AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998
REGISTRATION NO. 333 - 61539
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 2
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>
[GRAPHIC]
[GRAPHIC]
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 $1.38 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:
December 23, 1998, 3:00 p.m.
Room 10
SunTrust Bank, Atlanta Tower
25 Park Place, N.E.
Atlanta, Georgia
For Crestar shareholders:
December 23, 1998, 9:30 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.
/s/ L. Phillip Humann /s/ Richard G. Tilghman
- --------------------- -----------------------
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
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 NOVEMBER , 1998 AND IT
IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT NOVEMBER , 1998.
<PAGE>
<PAGE>
SUNTRUST BANKS, INC.
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On December 23, 1998
A Special Meeting of Shareholders of SunTrust Banks, Inc. ("SunTrust") will
be held on December 23, 1998, at 3:00 p.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 October 30, 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
/s/ Raymond D. Fortin
---------------------
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>
CRESTAR FINANCIAL CORPORATION
919 EAST MAIN STREET
P.O. BOX 26665
RICHMOND, VA 23261-6665
RICHARD G. TILGHMAN CRESTAR
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 23, 1998
A Special Meeting of shareholders of Crestar Financial Corporation
("Crestar") will be held at 9:30 a.m. on December 23, 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 October 30,
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
/s/ Linda F. Rigsby
-------------------
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>
<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 23.
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 $1.38 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 $1.3248. 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 40 and 41.
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 issuance of
SunTrust Common Stock in the Merger. 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 will take place at 9:30 a.m. on December 23, 1998, and
the SunTrust Meeting will take place at 3:00 p.m. on December 23, 1998. 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
Investor Relations
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. 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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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
Recent Developments ................................ 5
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 .................................... 15
THE MERGER ............................................ 17
Structure of the Merger ............................ 17
Background of and Reasons for the Merger ........... 17
Opinions of Financial Advisors ..................... 23
Exchange of Crestar Common Stock for SunTrust
Common Stock ..................................... 30
Terms of the Merger Agreement ...................... 31
Interests of Certain Persons in the Merger ......... 35
Accounting Treatment ............................... 37
Resales of SunTrust Common Stock ................... 38
Regulatory Approvals ............................... 38
Appraisal Rights ................................... 40
Material Federal Income Tax Consequences ........... 40
The Stock Option Agreements ........................ 41
Crestar Rights Agreement ........................... 45
MANAGEMENT AND OPERATIONS AFTER
THE MERGER ............................................ 46
COMPARATIVE RIGHTS OF
SHAREHOLDERS .......................................... 47
EXPERTS ............................................... 55
LEGAL MATTERS ......................................... 55
SHAREHOLDER PROPOSALS ................................. 55
WHERE YOU CAN FIND MORE
INFORMATION ........................................... 56
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION ........................ 58
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 56).
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 15)
SUNTRUST. The SunTrust Meeting will be held at Room 10 SunTrust Bank,
Atlanta Tower, 25 Park Place, N.E., Atlanta, Georgia, at 3:00 p.m., local time,
on December 23, 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 9:30 a.m., local time,
on December 23, 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 October 30, 1998, the SunTrust Record Date. As of such date, there
were 209,568,155 shares of SunTrust Common Stock issued and outstanding held by
approximately 30,221 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 October 30, 1998, the Crestar Record Date. On such date, there were
114,144,118 shares of Crestar Common Stock issued and outstanding held by
approximately 20,807 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, had voting power with respect to an
aggregate of 5,268,754 shares of SunTrust Common Stock, or approximately 2.5% 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, had voting power with respect to an
aggregate of 1,944,189 shares of Crestar Common Stock, or approximately 1.7% 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 23.
OPINIONS OF FINANCIAL ADVISORS (PAGE 23)
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. Morgan Stanley subsequently confirmed its July 19, 1998
opinion by delivery to the Crestar Board of a written opinion dated as of the
date of this document. 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 31)
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 -- Material 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;
2
<PAGE>
o the Crestar Shareholders or the SunTrust Shareholders do not approve
the Merger Agreement;
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 41)
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 35)
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
3
<PAGE>
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 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 35 AND 46)
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 37)
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 38)
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 38)
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.
The application and notice filed with the Federal Reserve Board was
approved on October 28, 1998. The State Corporation Commission of Virginia
approved the Merger on October 26, 1998. All other necessary applications and
notices have been filed.
We cannot predict whether or when we will obtain all required regulatory
approvals that have not already been obtained.
APPRAISAL RIGHTS (PAGE 40)
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 47)
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>
RECENT DEVELOPMENTS
In connection with the review by the Staff of the Securities and Exchange
Commission of documents related to the Merger, and the Staff's comments thereon,
SunTrust has lowered its provision for loan losses in 1996, 1995 and 1994 by $40
million, $35 million and $25 million, respectively. The effect of this action
was to increase SunTrust's net income in those years by $24.4 million, $21.4
million and $15.3 million, respectively. Further, as of December 31, 1997 and
1996, the reserve for loan losses has been decreased by a total of $100 million
and shareholders' equity has been increased by a total of $61 million. All
amounts included herein have been restated to give effect to the above
adjustments. SunTrust has amended certain of its reports filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, to reflect, among other things, the adjustments to its
historical financial statements resulting from the foregoing. See "Where You Can
Find More Information." All historical financial information for SunTrust and
all pro forma financial information for SunTrust and Crestar combined included
in this document has been adjusted to reflect the adjustments to SunTrust's loan
loss provision discussed above. See " -- Selected Financial Data" and "Unaudited
Pro Forma Condensed Combined Financial Information."
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
November 11, 1998. July 17, 1998 was the last full trading day prior to our
announcement of the signing of the Merger Agreement. November 11, 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
November 11, 1998 ......... 71.125 68.8125 68.875 67.125 64.625 65.00
<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
November 11, 1998 ......... 68.28 66.06 66.12
</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
30,221 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 November 11, 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 ...................................... 87.75 54.00 .25
Fourth quarter (through November 11, 1998) ......... 74.125 55.06 .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
20,807 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 November 11, 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 ...................................... 75.13 48.94 .33
Fourth quarter (through November 11, 1998) ......... 69.75 51.44 N/A
</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 $1.38 per share,
effective as of the first quarterly dividend date to occur after the Merger.
Crestar's current annual dividend rate is $1.32 per share. At the dividend rate
of $1.38 per share, the pro forma equivalent dividend per share for current
Crestar Shareholders would be $1.3248 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 58).
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 56). Figures for the nine months ended September 30, 1998 and
1997 are unaudited, but SunTrust and Crestar each believes that its own
nine-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 nine 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,
NINE MONTHS ENDED ------------------------------------
SEPTEMBER 30, 1998 1997 1996 1995
------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE OF COMMON STOCK:
SunTrust
Historical
Diluted ....................................... $ 2.64 $ 3.13 $ 2.87 $ 2.56
Basic ......................................... 2.68 3.17 2.91 2.59
Pro forma combined ..............................
