidiary have paid, or have made
adequate provision or set up an adequate accrual or reserve for the payment of,
all taxes shown or required to be shown to be owing on all such returns or
reports, together with any interest, additions or penalties related to any such
taxes or to any open taxable year or period. Except as set forth in the Crestar
Disclosure Letter, neither Crestar nor any Crestar Subsidiary has consented to
extend the statute of limitations with respect to the assessment of any tax.
Except as set forth in the Crestar Disclosure Letter, neither Crestar nor any
Crestar Subsidiary is a party to any action or proceeding, nor to the best of
Crestar's knowledge is any such action or proceeding threatened, by any
Governmental Entity in connection with the determination, assessment or
collection of any material amount of taxes, and no deficiency notices or
reports have been received by Crestar or any Crestar Subsidiary in respect of
any material deficiencies for any tax, assessment, or government charge.
4.10 EMPLOYEE PLANS. All employee benefit, welfare, bonus, deferred
compensation, pension, profit sharing, stock option, employee stock ownership,
consulting, severance, or fringe benefit plans, formal or informal, written or
oral and all trust agreements related thereto, relating to any present or
former directors, officers or employees of Crestar or the Crestar Subsidiaries
("Crestar Employee Plans") are listed in the Crestar Disclosure Letter. Except
as set forth in the Crestar Disclosure Letter, all of the Crestar Employee
Plans have been maintained, operated, and administered in all material respects
in compliance with their terms and currently comply, and have at all relevant
times complied, in all material respects with the applicable requirements of
ERISA, the Code, and any other applicable laws. Except as set forth in the
Crestar Disclosure Letter, with respect to each Crestar Employee Plan which is
a pension plan (as defined in Section 3(2) of ERISA): (a) each pension plan as
amended (and any trust relating thereto) intended to be a qualified plan under
Section 401(a) of the Code either has been determined by the IRS to be so
qualified or is the subject of a pending application for such determination
that was timely filed, (b) there is no accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, and no waiver of the minimum funding standards of such sections has
been requested from the IRS, (c) neither Crestar nor any of the Crestar
Subsidiaries has provided, or is required to provide, security to any pension
plan pursuant to Section 401(a)(29) of the Code, (d) the fair market value of
the assets of each defined benefit plan (as defined in Section 3(35) of ERISA)
exceeds the value of the "benefit liabilities" within the meaning of Section
4001(a)(16) of ERISA under such defined benefit plan as of the end of the most
recent plan year thereof ending prior to the date hereof, calculated on the
basis of the actuarial assumptions used in the most recent actuarial valuation
for such defined benefit plan as of the date hereof, (e) no reportable event
described in Section 4043 of ERISA has occurred for which the 30 day reporting
requirement has not been waived has occurred, (f) no defined benefit plan has
been terminated, nor has the PBGC instituted proceedings to terminate a defined
benefit plan or to appoint a trustee or administrator of a defined benefit
plan, and no circumstances exist that constitute grounds under Section
4042(a)(2) of ERISA entitling the PBGC to institute any such proceedings and
(g) no pension plan is a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a "multiple employer plan" within the meaning of Section
413(c) of the Code. Neither Crestar nor any Crestar Subsidiary has incurred any
liability to the PBGC with respect to any "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by any
entity considered one employer with it under Section 4001 of ERISA or Section
414 of the Code, except for premiums all of which have been paid when due.
Neither Crestar nor any of its subsidiaries has incurred any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA. Neither Crestar nor any of its subsidiaries has an obligation to
institute any Employee Plan or any such other arrangement, agreement or plan.
Except as set forth in the Crestar Disclosure Letter, there are no outstanding
grants of restricted stock with respect to Crestar Common Stock and no
outstanding stock appreciation rights with respect to Crestar Common Stock.
With respect to any insurance policy that heretofore has or currently does
provide funding for benefits under any Crestar Employee Plan, (A) there is no
liability on the part of Crestar or any of its subsidiaries in the nature of a
retroactive or retrospective rate adjustment, loss sharing arrangement, or
other actual or contingent liability, nor would there be any such liability if
such insurance policy was terminated, and (B) no insurance Crestar issuing such
policy is in receivership, conservatorship, liquidation or similar proceeding
and, to the knowledge of Crestar, no such proceeding with respect to any such
insurer is imminent. Except as set forth in the Crestar Disclosure Letter,
neither the execution of this Agreement, nor the consummation of the
transactions
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contemplated thereby will (A) constitute a stated triggering event under any
Crestar Employee Plan that will result in any payment (whether of severance pay
or otherwise) becoming due from Crestar or any of its subsidiaries to any
present or former officer, employee, director, shareholder, consultant or
dependent of any of the foregoing or (B) accelerate the time of payment or
vesting, or increase the amount of compensation due to any present or former
officer, employee, director, shareholder, consultant, or dependent of any of
the foregoing. The material terms of the Executive Agreements (as defined
below) are reflected in the Crestar SEC Reports, as amended in the manner
reflected in the Crestar Disclosure Letter. Neither Crestar nor any Crestar
Subsidiary has any obligations for retiree health and life benefits under any
Crestar Employee Plan, except as set forth in the Crestar Disclosure Letter.
Except as set forth in the Crestar Disclosure Letter, there are no restrictions
on the rights of Crestar or the Crestar Subsidiaries to amend or terminate any
such Crestar Employee Plan without incurring any liability thereunder.
4.11 MATERIAL CONTRACTS. Except as set forth in the Crestar Disclosure
Letter or disclosed in the Crestar SEC Reports, neither Crestar nor any Crestar
Subsidiary is a party to, or is bound or affected by, or receives benefits
under (a) any agreements providing for aggregate payments to any director,
officer, employee or consultant of Crestar or any Crestar Subsidiary in any
calendar year in excess of $50,000, (b) any material agreement, indenture or
other instrument relating to the borrowing of money by Crestar or any Crestar
Subsidiary or the guarantee by Crestar or any Crestar Subsidiary of any such
obligation (other than trade payables and instruments relating to transactions
entered into in the ordinary course of business) or (c) any other contract or
agreement or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by Crestar with the Commission as of the date of this
Agreement (collectively, the "Crestar Contracts"). Neither Crestar nor any
Crestar Subsidiary is in default under any Crestar Contract, which default is
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect, and there has not occurred any event that with the lapse of
time or the giving of notice or both would constitute such a default. Except as
set forth in the Crestar Disclosure Letter, neither Crestar nor any Crestar
Subsidiary is a party to, or is bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization, nor is Crestar or any Crestar Subsidiary the subject of a
proceeding asserting that it or any Crestar Subsidiary has committed an unfair
labor practice or seeking to compel it or such subsidiary to bargain with any
labor organization as to wages and conditions of employment, nor is there any
strike, work stoppage or other labor dispute involving it or any Crestar
Subsidiary pending or threatened.
4.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby,
since December 31, 1997, Crestar and its subsidiaries have conducted their
business only in the ordinary course or as disclosed in any Crestar SEC
Reports, and there has not been (1) any change or event having a Material
Adverse Effect on Crestar, (2) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock, or property) with
respect to any of Crestar's capital stock, other than regular quarterly cash
dividends on Crestar Common Stock, (3) any split, combination or
reclassification of any of Crestar's capital stock or any substitution for
shares of Crestar's capital stock, except for issuances of Crestar's Common
Stock upon the exercise of options awarded prior to the date hereof in
accordance with the Crestar Option Plans, (4) except as set forth in the
Crestar Disclosure Letter (A) any granting by Crestar or any of its
subsidiaries to any current or former director, executive officer or other key
employee of Crestar or its subsidiaries of any increase in compensation, bonus
or other benefits, except for normal increases in the ordinary course of
business or as was required under any employment agreements in effect as of the
date of the most recent audited financial statements included in the Crestar
SEC Reports filed and publicly available prior to the date of this Agreement,
(B) any granting by Crestar or any of its subsidiaries to any such current or
former director, executive officer or key employee of any increase in severance
or termination pay, except in the ordinary course of business or pursuant to
the Crestar Stock Option Plans, or (C) any entry by Crestar or any of its
subsidiaries into, or any amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any such
current or former director, executive officer or key employee, other than in
the ordinary course of business, (5) except insofar as may have been disclosed
in the Crestar SEC Reports or required by a change in generally accepted
accounting principles, any change in accounting methods, principles or
practices by Crestar materially affecting its assets, liabilities or business
or (6) except insofar as may have been disclosed in the Crestar SEC Reports,
any tax election that individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
4.13 LITIGATION. Except as disclosed in the Crestar SEC Reports filed by
Crestar with the Commission prior to the date of this Agreement or as set forth
in the Crestar Disclosure Letter, there is no suit, action or proceeding
pending, or, to the knowledge of Crestar, threatened, against or affecting
Crestar or any Crestar Subsidiary which, either individually or in the
aggregate, would be reasonably expected to have a Material Adverse Effect, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator, outstanding against Crestar or any Crestar Subsidiary
having, or which, insofar as reasonably can be foreseen, in the future would
have, either individually or in the aggregate, a Material Adverse Effect.
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4.14 COMPLIANCE WITH LAWS AND ORDERS. Except as set forth in the Crestar
Disclosure Letter or as disclosed in the Crestar SEC Reports filed by Crestar
with the Commission prior to the date of this Agreement, the businesses of
Crestar and the Crestar Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, judgment, order, decree, license or permit of
any Governmental Entity (including, without limitation, in the case of Crestar
Subsidiaries that are banks, all statutes, rules and regulations pertaining to
the conduct of the banking business and the exercise of trust powers), except
for violations which individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect. Except as set forth in the Crestar Disclosure Letter, no investigation
or review by any Governmental Entity with respect to Crestar or any Crestar
Subsidiary is pending or, to the knowledge of Crestar threatened, nor has any
Governmental Entity indicated an intention to conduct the same in each case
other than those the outcome of which will not, either individually or in the
aggregate, have a Material Adverse Effect.
4.15 AGREEMENTS WITH BANK REGULATORS, ETC. Neither Crestar nor any Crestar
Subsidiary is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, any Governmental Entity which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies or its management, nor has
Crestar been advised by any Governmental Entity that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
Neither Crestar nor any Crestar Subsidiary is required by Section 32 of the
FDIA to give prior notice to a Federal banking agency of the proposed addition
of an individual to its board of directors or the employment of an individual
as a senior or executive officer. Crestar knows of no reason why the regulatory
approvals referred to in Section 4.6(d) should not be obtained.
4.16 CRESTAR OWNERSHIP OF STOCK. As of the date of this Agreement, other
than with respect to the SunTrust Option Agreement, neither Crestar nor any of
its affiliates or associates (i) beneficially owns, directly or indirectly, or
(ii) are parties to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, SunTrust Common Stock (other
than held in trust accounts, managed accounts or in any similar manner as
trustee or in a fiduciary capacity), which in the aggregate, represent 5% or
more of the outstanding shares of SunTrust Common Stock.
4.17 ACCOUNTING TREATMENT; TAX TREATMENT. Crestar knows of no reason, with
respect to Crestar and its affiliates, that would prevent SunTrust from
accounting for the business combination to be effected by the Merger as a
"pooling-of-interests." As of the date hereof, Crestar is aware of no reason
why the Merger will fail to qualify as a reorganization under Section 368(a) of
the Code.
4.18 FEES. Except for fees paid and payable to Morgan Stanley, Discover &
Co., neither Crestar nor any Crestar Subsidiary has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated by this Agreement.
4.19 CRESTAR ACTION. The Board of Directors of Crestar (at a meeting duly
called, constituted and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and in the best interests
of Crestar and its shareholders, (b) approved this Agreement and the
transactions contemplated hereby, including the Merger, and (c) directed that
the Merger be submitted for consideration by Crestar's shareholders at the
Crestar Meeting. Crestar has taken all steps necessary to exempt (i) the
execution of this Agreement, the SunTrust Option Agreement and the Crestar
Option Agreement, (ii) the Merger and (iii) the transactions contemplated
hereby and thereby from, (x) any statute of the Commonwealth of Virginia that
purports to limit or restrict business combinations or the ability to acquire
or to vote shares, including, without limitation, Sections 13.1-725 ET SEQ. and
Sections 13.1-728.1 ET SEQ. of the VSCA, (y) the Crestar Rights Agreement and
(z) any applicable provision of Crestar's articles of incorporation or bylaws
containing change of control or anti-takeover provisions. Crestar has (A) duly
entered into an appropriate amendment to the Crestar Rights Agreement and (B)
taken all other action necessary or appropriate so that the execution of this
Agreement, and the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) do not and will not result in the
ability of any person to exercise any rights under the Crestar Rights Agreement
or enable or require the rights to separate from the shares of Crestar Common
Stock to which they are attached or to be triggered or become exercisable.