Diluted ....................................... 2.56 3.04 2.60 2.38
Basic ......................................... 2.59 3.09 2.63 2.41
Crestar
Historical
Diluted ....................................... 2.30 2.77 1.95 1.92
Basic ......................................... 2.33 2.80 1.97 1.95
Pro forma equivalent (1)
Diluted ....................................... 2.45 2.92 2.49 2.28
Basic ......................................... 2.49 2.97 2.53 2.31
CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK:
SunTrust
Historical ...................................... $ .750 $ .925 $ .825 $ .740
Pro forma combined (2) .......................... .750 .925 .825 .740
Crestar
Historical (3) .................................. .950 .870 1.275 .875
Pro forma equivalent (1) ........................ .720 .888 .792 .710
BOOK VALUE PER SHARE AT PERIOD END:
SunTrust
Historical ...................................... $ 25.29 $ 25.06 $ 22.41 $ 19.08
Pro forma combined .............................. 23.95 23.10 20.62 18.35
Crestar
Historical ...................................... 20.51 18.49 16.20 16.12
Pro forma equivalent (1) ........................ 23.00 22.18 19.79 17.61
</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
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
-----------------------------------------
1998 1997
-------------------- --------------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest and dividend income ................ $ 2,920.1 $ 2,696.4
Interest expense ............................ 1,437.0 1,287.5
------------ ------------
Net interest income ......................... 1,483.1 1,408.9
Provision for loan losses ................... 93.5 84.4
------------ ------------
Net interest income after provision for
loan losses ................................ 1,389.6 1,324.5
Noninterest income .......................... 876.4 686.9
Noninterest expense ......................... 1,441.5 1,251.7
------------ ------------
Income before provision for income tax 824.5 759.7
Provision for income taxes .................. 269.8 264.6
------------ ------------
Net income .................................. $ 554.7 $ 495.1
============ ============
Net interest income (taxable-equivalent) $ 1,506.6 $ 1,436.9
PER COMMON SHARE (1)
Net income-diluted .......................... $ 2.64 $ 2.31
Net income-basic ............................ 2.68 2.34
Dividends paid .............................. 0.750 0.675
SELECTED AVERAGE BALANCES
Total assets (2) ............................ $ 59,668.5 $ 53,600.0
Earnings assets (2) ......................... 54,662.3 49,338.4
Loans (5) ................................... 41,370.6 36,938.7
Deposits .................................... 36,456.7 35,906.9
Realized shareholders' equity ............... 3,418.9 3,222.3
Total shareholders' equity (2) .............. 5,681.7 5,083.1
AT PERIOD END
Total assets (2) ............................ $ 60,841.3 $ 55,554.2
Earning assets (2) .......................... 55,878.9 50,892.6
Loans (5) ................................... 42,889.5 38,475.5
Reserve for loan losses ..................... 666.1 647.1
Deposits .................................... 36,483.0 36,217.1
Long-term debt .............................. 4,605.3 3,026.2
Realized shareholders' equity ............... 3,496.0 3,172.2
Total shareholders' equity (2) .............. 5,284.4 5,050.1
RATIOS AND OTHER DATA
ROA (2) ..................................... 1.33%(3) 1.32%(3)
ROE (2) ..................................... 21.69 (3) 20.54 (3)
Net interest margin (2) ..................... 3.95 (3) 4.15 (3)
Efficiency ratio ............................ 60.5 58.9
Tier 1 capital ratio (4) .................... 7.49 7.71
Total capital ratio (4) ..................... 12.83 11.29
Tier 1 leverage ratio (4) ................... 7.10 6.74
Total shareholders' equity to assets ........ 8.69 9.09
Nonperforming assets to total loans plus
other real estate owned .................... 0.37 (3) 0.50 (3)
Common dividend payout ratio ................ 28.3 29.0
Full-time equivalent employees .............. 21,870 21,060
Average common shares-diluted (in
thousands) ................................. 210,297 214,466
Average common shares-basic (in
thousands) ................................. 207,110 211,289
<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 75.9 77.1 112.8 189.1
----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ................................ 1,777.4 1,708.3 1,599.3 1,507.0 1,382.5
Noninterest income .......................... 934.2 818.0 713.1 700.0 726.5
Noninterest expense ......................... 1,685.6 1,583.1 1,451.5 1,400.0 1,408.4
----------- ----------- ----------- ----------- -----------
Income before provision for income tax 1,026.0 943.2 860.9 807.0 700.6
Provision for income taxes .................. 358.7 302.2 274.1 269.0 226.9
----------- ----------- ----------- ----------- -----------
Net income .................................. $ 667.3 $ 641.0 $ 586.8 $ 538.0 $ 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 $ 2.87 $ 2.56 $ 2.32 $ 1.99
Net income-basic ............................ 3.17 2.91 2.59 2.35 2.01
Dividends paid .............................. 0.925 0.825 0.740 0.660 0.580
SELECTED AVERAGE BALANCES
Total assets (2) ............................ $ 54,372.0 $ 47,788.9 $ 43,106.4 $ 40,495.6 $ 37,524.9
Earnings assets (2) ......................... 46,996.3 41,831.0 38,401.4 36,111.0 34,047.3
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 ............... 3,219.4 3,306.6 3,072.9 2,964.0 2,875.1
Total shareholders' equity (2) .............. 5,079.0 4,664.2 3,925.9 3,575.4 2,877.2
AT PERIOD END
Total assets (2) ............................ $ 58,082.7 $ 52,568.2 $ 46,531.5 $ 42,734.1 $ 40,728.4
Earning assets (2) .......................... 49,743.3 45,182.1 40,530.0 38,045.6 35,904.5
Loans (5) ................................... 40,135.5 35,404.2 31,301.4 28,548.9 25,292.1
Reserve for loan losses ..................... 651.8 625.8 638.9 622.0 561.2
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 ............... 3,211.5 3,339.2 3,147.6 2,898.5 2,845.8
Total shareholders' equity (2) .............. 5,260.4 4,941.0 4,306.2 3,468.6 3,609.6
RATIOS AND OTHER DATA
ROA (2) ..................................... 1.30% 1.41% 1.41% 1.36% 1.26%
ROE (2) ..................................... 20.73 19.39 19.10 18.15 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) .................... 7.19 7.59 7.86 7.99 8.88
Total capital ratio (4) ..................... 12.33 10.99 9.79 10.09 10.55
Tier 1 leverage ratio (4) ................... 6.59 6.51 6.78 6.71 6.82
Total shareholders' equity to assets ........ 9.06 9.40 9.25 8.12 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
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
-----------------------------------------
1998 1997
-------------------- --------------------
SUMMARY OF OPERATIONS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest and dividend income ................... $ 1,301.1 $ 1,166.1
Interest expense ............................... 621.7 511.0
------------ ------------
Net interest income ............................ 679.4 655.1
Provision for loan losses ...................... 54.0 84.8
------------ ------------
Net interest income after provision for loan
losses ........................................ 625.4 570.3
Noninterest income ............................. 384.1 310.6
Noninterest expense ............................ 602.9 532.2
------------ ------------
Income before provision for income tax ......... 406.6 348.7
Provision for income taxes ..................... 145.4 121.6
------------ ------------
Net income ..................................... $ 261.2 $ 227.1
============ ============
Net interest income (taxable-equivalent) ....... $ 689.0 $ 663.4
PER COMMON SHARE (1)
Net income-diluted ............................. $ 2.30 $ 2.03
Net income-basic ............................... 2.33 2.05
Dividends paid ................................. 0.950 0.850
SELECTED AVERAGE BALANCES
Total assets (2) ............................... $ 24,769.3 $ 21,519.9
Earnings assets (2) ............................ 22,682.8 19,601.5
Loans (3) ...................................... 17,495.6 14,742.1
Deposits ....................................... 16,874.0 15,633.0
Realized shareholders' equity .................. 2,145.5 1,877.2
Total shareholders' equity (2) ................. 2,149.9 1,848.7
AT PERIOD END
Total assets (2) ............................... $ 25,772.4 $ 23,188.4
Earning assets (2) ............................. 23,526.1 20,693.9
Loans (3) ...................................... 18,386.5 15,530.2
Reserve for loan losses ........................ 246.0 278.3
Deposits ....................................... 17,043.1 16,109.7
Long-term debt ................................. 1,127.3 799.4
Realized shareholders' equity .................. 2,274.9 1,951.4
Total shareholders' equity (2) ................. 2,310.8 1,939.6
RATIOS AND OTHER DATA
ROA (as reported) (2) .......................... 1.41%(4) 1.41%(4)
ROA (conformed) (5) ............................ 1.41 (4) 1.40 (4)
ROE (as reported) (2) .......................... 16.20 (4) 16.38 (4)
ROE (conformed) (5) ............................ 16.23 (4) 16.13 (4)
Net interest margin (as reported) (2) .......... 4.04 (4) 4.51 (4)
Net interest margin (conformed) (5) ............ 4.05 (4) 4.50 (4)
Efficiency ratio ............................... 56.2 54.6
Tier 1 capital ratio (6) ....................... 10.43 10.45
Total capital ratio (6) ........................ 13.38 13.00
Tier 1 leverage ratio (6) ...................... 9.12 9.27
Total shareholders' equity to assets ........... 8.97 8.36
Nonperforming assets to total loans plus
other real estate owned ....................... 0.44 (4) 0.60 (4)
Common dividend payout ratio ................... 40.7 41.4
Full-time equivalent employees ................. 8,209 7,934
Average common shares-diluted (in
thousands) .................................... 113,542 111,754
Average common shares-basic (in thousands) 112,117 110,518
<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
NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE
SUMMARY OF OPERATIONS DATA)
<S> <C>
Interest and dividend income ............................................. $ 4,221.2
Interest expense ......................................................... 2,058.7
------------
Net interest income ...................................................... 2,162.5
Provision for loan losses ................................................ 147.5
------------
Net interest income after provision for loan losses ...................... 2,015.0
Noninterest income ....................................................... 1,260.5
Noninterest expense ...................................................... 2,044.4
------------
Income before provision for income tax ................................... 1,231.1
Provision for income taxes ............................................... 415.2
------------
Net income ............................................................... $ 815.9
============
Net interest income (taxable-equivalent) ................................. $ 2,195.6
PER COMMON SHARE
Net income-diluted ....................................................... $ 2.56
Net income-basic ......................................................... 2.59
Dividends paid (4) ....................................................... 0.750
SELECTED AVERAGE BALANCES
Total assets (1) ......................................................... $ 84,437.8
Earnings assets (1) ...................................................... 77,345.1
Loans .................................................................... 58,866.2
Deposits ................................................................. 53,330.7
Realized shareholders' equity ............................................ 5,564.4
Total shareholders' equity (1) ........................................... 7,831.6
AT PERIOD END
Total assets (1) ......................................................... $ 86,613.7
Earning assets (1) ....................................................... 79,405.0
Loans (5) ................................................................ 61,276.0
Reserve for loan losses .................................................. 912.1
Deposits ................................................................. 53,526.1
Long-term debt ........................................................... 5,732.6
Realized shareholders' equity ............................................ 5,770.9
Total shareholders' equity (1) ........................................... 7,595.2
RATIOS AND OTHER DATA
ROA (1) .................................................................. 1.35%(2)
ROE (1) .................................................................. 19.60 (2)
Net interest margin (1) .................................................. 3.98 (2)
Efficiency ratio ......................................................... 59.2
Tier 1 capital ratio (3) ................................................. 8.34
Total capital ratio (3) .................................................. 12.99
Tier 1 leverage ratio (3) ................................................ 7.72
Total shareholders' equity to assets ..................................... 8.77
Nonperforming assets to total loans plus other real estate owned ......... .38 (2)
Common dividend payout ratio ............................................. 32.3
Full-time equivalent employees ........................................... 30,079
Average common shares-diluted (in thousands) ............................. 319,297
Average common shares-basic (in thousands) ............................... 314,742
<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 ................................................ 225.1 171.8 143.4
----------- ----------- -----------
Net interest income after provision for loan losses ...................... 2,545.6 2,478.7 2,347.9
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 1,266.5 1,211.4
Provision for income taxes ............................................... 524.3 407.2 408.7
----------- ----------- -----------
Net income ............................................................... $ 977.1 $ 859.3 $ 802.7
=========== =========== ===========
Net interest income (taxable-equivalent) ................................. $ 2,818.5 $ 2,700.6 $ 2,552.1
PER COMMON SHARE
Net income-diluted ....................................................... $ 3.04 $ 2.60 $ 2.38
Net income-basic ......................................................... 3.09 2.63 2.41
Dividends paid (4) ....................................................... 0.925 0.825 0.740
SELECTED AVERAGE BALANCES
Total assets (1) ......................................................... $ 76,181.7 $ 69,376.9 $ 63,542.2
Earnings assets (1) ...................................................... 66,859.4 61,550.3 57,004.5
Loans .................................................................... 52,590.9 47,257.8 43,758.9
Deposits ................................................................. 51,654.2 50,289.5 47,240.2
Realized shareholders' equity ............................................ 5,124.2 5,108.0 4,798.2
Total shareholders' equity (1) ........................................... 6,960.9 6,440.9 5,542.6
AT PERIOD END
Total assets (1) ......................................................... $ 83,011.2 $ 75,430.1 $ 68,864.1
Earning assets (1) ....................................................... 72,282.5 65,922.2 60,575.8
Loans (5) ................................................................ 56,777.2 50,112.7 46,022.4
Reserve for loan losses .................................................. 933.2 894.7 913.3
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 ............................................ 5,272.1 5,140.0 4,920.0
Total shareholders' equity (1) ........................................... 7,320.2 6,720.5 6,091.8
RATIOS AND OTHER DATA
ROA (1) .................................................................. 1.34% 1.28% 1.29%
ROE (1) .................................................................. 19.07 16.82 16.73
Net interest margin (1) .................................................. 4.22 4.39 4.48
Efficiency ratio ......................................................... 57.5 61.4 60.5
Tier 1 capital ratio (3) ................................................. 8.04 8.47 8.33
Total capital ratio (3) .................................................. 12.39 11.71 10.58
Tier 1 leverage ratio (3) ................................................ 7.70 7.12 7.09
Total shareholders' equity to assets ..................................... 8.82 8.91 8.85
Nonperforming assets to total loans plus other real estate owned ......... 0.42 .73 .83
Common dividend payout ratio ............................................. 33.4 32.9 31.9
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.