4.20 VOTE REQUIRED. The affirmative vote of holders of more than
two-thirds of the outstanding shares of Crestar Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Crestar
capital stock necessary to approve this Agreement and the transactions
contemplated by the Agreement.
4.21 MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
Crestar's Proxy Statement for its 1998 Annual Meeting of Shareholders or as set
forth in the Crestar Disclosure Letter, no officer or director of Crestar, or
any "associate" (as such
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term is defined in Rule 14a-1 under the Exchange Act) of any such officer or
director, has any material interest in any material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
Crestar or any Crestar Subsidiary.
4.22 INTELLECTUAL PROPERTY.
(a) Crestar and its subsidiaries own or have a valid license to use all
trademarks, service marks and trade names (including any registrations or
applications for registration of any of the foregoing) (collectively, the
"Crestar Intellectual Property") necessary to carry on its business
substantially as currently conducted, except for such Crestar Intellectual
Property the failure of which to own or validly license individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
Neither Crestar nor any such subsidiary has received any notice of infringement
of or conflict with, and, to Crestar's knowledge, there are no infringements of
or conflicts with, the rights of others with respect to the use of any Crestar
Intellectual Property that individually or in the aggregate, in either such
case, would reasonably be expected to have a Material Adverse Effect.
(b) The consummation of the Merger and the other transactions contemplated
by this Agreement will not result in the loss by Crestar of any rights to use
computer and telecommunications software including source and object code and
documentation and any other media (including, without limitation, manuals,
journals and reference books) necessary to carry on its business substantially
as currently conducted and the loss of which would have a Material Adverse
Effect.
(c) The computer software operated by Crestar which is material to the
conduct of its business is capable of providing or is being adapted to provide
uninterrupted millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores,
processes and presents such calendar dates falling on or before December 31,
1999, except as would not have a Material Adverse Effect. None of Crestar or
any of its subsidiaries has received, or reasonably expects to receive, a "Year
2000 Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). Crestar has disclosed to SunTrust a complete and accurate copy of
Crestar's plan for addressing the issues set forth in the statements of the
Federal Financial Institutions Examination Council, dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 1997, entitled "Safety
and Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect Crestar and its subsidiaries. The costs of the adaptions and
compliance referred to in this Section 4.22(c) will not have a Material Adverse
Effect.
4.23 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Except as would not
reasonably be expected to have a Material Adverse Effect, all interest rate
swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of Crestar or for
the account of a customer of Crestar or of one of Crestar's subsidiaries, were
entered into in the ordinary course of business and, to Crestar's knowledge, in
accordance with prudent banking practices and applicable rules, regulations and
policies of any Governmental Entity and with counterparties believed to be
financially responsible at the time and are legal, valid and binding
obligations of Crestar or one of its subsidiaries enforceable in accordance
with their terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and are in full force
and effect. Except as would not reasonably be expected to have a Material
Adverse Effect, Crestar and each of Crestar's subsidiaries have duly performed
all of their obligations thereunder to the extent that such obligations to
perform have accrued, and, to Crestar's knowledge, there are no breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
4.24 INSURANCE. Except as would not reasonably be expected to have a
Material Adverse Effect, Crestar and Crestar's subsidiaries have in effect
insurance coverage with reputable insurers which, in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by bank holding companies and
their subsidiaries comparable in size and operations to Crestar and Crestar's
subsidiaries.
4.25 ENVIRONMENTAL MATTERS. (a) Neither Crestar nor any of its
subsidiaries is in violation of or has any liability, absolute or contingent,
in connection with or under any Environmental Law, except any such violations
or liabilities which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; (b) none of the Loan Portfolio
Properties, Trust Properties and Other Properties of Crestar or its
subsidiaries is in violation of or has any liability, absolute or contingent,
under any Environmental Law, except any such violations or liabilities which,
individually or in the aggregate would not have a Material Adverse Effect; and
(c) to the best of Crestar's knowledge, there are no actions, suits, demands,
notices, claims, investigations or proceedings pending or threatened relating
to any Loan Portfolio Properties, Trust Properties and Other Properties
including, without limitation any notices, demand letters or requests for
information from any federal or state environmental agency relating to any such
liability under or violation of Environmental Law, which would impose
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a liability upon Crestar or its subsidiaries pursuant to any Environmental Law,
except such as would not, individually or in the aggregate, have a Material
Adverse Effect.
4.26 RESCISSION OF REPURCHASES. All share repurchase programs previously
authorized by the Board of Directors of Crestar, except to the extent that
Crestar is advised by the Commission that such purchases would not adversely
affect the ability of SunTrust and Crestar to account for the Merger as a
"pooling of interests" for accounting purposes, have been revoked by resolution
duly adopted on or prior to the date hereof.
4.27 DISCLOSURE LETTER. Prior to the execution and delivery of this
Agreement, Crestar has delivered to SunTrust a schedule (the "Crestar
Disclosure Letter") setting forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to Crestar's
representations or warranties contained in Article IV or to Crestar's covenants
contained in Article V; PROVIDED, HOWEVER, that notwithstanding anything in
this Agreement to the contrary the mere inclusion of an item in the Crestar
Disclosure Letter as an exception to a representation or warranty shall not be
deemed an admission by a party that such item represents a material exception
or material fact, event or circumstance or that such item has had or would have
a Material Adverse Effect (as defined herein) with respect to Crestar.
ARTICLE V
COVENANTS
5.1 ACQUISITION PROPOSALS. Crestar shall not, nor shall it permit any
Crestar Subsidiary to, nor shall it authorize or permit any officer, director
or employee of, or any investment banker, attorney or other advisor or
representative or agent of, Crestar or any Crestar Subsidiary to, directly or
indirectly, (i) solicit, initiate, encourage or facilitate the submission of
any proposal relating to or involving an Acquisition Transaction (as
hereinafter defined) or (ii) enter into, encourage or facilitate any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to encourage or facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, or constitute an effort to facilitate, any proposal
relating to or involving an Acquisition Transaction; PROVIDED, HOWEVER, that
nothing contained in this Section 5.1 shall prohibit the Board of Directors of
Crestar from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited, written BONA
FIDE proposal regarding an Acquisition Transaction if, and only to the extent
that (A) the Board of Directors of Crestar concludes in good faith, after
consultation with and based upon the advice of outside counsel, that it is
required to furnish such information or enter into such discussions or
negotiations in order to comply with its fiduciary duties to shareholders under
applicable law, (B) prior to taking such action, Crestar receives from such
person or entity an executed confidentiality agreement and an executed
standstill agreement, each in reasonably customary form (provided that such
agreement is at least as limiting as any such agreement between SunTrust and
Crestar), and (C) the Board of Directors of Crestar concludes in good faith
that the proposal regarding the Acquisition Transaction contains an offer of
consideration that is superior to the consideration set forth herein.
Notwithstanding anything in this Agreement to the contrary, Crestar shall (i)
immediately advise SunTrust orally and in writing of (A) the receipt by it (or
any of the other entities or persons referred to above) of any proposal
regarding an Acquisition Transaction, or any inquiry which could reasonably be
expected to lead to any such proposal, (B) the material terms and conditions of
such proposal or inquiry (whether written or oral), and (C) the identity of the
person making any such proposal or inquiry, (ii) keep SunTrust fully informed
of the status and details of any such proposal or inquiry, and (iii) negotiate
in good faith with SunTrust to make such adjustments in the terms and
conditions of this Agreement as would enable Crestar to proceed with the
transactions contemplated herein on such adjusted terms. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the first sentence of this Section 5.1 by any officer or director of Crestar or
any Crestar Subsidiary or any investment banker, attorney or other advisor,
representative or agent of Crestar or any Crestar Subsidiary, acting on behalf
of or at the request of the Board of Directors of Crestar, shall be deemed to
be a breach of this Section 5.1 by Crestar. Crestar shall immediately terminate
and cease any and all discussions, negotiations and/or contacts with any other
person or entity which may exist relating to or involving an Acquisition
Transaction. For purposes of this Agreement, "Acquisition Transaction" means
any merger, consolidation, share exchange, joint venture, business combination
or similar transaction involving Crestar or any Crestar Subsidiary, or any
purchase of all or any material portion of the assets of Crestar or any Crestar
Subsidiary.
5.2 INTERIM OPERATIONS OF CRESTAR. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by this
Agreement or the Crestar Option Agreement, set forth in the Crestar Disclosure
Letter or as otherwise approved expressly in writing by SunTrust:
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(a) Crestar shall, and shall cause each of the Crestar Subsidiaries to,
conduct their respective businesses only in, and not take any action except in,
the ordinary course of business consistent with past practice. Crestar shall
use all commercially reasonable efforts to preserve intact the business
organization of Crestar and each of the Crestar Subsidiaries, to keep available
the services of its and their present key officers and employees and to
preserve the goodwill of those having business relationships with Crestar or
the Crestar Subsidiaries. Other than in the ordinary course of business
consistent with past practice, Crestar shall not (i) incur any indebtedness for
borrowed money (it being understood and agreed that incurrence of indebtedness
in the ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of federal funds, borrowings
pursuant to existing lines of credit, sales of certificates of deposit and
entering into repurchase agreements), (ii) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity, or (iii) make any loan or
advance.
(b) Crestar shall not and shall not permit any Crestar Subsidiary to make
any change or amendment to their respective articles of incorporation or bylaws
(or comparable governing instruments) in a manner that would materially and
adversely affect either party's ability to consummate the Merger or the
economic benefits of the Merger to either party.
(c) Crestar shall not, and shall not permit any Crestar Subsidiary to,
issue or sell any shares of capital stock or any other securities of any of
them (other than (i) pursuant to outstanding exercisable stock options granted
pursuant to one of the Crestar Option Plans or pursuant to outstanding
exercisable stock awards reflected in the Crestar Disclosure Letter, (ii)
pursuant to the Crestar Rights Agreement, (iii) pursuant to the terms of 401(k)
plans of Crestar and any Crestar Subsidiary in effect as of the date hereof, or
(iv) pursuant to the Crestar Dividend Reinvestment Plan) or issue any
securities convertible into or exchangeable for, or options, warrants to
purchase, scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or enter into any contract, understanding or
arrangement with respect to the issuance of, any shares of capital stock or any
other securities of any of them (other than pursuant to the Crestar Option
Plans) or enter into any arrangement or contract with respect to the purchase
or voting of shares of their capital stock, or adjust, split, combine or
reclassify any of their capital stock or other securities or make any other
changes in their capital structures. Neither Crestar nor any Crestar
Subsidiaries shall grant any additional stock options, except for stock option
grants made in accordance with existing elections by participants in the
Crestar Option Plans.
(d) Crestar shall not, and shall not permit any Crestar Subsidiary to,
declare, set aside, pay or make any dividend or other distribution or payment
(whether in cash, stock or property) with respect to, or purchase or redeem,
any shares of the capital stock of any of them other than (a) regular quarterly
cash dividends in an amount not to exceed $0.33 per share of Crestar Common
Stock payable on the regular historical payment dates and (b) dividends paid by
any Crestar Subsidiary to Crestar or another Crestar Subsidiary with respect to
its capital stock between the date hereof and the Effective Time.
(e) Crestar shall not, and shall not permit any Crestar Subsidiary to,
acquire or agree to acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any business or
any person.
(f) Crestar shall not, and shall not permit any Crestar Subsidiary to,
sell, lease, license, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of a material amount of its properties or assets (including
securitizations), other than in the ordinary course of business consistent with
past practice.
(g) Except as set forth in the Crestar Disclosure Letter or as otherwise
provided in this Agreement, Crestar shall not, and shall not permit any Crestar
Subsidiary to, adopt or amend (except as required by law or other contractual
obligations existing on the date hereof) any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreements, trusts,
plans, funds or other arrangements for the benefit or welfare of any director,
officer or employee, or (except for normal merit increases in the ordinary
course of business consistent with past practice) increase the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any existing plan, agreement or arrangement (including, without
limitation, the granting of stock options or stock appreciation rights) or take
any action or grant any benefit not required under the terms of any existing
agreements, trusts, plans, funds or other such arrangements or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
PROVIDED, HOWEVER, that nothing contained herein shall prohibit Crestar from
conclusively determining the earned amount of any bonuses under Crestar's bonus
plans in respect of calendar year 1998, based on Crestar's annualized
performance through the Effective Time (determined without regard to the costs
incurred in connection with the transactions contemplated by this Agreement),
such bonuses to be paid in accordance with Crestar's past practice. SunTrust
hereby agrees that any Crestar Employee (as hereinafter defined) who is
involuntarily terminated from employment following the Effective Time shall be
paid any bonus payable in respect of 1998 in accordance with the preceding
sentence. Crestar shall appoint one individual at its discretion and one
individual at SunTrust's direction to serve jointly, as the Administrator of
Crestar's Executive Severance Plan.