(5) Includes loans classified as held for sale.
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 for any increase or decrease in the market
prices of Crestar Common Stock or SunTrust Common Stock. The market 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 market 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 December 23, 1998 at the times 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 December 23, 1998 at 3:00
p.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 October 30, 1998 (the "SunTrust Record
Date") are entitled to notice of and to vote at the SunTrust Meeting. On such
date, there were 209,568,155 issued and outstanding shares of SunTrust Common
Stock held by approximately 30,221 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 of
SunTrust, including their affiliates, had voting power with respect to an
aggregate of 5,268,754 shares of SunTrust Common Stock or approximately 2.5% 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.
VOTING BY PARTICIPANTS IN CERTAIN SUNTRUST EMPLOYEE BENEFITS PLANS.
Participants in the SunTrust Banks, Inc. 401K Plan will receive cards with
voting instructions to the trustee of the plan as to the voting of shares of
SunTrust Common Stock held in the plan. The trustee will vote shares of SunTrust
Common Stock allocated to participants' accounts in the same manner as
instructed by participants, but shares of SunTrust Common Stock allocated to
participants' accounts for which it does not receive instructions will not be
voted by the trustee.
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.
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CRESTAR MEETING
GENERAL. The Crestar Meeting will be held on December 23, 1998 at 9:30
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.
RECORD DATE; VOTING POWER. Only holders of record of shares of Crestar
Common Stock at the close of business on October 30, 1998 (the "Crestar Record
Date") are entitled to notice of and to vote at the Crestar Meeting. As of such
date, there were 114,144,118 issued and outstanding shares of Crestar Common
Stock held by approximately 20,807 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, had voting power with respect to an
aggregate of 1,944,189 shares of Crestar Common Stock or approximately 1.7% 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.
VOTING BY PARTICIPANTS IN CERTAIN CRESTAR EMPLOYEE BENEFITS PLANS.
Participants in the Crestar Employees' Thrift and Profit Sharing Plan will
receive cards with voting instructions to the trustee of the plan as to the
voting of shares of Crestar Common Stock held in the plan. The trustee will vote
shares of Crestar Common Stock allocated to participants' accounts in the same
manner as instructed by participants, but shares of Crestar Common Stock
allocated to participants' accounts for which it does not receive instructions
will not be voted by the trustee.
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.
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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.
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 corporation, 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 corporation
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 the Merger Agreement and the transactions contemplated thereby,
including the Stock Issuance, to be 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. During this due
diligence review, each of SunTrust and Crestar provided stand-alone earnings
estimates for 1998 and 1999 to the other party and its financial advisor. See "
- -- SunTrust's Reasons for the Merger" and " -- Crestar's Reasons for the
Merger."
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 " -- Material 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."
Additionally, in considering the opinion of Lehman Brothers, the SunTrust
Board was advised that in arriving at such opinion, Lehman Brothers relied upon
median estimates of SunTrust's and Crestar's 1998 and 1999 earnings per share
and earnings per share growth rates thereafter as published by Institutional
Brokers Estimate System ("IBES"). During each company's due diligence review on
July 18 and 19, 1998, the senior managements of SunTrust and Crestar provided
Lehman Brothers with their respective earnings estimates for 1998 and 1999. None
of such earnings information was prepared with a view toward public disclosure,
none of such information, as set forth below, has been updated since the date of
the Merger Agreement and none of such information took into account any of the
synergies or charges expected to result from the Merger, any other
Merger-related adjustments or the suspension of SunTrust's common stock
repurchase program. All of the earnings estimates for each of SunTrust and
Crestar were materially consistent with median IBES forecasts. The senior
management of SunTrust advised Lehman Brothers that they expected SunTrust's
stand-alone 1998 and 1999 earnings per share to be $3.57 and $4.00,
respectively, on a diluted basis (compared with the median IBES estimates at
that time of $3.50 and $3.90, respectively). The senior management of Crestar
advised Lehman Brothers that Crestar's plan indicated stand-alone 1998 and 1999
earnings per share to be $3.10 (net of non-recurring items of $0.17) and $3.45,
respectively, on a diluted basis (compared with the median IBES estimates at
that time of $3.10 and $3.40, respectively). In light of the consistency of
SunTrust's and Crestar's senior management earnings estimates with median IBES
estimates, Lehman Brothers did not revise its financial analysis to utilize such
earnings estimates, and instead utilized only median IBES earnings estimates in
connection with its quantitative analyses performed in arriving at its
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opinion. The senior management earnings estimates were utilized by Lehman
Brothers for the purpose of confirming that such estimates were substantially
consistent with IBES estimates, and such senior management estimates were not
included in the presentation of Lehman Brothers to the SunTrust Board in
connection with the SunTrust Board's consideration of the Merger Agreement and
the transactions contemplated thereby. There can be no certainty that the
results reflected in the earnings estimates prepared by the senior managements
of SunTrust and Crestar will be achieved or that actual results will not vary
materially from the estimated results. For more information concerning the
factors that could affect actual results, see "A Warning About Forward-Looking
Information."
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.
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
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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.
(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 " -- Material 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."