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(h) At the request of SunTrust, Crestar will modify and change its loan,
litigation, real estate valuation, asset, liquidity and investment portfolio
policies and practices (including loan classifications and level of reserves)
prior to the Effective Time so as to be consistent on a mutually satisfactory
basis with those of SunTrust and generally accepted accounting principles, at
the earlier of (i) such time within seven days prior to the Effective Time as
SunTrust acknowledges in writing that all conditions to its obligations to
consummate the Merger set forth in Sections 7.1 and 7.3 have been waived or
satisfied if the Merger were to be consummated on such date or (ii) immediately
prior to the Effective Time.
(i) Crestar shall not, and shall not permit any Crestar Subsidiary to,
authorize, or commit or agree to take, any of the actions set forth in clauses
(a) through (g) of this Section 5.2.
5.3 INTERIM OPERATIONS OF SUNTRUST. During the period from the date of
this Agreement to the Effective Time, without the prior written consent of
Crestar, SunTrust will not declare or pay any extraordinary or special dividend
on the SunTrust Common Stock or take any action that would (a) materially delay
or adversely affect the ability of SunTrust to obtain any approvals of
Governmental Entities required to permit consummation of the Merger or (b)
materially adversely affect its ability to perform its obligations under this
Agreement or to consummate the transactions contemplated hereby.
5.4 COORDINATION OF DIVIDENDS. Subject to Section 5.16, each of SunTrust
and Crestar shall coordinate with the other regarding the declaration and
payment of dividends in respect of the SunTrust Common Stock and the Crestar
Common Stock and the record dates and payment dates relating thereto, it being
the intention of SunTrust and Crestar that any holder of SunTrust Common Stock
or Crestar Common Stock shall not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to its shares of
SunTrust Common Stock and/or shares of Crestar Common Stock, including shares
of SunTrust Common Stock that a holder receives in exchange for shares of
Crestar Common Stock pursuant to the Merger.
5.5 EMPLOYEE MATTERS.
(a) The Surviving Corporation and SunTrust shall assume, honor, maintain
and perform on and after the Effective Time, without deduction, counterclaims,
interruptions or deferment (other than withholding under applicable law), all
vested benefits of any person under all Crestar Employee Plans in accordance
with the terms of such plans. Without limiting the generality of the foregoing,
as of the Effective Time, SunTrust shall assume and honor and shall cause the
Surviving Corporation to assume and to honor in accordance with their terms all
employment, severance and other compensation agreements and arrangements
existing prior to the execution of this Agreement which are between Crestar or
any Crestar Subsidiary and any director, officer or employee thereof (each an
"Executive Agreement") except as otherwise expressly agreed between SunTrust
and such person. SunTrust and Crestar hereby agree that the execution of this
Agreement or the consummation of the Merger shall constitute a "Change in
Control" for purposes of any Executive Agreement and all other Crestar Employee
Plans, as is provided for under the terms of such plan.
(b) For purposes of all employee benefit plans, programs or arrangements
maintained or contributed to by SunTrust or the Surviving Corporation, SunTrust
shall credit and cause the Surviving Corporation to credit employees of Crestar
and the Crestar Subsidiaries as of the Effective Time ("Crestar Employees")
with all service with Crestar or any Crestar Subsidiary for purposes of
eligibility and vesting as if such service, and compensation therefrom, had
been performed for SunTrust. From and after the Effective Time, SunTrust shall,
and shall cause the Surviving Corporation to, cause any and all pre-existing
condition limitations under any health plans to be waived with respect to
Crestar Employees and their eligible dependents to the extent that such
conditions were covered by Crestar's health plans. To the extent that any
Crestar Employee and their eligible dependents have, before the Effective Time,
satisfied in whole or in part any annual deductible or paid any out of pocket
or co-payment expenses under the applicable plan of Crestar, SunTrust shall
credit such individual therefor under the corresponding plan of SunTrust or
Surviving Corporation in which such individual participates after the Effective
Time. A Crestar Employee who is eligible for a specific period of paid vacation
at the Effective Time under Crestar's standard vacation policy shall remain
eligible for that period of paid vacation after the Effective Time.
(c) Except as otherwise provided herein or in the Crestar Disclosure
Letter, SunTrust shall, and shall cause the Surviving Corporation to maintain,
the Crestar Employee Plans at least through December 31, 1998. SunTrust for
1999 will provide the Crestar Employees with benefits under SunTrust's employee
benefit plans or Crestar's employee benefit plans, or a combination of such
plans, which will (in SunTrust's judgment) be no less favorable in the
aggregate to Crestar Employees than the benefits provided at the Effective Time
to Covered Employees generally. Thereafter, Crestar Employees shall participate
in such employee benefit plans, or combination of plans, of SunTrust as
determined by a committee which will be formed as soon as practicable after the
date hereof by SunTrust and Crestar, which committee shall make recommendations
to the current Chief Executive Officers of SunTrust and Crestar.
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(d) SunTrust shall, and shall cause the Surviving Corporation to, maintain
without adverse amendment Crestar's deferred compensation plans with respect to
(A) any amounts deferred as of the date hereof and (B) amounts with respect to
which deferral elections are in place as of the date hereof and relate to
bonuses paid to or to be paid in respect of 1997 and 1998. SunTrust further
agrees to permit the deferral of any bonus amounts paid in respect of calendar
years 1997 and 1998 and to take no action with respect to amounts deferred
during such years which would prevent such amounts from becoming entitled to
the most favorable interest rates provided in such deferred compensation plans,
notwithstanding the occurrence of a Change of Control for purposes of Crestar's
various bonus and production incentive plans. SunTrust hereby agrees that any
deferral elections made prior to the date hereof by any Crestar Employee
pursuant to the deferred compensation plans shall be honored notwithstanding
(i) the involuntary termination of any such Crestar Employee's employment as of
or following the Effective Time (other than for cause) or (ii) in the case of
those Crestar Employees who are parties to an Executive Agreement, the
termination of any such Crestar Employee's employment for Good Reason (as
defined in such Executive Agreement) as of or following the Effective Time.
(e) SunTrust acknowledges and agrees that, immediately prior to the
Effective Time, Crestar may make payment in shares of Crestar Common Stock (net
of applicable withholding taxes) in settlement of all awards under Crestar's
Value Share II and Value Share III plans in accordance with the terms of
Crestar's 1993 Stock Incentive Plan and any related agreements, including any
Incentive Award Agreement relating to such awards.
(f) SunTrust's obligations under the first and second sentences in Section
5.5(a) (and any related provisions of the Crestar Disclosure Letter) are
intended to be for the benefit of, and shall be enforceable by, any Crestar
Employee to which such obligations relate.
5.6 ACCESS AND INFORMATION. Upon reasonable notice, each of the parties
shall (and shall cause each of the parties' subsidiaries to) afford to the
other parties and their representatives (including, without limitation,
directors, officers and employees of the parties and their affiliates, and
counsel, accountants and other professionals retained) such access during
normal business hours throughout the period prior to the Effective Time to the
books, records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel of such party and its subsidiaries
and to such other information as any party may reasonably request; PROVIDED,
HOWEVER, that no party shall be required to provide access to any such
information if the providing of such access (i) would be reasonably likely, in
the written opinion of counsel, to result in the loss or impairment of any
privilege generally recognized under law with respect to such information or
(ii) would be precluded by any law, ordinance, regulation, judgment, order,
decree, license or permit of any Governmental Entity. The parties hereto will
use reasonable efforts to make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentences apply.
All information furnished by one party to any of the others in connection with
this Agreement or the transactions contemplated hereby shall be kept
confidential by such other party in accordance with the terms of the
Confidentiality Agreement dated July 17, 1998, between SunTrust and Crestar
(the "Confidentiality Agreement").
5.7 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. The parties hereto shall
cooperate with each other and use their commercially reasonable efforts to
promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger). Crestar and SunTrust shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all
the information relating to Crestar or SunTrust, as the case may be, and any of
their respective Subsidiaries, which appears in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. SunTrust and Crestar shall
promptly furnish each other with copies of written communications received by
SunTrust or Crestar, as the case may be, or any of their respective
Subsidiaries, affiliates or associates from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.8 STATE TAKEOVER STATUTES. Crestar shall take all reasonable steps to
(i) exempt Crestar and the Merger from the requirements of any state takeover
law by action of Crestar's Board of Directors or otherwise and (ii) upon the
request of SunTrust, assist in any challenge by SunTrust to the applicability
to the Merger of any state takeover law.
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5.9 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, SunTrust shall indemnify, defend
and hold harmless the present and former directors and officers of Crestar and
the Crestar Subsidiaries (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions or omissions
occurring at or prior to the Effective Time, which is based upon or relates to
such Indemnified Party's capacity as a director or officer, to the fullest
extent that such persons are permitted to be indemnified under the VSCA or
Crestar's Articles of Incorporation and Bylaws as in effect on the date hereof.
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 and to SunTrust; PROVIDED, HOWEVER, that (1) SunTrust shall have the right
to assume the defense thereof and upon such assumption SunTrust 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 SunTrust 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 SunTrust and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them and to SunTrust, and SunTrust
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) SunTrust shall in all cases be obligated pursuant to this Section
5.9(a) to pay for only one firm of counsel for all Indemnified Parties, and (3)
SunTrust shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld). Any
Indemnified Party wishing to claim indemnification under this Section 5.9, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify SunTrust thereof, provided that the failure to so notify shall
not affect the obligation of SunTrust under this Section 5.9 except to the
extent such failure to notify materially prejudices SunTrust. SunTrust's
obligations under this Section 5.9(a) shall continue in full force and effect
for a period of six years after the Effective Time; provided that all rights to
indemnification in respect of any claim, action, suit, proceeding or
investigation made, asserted or commenced within such six year period shall
continue until the final disposition of such claim, action, suit, proceeding or
investigation.
(b) SunTrust shall cause the persons serving as officers and directors of
Crestar immediately prior to the Effective Time to be covered for a period of
six years from the Effective Time by the directors' and officers' liability
insurance policy maintained by Crestar (provided that SunTrust may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous than such policy) with respect
to acts or omissions occurring prior to the Effective Time which were committed
by such officers and directors in their capacity as such; provided, however,
that in no event shall SunTrust be required to expend on any annual basis more
than 200% of the current amount expended by Crestar (the "Insurance Amount") to
maintain or procure insurance coverage, and further provided that if SunTrust
is unable to maintain or obtain the insurance called for by this Section
5.9(b), SunTrust shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(c) In the event SunTrust or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of SunTrust
assume the obligations set forth in this section.
(d) The provisions of this Section 5.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
5.10 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to do
promptly, or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, including using its commercially reasonable efforts to obtain all
necessary actions or non-actions, extensions, waivers, consents and approvals
from all applicable Governmental Entities, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
5.11 PUBLICITY. The initial press release announcing this Agreement shall
be a joint press release and thereafter Crestar and SunTrust shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and in making any filings
with any Governmental Entity or with any national securities exchange with
respect thereto.
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5.12 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
SHAREHOLDER'S MEETINGS.
(a) As soon as practicable following the date of this Agreement, SunTrust
and Crestar shall prepare and file with the Commission the Proxy Statement and
SunTrust shall prepare and file with the Commission the Registration Statement,
in which the Proxy Statement will be included as a prospectus. Each of Crestar
and SunTrust shall use all commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Crestar shall use all commercially reasonable
efforts to cause the Proxy Statement to be mailed to Crestar's shareholders,
and SunTrust shall use all commercially reasonable efforts to cause the Proxy
Statement to be mailed to SunTrust's shareholders, in each case as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. SunTrust shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified or to file
a general consent to service of process) required to be taken under any
applicable state securities laws in connection with the issuance of SunTrust
Common Stock in the Merger and Crestar shall furnish SunTrust all information
concerning Crestar and the holders of its capital stock and shall take any
action as SunTrust may reasonably request in connection with any such action.
If at any time prior to the Effective Time any information relating to Crestar,
or any of its affiliates, officers or directors, should be discovered by
Crestar which should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, Crestar shall
promptly notify SunTrust and Crestar shall cooperate in the filing of any
appropriate amendment or supplement describing such information with the
Commission and, to the extent required, any dissemination thereof to the
shareholders of Crestar and SunTrust.
(b) SunTrust shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "SunTrust Meeting") for the purpose of approving this
Agreement and shall, through its Board of Directors, recommend to its
shareholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby.
(c) Crestar shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Crestar Meeting") for the purpose of approving this
Agreement and the Board of Directors of Crestar shall recommend to its
shareholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby, shall use all reasonable efforts to
solicit such approval and adoption and shall not recommend or present for
shareholder consideration in any manner any other Acquisition Transaction,
tender offer or exchange offer for 20% or more of the outstanding securities of
Crestar, or a transaction contemplating the sale of any material Crestar
Subsidiary or Subsidiaries, or any material assets of Crestar or a Crestar
Subsidiary or Subsidiaries; PROVIDED, HOWEVER, that nothing in this Section
5.12(c) shall prohibit the Board of Directors of Crestar from withdrawing or
modifying in a manner adverse to SunTrust its recommendation to the
shareholders or recommending any other Acquisition Transaction or any other
such transaction described in the foregoing clause if Crestar is not in breach
of, and has not breached, any of the provisions of Section 5.1, Crestar
receives an unsolicited, written BONA FIDE proposal regarding an Acquisition
Transaction, and as a result of such proposal (A) the Board of Directors of
Crestar concludes in good faith that it is required to take such action, but
only after consultation with outside counsel and only if such outside counsel
concludes and advises the Board that the failure to take such action would
result in a substantial risk that the Board of Directors would violate any
fiduciary duties of the Crestar Board to Crestar shareholders under applicable
law, and (B) the proposal regarding the Acquisition Transaction contains an
offer of consideration that is superior to the consideration set forth herein.
(d) Crestar and SunTrust shall use all commercially reasonable efforts to
hold the Crestar Meeting and the SunTrust Meeting on the same date and as soon
as practicable after the date hereof.
5.13 SECURITIES ACT; POOLING-OF-INTERESTS.
(a) Prior to the Effective Time, each of SunTrust and Crestar shall
identify to the other all persons who were, at the time of the SunTrust Meeting
or the Crestar Meeting, as the case may be, "affiliates" of such party as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(including at a minimum, all those persons subject to the reporting
requirements of Rule 16(a) under the Exchange Act) and for purposes of
qualifying for "pooling-of-interests" accounting treatment (the "Affiliates").
(b) Each of SunTrust and Crestar shall obtain a written agreement in the
form of EXHIBIT C and EXHIBIT D, respectively, from each person who is
identified as an Affiliate of such party pursuant to clause (a) above. Each of
SunTrust and Crestar shall deliver such written agreements to the other party
no later than 30 days prior to the Effective Time.
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5.14 STOCK EXCHANGE LISTINGS. SunTrust shall use all commercially
reasonable efforts to list on the New York Stock Exchange, upon official notice
of issuance, the SunTrust Common Stock to be issued pursuant to the Merger.
5.15 SHAREHOLDER LITIGATION. Each of Crestar and SunTrust shall give the
other the reasonable opportunity to participate in the defense of any
shareholder litigation against Crestar or SunTrust, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
5.16 POOLING-OF-INTERESTS AND TAX-FREE REORGANIZATION TREATMENT. Neither
SunTrust nor Crestar shall knowingly take or cause to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger
as a "pooling of interests" for accounting purposes or as a "reorganization"
within the meaning of Section 368 of the Code.
5.17 LETTERS OF ACCOUNTANTS.
(a) SunTrust shall use all commercially reasonable efforts to cause to be
delivered to Crestar two letters from SunTrust's independent accountants, one
dated a date within two business days before the date on which the Registration
Statement shall become effective and one dated a date within two business days
before the Closing Date, each addressed to Crestar, in form and substance
reasonably satisfactory to Crestar and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(b) SunTrust shall use all commercially reasonable efforts to cause to be
delivered to Crestar and Crestar's independent accountants two letters from
SunTrust's independent accountants addressed to Crestar and SunTrust, one dated
as of the date the Registration Statement is effective and one dated as of the
Closing Date, in each case stating that accounting for the Merger as a pooling
of interests under Opinion 16 of the Accounting Principles Board and applicable
Commission rules and regulations is appropriate if the Merger is closed and
consummated in accordance with this Agreement.
(c) Crestar shall use all commercially reasonable efforts to cause to be
delivered to SunTrust two letters from Crestar's independent accountants, one
dated a date within two business days before the date on which the Registration
Statement shall become effective and one dated a date within two business days
before the Closing Date, each addressed to SunTrust, in form and substance
reasonably satisfactory to SunTrust and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(d) Crestar shall use all commercially reasonable efforts to cause to be
delivered to SunTrust and SunTrust's independent accountants two letters from
Crestar's independent accountants addressed to SunTrust and Crestar, one dated
as of the date the Registration Statement is effective and one dated as of the
Closing Date, in each case stating that accounting for the Merger as a pooling
of interests under Opinion 16 of the Accounting Principles Board and applicable
Commission rules and regulations is appropriate if the Merger is closed and
consummated in accordance with this Agreement.
5.18 EXPENSES. Except as otherwise provided in Section 8.2, each party
shall bear all expenses incurred by it in connection with this Agreement and
the transactions contemplated hereby, except that printing expenses and
commission filing and registration fees shall be shared equally between Crestar
and SunTrust.
5.19 ADVERSE ACTION. From the date hereof until the Effective Time, except
as expressly contemplated by this Agreement, neither party will, without the
written consent of the other party (which consent will not be unreasonably
withheld or delayed) knowingly take any action that would, or would be
reasonably likely to result in (a) any of its representations and warranties
set forth in the Agreement being or becoming untrue in any material respect,
(b) any of the conditions to the Merger set forth in Article VII not being
satisfied or (c) a material violation of any provision of the Agreement except,
in each case, as may be required by applicable law.
5.20 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. During the period
from the date of this Agreement through the Effective Time, neither Crestar nor
SunTrust shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party (other than the Confidentiality Agreement). During such
period, Crestar or SunTrust, as the case may be, shall enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement,
including by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court
having jurisdiction.
5.21 ISSUANCE OF TREASURY SHARES. SunTrust shall use all commercially
reasonable efforts to reissue the requisite number of shares of SunTrust Common
Stock held as treasury stock as of the date of this Agreement so that the
Merger will not fail to qualify for pooling of interests accounting treatment
by virtue of the number of shares of SunTrust Common Stock held in the SunTrust
treasury.
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5.22 REDEMPTION OF SECURITIES. Prior to the Effective Time, to the extent
not prohibited by the terms of such securities, Crestar shall redeem or tender
for, or cause to be redeemed or tendered for, such outstanding securities of
Crestar (other than Crestar Common Stock) or any Crestar Subsidiary as SunTrust
may reasonably request.
ARTICLE VI
CLOSING MATTERS
6.1 THE CLOSING. Subject to satisfaction or waiver of all conditions
precedent set forth in Article VII of this Agreement, the closing of the Merger
("Closing") shall take place at the offices of King & Spalding, 1185 Avenue of
the Americas, New York, New York, or at such other location mutually agreeable
to the parties and on a date ("Closing Date") which is on the third business
day after the later of:
(a) the first date on which the Merger may be consummated in accordance
with the approvals of any Governmental Entities,
(b) the date the required approvals of Crestar's shareholders and
SunTrust's shareholders have been obtained, or
(c) such other date to which the parties agree in writing.
If all conditions are determined to be satisfied in all material respects
(or are duly waived) at the Closing, the Closing shall be consummated by the
making of all necessary filings required by all Governmental Entities.
6.2 DOCUMENTS AND CERTIFICATES. SunTrust and Crestar shall, on or prior to
Closing, execute and deliver all such instruments, documents or certificates as
may be necessary or advisable, on the advice of counsel, for the consummation
at the Closing of the transactions contemplated by this Agreement to occur as
soon as practicable.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Merger shall have been approved and adopted by the requisite vote
of the holders of Crestar Common Stock and the issuance of SunTrust Common
Stock shall have been approved by the requisite vote of the holders of SunTrust
Common Stock.
(b) The SunTrust Common Stock issuable in the Merger shall have been
authorized for listing on the New York Stock Exchange, upon official notice of
issuance.
(c) All authorizations, consents, orders or approvals of, and all
expirations of waiting periods imposed by, any Governmental Entity
(collectively, "Consents") which are necessary for the consummation of the
Merger (other than immaterial Consents, the failure to obtain which would not
be materially adverse to the combined businesses of SunTrust, Crestar,
SunTrust's subsidiaries and the Crestar Subsidiaries taken as a whole) shall
have been obtained or shall have occurred and shall be in full force and effect
at the Effective Time; PROVIDED, HOWEVER, that none of the preceding Consents
shall be deemed obtained if it shall have imposed any condition or requirement
which would so materially and adversely impact the economic or business
benefits to SunTrust or Crestar of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such party would
not, in its reasonable judgment, have entered into this Agreement.
(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and remain in effect.
(e) SunTrust and Crestar shall have received a letter, dated the date of
the Closing, from Arthur Andersen LLP or its successor, SunTrust's independent
accountants, and KPMG Peat Marwick LLP or its successor, Crestar's independent
accountants, each to the effect that, for financial reporting purposes, the
Merger qualifies for pooling-of-interests accounting treatment under generally
accepted accounting principles if consummated in accordance with this
Agreement.
(f) No temporary restraining order, preliminary or permanent injunction or
other order by any federal or state court in the United States which prevents
the consummation of the Merger shall have been issued and remain in effect.
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7.2 CONDITIONS TO OBLIGATION OF CRESTAR TO EFFECT THE MERGER. The
obligation of Crestar to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the additional following
conditions:
(a) SunTrust and Sub shall have performed in all material respects all
covenants contained in this Agreement required to be performed by each of them
at or prior to the Effective Time.
(b) The representations and warranties of SunTrust contained in Article
III shall be true and correct when made and shall be true and correct as of the
Effective Time as if made at and as of such time, except as expressly
contemplated or permitted by this Agreement, except for representations and
warranties relating to a time or times other than the Effective Time which were
or will be true and correct at such time or times and except where the failure
or failures of such representations and warranties to be so true and correct,
individually or in the aggregate, does not result or would not result in a
Material Adverse Effect.
(c) SunTrust shall have furnished Crestar a certificate dated the date of
the Closing, signed by the Chief Executive Officer and Chief Financial Officer
of SunTrust that the conditions set forth in Sections 7.2(a) and 7.2(b) have
been satisfied.
(d) Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Crestar, shall
have delivered to Crestar their opinion, dated on or about the date that is two
business days prior to the date the Proxy Statement is first mailed to the
shareholders of Crestar and the shareholders of SunTrust, and reaffirmed as of
the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at such time, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel may require and rely
upon representations contained in certificates of officers of Crestar,
SunTrust, and others, reasonably satisfactory in form and substance to such
counsel.
7.3 CONDITIONS TO OBLIGATION OF SUNTRUST TO EFFECT THE MERGER. The
obligation of SunTrust to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the additional following
conditions:
(a) Crestar shall have performed in all material respects its covenants
contained in this Agreement required to be performed at or prior to the
Effective Time.
(b) The representations and warranties of Crestar contained in Article IV
shall be true and correct when made and shall be true and correct as of the
Effective Time as if made on and as of such time, except as expressly
contemplated or permitted by this Agreement, except for representations and
warranties relating to a time or times other than the Effective Time which were
or will be true and correct at such time or times and except where the failure
or failures of such representations and warranties to be so true and correct,
individually or in the aggregate, does not result or would not result in a
Material Adverse Effect.
(c) Crestar shall have furnished SunTrust a certificate dated the date of
the Closing signed by the Chief Executive Officer and Chief Financial Officer
of Crestar that the conditions set forth in Sections 7.3(a) and 7.3(b) have
been satisfied.
(d) King & Spalding, counsel to SunTrust, shall have delivered to SunTrust
their opinion, dated on or about the date that is two business days prior to
the date the Proxy Statement is first mailed to the shareholders of Crestar and
the shareholders of SunTrust, and reaffirmed as of the Closing Date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at such time, the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of Crestar, SunTrust, and others,
reasonably satisfactory in form and substance to such counsel.