Additionally, in considering the opinion of Morgan Stanley, the Crestar
Board was advised that in arriving at such opinion, Morgan Stanley relied upon
median estimates of SunTrust's and Crestar's 1998 and 1999 earnings per share
and earnings per share growth rates thereafter as published by IBES. During each
company's due diligence review on July 18 and 19, 1998, the senior managements
of SunTrust and Crestar provided Morgan Stanley with their respective earnings
estimates for 1998 and 1999. None of such earnings information was prepared with
a view toward public disclosure, none of such information, as set forth below,
has been updated since the date of the Merger Agreement and none of such
information took into account any of the synergies or charges expected to result
from the Merger, any other Merger- related adjustments or the suspension of
SunTrust's common stock repurchase program. All of the earnings estimates for
each of SunTrust and Crestar were materially consistent with median IBES
forecasts. The senior management of SunTrust advised Morgan Stanley that they
expected SunTrust's stand-alone 1998 and 1999 earnings per share to be $3.57 and
$4.00, respectively, on a diluted basis (compared with the median IBES estimates
at that time of $3.50 and $3.90,
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respectively). The senior management of Crestar advised Morgan Stanley that
Crestar's plan indicated stand-alone 1998 and 1999 earnings per share to be
$3.10 (net of non-recurring items of $0.17) and $3.45, respectively, on a
diluted basis (compared with the median IBES estimates at that time of $3.10 and
$3.40, respectively). The senior management earnings estimates were utilized by
Morgan Stanley for the purpose of confirming that such estimates were
substantially consistent with IBES estimates, and such senior management
estimates were not included in the presentation of Morgan Stanley to the Crestar
Board in connection with the Crestar Board's consideration of the Merger
Agreement and the transactions contemplated thereby. There can be no certainty
that the results reflected in the earnings estimates prepared by the senior
managements of SunTrust and Crestar will be achieved or that actual results will
not vary materially from the estimated results. For more information concerning
the factors that could affect actual results, see "A Warning About
Forward-Looking Information."
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 arms-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.
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 annual 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;
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(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 performing its
quantitative analyses used 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.
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 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
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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 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
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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 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
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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).
Morgan Stanley subsequently confirmed its July 19, 1998 opinion by delivery to
the Crestar Board of a written opinion dated as of the date of this document.
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 DATED AS OF THE DATE OF THIS
DOCUMENT, 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 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,
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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 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
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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.
In connection with its written opinion dated as of the date of this
document, Morgan Stanley confirmed the appropriateness of its reliance on the
analyses used to render its July 19, 1998 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions upon which such
analyses were based and the factors considered in connection therewith.
The 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, 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 of 0.20% of the aggregate consideration payable to Crestar Shareholders
under the Merger Agreement upon consummation of the Merger. Based on the current
market price of SunTrust Common Stock as of the date of this document, the
estimated fee payable to Morgan Stanley under the preceding formula would be
$15.8 million. 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
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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
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 (the "Closing Date") 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
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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
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
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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
(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
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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 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
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to SunTrust, its approval or recommendation of the Merger Agreement or the
Merger or (y) approves, recommends or 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
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defined as (i) continued and willful failure to perform duties or (ii) conduct
demonstrably and materially injurious to Crestar's successor or its affiliates.
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)
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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 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 up to
approximately 3,000,000 shares of SunTrust Common Stock held in the treasury of
SunTrust to the public, which sales may be made directly by SunTrust or through
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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.
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
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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
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.
The application and notice filed with the Federal Reserve Board pursuant to
the BHCA was approved on October 28, 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 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 was
approved by the State Corporation Commission of Virginia, acting pursuant to
title 6.1, chapter 15 of the Virginia Code, on October 26, 1998. 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, as amended,
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."
MATERIAL 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 AND TAX CONSEQUENCES OF THE MERGER. In connection with the
filing of the Registration Statement, King & Spalding, counsel to SunTrust, has
delivered to SunTrust its opinion (the "Tax Opinion") that, 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 and the U.S. federal income tax
consequences of the Merger will be that: (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 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.
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Each party's obligation to consummate the Merger is conditioned upon the
receipt by each of SunTrust and Crestar of its respective counsel's opinion,
dated as of the Effective Time, that, 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 "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.
CERTAIN CONSIDERATIONS WITH RESPECT TO OPINIONS. The Tax Opinion, 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 Opinion
is not binding on the Internal Revenue Service or the courts and does 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 114,144,118 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
209,568,155 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 Common 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 Crestar 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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<PAGE>
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
53
<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.
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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 be 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 4,800 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 have been 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.
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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." Crestar's latest annual report and quarterly report can also be
accessed through Crestar's Internet World Wide Web site at
"http//www.crestar.com." 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 on November 13, 1998
Quarterly Reports on Form 10-Q ................ Quarters ended September 30, 1998, June 30, 1998, as amended
November 13, 1998 and March 31, 1998, as amended on Novem-
ber 13, 1998
Current Reports on Form 8-K ................... Dated November 13, 1998, 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 September 30, 1998, 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
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<PAGE>
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:
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 November , 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.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1998, combines the historical consolidated balance sheets of
SunTrust and Crestar as if the Merger had been effective on September 30, 1998,
after giving effect to certain adjustments. The Unaudited Pro Forma Combined
Condensed Statements of Income for the nine months ended September 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."
In connection with the review by the Staff of the Securities and Exchange
Commission of documents related to the Merger, and the Staff's comments thereon,
SunTrust has lowered its provision for loan losses in 1996, 1995 and 1994 by $40
million, $35 million and $25 million, respectively. The effect of this action
was to increase SunTrust's net income in those years by $24.4 million, $21.4
million and $15.3 million, respectively. Further, as of December 31, 1997 and
1996, the reserve for loan losses has been decreased by a total of $100 million
and shareholders' equity has been increased by a total of $61 million. SunTrust
has amended certain of its reports filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, to
reflect, among other things, the adjustments to its historical financial
statements resulting from the foregoing. See "Where You Can Find More
Information." All historical financial information for SunTrust and all pro
forma financial information for SunTrust and Crestar combined included in this
document reflects the adjustments to SunTrust's loan loss provision discussed
above.