ARTICLE VIII
MISCELLANEOUS
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of both
Crestar and SunTrust:
(a) by mutual consent of the Board of Directors of SunTrust and the Board
of Directors of Crestar set forth in a written instrument;
(b) by either SunTrust or Crestar if (i) the Merger shall not have been
consummated on or before March 31, 1999; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be
available to any party that is in material breach of its obligations under this
Agreement or whose failure to fulfill any of its obligations contained in this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have occurred on or prior to
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the aforesaid date or (ii) any court or other Governmental Entity having
jurisdiction over a party hereto shall have issued an order enjoining,
restraining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and nonappealable;
(c) by either SunTrust or Crestar if this Agreement is not approved at the
Crestar Meeting or the issuance of SunTrust Common Stock is not approved at the
SunTrust Meeting (provided the terminating party is not otherwise in material
breach of its obligations under this Agreement);
(d) by SunTrust if the Board of Directors of Crestar (A) withdraws, or
modifies in a manner adverse to SunTrust, the approval or recommendation by
such Board of Directors of this Agreement or the Merger or (B) approves,
recommends or causes Crestar to enter into any agreement with respect to any
Acquisition Transaction;
(e) by Crestar if any of the conditions specified in Sections 7.1 and 7.2
have not been met or waived by Crestar at such time as such condition can no
longer be satisfied;
(f) by SunTrust if any of the conditions specified in Sections 7.1 and 7.3
have not been met or waived by SunTrust at such time as such condition can no
longer be satisfied;
(g) by Crestar in the event of a breach by SunTrust of any representation
or warranty, or any covenant or other agreement (in any material respect)
contained in this Agreement which breach is not cured within 30 days after
written notice thereof to SunTrust by Crestar; PROVIDED, HOWEVER, that Crestar
shall not have the right to terminate this Agreement pursuant to this Section
8.1(g) with respect to a breach of a representation or warranty unless the
breach of representation or warranty, together with all other such breaches,
would entitle Crestar not to consummate the transactions contemplated hereby
under Section 7.2; or
(h) by SunTrust in the event of a breach by Crestar of any representation
or warranty, or any covenant or other agreement (in any material respect)
contained in this Agreement which breach is not cured within 30 days after
written notice thereof to Crestar by SunTrust; PROVIDED, HOWEVER, that SunTrust
shall not have the right to terminate this Agreement pursuant to this Section
8.1(h) with respect to a breach of a representation or warranty unless the
breach of representation or warranty, together with all other such breaches,
would entitle SunTrust not to consummate the transactions contemplated hereby
under Section 7.3.
8.2 EXPENSE REIMBURSEMENT.
(a) In order to induce SunTrust to enter into this Agreement and to
reimburse and compensate SunTrust for its time, expenses and lost opportunity
costs of pursuing the Merger and seeking to consummate the transactions
contemplated by this Agreement, Crestar will make a cash payment to SunTrust of
an amount equal to all out-of-pocket expenses and fees incurred by SunTrust,
including without limitation fees and expenses payable to all legal,
accounting, financial and other professional advisors, relating to the Merger
or the transactions contemplated by this Agreement if:
(i) SunTrust terminates this Agreement pursuant to Section 8.1(d) or
Section 8.1(h);
(ii) Crestar terminates this Agreement pursuant to Section 8.1(c) because
this Agreement was not approved at the Crestar Meeting; or
(iii) SunTrust terminates this Agreement pursuant to Section 8.1(c)
because this Agreement was not approved at the Crestar Meeting.
(b) In order to induce Crestar to enter into this Agreement and to
reimburse and compensate Crestar for its time, expenses and lost opportunity
costs of pursuing the Merger and seeking to consummate the transactions
contemplated by this Agreement, SunTrust will make a cash payment to Crestar of
an amount equal to all out-of-pocket expenses and fees incurred by Crestar,
including without limitation fees and expenses payable to all legal,
accounting, financial and other professional advisors, relating to the Merger
or the transactions contemplated by this Agreement if:
(i) Crestar terminates this Agreement pursuant to Section 8.1(g);
(ii) SunTrust terminates this Agreement pursuant to Section 8.1(c)
because the issuance of SunTrust Common Stock was not approved at the
SunTrust Meeting; or
(iii) Crestar terminates this Agreement pursuant to Section 8.1(c)
because the issuance of SunTrust Common Stock was not approved at the
SunTrust Meeting.
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(c) Any payment required by this Section 8.2 must be paid by Crestar or
SunTrust, as applicable, to the other party (by wire transfer of immediately
available funds to an account designated by such party) within one (1) business
day after demand by such party; provided, however, that if such payment is
required pursuant to Section 8.2(a)(ii) or Section 8.2(b)(ii), such payment
must be made by Crestar or SunTrust, as applicable, concurrently with, and as a
condition to, such termination of this Agreement.
(d) The parties agree that the agreements contained in this Section 8.2
are an integral part of the transactions contemplated by this Agreement. The
parties acknowledge and agree that damages upon termination of the Agreement in
the circumstances referred to in Section 8.2(a) and Section 8.2(b) are not
reasonably ascertainable and the payment pursuant to this Section 8.2
constitutes liquidated damages and not a penalty. The payment pursuant to
Section 8.2 is intended to provide reimbursement for out-of-pocket expenses and
not damages, for termination of this Agreement under the circumstances referred
to therein, and such payments shall not relieve any party from liability for
the willful breach of any of its representations, warranties, covenants or
agreements contained in this Agreement and the nonbreaching party may pursue
any remedies available to it at law or in equity, including recovery of such
damages to which it may be entitled. Notwithstanding anything to the contrary
contained in this Section 8.2, in addition to any amounts paid or payable
pursuant to Section 8.2(a) or Section 8.2(b), Crestar or SunTrust, as
applicable, shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken by the other party to collect payment hereunder,
together with interest on the unpaid amount at the publicly announced prime
rate of SunTrust from the date such amount was required to be paid.
8.3 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, covenants and agreements in this Agreement will
terminate at the Effective Time or the earlier termination of this Agreement
pursuant to Section 7.1, as the case may be; provided, however, that if the
Merger is consummated, Sections 1.6, 2.1 through 2.4, 5.6, 5.9 and this Section
8.3 will survive the Effective Time to the extent contemplated by such
Sections; provided, further, that Section 5.18, the last sentence of Section
5.6 and all of Section 8.2 will in all events survive any termination of this
Agreement.
8.4 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party which is, or whose shareholders are, entitled to the
benefits thereof, and this Agreement may be amended or supplemented at any
time, provided that no amendment will be made after any shareholder approval of
the Merger which reduces or changes the form of the Merger Consideration
without further shareholder approval. No such waiver, amendment or supplement
will be effective unless in a writing which makes express reference to this
Section 8.4 and is signed by the party or parties sought to be bound thereby.
8.5 ENTIRE AGREEMENT. This Agreement together with the Crestar Option
Agreement, the SunTrust Option Agreement and the Confidentiality Agreement,
contain the entire agreement among SunTrust and Crestar with respect to the
Merger and the other transactions contemplated hereby and thereby, and
supersedes all prior agreements among the parties with respect to such matters.
8.6 APPLICABLE LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Georgia.
8.7 CERTAIN DEFINITIONS; HEADLINES. (a) For purposes of this Agreement, the
term:
(i) "affiliate", "associate" and "significant subsidiary" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date
hereof.
(ii) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(iii) "group" shall have the meaning ascribed to such term in Section
13(d) of the Exchange Act, as in effect on the date hereof.
(iv) "Market Price" means the average of the per share closing prices on
the New York Stock Exchange of SunTrust Common Stock for the 20 consecutive
trading days ending at the end of the third trading day immediately
preceding the Effective Time.
(v) "Material Adverse Effect" means an event, change or occurrence which
has a material negative impact on the financial condition, businesses or
results of operations of Crestar and its subsidiaries, taken as a whole, or
SunTrust and its subsidiaries, taken as a whole, as the case may be, or the
ability of Crestar or SunTrust, as the case may be, to consummate the
transactions contemplated hereby.
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(vi) "person" means an individual, corporation, partnership, association,
trust or unincorporated organization; and
(vii) "subsidiary" of Crestar, SunTrust or any other person means, except
where the context otherwise requires, any corporation, partnership, trust
or similar association of which Crestar, SunTrust or any other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation.
(b) The descriptive headings contained in this Agreement are for
convenience and reference only and will not affect in any way the meaning or
interpretation of this Agreement.
(c) Unless the context of this Agreement expressly indicates otherwise,
(i) any singular term in this Agreement will include the plural and any plural
term will include the singular and (ii) the term section or schedule will mean
a section or schedule of or to this (16) Agreement.
8.8 NOTICES. All notices, consents, requests, demands and other
communications hereunder will be in writing and will be deemed to have been
duly given or delivered if delivered personally, telexed with receipt
acknowledged, mailed by registered or certified mail return receipt requested,
sent by facsimile with confirmation of receipt, or delivered by a recognized
commercial courier addressed as follows:
If to SunTrust to:
SunTrust Banks, Inc.
303 Peachtree Street, N.E
Atlanta, Georgia 30308
Attention: John W. Spiegel
Executive Vice President and
Chief Financial Officer
Telephone: (404) 588-7495
Telecopy: (404) 581-1664
With a copy to:
SunTrust Banks, Inc.
303 Peachtree Street, N.E
Atlanta, Georgia 30308
Attention: Raymond D. Fortin
General Counsel
Telephone: (404) 588-7165
Telecopy: (404) 581-1664
And an additional copy:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: C. William Baxley
Telephone: (404) 572-4600
Telecopy: (404) 572-5100
If to Crestar to:
Crestar Financial Corporation
919 East Main Street
Richmond, Virginia 23261-6665
Attention: Linda G. Rigsby
Senior Vice President and
Corporate Secretary
Telephone: (804) 782-7738
Telecopy: (804) 782-7244
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With a copy to:
Hunton & Williams
Riverfront Plaza, East Towers
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Lathan M. Ewers, Jr.
Telephone: (804) 788-8200
Facsimile: (804) 788-8218
and an additional copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: William S. Rubenstein
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section 8.8.
8.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which will be deemed to be an original but all of which together will
constitute but one agreement.
8.10 PARTIES IN INTEREST; ASSIGNMENT. Except for Section 2.2 (which is intended
to be for the benefit of the holders of Outstanding Options under the Crestar
Option Plans to the extent contemplated thereby and their beneficiaries, and
may be enforced by such persons) and Section 5.9 hereof (which is intended to
be for the benefit of directors and officers to the extent contemplated thereby
and their beneficiaries, and may be enforced by such persons), this Agreement
is not intended to nor will it confer upon any other person (other than the
parties hereto) any rights or remedies. Without the prior written consent of
the other parties to this Agreement, neither SunTrust, Crestar nor Sub shall
assign any rights or delegate any obligations under this Agreement. Any such
purported assignment or delegation made without prior consent of the other
parties hereto shall be null and void.
8.11 SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other terms and provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party hereto.
Upon any such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible.
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
SUNTRUST BANKS, INC.
By: /s/ L. Phillip Humann
---------------------------
L. Phillip Humann
Chairman of the Board and
Chief Executive Officer
CRESTAR FINANCIAL CORPORATION
By: /s/ Richard G. Tilghman
---------------------------
Richard G. Tilghman
Chairman of the Board and
Chief Executive Officer
SMR CORPORATION (VA.)
By: /s/ L. Phillip Humann
-------------------------
L. Phillip Humann
President
A-35
<PAGE>
ANNEX B
[Letterhead of Lehman Brothers Inc.]
July 20, 1998
Board of Directors
SunTrust Banks, Inc.
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
MEMBERS OF THE BOARD:
We understand that SunTrust Banks, Inc. ("SunTrust" or the "Company") and
Crestar Financial Corporation ("Crestar") are proposing to enter into a
definitive merger agreement pursuant to which a subsidiary of SunTrust will be
merged with and into Crestar and each share of common stock of Crestar will be
exchanged for 0.96 shares (the "Exchange Ratio") of common stock of SunTrust
(the "Proposed Transaction"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement and Plan of Merger
dated as of July 20, 1998 (the "Agreement").
We have been requested by the Board of Directors of SunTrust to render our
opinion with respect to the fairness, from a financial point of view, to
SunTrust of the Exchange Ratio to be paid to the stockholders of Crestar in the
Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement
and the specific terms of the Proposed Transaction, (2) such publicly available
information concerning SunTrust and Crestar that we believe to be relevant to
our analysis, including, without limitation, public information released by
SunTrust and Crestar with respect to income for the three month period and six
month period ended, and financial condition as of, June 30, 1998, SunTrust's
and Crestar's quarterly reports on Form 10-Q for the period ended March 31,
1998 and SunTrust's and Crestar's reports on Form 10-K for the year ended
December 31, 1997, (3) financial and operating information with respect to the
businesses, operations and prospects of SunTrust and Crestar furnished to us by
SunTrust and Crestar, respectively, (4) trading histories of the common stocks
of SunTrust and Crestar from July 15, 1993 to the present and a comparison of
those trading histories with those of other companies that we deemed relevant,
(5) a comparison of the historical financial results and present financial
conditions of SunTrust and Crestar with those of other companies that we deemed
relevant, (6) published estimates of third party research analysts regarding
the future financial performance of SunTrust and Crestar, (7) a comparison of
the financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions that we deemed relevant, (8) the relative
contributions of SunTrust and Crestar on a pro forma basis to the historical
and projected financial condition and operations of the combined company upon
consummation of the Proposed Transaction, and (9) the potential pro forma
impact of the Proposed Transaction on SunTrust.
In addition, we have had discussions with the managements of SunTrust and
Crestar concerning their respective businesses, operations, assets,
liabilities, financial conditions, and prospects and the potential cost
savings, operating synergies, incremental earnings (including as a result of
the use of excess capital) and other strategic benefits expected by management
of SunTrust to result from a combination of the businesses of SunTrust and
Crestar and have undertaken such other studies, analyses and investigations as
we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information
and have further relied upon the assurances of the managements of SunTrust and
Crestar that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the future financial
performance of SunTrust and Crestar, the Company has directed us to rely upon
the publicly available estimates of research analysts in performing our
analysis and, based upon advice of SunTrust and Crestar, we have assumed that
such estimates are a reasonable basis upon which to evaluate and analyze the
future financial performance of SunTrust and Crestar and that SunTrust and
Crestar will perform substantially in accordance with such estimates. With
respect to the cost savings, operating synergies, incremental earnings
(including as a result of the use of excess capital) and other strategic
benefits projected by the management of SunTrust to result from a combination
of the businesses of SunTrust and Crestar, upon advice of SunTrust we have
assumed that such cost savings, operating synergies, revenue enhancements and
other strategic benefits will be achieved substantially in accordance with such
projections.
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Upon advice of SunTrust and its legal and accounting advisors, we have
assumed that the merger will qualify for pooling-of-interests accounting
treatment. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of SunTrust or Crestar and have not
made or obtained any evaluations or appraisals of the assets of SunTrust or
Crestar. In addition, we are not experts in the evaluation of loan portfolios
or allowance for loan and real estate owned losses and, upon advice of the
Company, we have assumed that the allowances for loan and real estate owned
losses provided to us by SunTrust and Crestar and used by us in our opinion are
in the aggregate adequate to cover all such losses. Our opinion necessarily is
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be paid
by the Company to the stockholders of Crestar in the Proposed Transaction is
fair to SunTrust.
We have acted as financial advisor to SunTrust in connection with the
Proposed Transaction and will receive a fee for our services which is
contingent upon the consummation of the Proposed Transaction. In addition,
SunTrust has agreed to indemnify us for certain liabilities that may arise out
of the rendering of this opinion. We also have performed various investment
banking services for SunTrust and Crestar in the past and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the securities of SunTrust and Crestar 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.
This opinion is for the use and benefit of the Board of Directors of
SunTrust and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of SunTrust as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
B-2
<PAGE>
ANNEX C
[Letterhead of Morgan Stanley & Co. Incorporated]
July 19, 1998
Board of Directors
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Members of the Board:
We understand that Crestar Financial Corporation ("Crestar"), SunTrust
Banks, Inc. ("SunTrust") and SMR Corporation (Va.), a wholly owned subsidiary
of SunTrust ("Merger Sub"), propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated July 19, 1998 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Merger Sub with and into Crestar. Pursuant to the Merger, each issued and
outstanding share of common stock, par value $5.00 per share, of Crestar (the
"Crestar Common Stock"), other than shares held by SunTrust or any affiliate of
SunTrust, will be converted into the right to receive 0.96 shares (the
"Exchange Ratio") of common stock, par value $1.00 per share, of SunTrust (the
"SunTrust Common Stock"). The terms and conditions of the Merger are more fully
set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant
to the Merger Agreement is fair from a financial point of view to the holders
of shares of Crestar Common Stock (other than SunTrust and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Crestar and SunTrust, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning Crestar and SunTrust prepared by the
managements of Crestar and SunTrust, respectively;
(iii) analyzed certain financial projections prepared by the managements
of Crestar and SunTrust, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of Crestar and SunTrust with senior executives of Crestar
and SunTrust, respectively;
(v) reviewed the reported prices and trading activity for the Crestar
Common Stock and the SunTrust Common Stock;
(vi) compared the financial performance of Crestar and SunTrust and the
prices and trading activity of the Crestar Common Stock and the SunTrust
Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(vii) discussed the results of regulatory examinations of Crestar and
SunTrust with senior management of the respective companies;
(viii) discussed with senior managements of Crestar and SunTrust the
strategic objectives of the Merger and their estimates of the synergies and
other benefits of the Merger for the combined company;
(ix) analyzed the pro forma impact of the Merger on the combined
company's earnings per share, consolidated capitalization and financial
ratios;
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions;
(xi) participated in discussions and negotiations among representatives
of Crestar and SunTrust and their financial and legal advisors;
(xii) reviewed the Merger Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including the
synergies and other benefits expected to result from the Merger, we have
assumed that they have been reasonably prepared on bases reflecting
C-1
<PAGE>
the best currently available estimates and judgments of the future financial
performance of Crestar and SunTrust. We have not made any independent valuation
or appraisal of the assets or liabilities of Crestar or SunTrust, nor have we
been furnished with any such appraisals and we have not examined any individual
loan files of Crestar or SunTrust. In addition, we have assumed the Merger will
be consummated substantially in accordance with the terms set forth in the
Merger Agreement. 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.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition or merger
involving Crestar or any of its assets.
We have acted as financial advisor to the Board of Directors of Crestar in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Crestar and SunTrust and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of Crestar, except that this opinion may be included in its entirety
in any filing made by Crestar with the Securities and Exchange Commission with
respect to the Merger. In addition, we express no opinion and make no
recommendations as to how the holders of Crestar Common Stock should vote at
the shareholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to the holders of shares of Crestar Common Stock (other than SunTrust
and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ WILLIAM M. WEIANT
--------------------------
William M. Weiant
Managing Director
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Part 5 of Article 8 of the Georgia Business Corporation Code states:
14-2-850. Part Definitions.
As used in this part, the term:
(1) "Corporation" includes any domestic or foreign predecessor entity of
a corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" or "officer" means an individual who is or was a director
or officer, respectively, of a corporation or who, while a director or
officer of the corporation, is or was serving at the corporation's request
as a director, officer, partner, trustee, employee, or agent of another
domestic or foreign corporation, partnership, joint venture, trust,
employee benefit plan, or other entity. A director or officer is considered
to be serving an employee benefit plan at the corporation's request if his
or her duties to the corporation also impose duties on, or otherwise
involve services by, the director or officer to the plan or to participants
in or beneficiaries of the plan. Director or officer includes, unless the
context otherwise requires, the estate or personal representative of a
director or officer.
(3) "Disinterested director" means a director who at the time of a vote
referred to in subsection (c) of Code Section 14-2-853 or a vote or
selection referred to in subsection (b) or (c) of Code Section 14-2-855 or
subsection (a) of Code Section 14-2-856 is not:
(A) A party to the proceeding; or
(B) An individual who is a party to a proceeding having a familial,
financial, professional, or employment relationship with the director
whose indemnification or advance for expenses is the subject of the
decision being made with respect to the proceeding, which relationship
would, in the circumstances, reasonably be expected to exert an influence
on the director's judgment when voting on the decision being made.
(4) "Expenses" includes counsel fees.
(5) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a
proceeding.
(6) "Official capacity" means:
(A) When used with respect to a director, the office of director in a
corporation; and
(B) When used with respect to an officer, as contemplated in Code
Section 14-2-857, the office in a corporation held by the officer.
Official capacity does not include service for any other domestic or
foreign corporation or any partnership, joint venture, trust, employee
benefit plan, or other entity.
(7) "Party" means an individual who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
(8) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative,
or investigative and whether formal or informal.
14-2-851. Authority to Indemnify.
(a) Except as otherwise provided in this Code section, a corporation may
indemnify an individual who is a party to a proceeding because he or she is or
was a director against liability incurred in the proceeding if:
(1) Such individual conducted himself or herself in good faith; and
(2) Such individual reasonably believed:
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(A) In the case of conduct in his or her official capacity, that such
conduct was in the best interests of the corporation;
(B) In all other cases, that such conduct was at least not opposed to
the best interests of the corporation; and
(C) In the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he or she believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (a)(1)(B) of this Code section.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Code section.
(d) A corporation may not indemnify a director under this Code section:
(1) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant
standard of conduct under this Code section; or
(2) In connection with any proceeding with respect to conduct for which
he was adjudged liable on the basis that personal benefit was improperly
received by him, whether or not involving action in his official capacity.
14-2-852. Mandatory Indemnification.
A corporation shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he or she was a
party because he or she was a director of the corporation against reasonable
expenses incurred by the director in connection with the proceeding.
14-2-853. Adavance for Expenses.
(a) A corporation may, before final disposition of a proceeding, advance
funds to pay for or reimburse the reasonable expenses incurred by a director
who is a party to a proceeding because he or she is a director if he or she
delivers to the corporation:
(1) A written affirmation of his or her good faith belief that he or she
has met the relevant standard of conduct described in Code Section 14-2-851
or that the proceeding involves conduct for which liability has been
eliminated under a provision of the articles of incorporation as authorized
by paragraph (4) of subsection (b) of Code Section 14-2-202; and
(2) His or her written undertaking to repay any funds advanced if it is
ultimately determined that the director is not entitled to indemnification
under this part.
(b) The undertaking required by paragraph (2) of subsection (a) of
this Code section must be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to the
financial ability of the director to make repayment.
(c) Authorization under this Code section shall be made:
(1) By the board of directors:
(A) When there are two or more disinterested directors, by a majority
vote of all the disinterested directors (a majority of whom shall for
such purpose constitute a quorum) or by a majority of the members of a
committee of two or more disinterested directors appointed by such a
vote; or
(B) When there are fewer than two disinterested directors, by the vote
necessary for action by the board in accordance with subsection (c) of
Code Section 14-2-824, in which authorization directors who do not
qualify as disinterested directors may participate; or
(2) By the shareholders, but shares owned or voted under the control of a
director who at the time does not qualify as a disinterested director with
respect to the proceeding may not be voted on the authorization.
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14-2-854. Court-Ordered Indemnification and Advances for Expenses.
(a) A director who is a party to a proceeding because he or she is a
director may apply for indemnification or advance for expenses to the court
conducting the proceeding or to another court of competent jurisdiction. After
receipt of an application and after giving any notice it considers necessary,
the court shall:
(1) Order indemnification or advance for expenses if it determines that
the director is entitled to indemnification under this part; or
(2) Order indemnification or advance for expenses if it determines, in
view of all the relevant circumstances, that it is fair and reasonable to
indemnify the director or to advance expenses to the director, even if the
director has not met the relevant standard of conduct set forth in
subsections (a) and (b) of Code Section 14-2-851, failed to comply with
Code Section 14-2-853, or was adjudged liable in a proceeding referred to
in paragraph (1) or (2) of subsection (d) of Code Section 14-2-851, but if
the director was adjudged so liable, the indemnification shall be limited
to reasonable expenses incurred in connection with the proceeding.
(b) If the court determines that the director is entitled to
indemnification or advance for expenses under this part, it may also order the
corporation to pay the director's reasonable expenses to obtain court-ordered
indemnification or advance for expenses.
14-2-855. Determination and Authorization of Indemnification.
(a) A corporation may not indemnify a director under Code Section 14-2-851
unless authorized thereunder and a determination has been made for a specific
proceeding that indemnification of the director is permissible in the
circumstances because he or she has met the relevant standard of conduct set
forth in Code Section 14-2-851.
(b) The determination shall be made:
(1) If there are two or more disinterested directors, by the board of
directors by a majority vote of all the disinterested directors (a majority
of whom shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors appointed by
such a vote;
(2) By a special legal counsel:
(A) Selected in the manner prescribed in paragraph (1) of this
subsection; or
(B) If there are fewer than two disinterested directors, selected by
the board of directors (in which selection directors who do not qualify
as disinterested directors may participate); or
(3) By the shareholders, but shares owned by or voted under the control
of a director who at the time does not qualify as a disinterested director
may not be voted on the determination.
(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, except that if there are
fewer than two disinterested directors or if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subparagraph
(b)(2)(B) of this Code section to select special legal counsel.
14-2-856. Shareholders Approved Indemnification.