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<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
---------------------------------------------------------------------
SUNTRUST CRESTAR ADJUSTMENTS COMBINED
---------------- ---------------- ------------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ............................. $ 2,190,913 $ 887,047 $ 3,077,960
Trading account assets .............................. 200,479 7,226 207,705
Securities Held to Maturity ......................... -- 499,253 499,253
Securities Available for Sale ....................... 11,455,372 4,008,852 15,464,224
Funds sold .......................................... 1,333,582 624,245 1,957,827
Loans ............................................... 42,889,478 18,386,495 61,275,973
Reserve for loan losses ............................. (666,146) (245,992) (912,138)
------------ ------------ ------------
Net Loans ........................................... 42,223,332 18,140,503 -- 60,363,835
Premises and equipment .............................. 1,023,638 474,747 1,498,385
Intangible assets ................................... 442,077 193,886 635,963
Other assets ........................................ 1,971,925 936,652 2,908,577
------------ ------------ ------------
Total Assets ....................................... $ 60,841,318 $ 25,772,411 -- $ 86,613,729
============ ============ == ============
LIABILITIES
Deposits
Noninterest-bearing deposits ....................... $ 8,314,365 $ 3,520,486 $ 11,834,851
Interest-bearing deposits .......................... 28,168,612 13,522,589 41,691,201
------------ ------------ ------------
Total deposits ................................... 36,482,977 17,043,075 -- 53,526,052
Funds purchased ..................................... 9,701,770 3,670,570 13,372,340
Other short-term borrowings ......................... 1,400,450 921,965 2,322,415
Long-term debt ...................................... 4,605,319 1,127,262 152,500 (B) 5,885,081
Other liabilities ................................... 3,366,452 698,733 4,065,185
------------ ------------ ------------
Total liabilities .................................. 55,556,968 23,461,605 152,500 79,171,073
------------ ------------ ------- ------------
STOCKHOLDERS' EQUITY
Preferred stock ..................................... -- --
Common stock ........................................ 213,108 563,217 (450,574)(A) 325,751
Additional paid in capital .......................... 389,583 404,001 450,574 (A) 1,244,158
Retained earnings ................................... 3,210,549 1,307,713 (152,500)(B) 4,365,762
Treasury stock and other ............................ (317,287) -- (317,287)
------------ ------------ ------------
Realized shareholders' equity ...................... 3,495,953 2,274,931 (152,500) 5,618,384
Accumulated Other Comprehensive Income .............. 1,788,397 35,875 1,824,272
------------ ------------ ------------
Total shareholders' equity ......................... 5,284,350 2,310,806 (152,500) 7,442,656
------------ ------------ -------- ------------
Total liabilities and shareholders' equity ......... $ 60,841,318 $ 25,772,411 -- $ 86,613,729
============ ============ ======== ============
</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 and $30 million for other identified items.
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<PAGE>
SUNTRUST BANKS, INC. AND CRESTAR FINANCIAL CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------------
SUNTRUST CRESTAR COMBINED
---------------- ---------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .................................. $ 2,456,936 $ 1,062,851 $ 3,519,787
Interest and dividends on investment securities ............. 412,602 223,234 635,836
Other interest income ....................................... 50,603 14,980 65,583
------------ ------------ -----------
Total interest income ...................................... 2,920,141 1,301,065 4,221,206
------------ ------------ -----------
INTEREST EXPENSE
Interest on deposits ........................................ 851,251 393,895 1,245,146
Interest on short-term borrowings ........................... 387,813 176,299 564,112
Interest on long-term debt .................................. 197,973 51,478 249,451
------------ ------------ -----------
Total interest expense ..................................... 1,437,037 621,672 2,058,709
------------ ------------ -----------
NET INTEREST INCOME 1,483,104 679,393 2,162,497
Provision for loan losses ................................... 93,465 53,987 147,452
------------ ------------ -----------
Net interest income after provision for loan losses ......... 1,389,639 625,406 2,015,045
------------ ------------ -----------
NONINTEREST INCOME
Trust and investment advisory income ........................ 354,566 61,537 416,103
Service charges on deposit accounts ......................... 192,026 103,184 295,210
Securities gains (losses) ................................... 1,053 6,103 7,156
Other noninterest income .................................... 328,721 213,307 542,028
------------ ------------ -----------
Total noninterest income ................................... 876,366 384,131 1,260,497
------------ ------------ -----------
NONINTEREST EXPENSE
Personnel expense ........................................... 838,370 325,358 1,163,728
Net occupancy expense ....................................... 99,449 42,659 142,108
Equipment expense ........................................... 95,156 34,076 129,232
Other noninterest expense ................................... 408,513 200,848 609,361
------------ ------------ -----------
Total noninterest expense .................................. 1,441,488 602,941 2,044,429
------------ ------------ -----------
Income before provision for income taxes .................... 824,517 406,596 1,231,113
Provision for income taxes .................................. 269,801 145,418 415,219
------------ ------------ -----------
Net Income ................................................. $ 554,716 $ 261,178 $ 815,894
============ ============ ===========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 2.64 $ 2.30 $ 2.56 (A)
Earnings -- basic ........................................... 2.68 2.33 2.59 (A)
Average common shares -- diluted ............................ 210,297 113,542 319,297 (A)
Average common shares -- basic .............................. 207,110 112,117 314,742 (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, 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.
61
<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 ................................... 75,916 95,890 171,806
----------- ----------- ----------
Net interest income after provision for loan losses ......... 1,708,294 770,420 2,478,714
----------- ----------- ----------
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 .................... 943,200 323,259 1,266,459
Provision for income taxes .................................. 302,185 104,988 407,173
----------- ----------- ----------
Net Income ................................................. $ 641,015 $ 218,271 $ 859,286
=========== =========== ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 2.87 $ 1.95 $ 2.60 (A)
Earnings -- basic ........................................... 2.91 1.97 2.63 (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.
62
<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 ................................... 77,108 66,265 143,373
---------- ---------- ----------
Net interest income after provision for loan losses ......... 1,599,334 748,590 2,347,924
---------- ---------- ----------
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 .................... 860,925 350,459 1,211,384
Provision for income taxes .................................. 274,099 134,572 408,671
---------- ---------- ----------
Net Income ................................................. $ 586,826 $ 215,887 $ 802,713
========== ========== ==========
PER COMMON SHARE DATA
Earnings -- diluted ......................................... $ 2.56 $ 1.92 $ 2.38 (A)
Earnings -- basic ........................................... 2.59 1.95 2.41 (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.
63
<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 consisting of $100 million
for severance and retention, $65 million for conversion costs and $35
million for transaction related costs. Crestar is expected to record $50
million in pre-tax Merger-related charges in 1998 consisting of $20
million for state income tax provision and $30 million for other
identified items.
(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.
64
<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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<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>
<CAPTION>
PAGE
-----
<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' Meetings A-27
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
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
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
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(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
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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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<PAGE>
(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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<PAGE>
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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<PAGE>
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
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<PAGE>
ANNEX B
LEHMAN BROTHERS
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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<PAGE>
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,
/s/ Lehman Brothers
-------------------
LEHMAN BROTHERS
---------------
B-2
<PAGE>
ANNEX C
MORGAN STANLEY DEAN WITTER
November , 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"), have entered into an Amended and Restated Agreement and
Plan of Merger, dated as of July 20, 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
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<PAGE>
benefits expected to result from the Merger, we have assumed 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. 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:
-------------------------
William M. Weiant
Managing Director
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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. Advance 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.
II-8
<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.
II-9
<PAGE>
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 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.*
99.5 Form of Instructions to SunTrust Banks 401(k) Plan Trustee
99.6 Form of Proxy to be used by Crestar Plan Participants.
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.