(a) If authorized by the articles of incorporation or a bylaw, contract,
or resolution approved or ratified by the shareholders by a majority of the
votes entitled to be cast, a corporation may indemnify or obligate itself to
indemnify a director made a party to a proceeding including a proceeding
brought by or in the right of the corporation, without regard to the
limitations in other Code sections of this part, but shares owned or voted
under the control of a director who at the time does not qualify as a
disinterested director with respect to any existing or threatened proceeding
that would be covered by the authorization may not be voted on the
authorization.
(b) The corporation shall not indemnify a director under this Code section
for any liability incurred in a proceeding in which the director is adjudged
liable to the corporation or is subjected to injunctive relief in favor of the
corporation:
(1) For any appropriation, in violation of the director's duties, of
any business opportunity of the corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
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(3) For the types of liability set forth in Code Section 14-2-832; or
(4) For any transaction from which he or she received an improper
personal benefit.
(c) Where approved or authorized in the manner described in subsection
(a) of this Code section, a corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
(1) The director furnishes the corporation a written affirmation of
his or her good faith belief that his or her conduct does not constitute
behavior of the kind described in subsection (b) of this Code section;
and
(2) The director furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay any advances if it
is ultimately determined that the director is not entitled to
indemnification under this Code section.
14-2-857. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.
(a) A corporation may indemnify and advance expenses under this part to an
officer of the corporation who is a party to a proceeding because he or she is
an officer of the corporation:
(1) To the same extent as a director; and
(2) If he or she is not a director, to such further extent as may be
provided by the articles of incorporation, the bylaws, a resolution of the
board of directors, or contract except for liability arising out of conduct
that constitutes:
(A) Appropriation, in violation of his or her duties, of any business
opportunity of the corporation;
(B) Acts or omission which involve intentional misconduct, or a knowing
violation of law;
(C) The types of liability set forth in Code Section 14-2-832; or
(D) Receipt of an improper personal benefit.
(b) The provisions of paragraph (2) of subsection (a) of this Code section
shall apply to an officer who is also a director if the sole basis on which he
or she is made a party to the proceeding is an act or omission solely as an
officer.
(c) An officer of a corporation who is not a director is entitled to
mandatory indemnification under Code Section 14-2-852, and may apply to a court
under Code Section 14-2-854 for indemnification or advances for expenses, in
each case to the same extent to which a director may be entitled to
indemnification or advances for expenses under those provisions.
(d) A corporation may also indemnify and advance expenses to an employee
or agent who is not a director to the extent, consistent with public policy,
that may be provided by its articles of incorporation, bylaws, general or
specific action of its board of directors, or contract.
14-2-858. INSURANCE.
A corporation may purchase and maintain insurance on behalf of an
individual who is a director, officer, employee, or agent of the corporation or
who, while a director, officer, employee, or agent of the corporation, serves
at the corporation's request as a director, officer, partner, trustee,
employee, or agent of another domestic or foreign corporation, partnership,
joint venture, trust, employee benefit plan, or other entity against liability
asserted against or incurred by him or her in that capacity or arising from his
or her status as a director, officer, employee, or agent, whether or not the
corporation would have power to indemnify or advance expenses to him or her
against the same liability under this part.
14-2-859. APPLICATION OF PART.
(a) A corporation may, by a provision in its articles of incorporation or
bylaws or in a resolution adopted or a contract approved by its board of
directors or shareholders, obligate itself in advance of the act or omission
giving rise to a proceeding to provide indemnification or advance funds to pay
for or reimburse expenses consistent with this part. Any such obligatory
provision shall be deemed to satisfy the requirements for authorization
referred to in subsection (c) of Code Section 14-2-853 or subsection (c) of
Code Section 14-2-855. Any such provision that obligates the corporation to
provide indemnification to the fullest extent permitted by law shall be deemed
to obligate the corporation to advance funds to pay for or reimburse expenses
in accordance with Code Section 14-2-853 to the fullest extent permitted by
law, unless the provision specifically provides otherwise.
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(b) Any provision pursuant to subsection (a) of this Code section shall
not obligate the corporation to indemnify or advance expenses to a director of
a predecessor of the corporation, pertaining to conduct with respect to the
predecessor, unless otherwise specifically provided. Any provision for
indemnification or advance for expenses in the articles of incorporation,
bylaws, or a resolution of the board of directors or shareholders, partners,
or, in the case of limited liability companies, members or managers of a
predecessor of the corporation or other entity in a merger or in a contract to
which the predecessor is a party, existing at the time the merger takes effect,
shall be governed by paragraph (3) of subsection (a) of Code Section 14-2-1106.
(c) A corporation may, by a provision in its articles of incorporation,
limit any of the rights to indemnification or advance for expenses created by
or pursuant to this part.
(d) This part does not limit a corporation's power to pay or reimburse
expenses incurred by a director or an officer in connection with his or her
appearance as a witness in a proceeding at a time when he or she is not a
party.
(e) Except as expressly provided in Code Section 14-2-857, this part does
not limit a corporation's power to indemnify, advance expenses to, or provide
or maintain insurance on behalf of an employee or agent.
Articles of Incorporation Authority:
Article 14 of the Corporation's Articles of Incorporation provides:
In addition to any powers provided by law, in the Bylaws, or otherwise,
the Corporation shall have the power to indemnify any person who becomes a
party or who is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including any 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.
Bylaw Authority:
Article VII of the Corporation's Bylaws provides:
Section 1. DEFINITIONS. As used in this Article, the term:
(A) "Corporation" includes any domestic or foreign predecessor entity of
this Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(B) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other entity. A
"director" is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on,
or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(C) "Disinterested director" means a director who at the time of a vote
referred to in Section 3(C) or a vote or selection referred to in Section 4(B),
4(C) or 7(A) is not: (i) a party to the proceeding; or (ii) an individual who
is a party to a proceeding having a familial, financial, professional, or
employment relationship with the director whose indemnification or advance for
expenses is the subject of the decision being made with respect to the
proceeding, which relationship would, in the circumstances, reasonably be
expected to exert an influence on the director's judgment when voting on the
decision being made.
(D) "Employee" means an individual who is or was an employee of the
Corporation or an individual who, while an employee of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
An "Employee" is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on,
or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Employee" includes, unless the context requires
otherwise, the estate or personal representative of an employee.
(E) "Expenses" includes counsel fees.
(F) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
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(G) "Officer" means an individual who is or was an officer of the
Corporation which for purposes of this Article VII shall include an assistant
officer, or an individual who, while an Officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other entity. An "Officer" is
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the
plan. "Officer" includes, unless the context requires otherwise, the estate or
personal representative of an Officer.
(H) "Official capacity" means: (i) when used with respect to a director,
the office of a director in a corporation; and (ii) when used with respect to
an Officer, the office in a corporation held by the Officer. Official capacity
does not include service for any other domestic or foreign corporation or any
partnership, joint venture, trust, employee benefit plan, or other entity.
(I) "Party" means an individual who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(J) "Proceeding" means any threatened, pending or completed action, suit,
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal.
Section 2. BASIC INDEMNIFICATION ARRANGEMENT.
(A) Except as provided in subsections 2(D) and 2(E) below and, if required
by Section 4 below, upon a determination pursuant to Section 4 in the specific
case that such indemnification is permissible in the circumstances under this
subsection because the individual has met the standard of conduct set forth in
this subsection (A), the Corporation shall indemnify an individual who is made
a party to a proceeding because he is or was a director or Officer against
liability incurred by him in the proceeding if he conducted himself in good
faith and, in the case of conduct in his official capacity, he reasonably
believed such conduct was in the best interest of the Corporation, or in all
other cases, he reasonably believed such conduct was at least not opposed to
the best interests of the Corporation and, in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
(B) A person's conduct with respect to an employee benefit plan for a
purpose he believes in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 2(A) above.
(C) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the proposed indemnitee did not meet the standard of
conduct set forth in subsection 2(A) above.
(D) The Corporation shall not indemnify a person under this Article in
connection with (i) a proceeding by or in the right of the Corporation, except
for reasonable expenses incurred in connection with the proceeding if it is
determined that such person has met the relevant standard of conduct under this
section, or (ii) with respect to conduct for which such person was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity.
Section 3. ADVANCES FOR EXPENSES.
(A) The Corporation may advance funds to pay for or reimburse the
reasonable expenses incurred by a director or Officer who is a party to a
proceeding because he is a director or Officer in advance of final disposition
of the proceeding if: (i) such person furnishes the Corporation a written
affirmation of his good faith belief that he has met the relevant standard of
conduct set forth in subsection 2(A) above or that the proceeding involves
conduct for which liability has been eliminated under the Corporation's
Articles of Incorporation; and (ii) such person furnishes the Corporation a
written undertaking meeting the qualifications set forth below in subsection
3(B), executed personally or on his behalf, to repay any funds advanced if it
is ultimately determined that he is not entitled to any indemnification under
this Article or otherwise.
(B) The undertaking required by subsection 3(A)(ii) above must be an
unlimited general obligation of the director or Officer but need not be secured
and shall be accepted without reference to financial ability to make repayment.
(C) Authorizations under this Section shall be made: (i) By the Board of
Directors: (a) when there are two or more disinterested directors, by a
majority vote of all disinterested directors (a majority of whom shall for such
purpose constitute a quorum) or by a majority of the members of a committee of
two or more disinterested directors appointed by such a vote; or (b) when there
are fewer than two disinterested directors, by a majority of the directors
present, in which authorization directors who do not qualify as disinterested
directors may participate; or (ii) by the shareholders, but shares owned or
voted
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under the control of a director who at the time does not qualify as a
disinterested director with respect to the proceeding may not be voted on the
authorization.
Section 4. AUTHORIZATION OF AND DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(A) The Corporation shall not indemnify a director or Officer under
Section 2 above unless authorized thereunder and a determination has been made
for a specific proceeding that indemnification of such person is permissible in
the circumstances because he has met the relevant standard of conduct set forth
in subsection 2(A) above; provided, however, that regardless of the result or
absence of any such determination, to the extent that a director or Officer has
been wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director or Officer,
the Corporation shall indemnify such person against reasonable expenses
incurred by him in connection therewith.
(B) The determination referred to in subsection 4(A) above shall be made:
(i) If there are two or more disinterested directors, by the board of
directors by a majority vote of all the disinterested directors (a majority
of whom shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors appointed by
such a vote;
(ii) by special legal counsel:
(1) selected by the Board of Directors or its committee in the manner
prescribed in subdivision (i); or
(2) if there are fewer than two disinterested directors, selected by
the Board of Directors (in which selection directors who do not qualify
as disinterested directors may participate); or
(iii) by the shareholders; but shares owned by or voted under the control
of a director who at the time does not qualify as a disinterested director
may not be voted on the determination.
(C) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses of a director or Officer in the
specific case shall be made in the same manner as the determination that
indemnification is permissible, as described in subsection 4(B) above, except
that if there are fewer than two disinterested directors or if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be made
by those entitled under subsection 4(B)(ii)(2) above to select counsel.
(D) The Board of Directors, a committee thereof, or special legal counsel
acting pursuant to subsection (B) above or Section 5 below, shall act
expeditiously upon an application for indemnification or advances, and
cooperate in the procedural steps required to obtain a judicial determination
under Section 5 below.
(E) The Corporation may, by a provision in its Articles of Incorporation
or Bylaws or in a resolution adopted or a contract approved by its Board of
Directors or shareholders, obligate itself in advance of the act or omission
giving rise to a proceeding to provide indemnification or advance funds to pay
for or reimburse expenses consistent with this part. Any such obligatory
provision shall be deemed to satisfy the requirements for authorization
referred to in Section 3(C) or Section 4(C).
Section 5. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES.
A director or Officer who is a party to a proceeding because he is a
director or Officer may apply for indemnification or advances for expenses to
the court conducting the proceeding or to another court of competent
jurisdiction. After receipt of an application and after giving any notice it
considers necessary, the court shall order indemnification or advances for
expenses if it determines that:
(i) The director is entitled to indemnification under this part; or
(ii) In view of all the relevant circumstances, it is fair and reasonable
to indemnify the director or Officer or to advance expenses to the director
or Officer, even if the director or Officer has not met the relevant
standard of conduct set forth in subsection 2(A) above, failed to comply
with Section 3, or was adjudged liable in a proceeding referred to in
subsections (i) or (ii) of Section 2(D), but if the director or Officer was
adjudged so liable, the indemnification shall be limited to reasonable
expenses incurred in connection with the proceeding, unless the Articles of
Incorporation of the Corporation or a Bylaw, contract or resolution
approved or ratified by shareholders pursuant to Section 7 below provides
otherwise.