II-10
<PAGE>
(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 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 November 13, 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
13th day of November, 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
<PAGE>
SUNTRUST BANKS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
ON DECEMBER 23, 1998
The undersigned hereby appoints L. Phillip Humann, John W. Spiegel and
Raymond D. Fortin, and each of them, Proxies, with full power of substitution
and resubstitution, for and in the name of the undersigned, to vote all shares
of common stock, par value $1.00 per share ("Common Stock"), of SunTrust Banks,
Inc. ("SunTrust") which the undersigned would be entitled to vote if personally
present at the Special Meeting of Shareholders to be held on Wednesday, December
23, 1998, at 3:00 p.m. (local time) at Room 10, SunTrust Bank, Atlanta Tower, 25
Park Place, N.E., Atlanta, Georgia, or at any adjournment thereof, upon the
matters described in the accompanying Notice of Special Meeting of Shareholders
and Joint Proxy Statement/Prospectus, receipt of which is hereby acknowledged,
and upon any other business that may properly come before the Special Meeting of
Shareholders or any adjournment thereof. Said Proxies are directed to vote on
the matters described in the Notice of Special Meeting of Shareholders and Joint
Proxy Statement/Prospectus as follows:
1. To approve and adopt (i) the Amended and Restated Agreement and Plan of
Merger, 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"), pursuant to which Sub will merge with and into Crestar and
SunTrust will issue 0.96 shares of Common Stock in exchange for each share of
common stock of Crestar (the "Stock Issuance"), and (ii) the Stock Issuance.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
2. To vote at the discretion of the Proxies upon such other matters as may
properly come before the Special Meeting or any adjournment or postponement
thereof.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR APPROVAL OF EACH OF THE ABOVE-STATED PROPOSALS.
Please sign below exactly as your name
appears on the label. When signing as
attorney, corporate officer or
fiduciary, please give full title as
such. For more than one owner as shown
above, each should sign.
Dated----------------------------------------
Signature(s)---------------------------------
PLEASE DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<S> <C>
5.1 Opinion of Raymond D. Fortin, counsel of the Registrant, as to
the legality of the securities being registered.
8.1 Opinion of King & Spalding regarding certain tax aspects of the merger.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Deloitte & Touche LLP.
99.5 Form of Instructions to SunTrust Banks 401(K) Plan Trustee.
99.6 Form of Proxy to be used by Crestar Plan Participants.
</TABLE>
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
EXHIBIT 8.1
Opinion of Counsel to SunTrust Banks, Inc.
November 12, 1998
SunTrust Banks, Inc.
303 Peachtree Street, N.E.
Atlanta, GA 30308
Re: Federal Income Tax Consequences of Merger of SMR Corporation (Va.), a
Wholly Ownded Subsidiary of SunTrust Banks, Inc., with and into Crestar
Financial Corporation
Ladies and Gentlemen:
We have acted as counsel to SunTrust Banks, Inc. ("SunTrust") in connection
with the Merger (the "Merger") of SMR Corporation (Va.) ("Sub") with and into
Crestar Financial Corporation ("Crestar"), pursuant to the 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 (the
"Merger Agreement"). You have requested our opinion, in our capacity as counsel
to SunTrust, regarding certain federal income tax consequences of the Merger.
We understand that our opinion will be referred to in the Joint Proxy
Statement/Prospectus of SunTrust and Crestar (the "Joint Proxy
Statement/Prospectus") that forms part of the Registration Statement on Form S-4
filed with the Securities and Exchange Commission in connection with the Merger.
We hereby consent to such use of our opinion.
All capitalized terms used herein without definition have the respective
meanings specified in the Joint Proxy Statement/Prospectus. All references
herein to the Code are to the United States Internal Revenue Code of 1986, as
amended.
INFORMATION RELIED ON
In rendering the opinion expressed herein, we have examined such documents
as we have deemed appropriate, including the Merger Agreement. In our
examination of such documents, we have assumed, with your consent, that all
documents submitted to us as photocopies or telecopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate. We also have assumed, with
your consent, that the Merger will be consummated in compliance with the
material terms of the Merger Agreement.
We also have obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various
representatives of SunTrust, Crestar and Sub, including certificates from
officers of SunTrust, Crestar and Sub (the "Certificates") verifying certain
relevant facts that have been represented to us. We have assumed, with your
consent, that the statements contained in the Certificates are true and correct
on the date hereof and will be true and correct at the Effective Time, and that
any representation made in any of the documents referred to herein "to the best
of the knowledge and belief" (or with similar qualification) of any person or
party is true and correct without such qualification. We have not attempted
independently to verify such representations.
OPINION
Based upon the foregoing, it is our opinion that:
(1) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code;
(2) no gain or loss will be recognized by SunTrust, Sub or Crestar as a
result of the Merger;
(3) no gain or loss will be recognized by the Holders of 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;
(4) 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);
<PAGE>
(5) 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
(6) 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.
The opinion expressed herein is based upon existing statutory, regulatory,
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinion is based solely on the documents that we have
examined, the additional information that we have obtained and the accuracy of
the facts set forth in the Certificates. Our opinion cannot be relied upon if
any of the material facts contained in such documents or any such additional
information is, or later becomes, inaccurate. Finally, our opinion is limited to
the tax matters specifically covered thereby, and we have not been asked to
address herein, nor have we addressed herein, any other tax consequences of the
Merger.
Very truly yours,
/s/ King & Spalding
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
(except with respect to the matters discussed in Notes 17 and 18 as to which the
date is November 10, 1998) included in SunTrust Banks, Inc.'s Form 10-K/A 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
November 12, 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
November 12, 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
November 13, 1998
EXHIBIT 99.5
INSTRUCTIONS TO THE SUNTRUST BANKS, INC. 401(K) PLAN TRUSTEE
The undersigned hereby directs that all shares of SunTrust Banks, Inc.
Common Stock allocated to his/her account under the SunTrust Banks, Inc. 401(k)
Plan be voted at the SunTrust Banks, Inc. Special Meeting of Shareholders to be
held December 23, 1998, and at any adjournment thereof, in accordance with the
following instructions for the matters described herein. For any other business
that may properly come before the special meeting, all such shares shall be
voted as the Board of Directors may recommend. This instruction is solicited by
the Board of Directors.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
(arrow) FOLD AND DETACH HERE (arrow)
PLEASE COMPLETE THE CARD
AND RETURN IT IN
THE ENVELOPE PROVIDED
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT PLEASE MARK
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR YOUR VOTES AS [X]
APPROVAL OF EACH OF THE FOLLOWING PROPOSALS INDICATED IN
THIS EXAMPLE.
1. To approve and adopt (i) the Amended and Restated Agreement and Plan of
Merger, dated as of July 20, 1998, by and among SunTrust, Crestar Financial
Corporation ("Crestar") and SMR Corporation (Virginia), a wholly owned
subsidiary of SunTrust ("Sub"), pursuant to which Sub will merge with and into
Crestar and SunTrust will issue 0.96 shares of Common Stock in exchange for each
share of common stock of Crestar (the "Stock Issuance"), and (ii) the Stock
Issuance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To vote at the discretion of the Proxies upon such other matters as may
properly come before the Special Meeting or any adjournment of postponement
thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned acknowledges receipt of
a copy of the Notice of Special Meeting
of Shareholders and Joint Proxy
Statement/Prospectus, dated November
13, 1998.
IMPORTANT: Please date and sign this
instruction exactly as your name or
names appear to the left.
Date------------------------------, 1998
Signature-------------------------------
- --------------------------------------------------------------------------------
(arrow) FOLD AND DETACH HERE (arrow)
SUNTRUST
November 13, 1998
To our employee shareholders:
You and other employees who own SunTrust stock through your 401(k) Plan
account have the opportunity to vote on an important issue that will help
determine the future of our Company -- the merger with Crestar Financial
Corporation. The merger is described in the Proxy Statement, and will help
SunTrust expand into an excellent geographic area and grow through the
introduction of new products and services to our customers. Please vote your
shares and return them to the Plan Trustee in time for the Special Meeting of
Shareholders in December. If you do not respond, your shares will not be voted.
We are sending you two items in this package:
1. The Proxy Statement describing the business of the special shareholder
meeting scheduled for Wednesday, December 23, 1998; and
2. The Instructions to Plan Trustee (reverse side), which you should fill
out and return immediately, following the instructions provided.
Thank you for the contribution you make toward ensuring that SunTrust is
one of the most successful financial institutions in the nation.
Sincerely,
/s/ L. Phillip Humann
L. Phillip Humann
Chairman, President and
Chief Executive Officer
EXHIBIT 99.6
PROXY CARD FOR SHAREHOLDERS WHO ARE NOT Crestar Plan Participations
P R O X Y CRESTAR FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON DECEMBER 23, 1998.
The undersigned hereby directs the Trustee of the Crestar Employees' Thrift
and Profit Sharing Plan, the Crestar Merger Plan for Transferred Employees, the
Crestar Employee Stock Ownership Plan or the American National Savings Bank,
F.S.B. 401(k) Plan to appoint J. Carter Fox, Gordon F. Rainey, Jr., Frank S.
Royal, any one of whom may act and each with the power to appoint his
substitute, to represent and to vote all whole shares of Common Stock of Crestar
Financial Corporation ("Crestar") credited to the undersigned's account in the
Plan(s), at the Special Meeting of Shareholders to be held on December 23 , 1998
at 9:30 a.m. at Crestar's office located at 919 East Main Street, Richmond,
Virginia, and at any adjournment thereof.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
CRESTAR
VOTE BY PHONE
QUICK o EASY o IMMEDIATE
IF YOU VOTED BY TELEPHONE DO NOT MAIL YOUR PROXY CARD
<PAGE>
(Proxy Card for Shareholders who are NOT Crestar Plan Participants)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF THIS
PROXY IS EXECUTED AND DELIVERED BUT NO DIRECTION AS TO VOTING IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED
AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THE PROXIES IN THEIR
DISCRETION, 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 SPECIAL MEETING FOR THE PURPOSE OF SOLICITING ADDITIONAL
PROXIES TO APPROVE THE MERGER AGREEMENT.
1. 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
SunTrust will issue 0.96 shares of Common Stock in exchange for each share of
common stock of Crestar.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The undersigned acknowledges receipt of a Notice of Special Meeting of
Shareholders dated _______________, and of a Joint Proxy Statement/
Prospectus dated ________________.
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Dated ----------------------------- , 1998
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS.
WHEN SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE. IF A CORPORATION, PLEASE SIGN WITH
FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
[GRAPHIC]
FOLD AND DETACH HERE
[GRAPHIC]
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
o You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
o You will then hear these instructions:
To vote FOR approval of the Merger Agreement, press 1; to vote AGAINST
approval of the Merger Agreement, press 9.
To ABSTAIN, press 0 and listen to the instructions.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE.
CALL ** TOLL FREE ** ON TOUCH A TOUCH-TONE TELEPHONE
1-800-840-1208 - ANYTIME
<PAGE>
There is NO CHARGE to you for this call.
<PAGE>
Proxy Card for Shareholders who ARE Crestar Plan Participations
P R O X Y CRESTAR FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS ON DECEMBER 23, 1998.
The undersigned hereby directs the Trustee of the Crestar Employees' Thrift
and Profit Sharing Plan, the Crestar Merger Plan for Transferred Employees, the
Crestar Employee Stock Ownership Plan or the American National Savings Bank,
F.S.B. 401(k) Plan to appoint J. Carter Fox, Gordon F. Rainey, Jr., Frank S.
Royal, any one of whom may act and each with the power to appoint his
substitute, to represent and to vote all whole shares of Common Stock of Crestar
Financial Corporation ("Crestar") credited to the undersigned's account in the
Plan(s), at the Special Meeting of Shareholders to be held on December 23 , 1998
at 9:30 a.m. at Crestar's office located at 919 East Main Street, Richmond,
Virginia, and at any adjournment thereof.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
CRESTAR
VOTE BY PHONE
QUICK o EASY o IMMEDIATE
IF YOU VOTED BY TELEPHONE DO NOT MAIL YOUR PROXY CARD
<PAGE>
(Proxy Card for Shareholders who ARE Crestar Plan Participants)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
WHEN THIS PROXY IS PROPERLY EXECUTED, WHOLE SHARES OF CRESTAR COMMON STOCK
ALLOCATED TO YOUR PLAN ACCOUNT WILL BE VOTED AS DIRECTED. IF NO VOTING BOX IS
CHECKED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. IF ANY OTHER BUSINESS IS
PROPERLY PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THE
PROXIES IN THEIR DISCRETION, 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 SPECIAL MEETING FOR THE PURPOSE OF
SOLICITING ADDITIONAL PROXIES TO APPROVE THE MERGER AGREEMENT.
1. 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
SunTrust will issue 0.96 shares of Common Stock in exchange for each share of
common stock of Crestar.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The undersigned acknowledges receipt of a Notice of Special Meeting of
Shareholders dated _________________, and of a Joint Proxy Statement/
Prospectus dated __________________.
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Dated ----------------------------- , 1998
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS.
WHEN SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE. IF A CORPORATION, PLEASE SIGN WITH
FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
[GRAPHIC]
FOLD AND DETACH HERE
[GRAPHIC]
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
o You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
o You will then hear these instructions:
To vote FOR approval of the Merger Agreement, press 1; to vote AGAINST
approval of the Merger Agreement, press 9.
To ABSTAIN, press 0 and listen to the instructions.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE.
CALL ** TOLL FREE ** ON TOUCH A TOUCH-TONE TELEPHONE
1-800-840-1208 - ANYTIME
<PAGE>
There is NO CHARGE to you for this call.