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If the court determines that the director or Officer is entitled to
indemnification or advance for expenses, it may also order the Corporation
to pay the director's or Officer's reasonable expenses to obtain
court-ordered indemnification or advance for expenses.
Section 6. INDEMNIFICATION OF OFFICERS AND EMPLOYEES.
(A) Unless the Corporation's Articles of Incorporation provide otherwise,
the Corporation shall indemnify and advance expenses under this Article to an
employee of the Corporation who is not a director or Officer to the same
extent, consistent with public policy, as to a director or Officer.
(B) The Corporation may indemnify and advance expenses under this Article
to an Officer of the Corporation who is a party to a proceeding because he is
an Officer of the Corporation: (i) to the same extent as a director; and (ii)
if he is not a director, to such further extent as may be provided by the
Articles of Incorporation, the Bylaws, a resolution of the Board of Directors,
or contract except for liability arising out of conduct that is enumerated in
subsections (A)(i) through (A)(iv) of Section 7.
The provisions of this Section shall also apply to an Officer who is also
a director if the sole basis on which he is made a party to the proceeding is
an act or omission solely as an Officer.
Section 7. SHAREHOLDER APPROVED INDEMNIFICATION.
(A) If authorized by the Articles of Incorporation or a Bylaw, contract or
resolution approved or ratified by shareholders of the Corporation by a
majority of the votes entitled to be cast, the Corporation may indemnify or
obligate itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the Corporation, without regard to the
limitations in other sections of this Article, but shares owned or voted under
the control of a director who at the time does not qualify as a disinterested
director with respect to any existing or threatened proceeding that would be
covered by the authorization may not be voted on the authorization. The
Corporation shall not indemnify a person under this Section 7 for any liability
incurred in a proceeding in which the person is adjudged liable to the
Corporation or is subjected to injunctive relief in favor of the Corporation:
(i) for any appropriation, in violation of his duties, of any business
opportunity of the Corporation;
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of the
Georgia Business Corporation Code; or
(iv) for any transaction from which he received an improper personal
benefit.
(B) Where approved or authorized in the manner described in subsection
7(A) above, the Corporation may advance or reimburse expenses incurred in
advance of final disposition of the proceeding only if:
(i) the proposed indemnitee furnishes the Corporation a written
affirmation of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection 7(A)(i)-(iv) above; and
(ii) the proposed indemnitee furnishes the Corporation a written
undertaking, executed personally, or on his behalf, to repay any advances
if it is ultimately determined that he is not entitled to indemnification.
Section 8. LIABILITY INSURANCE.
The Corporation may purchase and maintain insurance on behalf of an
individual who is a director, officer, employee, or agent of the Corporation or
who, while a director, officer, employee, or agent of the Corporation, is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other entity
against liability asserted against or incurred by him in that capacity or
arising from his status as a director, officer, employee, or agent, whether or
not the Corporation would have power to indemnify him against the same
liability under Section 2 or Section 3 above.
Section 9. WITNESS FEES.
Nothing in this Article shall limit the Corporation's power to pay or
reimburse expenses incurred by a person in connection with his appearance as a
witness in a proceeding at a time when he is not a party.
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<PAGE>
Section 10. REPORT TO SHAREHOLDERS.
If the Corporation indemnifies or advances expenses to a director in
connection with a proceeding by or in the right of the Corporation, the
Corporation shall report the indemnification or advance, in writing, to
shareholders with or before the notice of the next shareholders' meeting.
Section 11. SEVERABILITY.
In the event that any of the provisions of this Article (including any
provision within a single section, subsection, division or sentence) is held by
a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain
enforceable to the fullest extent permitted by law.
Section 12. INDEMNIFICATION NOT EXCLUSIVE.
The rights of indemnification provided in this Article VII shall be in
addition to any rights which any such director, Officer, employee or other
person may otherwise be entitled by contract or as a matter of law.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of July 20, 1998, by and among
SunTrust Banks, Inc. (the "Registrant"), Crestar Financial Corporation and SMR Corporation (Va.)
(reference is made to Annex A of the Joint Proxy Statement/Prospectus included as a part of this
Registration Statement).
4.1 Indenture Agreement between SunTrust Banks, Inc. (the "Registrant") and Morgan Guaranty Trust
Company of New York, as Trustee (incorporated by reference to Exhibit 4(a) to the Registrant's
Registration Statement on Form S-3 (SEC File No. 33-00084)).
4.2 Indenture Agreement between the Registrant and Manufacturers Hanover Trust Company, as Trustee
(incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-3
(SEC File No. 33-12186)).
4.3 Indenture between the Registrant and PNC, N.A., as Trustee (incorporated by reference to Exhibit
4(a) to the Registrant's Registration Statement on Form S-3 (SEC File No. 33-62162)).
4.4 Indenture between the Registrant and The First National Bank of Chicago, as Trustee (incorporated
by reference to Exhibit 4(b) to the Registrant's Registration Statement on Form S-3 (SEC File No.
33-62162)).
5.1 Opinion of Raymond D. Fortin, counsel of the Registrant, as to the legality of the securities being
registered.
8.1 Form of Opinion of King & Spalding regarding certain tax aspects of the Merger.*
10.1 Employment Agreement, dated as of July 20, 1998, between the Registrant and Richard G.
Tilghman.*
10.2 Employment Agreement, dated as of July 20, 1998, between the Registrant and James M. Wells III.*
23.1 Consent of Lehman Brothers Inc.*
23.2 Consent of Morgan Stanley & Co. Incorporated.*
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Deloitte & Touche LLP.
23.6 Consent of King & Spalding (included in Exhibit 8.1).
23.7 Consent of Raymond D. Fortin, counsel of the Registrant (included in Exhibit 5.1).
23.8 Consent of Richard G. Tilghman.
24.1 Power of Attorney*
99.1 Stock Option Agreement, dated as of July 20, 1998, between the Registrant (Grantee) and Crestar
Financial Corporation (Issuer) (incorporated by reference to Exhibit 2.2 of the Registrant's Current
Report on Form 8-K dated July 20, 1998).
99.2 Stock Option Agreement, dated as of July 20, 1998, between the Registrant (Issuer) and Crestar
Financial Corporation (Grantee) (incorporated by reference to Exhibit 2.3 of the Registrant's Current
Report on Form 8-K dated July 20, 1998).
99.3 Form of Proxy to be used by the Registrant.*
99.4 Form of Proxy to be used by Crestar Financial Corporation.*
b. Financial Statement Schedules
None.
</TABLE>
- ---------
* Previously filed.
ITEM 22. UNDERTAKINGS.
(a) (1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (as amended and the
rules and regulations thereunder, the "Securities Act"), each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (as amended and the rules and regulations
thereunder, the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) 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.
(2) 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
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who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act, 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.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415
promulgated pursuant to the Securities Act, 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, 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.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions of this Item
22, or otherwise (other than insurance), 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 Securities
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 Securities Act and will be governed by
the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 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.
(c) 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.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to its Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto, duly authorized, in the
City of Atlanta, State of Georgia, on September 24, 1998.
SUNTRUST BANKS, INC.
By: /s/ L. Phillip Humann
----------------------------------------
L. PHILLIP HUMANN
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities indicated on this
24th day of September, 1998.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- ---------------------------------------
<S> <C>
/s/ L. Phillip Humann Chairman and Chief Executive Officer
---------------------------------- (Principal Executive Officer)
L. PHILLIP HUMANN
/s/ John W. Spiegel Executive Vice President and Chief
---------------------------------- Financial Officer (Principal Financial
JOHN W. SPIEGEL Officer)
/s/ William P. O'Halloran Senior Vice President and Controller
---------------------------------- (Principal Accounting Officer)
WILLIAM P. O'HALLORAN
*
---------------------------------- Director
J. HYATT BROWN
*
---------------------------------- Director
ALSTON D. CORRELL
*
---------------------------------- Director
A.W. DAHLBERG
*
---------------------------------- Director
DAVID H. HUGHES
*
---------------------------------- Director
M. DOUGLAS IVESTER
*
---------------------------------- Director
SUMMERFIELD K. JOHNSTON, JR.
*
---------------------------------- Director
JOSEPH L. LANIER, JR.
*
---------------------------------- Director
LARRY L. PRINCE
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ---------------------------------------- ---------
<S> <C>
*
---------------------------------- Director
SCOTT L. PROBASCO, JR.
*
---------------------------------- Director
R. RANDALL ROLLINS
*
---------------------------------- Director
JAMES B. WILLIAMS
*By: /s/ Raymond D. Fortin
----------------------------------
ATTORNEY-IN-FACT
</TABLE>
II-13
EXHIBIT 5.1
September 23, 1998
SunTrust Banks, Inc.
303 Peachtree Street
Atlanta, Georgia 30308
Ladies and Gentlemen:
I have acted as counsel for SunTrust Banks, Inc., a Georgia corporation
("SunTrust"), in connection with the preparation of a Registration Statement on
Form S-4 (File No. 333-61539) (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to the merger (the "Merger") of SMR Corporation (Va.) ("Sub")
with and into Crestar Financial Corporation, a Virginia corporation
("Crestar"), as set forth in the Joint Proxy Statement/Prospectus contained in
the Registration Statement and in accordance with the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement"), dated as of July 20,
1998, among SunTrust, Sub and Crestar, attached as Annex A to the Joint Proxy
Statement/Prospectus.
In so acting, I have reviewed the Registration Statement and the Merger
Agreement. I also have reviewed such matters of law and examined and relied
upon the accuracy of original, certified, conformed or photographic copies of
such records, agreements, certificates and other documents as I have deemed
necessary or appropriate to enable me to render the opinions set forth below.
In all such examinations, I have assumed the genuineness of signatures on
original documents and the conformity to such original documents of all copies
submitted to us as certified, conformed or photographic copies and, as to
certificates of public officials, I have assumed the same to have been properly
given and to be accurate. I also have relied, as to various matters of fact
relating to the opinions set forth below, on certificates of public officials
and officers of SunTrust and on the accuracy of the factual matters stated in
the representations and warranties made by SunTrust in the Merger Agreement.
Based upon the foregoing and subject to the limitations, qualifications
and assumptions set forth below, I am of the opinion that, subject to the
approval of the shareholders of SunTrust of the Merger Agreement and the Stock
Issuance (as such term is defined in the Joint Proxy Statement/Prospectus), the
shares of common stock, $1.00 par value per share, to be issued in connection
with the Merger have been duly authorized and, when issued in accordance with
the terms of the Merger Agreement, will be validly issued, fully paid and
nonassessable.
I am a member of the Bar of the State of Georgia and, accordingly, do not
purport to express any opinion herein concerning any law other than the laws of
the State of Georgia and the federal law of the United States.
This opinion is given as of the date hereof, and I assume no obligation to
advise you after the date hereof of facts or circumstances that come to my
attention or changes in law that occur which could affect the opinions
contained herein. This letter is being rendered solely for the benefit of the
Company in connection with the matters addressed herein. This opinion may not
be furnished to or relied upon by any person or entity for any purpose without
prior written consent.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Joint Proxy Statement/Prospectus that is included in the
Registration Statement.
Very truly yours,
/s/ Raymond D. Fortin
---------------------
Raymond D. Fortin
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 30,
1998 included in SunTrust Banks, Inc.'s Form 10-K for the year ended December
31, 1997 and to all references to our firm included in this registration
statement.
/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 24, 1998
EXHIBIT 23.4
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use of our report included in Crestar Financial
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the proxy statement/prospectus. Our report refers to our
reliance on another auditors' report with respect to amounts related to
Citizens Bancorp for 1996 and 1995 included in the aforementioned consolidated
financial statements.
/s/ KPMG PEAT MARWICK LLP
Richmond, Virginia
September 23, 1998
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of SunTrust Banks, Inc. on Form S-4 of our report dated January 16,
1997 on the consolidated financial statements of Citizens Bancorp as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, which is incorporated by reference in the Annual Report on
Form 10-K of Crestar Financial Corporation for the year ended December 31,
1997.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
September 23, 1998
EXHIBIT 23.8
CONSENT OF RICHARD G. TILGHMAN
The undersigned hereby consents, pursuant to Rule 438 of the Securities
Act of 1933, as amended, to the references to him in the Joint Proxy
Statement/Prospectus of SunTrust Banks, Inc. and Crestar Financial Corporation,
which is part of this Registration Statement on Form S-4 of SunTrust Banks,
Inc., with respect to his being elected or appointed as a director of SunTrust
Banks, Inc. under the circumstances described therein.
/s/ Richard G. Tilghman
------------------------------
Richard G. Tilghman
